The Cincinnati Enquirer July 03, 2003
Millions for GE added to legislation
THIS STORY CONTAINS A CORRECTION
By Carl Weiser
WASHINGTON - One sentence added to a congressional spending bill could mean $1 billion for GE Aircraft Engines in Evendale.
The 22-word sentence doesn't mention GE or Cincinnati, but it was added at the request of Rep. Rob Portman, R-Ohio, to give the company a chance to build engines for the next generation of Navy ship, dubbed the DD(X). GE even would get $20 million in federal money to help the company build its own engine prototype to Navy specs.
The new engine will form the basis for most large Navy engines for the next 50 years, said Paula Kollstedt, GE Aircraft Engines spokeswoman.
That means GE's ability to compete and build it will play a big role in whether GE can sustain and grow its business, which employs 6,400 in Greater Cincinnati, she said.
"This is big," Portman said last month as he lobbied a key congressman for the provision.
Added to the $369 billion defense spending bill approved by the House Appropriations Committee last Thursday, the provision illustrates how politics and business competition mingle in the murky but lucrative world of Pentagon contracting.
The Senate has not yet written its bill. In this world, everyone argues that his proposal is the one that would help national security and save taxpayers' money while the other guy's proposal is pork.
GE Aircraft Engines was the Pentagon's 16th-largest contractor in 2001, pulling in $2.3 billion, according to Defense News. Two spots behind was GE's top competitor in the large engine business, Rolls-Royce. Rolls-Royce earlier this year was selected to build a test version of the new, 36-megawatt engine that will propel the DD(X).
That was something of a surprise because when it comes to large gas marine turbine engines, the kind used to move big Navy ships, GE has been the Navy's sole supplier since the 1970s.
"They're finally getting competition for their products," said Patrick Regis, Rolls-Royce vice president for systems business development.
That means the Navy eventually will have lower prices and a wider range of engines to choose from, he said. The company wouldn't comment on the provision itself, but Regis said he expects competition when the DD(X) moves into production.
An estimated 70 ships worth $100 billion would be built, according to Globalsecurity.org, a defense think tank.
The engine contract alone probably would be worth at least $1 billion, Kollstedt said.
But with Rolls-Royce alone building the prototype, Portman's office worried that GE would be at a disadvantage when the contract for producing the engines came along. Thus the $20 million to help GE build its own prototype.
"This keeps GE in the ballgame," said Portman's spokesman, Kyle Downing.
GE is the only entity that can build a competing engine, he said.
"This is not pork because this is keeping competitiveness," Downing said. "Pork is the bridge that doesn't go anywhere or a cowgirl hall of fame. Competition always creates lower prices and better quality. This is the exact opposite of pork."
As for why taxpayers should foot the $20 million bill, Downing said: "Why do taxpayers pay for roads or airports or anything else? This is something that serves the public good. Taxpayers have always shared the burden for defense of America."
Added GE's Kollstedt: "The $20 million invested by the Department of Defense today allows the American taxpayer to benefit from lower purchase prices and higher product quality that could result from an engine competition."
Neither the Navy nor Northrop Grumman, the Los Angeles-based lead contractor, would comment, saying they didn't talk about spending bills until they became law.
Steven Kosiak, director of budget studies at the Center for Strategic and Budgetary Assessments defense think tank, said Portman's competition-encouraging efforts are not unusual. But if Rolls-Royce isn't having any problems building the engine, the money for GE may be unnecessarily duplicative.
Chris Hellman, a military analyst at the Center for Arms Control and Non-Proliferation, said adding $20 million to save money doesn't make much sense.
"When ensuring competition begins to cost you more money than not having competition, one wonders why we're doing it," he said.
But the reason is not really much of a mystery, Hellman said.
"When a major employer in your district is looking for assistance, it is part of your job to take care of them if you're able to do so," he said. "But at what point do local politics begin to impede good policy? That's the question."
GE Aircraft Engines had $11 billion in sales last year, Kollstedt said. So a $1 billion contract, even spread out over several years, is a major one.
Both Rolls-Royce and GE envision converting their large aircraft engines to marine use for the DD(X.) The engines have enough power to fly a large plane, like a Boeing 777.
The DD(X) actually uses two engines, a small 4-megawatt one and the 36 megawatt, which is the size of a recreational vehicle. GE and Rolls-Royce already are competing to build the 4-megawatt version. All GE is asking is to do the same on the 36-megawatt one, Kollstedt said.
"We just really appreciate Congressman Portman's interest and support during this critical phase of the program," she said.
Ironically, the company is in Rep. Steve Chabot's district. But until recently, it was in Portman's district, and Portman has been "a longtime champion," she said.
"Programs like the DD(X) form the basis of future production. And without a DD(X) program, we lose the ability to sustain and grow the business in the future," she said.
About GEAE
By Mike Boyer
Marine and industrial turbines are one of GE Aircraft Engines' oldest but smallest businesses.
GEAE began producing aero- derivative turbines for naval and industrial applications in 1959. To date, it has shipped 3,170 of such turbines all over the world.
GEAE is one of parent-General Electric Co.'s largest businesses.
Headquarters: Evendale.
CEO: David Calhoun.
Business: World's largest jet engine maker, GEAE and CFM International, its joint venture with Snecma Moteurs, have a fleet of more than 16,000 commercial engines in operation.
Employment: About 6,500 in Greater Cincinnati and 25,000 worldwide.
2002 Revenues: $11.1 billion.
2002 Operating earnings: $2 billion.
The sentence
Added on page 255 of the fiscal 2004 defense spending bill's committee report, which is binding:
"The committee recommends an increase of $20,000,000 for DD(X) which is only for developing an alternative engine as the prime power source."
About the DD(X)
The DD(X)( looks like a German U-Boat - "as close to a submarine as a surface ship can be," according to one defense think tank, Globalsecurity.org.
It is being designed by Northrop Grumman to be the centerpiece of the 21st century Navy's transformation to a nimble, lethal strike force. Often referred to as "the destroyer of the future," it will come in several sizes, and its guns will be able to fire 12 rounds per minute and hit targets 100 miles away. It is expected to go into production in 2007. The House defense spending bill contains $928 million for it this year.
On the Web:
For more information about the DD(X), go to http://peoships.crane.navy.mil/ddx/
Corrections and Clarifications
Portman's spokesman is Kyle Downey
U.S. Rep. Rob Portman's spokesman is Kyle Downey. His name was misspelled in a Page 1 story Thursday about GE Aircraft Engines.
Copyright © 2003, The Cincinnati Enquirer
