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Lockheed Cuts Cost Amid Pressure
Military.com  |  October 26, 2006
BETHESDA, Md. - Defense contractor Lockheed Martin has cut prices in the wake of congressional pressure over rising weapons costs, according to a published report.

The moves include a drop in the profit margin on the company's C-130J cargo plane, The Wall Street Journal said Wednesday on its Web site, citing people familiar with the matter.

The cuts follow criticism by Sen. John McCain, R-Ariz., who is expected to become chairman of the Armed Services Committee if Republicans maintain control of the Senate in the November election.

Lockheed invested more than $1 billion to develop the C-130J, planning to recoup the investment during production, but has now agreed not to seek further reimbursement.

The plane's importance to "national defense outweighs the continued recovery of funds we invested in its development," Lockheed spokesman Tom Jurkowsky said.

Restructuring of large Pentagon contracts is unusual, prompted normally by program changes or a contractor's failure to deliver. Neither was the case in this instance, although the C-130J did face early criticism of its performance.

The cost of the war in Iraq and procurement scandals have changed the defense contracting environment, shifting emphasis toward greater transparency, and Lockheed agreed to changes following prodding by McCain, widely viewed a potential Republican presidential candidate, and Air Force leaders, the newspaper reported.

Under the restructured contract, the Air Force said Lockheed will cut the program cost by 8 percent for the remaining 26 Air Force C-130Js and nearly 12 percent for 13 Marine planes, a total of $244 million, the newspaper said.

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