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Lockheed vows to attack F-35 costs


Just a day after the House Armed Services Committee considered -- but rejected -- a serious proposal to cut back on a planned purchase of F-35B Lightning IIs, Reuters' Andrea Shalal-Esa is reporting that Lockheed Martin officials say they get it: Everyone involved wants the price for the F-35 to come down as much as possible. What would help, Lockheed says, is if it could build the jets faster, using its newly upgraded factory. But as Shalal-Esa writes, even LockMart's ideal production target is just a trickle compared to the way things used to be:

The company has invested about $1 billion to modernize the same factory where "Rosie the Riveter" and other workers churned out 10 B-24 bombers a day during World War Two. These days, there's a new bright blue rail that moves airplane pieces down the line, and laser-guided machines that cut labor costs and eliminate expensive errors. The new machinery is working wonders, but Lockheed says accelerating production would have even more impact. The producer and the purchaser may agree on the need for lower costs, but they face a long summer of tough negotiations on how to get there. As recently as February, Pentagon acquisition chief Ashton Carter slowed production to allow more testing and fix technical challenges that have doubled the cost of the $382 billion weapons program over the past 10 years.

Lockheed says that move -- part of a second major restructuring in two years -- is making it tough to drive costs lower since it was counting on larger quantities to trim supplier costs and tap the resulting "economies of scale." "If you don't build the airplane in high production rates, you're never going to get the economic benefit of having that infrastructure in place. It's going to be just a cost to you," Tom Burbage, executive vice president and general manager of the F-35 program, told Reuters in an interview.

Once the plane hits full production, Lockheed expects to produce 17 to 22 planes a month -- a little less than daily production of one F-16 a day during that program's heyday.

As Shalal-Esa goes on to write, both U.S. and international customers have reason to expect the costs of the F-35 to at least remain high, if not continue growing. In fact, her story even includes the dreaded phrase "death spiral," the phenomenon in which quantity cuts lead to higher unit costs, which lead to quantity cuts, which lead to higher unit costs, and then the program dies. We're not yet there, but everyone is thinking about it. As for Lockheed's specific hope for an increased rate of production? Not in the cards, Shalal-Esa writes:

"[O]ne senior Senate aide said there was little appetite for more significant changes in 2012 given the concerns about spending and earmarks," she writes."'They haven't proven that they can build more airplanes yet,'" said the aide.


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