Lockheed sees next U.S. F-35 fighter contract early this summer

WASHINGTON, June 9 Mon Jun 9, 2014 6:45pm EDT

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WASHINGTON, June 9 (Reuters) - Lockheed Martin Corp expects to sign a contract with the U.S. government early this summer for an eighth batch of F-35 fighter jets, but the deal is unlikely to match price reductions seen on the last few contracts, the company's top financial officer said Monday.

Chief Financial Officer Bruce Tanner said the company had driven the price of the jets lower by 4 percent to 5 percent in each of the previous three contracts, but savings of that magnitude were unlikely on the next deal, which will be for 43 jets, given the lack of large quantity increases in the order.

"I'm not sure we will get to that level, but I do expect we'll have a reduction from the previous lot on an aircraft-to-aircraft basis," Tanner told Reuters in an interview during the company's annual "media day."

Lockheed submitted a proposal for the eighth batch of F-35 jets in December. The company finalized a contract valued at $7.8 billion in September for 71 more F-35s, including a sixth batch of 36 jets, and a seventh batch of 35 aircraft.

In April, the Pentagon's F-35 program chief, Air Force Lieutenant General Chris Bogdan, said he hoped to sign contracts with both Lockheed and engine maker Pratt & Whitney, a unit of United Technologies Corp, by the end of May.

Orlando Carvalho, executive vice president of Lockheed's aeronautics division, said the two sides were "making progress" and could sign a deal before the end of June, ahead of the jet's international premier at two air shows in Britain in July.

"I think we're closing on a final settlement, but we still have a little ways to go. Let's hope by the end of the month we have it done," he told Reuters.

Lorraine Martin, Lockheed's F-35 program manager, told reporters later that there had been some delays in getting the discussions started with the Pentagon, but the two sides were now "trading really productive offers to get to closure."

F-35 program spokesman Joe DellaVedova declined comment on the timing of a possible contract agreement, or the scope of any likely cost reductions, saying only that negotiations were continuing with both Lockheed and Pratt.

"I think we'll resolve this expeditiously," Martin said. (Reporting by Andrea Shalal; Editing by David Gregorio)

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