March 1, 2012 / 12:14 AM / 7 years ago

Japan says may cancel Lockheed F-35 if price rises

TOKYO (Reuters) - Japan may cancel orders for Lockheed Martin Corp’s F-35 fighter jets if the price rises or deliveries are delayed, Defense Minister Naoki Tanaka said on Wednesday, casting doubt on Tokyo’s choice of next-generation combat aircraft.

Tokyo has warned Washington against increasing the price, but this was the first time Tanaka publicly raised the possibility of cancelling the order.

The Pentagon this month confirmed plans to put off its own orders for 179 F-35s over the next five years to save $15.1 billion, a move that a Lockheed executive said would increase the price of the radar-evading warplane over time.

Smaller orders make it more difficult for Lockheed to order components in bulk from its suppliers. This can lead to higher prices in the short term. The company also has to spread its fixed infrastructure costs over a smaller number of planes.

Japan is due to pay 9.9 billion yen ($122.96 million) per fighter for an initial batch of four F-35s scheduled for delivery by March 2017. Japan plans to buy 42 in total.

“As for the first four planes, I expect an official contract to be concluded by this summer. If it turns out they cannot meet what they have proposed by that time, that would raise concerns about our defense capability,” Tanaka told parliament.

“I believe we would need to consider as a potential option matters like cancelling our orders and starting a new selection process if that is the case.”

Continued schedule delays and talk of lingering technical issues have prompted the eight countries helping to fund development of the F-35 to rethink their own near- and long-term plans. The group includes Britain, Australia, Turkey, Canada, Denmark, Norway, Italy and the Netherlands.

U.S. Air Force Chief of Staff General Norton Schwartz on Wednesday told Reuters the U.S. government was pressuring Lockheed to increase efforts to hold down the cost of the plane, despite the delay in orders from the United States.

The Air Force authorized the start of initial, limited flights of the Air Force variant of the F-35 by certified test pilots at Eglin Air Force Base in Florida, where pilots and maintainers will be trained.

Schwartz said a first flight was planned at Eglin next week, part of a phased approach that will evaluate the training curriculum and gain more experience on the airplane before transitioning to more active training flights later in the year.

“This will be a crawl, walk, run sort of undertaking,” he told reporter at a breakfast meeting.

Japan, which is concerned about China’s rapid military buildup and constant threats from impoverished North Korea, in December chose the F-35 over combat-proven but less stealthy rivals.

The F-35 competed against Boeing Co’s F/A-18 and the Eurofighter Typhoon, made by a consortium of European companies including BAE Systems.

Lockheed Martin has said it is committed to providing F-35s that meet the cost, schedule and industrial requirements of the Japanese government, but says F-35 pricing is determined by talks between the Japanese and U.S. governments.

Japan’s defense budget has been under pressure with the country saddled by a public debt twice the size of its economy.

Stealth technology has drawn much attention in Japan since China, which has a long-running territorial dispute with Japan, confirmed last year that it had held its first test flight of the J-20 stealth fighter jet.

Reporting by Kiyoshi Takenaka and Tim Kelly in Tokyo; additional reporting by Andrea Shalal-Esa in Washington; Editing by Nick Macfie, Phil Berlowitz

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