Pentagon Pushes for Deeper F-35 Cost Cuts

By Doug Cameron

The Pentagon is pushing to make the F-35 combat jet cheaper and will take over some repair work to prevent the world's most expensive military program from becoming unaffordable.

Lockheed Martin Corp.'s multiyear effort to reduce the plane's cost has worked, but the military head of the program warned spending on the F-35 could still surpass the Pentagon's budget for the program by 2021.

"The price is coming down, but it's not coming down fast enough," Vice Adm. Mat Winter said on Wednesday.

Lockheed derives a quarter of its sales from the F-35 program. The Pentagon's request could dent expectations for Lockheed to win a greater share of the business of maintaining the planes, which is typically more profitable than building aircraft.

Adm. Winter has launched a six-month review of labor expenses incurred by Lockheed and partners including Northrop Grumman Corp. and BAE Systems PLC to analyze the plane's cost structure.

Lockheed said it is satisfied with existing cost-cutting efforts by the companies, and said boosting production and securing economies of scale were the best ways to contain the F-35's costs.

The Pentagon said that taking on some of the F-35 repair work will free companies working on the program to make spare parts that have sometimes run short. Adm. Winter said just over half the fleet of 280 jets is available to fly because of spares shortages and quality issues.

Lockheed and its partners are in talks with the Pentagon on an 11th batch of jets for the U.S. and allies including the U.K., Norway and Australia. Adm. Winter said the average cost of jets in the 130-plane deal would be less than for the previous batch.

The average cost of the F-35A model used by the U.S. Air Force dropped to $94.6 million in the last contract, a 7% decline from the previous deal.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

February 28, 2018 15:21 ET (20:21 GMT)

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