GE says economy stable just as F-35 engine squabble flares anew

General Electric Co. said Wednesday that the broader economy and its own industrial and lending businesses are improving while at the same time a familiar problem is casting a shadow over the company’s sprawling River Works aircraft engine plant in Lynn.At its annual meeting in Houston, GE told investors that the “clouds are breaking” after one of the worst years ever for the company and that some key economic indicators have stabilized, including the high unemployment rate and the decline in housing prices.Bank losses have stopped growing and capital markets have improved – a positive sign for GE’s troubled GE Capital lending unit, a source for many of its problems.”The forecast ahead of us is promising,” said GE chief executive officer Jeffrey Immelt.This optimism may not translate locally as a report published Wednesday in New York says that GE and co-contractor Rolls-Royce have cut their prices again in a bid to build alternate engines for the Joint Strike Fighter or F-35.Ever since the Bush Administration green-lighted the alternative engine in early 2005 as a small part of the $5 billion program, funding for GE-Rolls Royce’s engine version has been in flux.Just last December, after a fierce, year-long battle Congress OK’d $465 million for the program but, according to the report, Secretary of Defense Robert Gates, who has constantly advocated against the program, has claimed the Pentagon can not afford to finish the project, adding that he would advise President Barack Obama to veto any legislation that finances it.Stating that they could save the Pentagon $1 billion, the two companies said they would build up to 150 engines at fixed prices if rival, Pratt & Whitney, a United Technologies unit, matched the price.With some of the engine work to take place at GE’s Lynn plant, the alternative engine program has been labeled “critical” by GE-Lynn spokesman Richard Gorham and needed to maintain current employment levels in Lynn which have shrunk over the last decade.General Electric is Lynn’s largest employer with almost 4,000 workers at the River Works. The plant is considered vital for the Greater Lynn economy and now the local employees, who breathed a sigh of relief over the Congressional funding last year, now must wonder anew about the future.Various models of the Joint Strike Fighter, also known as the F-35 Lightning, will be used by the Navy, Marines and Air Force. The GE engine will be built mostly in Ohio but the contract was expected to boost production at the company’s Lynn facility.The Pentagon estimated recently that it would cost $2.9 billion over the next six years to finish development for the alternative engine and fashion its production apparatus.Officials from both companies said Tuesday that they could complete the project for $1.8 billion, saving more than $1 billion if Pratt & Whitney matched their prices. The companies said they would expand their fixed-price offer made last fall. Under it, the two companies would honor a fixed price for any engines bought in fiscal 2012, followed by lower costs in 2013 and 2014.Pentagon officials have signaled they were not swayed by the latest offer. Pentagon press secretary Geoff Morrell said Gates “does not believe the JSF needs an extra engine. Period.”In a statement, rival Pratt & Whitney has said it offered to build its engines under fixed prices and called the latest offer from GE-Rolls-Royce “simply a distraction.”GE is frequently seen as an economic indicator since it has a major presence in sectors ranging from transportation to finance and employs more than 300,000 people in dozens of countries.GE suffered through a painful year in 2009, as the recession sapped demand for its products while the financial crisis led to a big spike in losses on loans GE Capital made for mortgages, credit cards and commercial real estate. The company cut its dividend, lost its top credit rating and saw its stock price swoon.GE expects overall profits to remain relatively flat