December 2, 2010 / 8:42 PM / 9 years ago

UPDATE 1-Lockheed says focused on keeping F-35 affordable

* Lockheed sees average F-35 price at $60 mln

* Company officials also unhappy with test, cost issues

* Reduction in total purchase seen as “showstopper”

By Andrea Shalal-Esa

NEW YORK, Dec 2 (Reuters) - Lockheed Martin Corp (LMT.N) officials said on Thursday they shared Pentagon concerns about cost increases and testing delays that have plagued the development of the F-35 fighter, but said they were making changes to ensure the new fighter remained affordable.

“We do believe that we’re on a path to achieve the affordable product that’s expected,” Ralph Heath, executive vice president of Lockheed’s aeronautics division told a conference hosted by Credit Suisse and Aviation Week.

Heath acknowledged concerns raised by the Pentagon’s chief weapons buyer, Ashton Carter, who told the same conference on Wednesday that he was unhappy with the state of the program and was pressing for more work to cut costs.

The Pentagon this year already restructured the $382 billion fighter program, adding 13 months to the development phase, but a comprehensive review is pointing to a further possible delay of up to three years and added costs of up to $5 billion, sources familiar with the program said last month.

Marine Corps General James Cartwright, vice chairman of the Joint Chiefs of Staff, said on Thursday that officials were considering whether it whether it would still be economical to build a short takeoff version of the F-35 for the Marine Corps now that Britain had decided to buy a different variant.

Britain’s decision could affect Lockheed’s ability to produce the plane economically, since the sole remaining customers would be the Marine Corps and Italy, analysts said.

Cartwright said the short takeoff variant was intended to provide the capability of deploying the F-35 from platforms other than land bases or aircraft carriers. The question was whether there were alternative ways to do that, he said.

Carter said on Wednesday that the new radar-evading fighters were initially slated to cost $50 million a piece in 2002 dollars, but cost growth was threatening to drive that sum to $92 million — a price the Pentagon was unwilling to pay.

Asked about that comment, Lockheed’s Heath said Lockheed still expected each F-35 fighter to cost $60 million on average, in 2002 dollars, over the life of program.

Asked about possible moves to scrap the short takeoff version of the fighter, Lockheed Chief Financial Officer Bruce Tanner told the conference that the variant was doing very well in testing and provided a capability for forward deploying fighters that was not available elsewhere.

He said another idea being circulated in Washington, to cut the overall number of F-35s and build more F-16s, would be a “showstopper” since the older fighter did not have the same capabilities as the more advanced F-35.

He also said Lockheed had tooling in place to build just 4 F-16s a month.

Tanner said a fixed price contract signed recently for a fourth batch of 32 new F-35 fighters came in at half the price of the first batch of planes built, which showed that the company was making good strides in lowering the plane’s cost. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)

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