Lockheed Martin Says New F-35 Contract Talks in Final Stages
Talks with Pentagon over second lot of stealthy fighter jets have run behind schedule
By Robert Wall
Updated July 7, 2016 11:50 a.m. ET
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 reaped rewards 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.