U.S. sees "manageable risk" in F-35 restructuring
WASHINGTON (Reuters) - The Pentagon on Monday confirmed plans to postpone production of 179 F-35 Joint Strike Fighters built by Lockheed Martin Corp over the next five years to save $15.1 billion, but it said the risk was "manageable."
The U.S. defense budget for fiscal 2013 funds 13 fewer airplanes than initially planned, saving $1.6 billion on the multinational, radar-evading fighter plane, the Pentagon's biggest weapons program.
This is the third restructuring in recent years of the F-35 program. The Pentagon expects to spend $382 billion over the next two decades to develop and buy 2,443 of the new warplanes.
A spokesman for the Pentagon's F-35 program office said the U.S. military remained committed to buying all 2,443 jets in its original plans, and was focused on completing developmental tests so the plane could enter service.
"We remain committed to the development of the Joint Strike Fighter. Our total numbers remain strong at 2,443," said Joe DellaVedova, the program's spokesman.
Lockheed said it would work to implement the Pentagon's proposed slowdown in F-35 production "as efficiently as possible" and remained confident that the new radar-evading plane would be affordable.
"We believe the program will stabilize around the new acquisition strategy. And we are confident that we will deliver an effective and affordable program," said Lockheed spokeswoman Jennifer Whitlow.
In documents released with the fiscal 2013 budget request, the Pentagon comptrollers office said the decision to slow production was based on "changing department priorities, funding constraints and the need to reduce concurrency."
Concurrency refers to the Pentagon's plan to start producing the new plane before flight tests were begun, or completed.
It said the department "determined that is a manageable risk to reduce procurement by a combined total of 13 aircraft in fiscal year 2013 and 179 aircraft from FY 2013 to FY 2017."
Defense Secretary Leon Panetta in January, a year ahead of schedule, lifted a two-year "probation" on the Marine Corps B-model of the plane, which can land like a helicopter. He said the jet's technical issues were on their way to being resolved.
Panetta justified the decision in a letter on Monday to Senator John McCain, the top Republican on the Senate Armed Services Committee and a leading critic of cost overruns in the F-35 program.
"I made the decision to lift ... probation because the F-35 B is now demonstrating development, test and production maturity comparable to, and not substantially different from, the other variants," he said in the letter.
Panetta said the different technical issues that led the plane to be put on probation had largely been resolved. He acknowledged continuing technical challenges with the aircraft but said they were "consistent with the kind of discovery to be expected in a development program."
Panetta said in January that the Pentagon would slow its production to avert costly retrofits as it began implementing $487 billion in defense cuts over the next decade.
The Pentagon's 2013 budget would fund 19 conventional takeoff variants for the Air Force, six short takeoff, vertical landing (STOVL) variants for the Marine Corps, and four jets for the Navy that are designed to land on aircraft carriers.
Washington's plan to further slow production of the F-35 is prompting its eight foreign partners to rethink their own orders, threatening a vital revenue stream for Lockheed and slowing its drive to make the stealthy new fighter jet as affordable as promised.
Slower U.S. orders will delay savings that would come from building more planes faster, according to Lockheed, which says the F-35 is making good progress in testing despite a constant stream of negative headlines and criticism from U.S. lawmakers.
Canada has tentatively scheduled a meeting of the partners at its embassy in Washington next month before a scheduled formal meeting in mid-March in Australia, where the partners are due to outline their production plans.
The delay in orders will also affect Northrop Grumman, which is responsible for about 25 percent of the F-35 program, Britain's BAE Systems, which has about 17 percent, and engine maker Pratt & Whitney, a unit of United Technologies Corp.
The new plan calls for the United States to buy 244 jets over the next five years, with the partner countries and Israel and Japan slated to buy 285 planes, although it is clear that the international orders will likely drop from that level.
Lockheed shares closed 72 cents, or 0.8 percent, higher at $88.23 on the New York Stock Exchange.
(Reporting By Andrea Shalal-Esa; Editing by Steve Orlofsky)
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