Lockheed Martin Says New F-35 Contract Talks in Final Stages
July 07 2016 - 9:50AM
Dow Jones News
FAIRFORD, England—Lockheed Martin Corp. is in the final stages
of negotiations with the Pentagon to conclude a multibillion-dollar
contract for the next batch of stealthy F-35 Joint Strike Fighter
jets after months of protracted talks, a senior company official
said Thursday.
"We are confident we will be on contract soon," said company
program manager Jeff Babione. The 160-aircraft deal would be for
two years of F-35 production, Mr. Babione said. Lockheed Martin is
slated to deliver the first of these jets after September.
The talks, originally expected to be completed months ago, have
dragged on amid haggling over costs between the Pentagon and its
contractors.
"It takes a while because it is very complex," Mr. Babione said.
One of the complexities is estimating what the costs of building
future planes will be, he said.
This is the second time the Pentagon is negotiating for two
years of F-35 production. The previous contract also took longer
than expected to complete.
Mr. Babione said the next batch of production, called Lot 9,
would be for 63 F-35s, with another 97 to be bought the subsequent
year under the combined contract. The price for the F-35A, the most
popular and least expensive model of the combat jet, would be less
than $100 million for each aircraft, including its engine, he said.
The final price will depend on what contractual terms are
completed.
The F-35, the Pentagon's most expensive weapons program, has
been struggling to reduce costs. Lockheed and its two largest
partners—Northrop Grumman Corp.and BAE Systems PLC—pledged to
invest $170 million during the past three years on reducing the
cost of the plane.
Mr. Babione said the cost-cutting effort has yielded lowered
costs with lower-than-anticipated investment of around $140
million. That has cut $1.1 million from the anticipated cost of
building a plane in Lot 9 and $1.7 million the year after.
The companies are now in talks with the Pentagon for another $60
million to $100 million investment programs to cut costs further in
subsequent years, Mr. Babione said. The Pentagon has to sign off so
the companies can reap a return on their investment if cost targets
are met.
F-35 officials have set a target price of eventually bringing
the costs of an F-35A to $85 million in fiscal year 2019. "There is
room for us to get lower than that," Mr. Babione said.
Many of the cost savings are linked to building more planes
every years. Mr. Babione said the goal is to reach about 170 to 180
planes a year.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
July 07, 2016 09:35 ET (13:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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