Lockheed: F-35A Cost To Drop Below $80 Million Per Fighter In 2023

By: Ben Werner

Lockheed Martin is committed to producing the F-35A Lightning II Joint Strike Fighter for $80 million each by next year and further reducing the overall program costs as part of the next production contract negotiations with the Department of Defense, the company said on Tuesday

In 2022, Lockheed Martin officials expect to negotiate the next multiyear F-35 contract with the Joint Program Office. The goal is to use the steady cash flow from a multiyear contract to drive down further the production costs once the contract kicks in.

As part of a pitch for multiyear contract, Lockheed Martin officials say such a deal will lower the F-35A price to less than $80 million per fighter, Marillyn Hewson, chief executive of Lockheed Martin, told analysts during a conference call today discussing the company's 2018 year-end results and expectations for 2019.

“That's our target, to continue to drive the unit cost down,” Hewson said. “And we won't stop there, we will always be looking at ways that we can take the cost down in the program as it continues to mature and grows.”

Currently, the F-35A, the standard take-off and landing variant primarily used by the U.S. Air Force and foreign partners, has a price tag of $89.2 million. The F-35B short takeoff/vertical landing variant used by the Marine Corps and some foreign partners currently cost $115.5 million each, and the F-35C carrier variant used by the Navy cost $107.7 million per fighter, according to Lockheed Martin.

As production increases, the price per F-35 is expected to decrease due to efficiencies in the production process and the ability to lock in lower prices for large quantities of raw materials and components. Lockheed Martin plans to deliver 131 fighters this year, compared to the 91 F-35 fighters delivered in 2018. Within two years, company officials expect to deliver more than 161 fighters per year.

However, with F-35 production is closing in on what's considered the full capacity for the program of record, Hewson said the company could build more.

Increasing the production rate would require coordination with the JPO, the supply chain and international customers, but Hewson said the company could handle increased demand. Germany, Switzerland and Finland are currently considering buying the F-35, Hewson said.

Already the U.S. and 12 other countries are either part of the program of record or committed to purchasing F-35 fighters, according to Lockheed Martin.

“We could certainly go to a higher rate if the demand were such that we needed to do that,” Hewson said.

Other segments of Lockheed Martin's weapons systems portfolio are also expected to perform well in 2019. The company's Missiles and Fire Control business are expected to record a profit of between $1.3 billion and $1.4 billion in the year. The Rotary and Mission Systems business is expected to record a profit of about $1.3 billion for the year, Bruce Tanner, Lockheed Martin's chief financial officer, said during the call.

After the call, the U.S. Department of State's Defense Security Cooperation Agency announced it approved the sale of two Aegis Weapon Systems, two Multi-Mission Signal Processors and two Command and Control Processor refreshes to Japan.

Lockheed Martin's Rotary and Mission Systems division is the prime contractor for the Aegis Weapon System and Multi-Mission Signal Processor portion of the $2.1-billion total buy. Japan selected Lockheed Martin in July to outfit its Aegis Ashore system but needed State Department approval before finalizing the deal.

In September, the Japanese Maritime Self-Defense Force successfully tested its sea-based Aegis ballistic missile defense capability with the U.S. Missile Defense Agency. Japan currently has four Aegis-equipped destroyers and is in the process of building two more.

The following is the State Department notice it approved a proposed Aegis Weapon System sale to Japan.
AEGIS Weapon Systems
Transmittal No: 19-08

WASHINGTON, January 29, 2019 – The State Department has made a determination approving a possible Foreign Military Sale to Japan of two (2) AEGIS Weapon Systems (AWS), two (2) Multi-Mission Signal Processors (MMSP) and two (2) Command and Control Processor (C2P) Refreshes and related equipment for an estimated cost of $2.150 billion. The Defense Security Cooperation Agency delivered the required certification notifying Congress of this possible sale today.

The Government of Japan has requested to buy two (2) AEGIS Weapon Systems (AWS), two (2) Multi-Mission Signal Processors (MMSP) and two (2) Command and Control Processor (C2P) Refreshes. Also included is radio navigation equipment, naval ordnance, two (2) Identification Friend or Foe (IFF) Systems, Global Command and Control System-Maritime (GCCS-M) hardware, and two (2) Inertial Navigation Systems (INS), U.S. Government and contractor representatives' technical, engineering and logistics support services, installation support material, training, construction services for six (6) vertical launch system launcher module enclosures, communications equipment and associated spares, classified and unclassified publications and software, and other related elements of logistical and program support. The total estimated program cost is $2.150 billion.

This proposed sale will contribute to the foreign policy and national security of the United States by improving the security of a major ally that is a force for political stability and economic progress in the Asia-Pacific region. It is vital to U.S. national interests to assist Japan in developing and maintaining a strong and effective self-defense capability.

This proposed sale will provide the Government of Japan with an enhanced capability against increasingly sophisticated ballistic missile threats and create an expanded, layered defense of its homeland. Japan, which already has the AEGIS in its inventory, will have no difficulty absorbing this system into its armed forces.

The proposed sale of this equipment and support does not alter the basic military balance in the region.

The prime contractor for the Aegis Weapon System and Multi-Mission Signal Processors will be Lockheed Martin Rotary and Mission Systems, Washington, DC. The Command and Control Processor Refresh will be provided by General Dynamics, Falls Church, VA.

There are no known offset agreements proposed in connection with this potential sale.

Implementation of this proposed sale will require annual trips to Japan involving U.S. Government and contractor representatives for technical reviews, support, and oversight for approximately eight years.

There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.

This notice of a potential sale is required by law and does not mean the sale has been concluded.

All questions regarding this proposed Foreign Military Sale should be directed to the State Department's Bureau of Political Military Affairs, Office of Congressional and Public Affairs, pm-cpa@state.gov.

https://news.usni.org/2019/01/29/40708