WASHINGTON - The United States would trim U.S. missile-defense spending, cancel some big-ticket weapons programs and buy more arms for fighting insurgents in places like Iraq and Afghanistan, under a 2010 budget plan.

Defense Secretary Robert Gates proposed on Monday to stop buying further F-22 fighters and would kill a planned new presidential helicopter as part of an overhaul of the world's most powerful military arsenal.

He also would scale down and restructure the Army's Future Combat Systems, a Boeing Co-led potential $159 billion centerpiece of U.S. Army modernization.

Also canceled under Gates' proposal would be a projected $26 billion Transformational Satellite program that would have swelled the coffers of rival bidders Lockheed Martin Corp or Boeing.

The proposals for fiscal 2010, that begins October 1, would add funding for unmanned aerial vehicles and other intelligence, surveillance, communications and reconnaissance programs designed to thwart insurgents.

As I told the Congress in January, this budget represents an opportunity, one of those rare chances to match virtue to necessity, to critically and ruthlessly separate appetites from real requirements, Gates told a news conference.

Gates' proposal would cut missile defense spending by $1.4 billion in 2010; end production of Lockheed Martin's F-22 fighter at 187 aircraft; scrap a $15 billion competition for new rescue helicopters, and buy 31 more of Boeing Co's F/A-18 fighter jets in 2010.

It would revamp the way the Navy builds destroyers, scrap a new cruiser program, and terminate a $13 billion presidential helicopter program run by Lockheed and AgustaWestland, a unit of Italy's Finmeccanica.

At the same time, it would boost funding for the F-35 Joint Strike Fighter being built by Lockheed with co-development funding from eight countries.


Defense stocks, beaten down for weeks on fears that years of unbridled growth in U.S. defense budget was finally ending, rebounded following Gates' presentation.

There was a cloud hanging over those stocks, people wondering what was going to happen, what the announcements were going to be, said Giri Cherukuri, head trader Oakbrook Investments LLC. Now that we got a more definitive answer about where the Defense Department is heading, I think that got rid of some of the uncertainty.

The Standard & Poor's Aerospace and Defense index ended up 3.6 percent.

The proposals, if approved by the White House and Congress, would pump billions of new dollars into unmanned aerial systems that would give U.S. troops new capabilities, especially in irregular conflicts.

Gates put the final touches on his proposals this weekend even as North Korea's missile launch sparked renewed debate over futuristic programs including Boeing's planned Airborne Laser, a modified 747 jumbo jet designed to zap missiles soon after they are launched.

The $10-billion-a-year missile shield is the Pentagon's costliest arms development project. Gates proposed turning the airborne laser into a research program, adding $700 million to regional missile defense programs, and said the Pentagon would put off buying more ground-based interceptors for a site in Alaska.


Lockheed, Boeing and Northrop Grumman Corp -- respectively the Pentagon's three biggest suppliers by sales -- each have big stakes in elements of the layered antimissile shield.

Six U.S. senators -- an independent, Republicans and Democrats -- urged President Barack Obama to restore full funding for missile defense.

The threat posed by rogue states with ballistic missiles has been underscored by Iran and North Korea's recent missile tests, they wrote.

Lawmakers have the final say on the budget.

Lockheed shares ended up 8.9 percent at $73.28, Northrop rose 9 percent to $47.94 and Raytheon rose 8.3 percent to $41.66. Even Boeing, which had been down for most of the session, ended slightly higher, up 1.3 percent at $38.16.

There was good news for Lockheed Martin. The F-22 in the Gates budget would be capped at 187 planes, that is not what Lockheed Martin was hoping for, said Richard Tortoriello, aerospace and defense analyst with Standard & Poor's Equity Research. But the budget significantly increases funding for the F-35, the joint strike fighter. That's great news.