Lockheed defends progress on F-35 despite concerns

* New report on delays came after $16 billion overrun

* Lockheed cites measurable progress

* Pentagon officials meet with Lockheed on Nov. 21-22

By Andrea Shalal-Esa

WASHINGTON, Nov 17 (Reuters) - Lockheed Martin Corp (LMT.N)
said on Tuesday it was making progress on the F-35 fighter, the
costliest U.S. weapons program, despite recent reports that
predict rising costs and delays.

Lockheed was working to improve the way it builds the
planes, to accelerate flight-test activities and to deal with
remaining technical risks, said Lockheed spokesman John Kent.

"The F-35 program is demonstrating measurable and
significant improvement," Kent said. The program will meet a
2012 deadline when military services plan to start using the
fighters, he said.

The Fort Worth Star-Telegram this week published details
from a Defense Contract Management Agency report, which showed
Lockheed and other contractors were months late on deliveries
of test planes and components for future production aircraft.

The report, obtained through a Freedom of Information Act
request, said the F-35 was even further behind on testing, and
Lockheed could exhaust its development budget in a year. The
report came weeks after another Pentagon team concluded it
would cost $16 billion more than expected, and take more time.

Pentagon acquisition chief Ashton Carter will meet with
company officials on Nov. 21-22 to examine ways to avoid cost
increases and delays, including accelerating flight tests.

Congressional aides and analysts said they were not
surprised about predicted cost increases and delays, given the
history of other major weapons programs.

But they also said the Pentagon had little choice but to
continue the Lockheed program. Partner nations are counting on
the F-35, and there are no viable alternatives for the U.S.
Marine Corps or the Air Force.

"Neither side has a lot of wiggle room," said Richard
Aboulafia, analyst with the Virginia-based Teal Group. "Both
sides are probably in a position where they have to sit down
and discuss the best way to reduce risk and control costs."

The F-35 issues were relatively minor compared with other
weapons programs, Aboulafia said. But he added that Congress
must lock in funding to prevent an "endless cycle of technical
problems and retaliatory budget cuts that make the problems
worse."

Congressional cuts trimmed the F-22 program from 750 to 187
aircraft, driving the cost of each remaining jet far higher.

LOCKHEED CLAIMS PROGRESS

Analysts said they did not expect Congress to cut the
purchases of F-35s significantly given that the Marine Corps
had no alternative for its short takeoff, vertical landing
version, and the Air Force's F-22 was ending production.

Lockheed said it made considerable progress over the past
year, delivering 12 development aircraft and cutting
manufacturing time of the remaining seven developmental planes
and 31 low-rate production planes. Lockheed's costs were
actually below the government's estimate in the latest selected
acquisition report, Kent said, and engineering development was
85 percent complete.

One senior defense official, who was not authorized to
speak on the record, said recent Pentagon reports "overstated"
the F-35 problems. But the program should "be as efficient in
flight test as you need to be for the budget that's out there,"
he added.

The F-35 program office, Lockheed and the Pentagon's cost
estimators are at odds over how quickly the company can shed
costly engineers working on the program. Accelerating flight
tests could help phase out those costly jobs sooner, said Loren
Thompson with the Lexington Institute.

But Chris Hellman of the National Priorities Project in
Massachusetts said the program must execute the level of
testing initially recommended. "Faster is fine, but less is
worrisome," he said.

Lockheed is developing three radar-evading F-35 models to
replace at least 13 types of aircraft, initially for 11
nations. The United States plans to buy 2,443 of the aircraft.

Purchases by partner nations Britain, Canada, Italy,
Denmark, Netherlands, Norway, Turkey and Australia and others
could raise production to 3,000 or more.

Northrop Grumman Corp (NOC.N) and BAE Systems (BAES.L) are
Lockheed's chief F-35 sub-contractors.
(Reporting by Andrea Shalal-Esa, editing by Matthew Lewis)