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F-35 Price Dropping But Not Enough for the Pentagon

Seaman Lance Gilinksy stands lookout watch on the fantail of the Nimitz-class aircraft carrier USS Abraham Lincoln (CVN 72) while an F-35C Lightning II, from the “Rough Raiders” of Strike Fighter Squadron (VFA) 125 approaches on Dec. 8, 2017. US Navy Photo

ARLINGTON, Va. — The F-35 Lighting II Joint Strike Fighter production is ramping-up, but the Pentagon’s official in charge of the program warns the current $94 million to $120 million cost per jet is still too high and could become unaffordable if more savings can’t be squeezed out of the manufacturing process.

Speaking with reporters Wednesday, Vice Adm. Mat Winter, the Pentagon director of the F-35 Joint Strike Fighter program, detailed where production now stands and provided a sketch of where he’d like production to be in the near future.

Winter’s team is in the midst of negotiations with lead F-35 contractor Lockheed Martin to set a price for the next group of F-35 jets – Lot 11 – the Pentagon will buy.

Lockheed Martin submitted its Lot 11 proposal about a year and a half ago, but Winter said the first offer from Lockheed Martin didn’t arrive at the Pentagon until more recently. Winter conceded he had hoped to have the deal finalized by the end of 2017.

The negotiation might be dragging on, but Winter both his team and Lockheed Martin are negotiating in good faith.

“I will tell you I am not as satisfied with the collaboration and the cooperation by Lockheed Martin,” Winter said.
“They could be much more cooperative and collaborative. We could seal this deal faster. We could. They choose not to, and that’s a negotiating tactic.”

More importantly, Winter stressed the prolonged negotiation is not delaying Lot 11 production. The component parts are purchased a year before the first aircraft is built, so work on Lot 11 has already started.

An F-35C Lightning II assigned to the “Rough Raiders” of Strike Fighter Squadron (VFA) 125 sits on the flight deck prior to flight operations aboard the Nimitz-class aircraft carrier USS Abraham Lincoln (CVN-72). US Navy Photo

Winter wouldn’t share the Pentagon’s target price for Lot 11, only saying it will be lower than what was paid for Lot 10. At the same time, Lot 11 will mark an increase in production, with 130 aircraft due for delivery. In comparison, when completed by the end of 2018, Lot 10 will have delivered 105 aircraft. Lot 9 had a delivery of 66 aircraft.

“We are on the ramp,” Winter said.

Marillyn Hewson, chief executive of Lockheed Martin, touted the increasing F-35 production during a Jan. 29 conference call with Wall Street analysts, according to a transcript from investor analysis site Seeking Alpha. Hewson said Lockheed Martin expects, “To deliver approximately 90 jets this year, an increase of over 35 percent from 2017 as we continue to progress to full rate production in the next few years.”

Lockheed Martin officials predict a production rate of 150 aircraft per year will be achieved within the next couple of years.

However, even with production increasing and the price-per-aircraft is decreasing, Winter expressed alarm the price isn’t dropping enough. Next week Winter is scheduled to appear before the House Armed Services Committee, and it is likely the program’s cost will be a topic of discussion.

Through Lot 10, the vast majority of production has been focused on building the mature designed F-35A – the Air Force variant – with an average cost of $94.3 million per jet, according to Lockheed Martin. The Marine Corps vertical lift F-35B variant and the Navy’s arrested landing F-35C variant both had a cost of more than $120 million per jet in Lot 10.

Winter has a team investigating 100 suppliers in the F-35 supply chain to identify places where production can be improved, reducing the problem of parts that aren’t manufactured correctly or where the production line can be more streamlined.

“The price is coming down but it’s not coming down fast enough,” Winter said. “We don’t know to the level of granularity that I want to know, what it actually costs to produce this aircraft.”