WASHINGTON (Reuters) - Senior Pentagon officials are considering postponing production of an additional 100 F-35 fighter jets by Lockheed Martin Corp as part of a five-year defense plan to be sent to Congress, according to three people familiar with the program.
“No decision is likely to be made until November or December, but this is clearly a major option that would help the Department of Defense meet the savings mandates under the Budget Control Act,” said one person who was not authorized to speak on the record.
The program has already been restructured twice over the past two years, postponing production of over 224 radar-evading fighter planes — moves that tend to drive up the price of each airplane in the short-term.
The F-35, the Pentagon’s costliest weapons program, is facing greater scrutiny in Congress and at the Pentagon as lawmakers look for ways to pare the nation’s expected $1.3 trillion budget deficit for fiscal 2011 and its $14.7 trillion of debt.
Lockheed Martin Chief Executive Robert Stevens, speaking at a Reuters summit this month, warned against underinvesting in the program. It was important to increase production and start delivering the planes to the battlefield, he said.
Stevens said the plane’s flight testing was ahead of schedule this year after delays in past years. At the end of August it was 8 percent ahead on flights and about 11 percent ahead on the number of test benchmarks it had completed.
The single-seat aircraft is currently in low-level initial production but is expected to ramp up to full production runs by 2015 or 2016 once it gets the go-ahead from the U.S. government. Lockheed is developing three different models for use by the Air Force, Navy and Marine Corps, as well as for over eight international partners on the program.
Slowing the expected ramp up in production could pose problems for hundreds of suppliers on the program, many of whom were counting on larger order volumes to drive down prices, according to industry executives.
Lower numbers will also affect Lockheed, which expects the F-35 to account for about 20 percent of its overall revenues once full production begins.
The Defense Department currently plans to 2,443 of the aircraft through 2035, at a total cost of some $385 billion. It is designed to replace at least 13 types of aircraft for 11 nations initially.
There has not been any discussion thus far about reducing that total buy, but analysts warn that rising unit costs could eventually prompt Congress to curtail the overall production number, which in turn would drive up prices per aircraft even further.
“It’s been called a death spiral,” said Norm Augustine, a former chief executive at Lockheed Martin. “When you start a program with the intention of buying 1,000 airplanes and you wind up buying 100 — and your plans call for building six a month, and you wind up building six a year — the costs just go out of sight,” he said.
Reporting by Andrea Shalal-Esa; Additional reporting by David Alexander; Editing by Phil Berlowitz and Tim Dobbyn