The Air Force cut back on a plan to buy Northrop Grumman Corp.'s Global Hawk unmanned aircraft, limiting its initial purchase to five vehicles as costs climbed more than 20%.
The decision, released in a Pentagon memo this week, marks a setback for Northrop Grumman.
The Century City-based company's integrated systems business, which builds the Global Hawk, accounted for 18% of its $30.7 billion in sales last year. At one time, the Air Force planned initial production of 20 Global Hawks.
"These things are so cutting edge," said Paul Nisbet, an analyst at JSA Research Inc. in Newport, R.I. "The technology is so new, there are going to be issues."
Costs have risen to more than $6.6 billion, including support equipment, testing and development costs, according to the Government Accountability Office, the investigative arm of Congress. In 2001, the program was estimated to cost $5.4 billion.
Northrop Grumman spokesman Randy Belote deferred comment to the Air Force. Capt. Dede Halfhill, an Air Force spokeswoman, said rising costs hadn't dimmed enthusiasm for the vehicle.
Shares of Northrop Grumman fell 56 cents to $63.59. They have gained 5.8% this year.
The 13-ton Global Hawk can fly as high as 65,000 feet and reach speeds of nearly 400 miles per hour. Northrop took over the program in 1999, and the vehicle was put into service before it had completed its initial technology demonstration phases. The system proved effective in Afghanistan and Iraq. Global Hawks have flown more than 6,000 combat hours, according to the company.
"While there have been successes on the battlefield, the development of unmanned aircraft systems has shared the same problems as other major weapon systems that begin an acquisition program too early, with many uncertainties about requirements, technology, design and production," GAO said in a report issued in April on the Global Hawk.
The GAO recommended curtailing full production until technological kinks were overcome.