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U.S. Army vehicle contracts may escape automatic budget cut axe

WASHINGTON (Reuters) - The U.S. Army on Tuesday said its ground vehicle procurement programs may escape significant impact from mandatory additional budget cuts due to start taking effect in January, since most of the programs are only in the developmental phase at the moment.

Scott Davis, program executive officer for the Army's ground combat systems, said most of the Army's ground vehicle programs were not multi-year agreements or large-scale production contracts, which limited the impact of across-the-board cuts.

"We're sort of in a transitional phase right now. We don't have a large production stream," Davis told reporters at the annual Association of the U.S. Army conference.

Automatic spending cuts totaling $1.2 trillion over the next decade -- of which half would come from Pentagon accounts -- were mandated by Congress as part of a deal to raise the debt ceiling for federal borrowing last year.

The White House last month said the cuts would result in a 9.4 percent cut in defense programs or $54.7 billion in fiscal year 2013, which began October 1, including $15.3 billion from Pentagon procurement accounts.

Those cuts would come on top of $487 billion in reductions to proposed military spending that are already on the books for the next decade.

Arms industry executives and military leaders have been pressing lawmakers to avert or at least delay the reductions after they return to Washington following the November elections.

During Monday's presidential debate, President Barack Obama said the cuts set for next year "will not happen", sparking surprise and skepticism from some Republicans who said Obama had not presented a plan for avoiding the cuts.

Davis said there were few details available about how the cuts could be avoided, but some additional reductions might be "manageable" given the current state of several big programs, including initial development of a new combat vehicle.

"I think it's manageable inside our portfolio from the perspective that we're in developmental efforts and we may be able to accommodate with adjustments," Davis told reporters.

The U.S. unit of BAE Systems Plc and General Dynamics Corp won Army contracts in August 2011 to begin working on technology development for a new Army infantry fighting vehicle. The Army does not plan to move to the next phase of that program until December 2013.

It has awarded smaller contracts to BAE and GD to work on modifications of their existing Bradley Fighting Vehicles and Abrams tanks.

(Reporting By Andrea Shalal-Esa; editing by Andrew Hay)

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