LMT Lockheed Martin Corp

By Doug Cameron 

Lockheed Martin Corp. Chief Executive Marillyn Hewson said Friday the company was close to reaching a deal on the next batch of F-35 combat jets, remarks that followed another meeting with President-elect Donald Trump.

Mr. Trump has singled out the F-35 for criticism over its cost and delays in a series of tweets and public statements. Pentagon officials have said they are continuing efforts to lower its costs.

Lockheed and Pentagon officials met this week to discuss terms for buying 90 more jets being built by the company, which has already delivered 200 of the planes to the U.S. and allies.

The two sides last year failed to reach an agreement on a previous batch of 57 jets following more than a year of talks, leading the Pentagon to take the unusual step of imposing terms on Lockheed.

"I told him that we are close to a deal on a new contract that reduces the price for the next 90 aircraft significantly," Ms. Hewson said Friday after meeting with Mr. Trump in New York. "I also had the opportunity to share some of our ideas on how to continue to drive the cost down in the F-35."

Lockheed and Pentagon officials met this week to discuss terms for the 10th set of jets being built by the company, which has already delivered 200 of the planes to the U.S. and allies.

The military head of the F-35 program, Lt. Gen. Chris Bogdan, has said he expects the current contract to be 6% to 7% less than the previous one, continuing a downward trend. While Mr. Trump has complained about the F-35's cost, Pentagon officials have said its effort to make the plane more affordable is broadly on track since being restructured in 2011.

"Negotiations for the next lot of F-35 aircraft continue," said a spokesman for the F-35 program office. Mr. Trump's transition team didn't immediately respond to a request for comment.

Analysts have said the reduced pricing may weigh on Lockheed's efforts to boost margins on the F-35, which accounts for more than a fifth of sales. Its shares rose following Ms. Hewson's comments before retreating some, recently up 0.8% at $254.75.

Mr. Trump has also suggested a combat jet made by Boeing Co. could be a partial substitute for the F-35 , though the notion has been broadly dismissed by defense officials.

Retired Marine Corps Gen. James Mattis, Mr. Trump's pick as defense secretary, on Thursday backed what he described as the unique capabilities of the F-35 and noted some U.S. allies buying the plane have no alternative.

Ms. Hewson on Friday reiterated her commitment to working with the incoming administration to cut the F-35's costs. Lockheed is already boosting production of the F-35 and had previously said it would add around 1,000 jobs at its main assembly facility in Fort Worth, Texas. Ms. Hewson said Friday that she expected to create 1,800 new jobs at the plant.

Mr. Trump's direct interventions in some high-profile military programs have rattled defense company executives and investors, partly deflating a postelection stock market bounce on expectations he would boost government spending.

--Michael C. Bender contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

January 13, 2017 15:20 ET (20:20 GMT)

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