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Lockheed Martin (LMT), the prime contractor on the Joint Strike Fighter (JSF), and the U.S. Department of Defense have pretty much wrapped up negotiations for the latest batch of F-35 Joint Strike Fighter (JSF) production. This goal was to complete and award this by the end of 2012 and it looks like that will be met.
The FY13 order will be for 32 more of the advanced aircraft split between the 3 variants. The bulk, 22, are the Air Force’s Conventional / Take Off and Landing (CTOL) version. These are intended to replace the F-16 and A-10 platforms currently in use. Then there are 3 F-35B Short/Vertical (S/VTOL) for Marine Corps to meet the AV-8A mission and finally 7 F-35C carrier based aircraft for the Navy. Estimates for the cost of the aircraft along with engineering services and other money is in the $3.8 – 4 billion range.
The F-35 program remains several years behind original schedules and cost have increased greatly but much progress has been recently made. There are now over 150 aircraft delivered or in production with this order. They are supporting test and development along with training for pilots and ground crew.
Due to the high concurrency remaining with the program Lockheed will have to go back and modify many of the current production aircraft to the final standard after they are delivered. This is due to the much more T&E remaining for things like the advanced helmet, software and other parts of the aircraft. The F-35 continues to remain on track to be the most expensive defense acquisition program in history.
Photo from U.S. Navy Imagery’s flickr photostream.
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The F-35 Joint Strike Fighter (JSF) is the largest defense acquisition program ever and it continues despite the budget uncertainty in the United States. If sequestration is implemented the program will most likely see across the board reductions in funding. This could lead to reduced production numbers and delays in the test and development program. The JSF while it is in low rate production is still facing concurrency as it moves toward a final design. The program is led by Lockheed Martin (LMT).
Some recent stories about the program include:
The new test plan for the program was reviewed by DoD leadership and did not win approval. There are major concerns with the pace of development for the new helmet the pilot wears that provides data directly to them rather then relying on their instruments.
Lockheed received a contract from the U.S. Navy worth over $200 million to begin implementing Israeli specific modifications to support that country’s buy of the aircraft.
In another move related to the foreign sales of the program Canada has hired KPMG to analyze the cost basis used by the government to award their contract for 65 F-35 to replace existing CF-18 fighters.
Despite all of this news the program continues with training, testing and development as Lockheed steadily delivers aircraft from the first 4 production batches. They also continue to work with the Government on the next buy.
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The F-35 Joint Strike Fighter (JSF) is the largest acquisition program in history headed up by prime, Lockheed Martin (LMT). The program has suffered delays due to testing and technical issues but now is in steady low rate production with the U.S. buying 30 or more a year for itself and allies. The F-35 will be used by the U.S. Air Force, Navy and Marine Corps. It also has countries like the u.K., Australia, the Netherlands, Norway and Canada as partners as well as already having Foreign Military Sales (FMS) to Japan and Israel.
Lockheed is not only getting contracts for the production but also for items such as training, simulators and of course spare parts. They were just awarded a contract for spares for the U.S. Navy and international aircraft worth about $200 million. As the aircraft are fielded they will also require the establishment of stocks of parts at bases and depots to support them.
The current production of F-35 is pretty much all going to the different training sites to support pilot conversion. They are also being used to continue testing and development of the system.
If the F-35 in its current plan survives potential budget cuts and restructuring between 3 and 4,000 aircraft will be made. They will fly for 30 plus years and be the main equipment of Western tactical air forces for most of that time.
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Lockheed Martin (LMT) remains the largest defense contractor in the United States as well as globally. It is responsible for the biggest military acquisition program in the history of the world – the F-35 Joint Strike Fighter (JSF) as well as several other major aircraft and hardware systems. The company has consistently done well with its earnings and maintained a high dividend.
The Lockheed stock seems attractive right now. Price as of 29 June was $87.08. It has outperformed the market by 6 percent over the last year, its P/E is a little above 10 and it pays a dividend of $4.00 a year. The major defense contractors like LMT or Northrop Grumman (NOC), Raytheon (RTN) and General Dynamics (GD) have consistently increased their dividend over time. The companies have also focused on reducing their costs to boost profit margins as well as make them more competitive with the Pentagon when it comes to price meaning as long as defense spending remains fairly consistent there should be increases in earnings and profit as these trends continue.
Lockheed has moved to reduce its workforce especially those in the middle management or overhead positions. It has also when possible adjusted its pension plans and negotiated new contracts with its unionized workers to lower personnel costs when possible. It’s most recent quarter set it apart from its competitors as the company had both growth in earnings and revenue. Most others had seen earnings up but on a revenue drop as their efforts to reduce overhead and cost of providing their products helped.
As the Pentagon continues to execute its Fiscal Year (FY) 12 budget plans new contracts are competed and awarded with Lockheed winning their fair share of them. Yet the future of defense spending is clouded with uncertainty due to the plans for FY13 spending caused by sequestration. Sequestration is automatic budget cuts of up to $100 billion a year in defense spending due to the failure of the Obama Administration and Congress to reach a budget deal last year. All acknowledge that these cuts would have a severe effect on the military, its contractors and the U.S. economy in general yet without changing the current law they will occur.
Lockheed just finally settled a major strike by its Dallas-Fort Worth aircraft assembly workers. This lasted over two months and was driven by Lockheed’s request for them to cut their pension plans. These workers make the F-35 and the F-16 fighters which are a large portion of Lockheed’s portfolio. The key part of the new contract as stated in the press release is “The agreement compensates union members fairly while allowing Lockheed Martin Aeronautics to be competitive for new contracts and respond to customer demands for greater affordability in defense products.” The settlement of this action will allow Lockheed to focus on delivery of the aircraft.
Other then the potential budgetary issues facing the industry as a whole Lockheed does raise some concerns. It has a large debt and pension obligation due to a large workforce and a more traditional defined benefit plan. The Pentagon recently announced that due to concerns with Lockheed Earned Value Management System (EVMS), which tracks cost and schedule data, it will now withhold up to 5 percent of payments. This is the maximum penalty that may be applied. The EVMS for the F-35 is the major concern which is a program that faces scrutiny of its costs and schedule from Congress. If Lockheed cannot get its system into compliance then it faces a potential hit to its earnings and profits as the F-35 program is so large.
Congress has already made some moves to keep parts of the budget recommended for cuts by the Obama Administration. (http://seekingalpha.com/article/566861-defense-contractors-aided-by-congress-keeping-money-in-defense-budget) It may be expected that these will continue. Sequestration is designed to prevent Congress from doing this which is why all are focused on ways to prevent it or minimize the effect on defense spending. Too many jobs, and votes, are affected by it. That does not mean that there will be success in preventing the reduced spending. The U.S. deficits are recognized as too high and something must be done.
Lockheed stock due to its current price, dividend and their large contracts should probably continue outperform the market over the next few months. Until the full effects of sequestration or efforts by Congress to minimize cuts to defense spending are identified there should be no major movement of the price. If the worst case happens and the U.S. faces cuts to defense spending in the range of $50-100 billion a year Lockheed should at least see some short term pain. If the plan is changed and defense spending is protected then this stock along with the other defense industrial stocks should see some increase. This, though, won’t occur until 2013 and the stock like most of its competitors really remains a dividend buy only.
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The Pentagon awarded Lockheed Martin (LMT), the prime contractor for the F-35 Joint Strike Fighter, another $237 million of work on the advanced aircraft program. This contract action is to add to the fourth low rate production batch some changes that have been developed over recent times. The F-35 program is very concurrent with testing and development ongoing while production is as well.
This means situations like this where aircraft already delivered or on the production line will be retrofitted with changes that have come out of the test program or experience flying the system. This concurrency is one of the reasons the program has suffered cost and schedule problems. At the same time it allows Lockheed to deliver aircraft to support training and testing and ultimately deployment.
Originally the contracts for production had been cost plus where the government was responsible for any increases in cost related to changing requirements or specifications. The most recent production one due to pressure to control cost has a cap above which Lockheed will be responsible for any additional costs.
Despite the fact that their line workers remain on strike for what is now approaching three weeks the company continues to work on the aircraft.
The F-35 program continues to be the most expensive defense acquisition program in history and recent moves to stretch out deliveries by several years will only add to that total cost.
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Testifying to Congress yesterday the Government Accountability Office (GAO) reported on cost growth and overruns of the F-35 Joint Strike Fighter (JSF). The JSF program headed by Lockheed Martin (LMT) suffered cost increases of a billion dollars on the first four production orders for the aircraft.
These buys are for 63 aircraft which means about an average of almost $16 million each. The F-35 is the largest acquisition program in the world and ultimately over 2,000 will be built for the U.S. and allies to replace the F-16, F/A-18 and A/V-8A aircraft.
The cost overruns will be shared by the government and Lockheed in about a 65-35 ratio.
The GAO stressed there have been some improvements in the program and its stability but expressed concerns that there is still too much concurrency in it with simultaneous production, development and testing. This could lead to changes to the aircraft as they are being built adding time and cost.
The F-35 has suffered from schedule delays as it works through the testing and development program. One of the reasons for this added time and cost is that there are three different versions of the aircraft. One has vertical takeoff ability, another short and the the third conventional. This is for use not only on aircraft carriers but also to replace the unique capabilities of the A/V-8 Harrier which can land and take off vertically.
With the expected decline in the defense budget further increases like this will not only stretch out the production timeline but also reduce available funds for other programs. The Air Force has to invest in new tankers and bomber aircraft as well as the JSF. The Navy could see it needing more funds for ship building and the Marines ground vehicle programs could suffer.
As with all defense programs as time goes by it will solve its issues but the Pentagon has to face the question as to at what cost.
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The F-35 will continue production in FY12 and FY13. The Pentagon has gone ahead and ordered the FY12 buy from Lockheed Martin (LMT) for another 30 or so aircraft for the U.S. Air Force, Marines and Navy as well as various foreign partners. This contract was awarded in December. The full production buy follows the advance procurement purchase made last year to support the long lead items for the latest production batch of the advanced fighter. The future of the program may get more interesting depending on how big a cut the Pentagon needs to make in the FY13 and out. The F-35 Joint Strike Fighter is the biggest acquisition program in history if all parts of it are executed coming in at well over a trillion dollars for production and support over the program’s lifetime. In order to save funding cuts to this total investment might become easy.
As part of the F-35 production there has to be engines and now that the fight between the F-135 manufactured by Pratt & Whitney, part of United Technologies (UTX), and the alternate engine from General Electric (GE) and Rolls-Royce (RR:LSE) is over those orders need to go to Pratt.
This means that last week as part of the upcoming advanced procurement for future aircraft P&W received a contract worth almost $200 million to support the engine production for 37 F-35 for the U.S., Italy and Australia.
The F-35 despite the fact that the budget wars about to affect the Pentagon may seriously change the program has had a few good weeks. First, Japan decided to buy it to replace some of their F-15 aircraft. Turkey also decided to buy two of the aircraft from a potential order of 100.
The contracts could be worth billions to Lockheed Martin and its supporting contractors as well aid the U.S. by decreasing the price of their aircraft. Every F-35 sold to another country will help keep production quantities up and prices down.
Overall the F-35 forms the core of the U.S. plans to modernize its aircraft fleets. Cuts in its quantities will only mean a requirement for older aircraft to fly longer at greater cost or reduced capability for the United States. This means despite the potential for reductions in U.S. defense spending the F-35 will remain a large part of the budget for the next several years.
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The Japanese government announced overnight that they have chosen the F-35 Joint Strike Fighter manufactured by Lockheed Martin (LMT) to be their new fighter aircraft. The advanced aircraft will replace some of the F-15J fighters that have been in service since the Eighties. The F-35 was in competition with Boeing’s (BA) F/A-18 and Eurofighter’s Typhoon aircraft.
Japan joins the list of foreign partners in the the program which is the largest acquisition program in history. Along with the United States the F-35 will also be used by the United Kingdom, the Netherlands, Canada, Australia and Norway. It is designed to replace the majority of the F-16, F/A-18 and AV-8 aircraft used by these countries as well as the U.S. Air Force, Navy and Marine Corps.
Ultimately the F-35 will be built in the thousands and serve until the middle of this century.
As with many of the purchasing countries Japanese industry will be able to help build parts and components of the F-35 and assist in the assembly if a deal can be worked out. This approach worked out well for the F-16 and the F-35 is trying to mirror that. Some of the buyers also invested their own R&D funds up front for the aircraft.
The F-35 program has seen struggles with its costs and schedule since its inception. Currently the U.S. has ordered five production lots of the aircraft but a recent assessment found more issues that will have to be worked out through development indicating that there remains a great deal of concurrent risk with the program.
Photo from ngotoh’s flickr photostream.
The trend among defense contractors of reducing their work forces is accelerating as Lockheed Martin (LMT) announced yesterday that it will layoff a further 1,500 employees. This time from its Aeronautics division. This is one of the largest parts of the company and is responsible for the production of the F-35 Joint Strike Fighter (JSF), the largest acquisition program in the history of the world.
Unlike many of the earlier cuts already made this year this is not related to the end of a contract or a restructuring of work by the Defense Department. This decision along with the recently planned eight percent reduction in headcount at Lockheed’s space systems is an attempt to reduce overhead and costs to make them a leaner, more efficient company. This then will reduce their prices as they bid for more contracts.
The Aeronautics division is quite large with almost thirty thousand employees and is about a fourth of the company’s work force. They are also working on two of the larger programs for Lockheed: the JSF and the C-130J transport. It seems that most of the job losses will be focused on administrative support and management and will be concentrated on the company’s Dallas-Fort Worth headquarters.
These kind of cuts are a reaction to the Pentagon’s new focus on price and lowering costs overall fro acquisition programs. One way for a company to lower its bids is to reduce overhead and most of that is in people. It can also lead to cuts in benefits for employees and this may be the next step as companies increase health insurance premiums, reduce leave and retirement benefits. This may mean negotiations by the larger defense contractors who manufacture systems such as aircraft, helicopters and vehicles and have a union workforce may become harder with the potential for strikes.
The company’s may be avoiding reducing those part of their workforces initially concentrating on salaried managers and support but eventually as there is more price and cost pressure there will have to be attempts to make cuts there as well. The decline in defense spending will also mean the end of contracts which will also cause these kind of cuts.
The next few years may see some labor strife in the defense industry leading to potential disruptions of schedules as well as local economies taking a hit as jobs are eliminated and spending is reduced. This scenario is not necessarily a good one for an already weak U.S. economy.
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When a company signs any contract they spend a great deal of time negotiating it with the other party. This is true not only of defense contractors and the government but in any contract. The decision on terms and conditions as well as price may take several months. Now Lockheed Martin (LMT) may be forced to sign a contract for the Joint Strike Fighter (JSF) where the terms and conditions will be dictated by the U.S. Senate.
In the recent Defense Authorization bill passed out of the Senate Armed Services Committee (SASC) for the consideration of the full Senate specific conditions were levied on the JSF program’s next contract. This is fairly unprecedented but indicates how high the level of concern there is with the performance of the program for this new combat aircraft program led by Lockheed.
The Joint Strike Fighter is the largest defense acquisition program in the history of the world. It will buy thousands of modern, stealthy aircraft to replace the aging Eighties fleet of F-16, F/A-18 and A/V-8 aircraft used by the Air Force, Navy and Marine Corps. Many allied nations will also purchase it to replace their F-16 aircraft. The F-35 Lightning II JSF will be made in three variants and ultimately cost the U.S. billions to produce and sustain over the next forty years.
The program has a history of sustained cost and schedule increases as development and testing has turned out to be longer and more complicated then originally thought. Over the last three years the program has been re-baselined and redesigned to account for some of problems but still faces many challenges to achieve its scheduled timeline. Many in Congress, the media and the aviation community have become increasingly concerned about this cost growth and how it will ultimately affect the production and delivery of the aircraft.
Due to these concerns the SASC added two very specific provisions to the 2012 defense authorization bill relative to the JSF. The authorization bill combined with the appropriations bill from the Senate Appropriations Committee tell the Pentagon how much money they have to spend and how it should be spent. Once the bills are approved by the Senate they go to a conference committee with the House to produce the final bills.
These provisions require the next annual production contract for the F-35 to be a fixed priced one with Lockheed absorbing any cost increases over the contracted amount. (http://www.defensenews.com/story.php?i=6845494&c=air;%20budget;%20policy&s=TOP) This is rather unique contracting decision because at this stage in the life of a defense program there remains enough uncertainty that fixed prices are hard to define and agree on. That type of contract is more commonly used when the production line is fairly stable and little or no development effort remains. Lockheed is currently under a fixed price contract but it will received fees for good performance. The contract also has a provision that the maximum the government will pay is 120 percent of the target price.
The second requirement that Lockheed will have to absorb cost overruns is something that will be hard for the company to accept at this time. When a program is in the testing and development stage the Government and the contractor make an effort to share the risk. This means that cost increases due to delays or technical issues are spread between the two parties. In the current contract any cost over the 20% increase would be covered by Lockheed with the Government accepting the cost growth risk to that point. The Senate is proposing that the contractor accept all of the risk meaning Lockheed would begin losing profit immediately.
The JSF is entering into dangerous territory. There is beginning to be extreme concerns about the cost of the program especially when the U.S. budget is facing such pressure due to the needs to reduce the annual deficits. The 2012 budget will include almost $7 billion to buy 28 aircraft for the U.S. military. Some in Congress are now discussing alternatives to the program which would require a different aircraft or approach. Ending or scaling back the program would be huge blow to the U.S. military who are counting on the JSF to provide a major technical upgrade as well as replace many aging systems. The U.S. ended production of the F-22 their last most recent tactical aircraft program in 2009. If there is no JSF they would have to consider re-starting that production, upgrading existing aircraft or looking overseas for a new fighter.
At the same time it is unprecedented for Congress to wade into the minutiae of details in contract negotiation like this. Lockheed and the Defense Department must decide on the best contract vehicle to achieve the goals of the program. The program has issues but dictating to Lockheed a situation where there ability to make money which is their goal will make it difficult to award the contract. These provisions will make it more difficult to negotiate the next production contract potentially stretching out the program even more as well as setting a precedent that will make other companies think twice about beginning programs. There is a chance that competition will be reduced causing further price problems for the Pentagon.
Article first published as Lockheed Martin Now Negotiating Contracts with the United States Senate on Technorati.
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The F-35 Joint Strike Fighter (JSF) being developed by Lockheed Martin (LMT) is the key modernization program for the U.S. military for the next few decades. The new Lightning II aircraft will replace U.S. Air Force, Navy and Marine Corps assets from the Cold War era as well as equip several Allied nations. It is also the largest, most expensive military acquisition program in history. Ultimately several thousand of the aircraft will be built in three variants for use from land bases, aircraft carriers and to supply the short vertical-take-off-and-landing (V/TOL) mission. A key component of this as with any other modern aircraft is the engine. The primary one for the JSF will be the F-135 under development by Pratt & Whitney, a United Technologies (UTX) company.
Up to this year the U.S. was pursuing a dual source for the F-35 engine albeit against the wishes of the Defense Department. Congress funded Rolls-Royce (RR:LSE) and General Electric (GE) to develop the F-136 as a form of risk reduction and potential cost savings to the program. Every year for the last several the Department did not request funding for this effort and Congress would add it through the appropriations process. The Obama Administration continued the practice of trying to end the effort and in April made the decision to terminate the contract with the two companies. The two companies continue to lobby Congress and will for now maintain some effort using their own internal funds.
While this is going on in the background P&W continue to support the F-35 program as a whole. Recently the delivered the engine for the latest production batch, LRIP 3. This is the first production lot that will see all three U.S. services receive aircraft as well as two of the Allied participants, the United Kingdom and the Netherlands. The delivery also represents the 21st engine delivered by P&W for the Low Rate Initial Production (LRIP) part of the JSF program.
Also the company received the order for the next batch, LRIP 4, which is worth a little over a billion dollars for the F-135. This is for 37 engines, technical support and engineering services. The latest contract continues price reductions over previous ones which is expected as the program matures and begins larger and more stable orders.
The size of the engine contract alone illustrates the cost and complexity of the program. It also shows why there is such competition for the work. Ideally you would have two suppliers for such a critical piece but the F-35 already went through a fly off an downselect between Boeing (BA) and Lockheed which included the use of the F-135. The program has seen such schedule slip and cost growth that continuing two engines while it may be risk reduction to some may also be unaffordable.
Until the Congress and Defense Department finally agree on just using the F-135 there will be attempts to keep the F-136 alive. At the same time the program continues with more and more production utilizing only the P&W product providing more revenue and earnings to that company.
Photo from kenhodge12′s flickr photostream.
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The F-35 Joint Strike Fighter is a great many things. It is the largest defense acquisition program in U.S. history with total costs projected in the hundreds of billions. It is the future of military aviation for America and several of its Allies for the bulk of the next century. It is also moving slowly towards entering full production.
At a time when the power of modern combat aviation is being demonstrated over Libya through the use of some of the more advanced and newer systems in use by the U.S. and its European NATO allies in combat that is right now strictly using air assets the JSF continues its testing and development. Designed to replace the ubiquitous General Dynamics (GD) F-16 that forms the core of the United States Air Force as well as many NATO countries military it will also be used by Navy and Marine Corps off of aircraft carriers and as a new Vertical and Take Off/Landing (VTOL) aircraft. Because of this complexity the program headed up by Lockheed Martin (LMT) has suffered its share of delays and cost growth that have threatened its completion.
In its most recent report to Congress the Government Accountability Office (GAO) reports that software development especially is now seeing delays. Final completion of this key component is now expected to be at least three years late in 2015. Part of this is due to the slow build up of flight testing although the program has seen great strides in that effort in recent months. The concern of the GAO, Congress and the Pentagon is that delayed development and entry into production will require more money at a time when the defense budget and Federal spending as a whole is under pressure to be reduced due to the recent large deficits.
Even though the second Low Rate Initial Production (LRIP) aircraft has joined the test fleet it and the others had to be grounded due to a oil leak and generator failure. Work by the Joint Program Office (JPO) and contractors have led to seven of the fourteen existing aircraft being cleared to fly again but the two LRIP remain grounded as it is believed a newer generator design may have led to the problem. Again problems like this is why you do testing but it does add time to the schedule.
Northrop Grumman (NOC) who is one of the major sub-contractors on the program responsible for making large parts of the fuselage assembly continued their support by opening their integrated assembly line in California. This production facility utilizes technology developed for the auto industry and has automated tools for assembly and manufacture as well as moving sections around. It is hoped that the more efficient line will lower costs and increase production rates.
The JSF program is ambitious, costly and now necessary. The U.S. and its Allies need a modern aircraft to replace systems originally developed in the Seventies and built in the Eighties for a general war in Europe. The JSF is suffering development problems like so many other programs have in the past. These are multiplied due to the size of the program and the amount of money committed to it. If the JSF was to be canceled or scaled back another aircraft would have to be developed and produced eventually at a potential greater cost. The requirement will be there no matter what.
Photo from Sh4rp_i’s flickr photostream.
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As part of their continuing resolution providing funding for the Federal government for the rest of Fiscal Year 2011 the Republican led House of Representatives struck funding for the F136 engine planned for the Joint Strike Fighter (JSF) program. The overall bill includes several billion in cuts to the Defense Department as well as much more for Federal spending overall. The second engine is being developed by General Electric (GE) and Rolls-Royce (RR:LSE) while the primary one by Pratt & Whitney, a United Technology Company (UTC).
The idea of having a second source for this critical hardware as risk reduction is sound but for the last several years the Pentagon and Bush and Obama Administrations had requested no funding as it was felt an unnecessary program. Congress through its power over the budget kept funding in each year.
While the House has cut the funding there is still a chance that the Senate will leave it in and the final decision will be made in Conference. One of the primary arguments that occurs each year with budget deliberations is how many jobs would be lost if programs like this were ended. That of course is not supposed to be a rationale for defense spending but carries a lot of weight in Congress. Already stories such as this one “Cut engine wold have meant 200 new jobs in Terre Haute” will be appearing in newspapers, blogs and on TV stations across the U.S. today.
GE released a statement thanking their supporters but obviously turning their eyes to the Senate in an attempt to keep the program going. They wrote “While we are disappointed at the outcome, the debate to preserve competition will continue.” The company also pointed out that studies show that the competition between the engines would save billions over the life of the program.
The F-35 JSF is the largest defense acquisition program in U.S. history and has suffered from schedule delays and cost growth over the last decade. The aircraft will equip large parts of the U.S. Air Force, Navy and Marine Corps while also being used by U.S. Allies such as Great Britain, Canada, Australia, Norway and Holland among other countries. With the program’s cost increases the second engine has seen as an expensive luxury.
If the cancellation holds only as the program plays out will it be seen as a wise or premature move. If P&W supports the program effectively and the engine causes no delays or cost increases then the lack of a second source will not matter. If the opposite occurs then there will be finger pointing and recriminations.
Photo from Dysanovic’s Flickr photostream.
Filed under: Business Line, Canada, Companies, Congress, Contract Awards, Countries, Department of Defense, development program, Events, Federal Budget Process, GE, Holland, Lockheed Martin, logistics, Military Aviation, Pratt & Whitney, production program, Proposal, Restructuring, Rolls-Royce, Services, U.S. Air Force, U.S. Marine Corps, U.S. Navy, UTC
UPDATE – The Senate Appropriations Committee (SAC) used their move to cut production by ten aircraft as a way to criticize the whole JSF program overall. They said that the cut was the second option they considered with the first being elimination of all funding in 2011 for the program. The committee while it did not fund the second engine for the aircraft supported it in their language. The House has funded this as they did last year and the money will have to be decided upon in Committee.
The F-35 Joint Strike Fighter (JSF) has become the major acquisition program underway by the United States. Lockeed Martin’s (LMT) team of contractors along with the joint Air Force and Navy program office is building an advanced aircraft that will be used by the U.S. and many allies to replace the F-16, F/A-18 and AV-8 and Harrier vertical take off aircraft. In order to do this three separate versions will be developed.
Over the last few years the program has suffered schedule problems which have led to cost growth. This has reached a point where the Pentagon under Robert Gates has put a great deal of pressure on Lockheed to control costs. The increases in price have caused some countries like Canada and The Netherlands to rethink their commitment to the program.
In the United States the Congress has also weighed in on the program. The Senate Appropriation Committee marked up the 2011 budget and reduced the planned buy of aircraft from 42 to 32 for next year. They are arguing that Lockheed has not even begun building the aircraft ordered with last buy and that it seems sensible to reduce risk by cutting back.
At the same time the House continues to fund the alternate engine in development for the aircraft. This program has been funded by Congress for several years despite the Air Force’s and Defense Department’s wishes as a potential risk reduction for the system. It also keeps General Electric (GE) and Rolls-Royce (RR:LSE) involved in the program as the primary engine is made by Pratt & Whitney, part of United Technologies (UTC). Gates and the Obama Administration have threatened to veto the budget if the money was kept although they relented in 2010 as the funding did not come out of the core program budget.
Finally the negotiations for the current production buy have taken longer then planned as Lockheed and the Air Force struggle to find a way to reach the cost goals for the program. Part of the problem is that the Pentagon wants to move to a fixed price contract with fee tied to specific events. Most development contracts which this still really is are cost plus some fee based on schedule. The change caused Lockheed to have to submit a new proposal and contract structure which is taking time for the government to review and accept.
Delays in awarding the next phase of the program may only cause further problems down the line. Schedule slip and decreases in quantities will only cause more cost in the years ahead. This may force Allies to wait longer then they have planned as well as the U.S. military to keep older aircraft in service longer. This then leads to higher maintenance costs putting pressure on the overall budget as a whole.
The JSF has had its struggles these last three years and it looks like they will continue in the near term. The program though is necessary and still requires a commitment from the U.S. and the other customers as their options are limited without a decision to accept other aircraft currently in production.
In addition the successor may well be thinking of his next role as the average 'life expectancy' of the JSF PEO is around 24 months - by service USAF (27 months), USN (24 months), USMC (19 months).
MajGen David R. Heinz, USMC (April 2009 - February 2010) = 10 months
Maj Gen Charles R. Davis, USAF (July 2006 - April 2009) = 33 months
RADM Steven L. Enewold, USN (June 2004 - July 2006) = 25 months
Maj Gen John L. Hudson, USAF (October 2001 - June 2004) = 32 months
Maj Gen Michael A. Hough, USMC (May 1999 - October 2001) = 29 months
Maj Gen Leslie F. Kenne, USAF (August 1997 - May 1999) = 21 months
RADM Craig E. Steidle, USN (August 1995 - August 1997) = 24 months
Maj Gen George K. Muellner, USAF (November 1993 - August 1995) = 21 months
Filed under: Boeing, Business Line, Companies, development program, Events, missile defense, Press Releases, S&T
Boeing Completes Key Reviews for High Energy Laser Technology Demonstrator Program
ALBUQUERQUE, N.M., Oct. 26, 2009 — The Boeing Company [NYSE: BA] today announced the successful completion of two key reviews for the U.S. Army’s High Energy Laser Technology Demonstrator (HEL TD) program.
Completion of a critical design review in July allows Boeing to begin building a rugged beam control system on a Heavy Expanded Mobility Tactical Truck (HEMTT), a widely used military tactical vehicle. A system functional review in June addressed key enablers for fielding a next-generation, solid-state laser weapon system.
“This demonstration program is making significant progress in developing a weapon system that will transform the way soldiers are protected on the battlefield,” said Gary Fitzmire, vice president and program director of Boeing Missile Defense Systems’ Directed Energy Systems unit. “HEL TD’s speed-of-light, ultra-precision capability will increase the warfighter’s ability to counter rocket, artillery and mortar projectiles.”
The Army in 2008 awarded Boeing a contract to develop the system-engineering requirements for the overall HEL TD system and to complete the design of, then build, test and evaluate, a rugged beam control system on a HEMTT.
HEL TD is a cornerstone of the Army’s high-energy laser program. The HEL TD demonstration program will support the transition to a full-fledged Army acquisition program.
Boeing leads the way in developing high-energy laser systems for a variety of warfighter applications. These systems include the Airborne Laser, Advanced Tactical Laser, Free Electron Laser, Laser Avenger and Tactical Relay Mirror System.
A unit of The Boeing Company, Boeing Integrated Defense Systems is one of the world’s largest space and defense businesses specializing in innovative and capabilities-driven customer solutions, and the world’s largest and most versatile manufacturer of military aircraft. Headquartered in St. Louis, Boeing Integrated Defense Systems is a $32 billion business with 70,000 employees worldwide.
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Boeing Missile Defense Systems
Boeing Missile Defense Systems
Photo courtesy of Boeing Integrated Defense Systems.
Filed under: Business Line, Companies, Contract Awards, Countries, development program, Events, Federal Budget Process, Florida, Israel, Japan, Military Aviation, missile defense, Northrop Grumman Corp., production program, Services, States, U.S. Navy
The Navy’s new carrier based radar search and surveillance plane the E-2D had a successful Milestone C Low Rate Production Decision. The aircraft is an incremental upgrade to the existing E-2C. The Advanced Hawkeye program has made steady progress over the last several years and the production decision is a major advance for it and any defense acquisition program.
The company and its team has been awarded contract worth about $430 million to deliver the first four aircraft. The development aircraft had first flown back in late 2007. There has also been discussion of selling the aircraft to selected overseas customers. Right now the E-2C is used by Israel, Egypt, Japan and Singapore among others.
Filed under: Syndicated Industry News