Dogfight

GE's engine victory

The duel was as fierce as an aerial battle. On one side was United Technologies' Pratt & Whitney unit, long the sole source of jet engines for the F-15 and F16, the Air Force's two top fighters. On the other was General Electric, which has been struggling to win some of that lucrative business. At issue was one of the biggest defense prizes ever: a long-term contract to build more than 2,000 engines for the F-15 and F16. The award could ultimately be worth $17 billion over the 20-year life of the engines. Following last Friday's closing of the New York Stock Exchange, the Air Force announced the initial winner:

General Electric. For at least the first year, said the Pentagon, General Electric would fly off with 75% of the contract, while Pratt & Whitney would have to settle for the remaining 25%. During that initial year, GE will build 120 engines, and Pratt & Whitney will construct 40. The Pentagon said it was particularly impressed with GE's warranty and its plan to let other firms bid to supply spare parts. Air Force Secretary Verne Orr called the warranty issue a key element of the competition. On Wall Street, investors correctly anticipated the Air Force action. General Electric stock closed at 54 1/2 on Friday, up 7/8 for the week. Shares of United Technologies, on the other hand, fell 2 5/8,to 66 1/8.

The decision was a painful blow for Pratt & Whitney, which had been working furiously to upgrade its engine since the Air Force invited competitive bidding and thereby set off what became known as the "Great Fighter Engine War."

Pratt & Whitney's product, the F100, had tended to stall when it was first placed on F-15 and F-16 fighter aircraft in the 1970s; the engine is considered responsible for about one-third of the 35 F-16s that have been lost in crashes.

But the company has made a series of design improvements over the years; recently added features include a new control system and a safer and longer-lasting main fuel pump. Both General Electric and Pratt & Whitney had lobbied hard to win the contract. While GE officials disparaged their competitor as "Brand X," Pratt & Whitney executives dismissed GE as the "lightbulb company." Last week Pratt & Whitney proclaimed in a full-page newspaper ad that the F100 was "a new bench mark for fighter engine reliability and durability." One battle in the Great Fighter Engine War is over, but the fighting is sure to go on. In announcing its decision, the Air Force left open the question of how future contracts will be divided between GE and Pratt & Whitney.