Efforts to Cut F-35 Costs Hinge on Foreign Partners

By Doug Cameron 

The head of the U.S. government's F-35 fighter program on Wednesday said efforts to trim costs on the world's most expensive weapons contract hinged in part on looming procurement decisions by Italy, Turkey and Canada.

Lt. Gen. Christopher Bogdan, head of the Pentagon's F-35 program office, said foreign partners are closely watching efforts to resolve continuing technical problems. Any changes to existing commitments by Italy and Turkey to buy the jets--or any move by Canada to secure an alternative plane--could inflate the aircraft's cost for all buyers by 2% to 3%, he said at a congressional hearing.

The F-35 currently sells for more than $100 million each, excluding research and development costs. The Pentagon and the F-35's main contractor, Lockheed Martin Corp., are trying to reduce the production and operating costs of the jet to make it more affordable to domestic and overseas customers.

Gen. Bogdan said he remains confident that the U.S. Marine Corps will declare that the F-35 to be combat ready in 2015, as planned, with the U.S. Air Force following the next year.

Delays in the F-35s deployment, its spiraling price since the project started in 2001, and lingering reliability and technical problems have focused attention on demand from export customers. Some of those nations already have trimmed their initial purchases. Partners in the project are due to meet next month to review progress in the jet's development, Gen. Bogdan said.

He said Turkey had delayed a decision on buying F-35s by two years, and noted recent comments by Italy's prime minister about cutting further commitments.

"That is an instability that could inflate future prices," Gen. Bogdan said at the hearing.

Canada initially settled on buying the F-35, but then reopened its fighter evaluation. That decision triggered a furious lobbying battle between Lockheed and Boeing Co., which is seeking fresh deals to keep its F/A-18 fighter jet production line open beyond 2016.

A senior Lockheed executive this week said that the company is confident it can win new customers for the F-35 to meet a key sales goal even if existing buyers reduce or defer their orders. Singapore is one country being targeted by the Pentagon, which oversees export sales.

South Korea this week committed to buy 40 F-35s, taking the number of export customers for the jet to nine.

Lockheed expects the F-35's share of its total revenue to increase to around 25% over the next five years from 15% in the face of a flat U.S. defense budget that has trimmed sales of other weapon systems.

Gen. Bogdan said software problems remained his largest concern about delivering planes that would have warfighting capabilities, though he also expressed concern about other modifications being made to planes already flying or on the production line.

The Pentagon is splitting the costs of these changes 50/50 with contractors, but plans in later orders to shift them entirely to the F-35 contractors, which also include Northrop Grumman Corp., BAE Systems PLC and United Technologies Corp.

The U.S. Government Accountability Office this week said it was concerned about the F-35 being combat ready as planned, as well as the potential need for more funding to fix the software and other problems.

"We're on it," said Air Force Secretary Deborah Lee James when asked about the F-35's technical problems at an earlier congressional hearing, saying she had met regularly with Mr. Bogdan, and also with Lockheed Chief Executive Marillyn Hewson.

"We feel like we're going to be reasonably on time" for combat readiness, she said.

Write to Doug Cameron at [e-mail]

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