REUTERS SUMMIT-Pentagon arms chief aims to preserve R&D weapons funding

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By Andrea Shalal-Esa and Paige Gance

WASHINGTON, Sept 4 (Reuters) - The Pentagon's chief weapons buyer said he was considering funding early work on a next-generation ground combat vehicle and rotorcraft to ensure the United States maintained its edge in weapons despite steep budget cuts.

Under Secretary of Defense Frank Kendall told the Reuters Aerospace and Defense Summit on Wednesday that he hoped to secure small amounts of funding for work on some leap-ahead technologies in those areas despite the challenging budget environment, although no firm decisions had been made.

Kendall said he was just starting to think about technology investments "that significantly changed the game in ground combat." He said U.S. Army acquisition chief Heidi Shyu was interested even though he had not discussed the idea formally with U.S. Army leaders, whose budgets were "extremely tight."

"Squeezing anything like this from the Army's budget is going to be very hard. But I would like to see us at some point do something that made a significant improvement in ground combat capability," he said.

Kendall and other top Pentagon leaders have repeatedly urged lawmakers to reverse $500 billion in mandatory cuts facing the U.S. defense budget over the next decade, arguing that the depth and timing of the cuts could erode military readiness and damage efforts to modernize the U.S. military.

Kendall said the cuts, which come on top of $487 billion in cuts already planned for the same period, would hit procurement and research and development (R&D) particularly hard, since it was harder to whittle down personnel costs in the short term.

But he said he was trying to safeguard R&D spending to ensure that other countries did not overtake the U.S. military with their weapons technologies.

"Our technological superiority is being challenged," Kendall told the summit. "We can't be complacent about that."

Kendall first discussed the possible rotorcraft project last December, but revealed his idea for a leap-ahead ground vehicle program at the Reuters summit for the first time.

Companies that build ground vehicles, like General Dynamics (NYSE: GD - news) Corp and BAE Systems (LSE: BA.L - news) , have argued that the Pentagon needs to invest in future technologies to ensure the continued viability of that sector of the industrial base.

He said such R&D programs generally began with small study contracts valued at millions of dollars, but could eventually build to larger acquisition programs worth hundreds of millions.

He said the ground vehicle studies could look at propulsion, lethality and ways to protect troops, noting that early work on these concepts under the Army's Future Combat Systems program had largely stopped when that program was cancelled in 2009.

Kendall told the ComDef industry conference earlier Wednesday that he had already taken steps to kick off a separate program funding early work on a successor to the F-35 fighter, now being developed and built by Lockheed Martin Corp, that would ensure continued U.S. air dominance.

That program would fund studies for several years, followed by possible development of a prototype, he told reporters after a speech in which he warned that other countries would soon overtake the United States in development of certain weapons.

Companies like Boeing Co (NYSE: BA - news) ; Bell Helicopter, a unit of Textron Inc (NYSE: TXT - news) ; Sikorsky Aircraft, a unit of United Technologies Corp ; Europe's EADS (Paris: NL0000235190 - news) ; and AgustaWestland, a unit of Italy's Finmeccanica (Other OTC: FINMF - news) , have been pressing U.S. defense officials to at least fund some design work on new rotorcraft programs.

Defense consultant Loren Thompson with the Virginia-based Lexington Institute said maintaining spending on research and development of new weapons was crucial to ensuring that the military was adequately equipped in later years.

"Unless spending on military aircraft is maintained, the supplier base will wither and the skills needed for development of the next generation of planes will disappear," Thompson said.

Kendall said the Pentagon had undertaken similar efforts to continue funding work on new weapons during previous downturns.

For instance, funding for the F-15, F-16 and F/A-18 fighter programs began during the 1970s despite a decline in military spending, and then rose in the 1980s as spending rebounded.

Results were mixed with programs begun during the 1990s downturn: the Lockheed F-22 fighter survived but the Sea Wolf submarine saw only very limited production.

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(For more summit stories, see ) (Additional reporting by Paige Gance; Editing by Stephen Coates)