Lockheed says US order shows commitment to missile

* Lockheed says nearing 90 percent reliability

* Program facing cancellation without improvements

* Late summer testing to determine program's fate

By Andrea Shalal-Esa

WASHINGTON, July 6 (Reuters) - Lockheed Martin Corp (LMT.N) said on Monday its troubled JASSM cruise missile was nearing a 90 percent reliability rate that could save it from termination after critical tests in late summer.

Alan Jackson, director of both Joint Air-to-Surface Standoff Missile programs for Lockheed, said Monday's $23 million Air Force order for 12 extended-range versions of the missile underscored the service's commitment to the development of the $6 billion radar-evading missile.

U.S. Air Force officials in May said they could cancel the program after years of repeated technical problems if tests this summer did not show a marked improvement in the missile's reliability. JASSM is a long-range, conventional, precision missile designed to destroy fixed and moving targets.

The weapon was declared combat-ready five years ago and has been deployed despite several testing failures, but it is under tough scrutiny now that the Pentagon is reexamining weapons programs with cost overruns and technical problems.

Jackson said the company had invested its own dollars in improvements and increased screening of components to meet the Air Force's 90 percent reliability requirement, due to take effect in several years.

"With a number of corrective actions that we have taken, we think that we are now significantly over 80 percent reliability," Jackson told Reuters by telephone.

He said Lockheed hoped to demonstrate the improvements during a series of flight tests of the new missile in late summer. He said dates for the tests had not yet been set.

"We're within very close striking distance of 90 percent now." He said the Air Force had not given Lockheed any "hard pass-fail criteria" for the tests, but the company knew that the program's future was at stake.

Four JASSM missiles tested in November, January and February did not detonate on impact or had other problems, raising fresh questions about the program. But the missile still had a reliability rate of 79 percent, and was on track to reach the 90 percent goal, the Air Force said.

Jackson said Lockheed was funding various changes on its "own nickel," included swapping some components on missiles already delivered to the Air Force, as well as design changes to more fully automate production of component parts and eliminate the possibility of human errors, Jackson said.

He decline to give details on the cost of the retrofits and other improvements being paid for by Lockheed.

The Air Force's proposed fiscal 2010 budget did not include any funding for production of new missiles, although it did include $82.2 million to address reliability issues.