Lockheed Bows To Trump, Agrees To Cut F-35 Prices

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January 19, 2017 7:51am NYSE:LMT

From Tyler Durden: Less than a month after president-elect Trump first tweeted about the F-35’s high costs, and a week after he brought up the F-35 in his first press conference, Reuters reports that The U.S. Department of Defense and Lockheed Martin are close to deal for a contract worth almost $9 billion as negotiations are poised to bring the price per F-35 below $100 million for the first time.


The Washington Post notes that in recent months, the president-elect has not been shy about taking to social media to criticize or heap praise on individual companies and military programs.

A Dec. 6 tweet bashed Chicago-based Boeing for what he referred to as the “out of control” cost of the Air Force One presidential airplane. Weeks later he turned in Boeing’s favor at the expense of Lockheed, tweeting that he had asked the company to “price out a comparable F-18 Super Hornet” because of the F-35’s high costs.

He also briefly brought up the F-35 in a Wednesday news conference intended to clarify his business conflicts, saying he would “do some big things” with the program and find a way to trim costs and improve the plane.

And then, after emerging from a meeting with President-elect Donald Trump at Trump Tower in New York last Friday, Lockheed Martin chief executive Marillyn Hewson told reporters that the Bethesda, Md.-based defense giant is close to a new contract deal that would cut the cost of the F-35 Joint Strike Fighter program and also create jobs.

“We had the opportunity to talk to [Trump] about the F-35 program, and I certainly share his views that we need to get the best capability to our men and women in uniform and we have to get it at the lowest possible price,” Hewson said.

 

“So I’m glad I had the opportunity to tell him that we are close to a deal that will bring the cost down significantly from the previous lot of aircraft to the next lot of aircraft and moreover it’s going to bring a lot of jobs to the United States.”

Which leads to tonight’s news, via Reuters, that they are close to deal for a contract worth almost $9 billion as negotiations are poised to bring the price per F-35 below $100 million for the first time, people familiar with the talks said Wednesday.

Talks are still ongoing for the tenth batch of stealthy fighter jets with a deal for 90 planes expected to be announced by the end of the month, three people said on condition of anonymity.

A Lockheed representative declined to comment and a representative for the fighter program said negotiations are ongoing.

The U.S. Defense Department expects to spend $391 billion in the coming decades to develop and buy 2,443 of the supersonic warplanes. Though the F-35 program has been criticized by Trump as too expensive, the price per jet has already been declining. Lockheed, the prime contractor, and its partners have been working on building a more cost-effective supply chain to fuel the production line in Fort Worth, Texas.

The overtures from the incoming administration may have had some effect, but Lockheed’s F-35 program manager Jeff Babione said last summer that the price of the F-35A conventional takeoff and landing version of the jet would drop to under $100 million per plane in this contract for the 10th low-rate production batch.

Another victory for Trump? Or as John Harwood would say, this would probably have happened anyway…

Lockheed Martin Corporation (NYSE:LMT) rose $1.43 (+0.56%) in premarket trading Thursday. Year-to-date, LMT has gained 1.65%, versus a 1.44% rise in the benchmark S&P 500 index during the same period.


This article is brought to you courtesy of ZeroHedge.


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