A U.S. Senate panel on Tuesday refused to fund General Electric Co.’s back-up engine for the F-35 Joint Strike Fighter in its fiscal 2011 defense budget, according to a press release.

The decision holds potential bad news for Indianapolis engine maker Rolls-Royce, which produces the enginest. Rolls-Royce, part of London-based Rolls-Royce Group PLC, is the region's second-largest manufacturer, behind Eli Lilly and Co., with about 4,300 local employees.

The Senate defense appropriations subcommittee, in approving $671 billion for defense, followed the lead of the chamber’s committee that authorizes defense programs.

The U.S. House has taken a different view, with its defense appropriations panel in July adding $450 million for the alternate engine. That was after the full House included funding for the engine in the measure it passed that authorizes military programs and sets defense policy for fiscal 2011.

U.S. Defense Secretary Robert Gates says a second engine is a wasteful expense. President Barack Obama said after the House authorization bill passed May 28 that he would veto the legislation if its final version includes the funding.

If the full Senate approves the appropriations panel’s budget, the engine’s fate will be decided by House and Senate negotiators later this year. A similar scenario unfolded with the fiscal 2010 budget: The House approved $465 million for the engine and the Senate did not. The money was finally approved by congressional negotiators.

The Senate Armed Services Committee rejected money for the engine in its version of the authorization bill. The full Senate hasn’t voted on that measure. House and Senate versions of the authorization and appropriations budgets must be reconciled and their joint measure must signed by the president before becoming law.

Pratt & Whitney supplies the primary engine for the Lockheed Martin Corp. jet fighter and opposes the GE program.

The battle in Congress pits supporters of Fairfield, Conn.-based GE and partner London-based Rolls-Royce Group Plc, who are clustered in Ohio, Indiana, Massachusetts and Virginia where GE has operations, against supporters of Pratt & Whitney in Maine, Connecticut and Florida, states where Pratt has facilities.

The bill the Senate defense appropriations panel passed today includes $157.7 billion for the wars in Afghanistan and Iraq.