WASHINGTON (Reuters) - The Pentagon
overhauled the Lockheed Martin Corp F-35
fighter program for the second time in a year
and said it would buy 41 Boeing Co F/A-18
warplanes over the next three years to offset
slower production of the Lockheed plane.
Defense Secretary Robert Gates announced on
Thursday a further restructuring of the radar-
evading F-35 as part of a broad cost-reduction
plan, saving it would result in net savings of
about $4 billion over the next five years.
The Pentagon's biggest arms program, the new
fighter is being developed with eight international
partner countries at total cost of $382 billion, but
the program has run into schedule delays and
massive cost overruns in recent years.
Gates said work on the Air Force and Navy
versions of the plane was moving along
satisfactorily.
But he said the Marine Corps variant of the plane,
which offers short takeoff and vertical landing
(STOVL) capabilities, was put on a two-year
"probation," and could be canceled if Lockheed
was unable to fix significant test problems.
"If we cannot fix this variant during this time
frame and get it back on track in terms of
performance, cost and schedule, then I believe it
should be canceled," Gates told reporters at a
Pentagon briefing.
For now, he said adopting "a more realistic
production schedule" and repricing would save
$4 billion over the next five years. The changes
must be approved by Congress.
A Pentagon document on the changes called for
Lockheed to build 325 F-35s through fiscal 2016,
instead of the 449 that were planned, and said
cost-cutting efforts were still needed.
Pentagon officials said the cuts would not have a
significant impact on the overall cost per plane,
since additional testing would stave off problems
later on.
Cutting those 124 planes could save well over
$10 billion at current prices, which ranged
between $109 million per plane and $142 million
under the Pentagon's last contract with
Lockheed. That does not include the price of the
aircraft's engine.
Of the total savings, $4.6 billion will be shifted
into the program's development phase to pay
for more testing and to offset too-low cost
estimates, the Pentagon said.
Development of the new fighter was now slated
for completion in early 2016 instead of mid-2015
under the previous restructuring, according to
the Pentagon document.
The Pentagon estimates that it must still spend
$13.8 billion to finish the F-35's development, on
top of $37 billion spent to date.
The document said all three military services
would reassess when they could begin using the
new Lockheed fighter jets in combat but had not
done so yet.
News of the further delay comes after the
disclosure of images this week that appeared to
show that China had a working prototype of its
own stealthy fighter jet.
Boeing will benefit by being able to sell the
Pentagon 41 more of its F/A-18 fighters in the
next three years, a deal industry sources say
could be worth close to $2 billion for Boeing,
plus engine orders for General Electric Co.
Boeing said it had been delivering its "Super
Hornet" warplanes to the Navy on time and on
cost for years, and was ready to meet the
Pentagon's new demand. "If the secretary has
decided that's what needed to fill the gap, we'll
be there for them," said Boeing spokesman Dan
Beck.
Analysts said the Lockheed restructuring was
more severe than expected. "This is clearly a
major blow to the program," said Virginia-based
analyst Jim McAleese.
A technical baseline review conducted by the
program's new manager, Navy Vice Admiral
David Venlet, had obviously gone worse than
expected, he said, adding, "We've never seen
something this significant before."
Lockheed Chief Executive Robert Stevens said his
company was determined to meet its
commitments.
"We recognize our role and responsibility to
deliver extraordinary fighters in three variants,"
Stevens said. "We're committed to doing that,
and we're confident that we'll succeed, including
delivering the STOVL variant."
The F-35 has been expected to eventually
account for about 25 percent of Lockheed's
yearly revenue.
Lockheed shares closed 1.75 percent higher on
the New York Stock Exchange.
Source: http://us.mobile.reuters.com/article/idUSTRE70561820110107?ca=rdt
