Lockheed Reaches Deal With President On Fighter Jets

Lockheed Martin Corp. has reportedly reached an agreement with President Donald Trump to reduce the United States’ cost of purchasing the company’s F-35 Joint Strike Fighter aircraft. The Trump administration said on Monday that $600 million in expenses have been eliminated from the contract. According to the administration, the $600 million reduction applies to 90 aircraft, of which the maximum value was $7.2 billion.

Very few details have been provided about the agreement. The $600 million reduction could apply to the contract total or to future sustainment and maintenance responsibilities. Others believe that the $600 million will come from cost savings up and down the supply chain.

Lockheed should be able to reduce aircraft costs during the F-35 production in the next batch due to the sheer number of jets being created. With the bigger batch, Lockheed will also have more leverage to negotiate better terms with its partner companies. In a July statement, Lockheed and its F-35 partners committed to reducing sustainment costs by 10 percent between Fiscal 2018 and Fiscal 2022.

Overall, the F-35 program has more than 1,250 suppliers in 45 states and Puerto Rico. Northrop Grumman provides the radar system while United Technologies’ Pratt & Whitney division builds the jet’s engine. Most of the aircraft’s assembly takes place at a plant in Fort Worth, Texas. To date, Lockheed has delivered more than 200 F-35 aircraft. The next lot of the planes isn’t expected to be delivered until 2018.

Trump began talks with Lockheed CEO Marillyn Hewson on the F-35 before getting sworn in as president. The president criticized the program for its “out-of-control” costs during his campaign. Lockheed signaled in recent weeks that it was close to a deal with the Trump administration.

The F-35 program could be valued at more than $1 trillion over the 55-year life cycle of the program and is considered the most costly program in the U.S. military. Lockheed received a $1.3 billion down payment for the latest lot of aircraft from the Pentagon in November. In a statement, Lockheed said that it shared the president’s “commitment to delivering this critical capability for our men and women in uniform at the lowest possible cost to taxpayers.”

In March of last year, Pentagon officials increased their estimates for the cost of operating and maintaining the F-35 jets to $1.12 trillion in inflation-adjusted dollars. They also lowered its estimate for the cost of developing and acquiring the F-35 jets by about $12.1 billion to $379 billion. In November, officials said that they needed an extra $500 million or more to finish the $55 billion development phase of the airplanes.

 

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