Gates finding $78 billion more in Pentagon cuts - lawmaker

House Armed Services Committee Chairman Howard McKeon, speaking to reporters on Thursday after a briefing from Gates, said the new cuts were more dramatic than defence companies had previously been bracing for.

"I'm not happy," McKeon said. Congress ultimately controls the Defence Department's budget and may not support the cuts.

The Arca index of defence stocks was up 0.6 percent in early afternoon trade.

Gates began his quest for $100 billion in internal savings last May to ensure funding for troops and modernization.

Reuters reported earlier this week that Gates was under pressure from the White House to find additional savings.

The additional $78 billion in cuts means that more weapons programs could go on the chopping block, as Gates tries to cancel lower-priority contracts and trim overhead costs.

Gates is scheduled to brief reporters later on Thursday about the cuts.

Lawmakers often block administration efforts to cancel pricey weapons programs since they provide high-paying jobs in their home districts.

For instance, the Pentagon has tried for five years to cancel an alternate engine for the Lockheed Martin Corp F-35 Joint Strike Fighter that is being developed by General Electric and Britain's Rolls-Royce, but lawmakers have refused to kill the program.

Lawmakers are already signalling their concerns about the latest Gates plan, especially a move to terminate the Expeditionary Fighting Vehicle, a 40-ton amphibious landing craft being developed by General Dynamics Corp.

Representative Bill Young, chairman of the House defence appropriations committee, told reporters after the Gates briefing that the Marine Corps had long insisted it needed the vehicle, and had already invested heavily in the program.

"One of the things we've got to stop doing here is starting something --- and then spend $2 or $3 billion -- and then kill it," Young said.

Sources briefed on the Gates meeting with lawmakers said the Pentagon also planned to cancel a surface-launched missile system being developed by Raytheon Co, and stretch out the development phase of the Pentagon's largest arms program, the F-35 fighter.

Some of the internal savings would be used to start development of a new long-range bomber and pay for more Boeing Co F/A-18 fighter planes, more unmanned planes, radar upgrades, and more ships, said sources briefed on the meeting.

Gates is not expected to reveal any specific details of the fiscal 2012 budget request for the Pentagon, which will be submitted to Congress as part of the overall federal budget around February 14.

But industry sources and analysts say the administration will ask for $554 billion in military spending in fiscal 2012, not counting overseas fighting, $12 billion less than it initially intended.

The remaining $64 billion in budget cuts would come over the following four years, analysts said.

(Reporting by Kim Dixon and Andrea Shalal-Esa; Editing by Tim Dobbyn)