* Four more test aircraft to be delivered* Pentagon cost estimate said lowered by $1 bln
* More conservative budgeting spurred by acquisition law (Adds quotes, background on program, analyst comment, byline)
Defense News ~ By Andrea Shalal-Esa
WASHINGTON, Jan 6 (Reuters) - Lockheed Martin Corp (LMT.N) on Wednesday said it was continuing work to sharply reduce the costs of the F-35 fighter and did not believe the program was in trouble despite a report that the Pentagon will cut production of 122 airplanes through 2015.
Lockheed spokesman Chris Geisel said the company was running about four to six months late on finishing the final four of 19 developmental aircraft, which in turn prevented completion of all the flight tests planned by the end of 2009.
But he said the gap was narrowing between Pentagon and Lockheed projections about the cost and time required to complete the development program and the company was continuing its drive to lower overall costs on the program.
"It is Lockheed Martin's intent to continue the ongoing steep reductions in F-35 cost during low-rate initial production so that the government can buy more aircraft within the existing budget," Geisel said.
Concerns about the F-35 program -- the Pentagon's most expensive weapons program at roughly $300 billion -- have mounted in recent months, amid declining tolerance by Pentagon officials and lawmakers for cost overruns and schedule delays.
Last month, the U.S. Senate Armed Services Committee said it was "deeply concerned" about the program after a closed-down discussion with Pentagon officials about a strategy to keep costs down and get development efforts back on track.
Air Force Secretary Michael Donley last month told Reuters he expected a shake-up of the F-35 program, including adjustments in schedule, but said there were no plans to reduce the total number of fighters to be purchased.
Lockheed Chief Executive Robert Stevens said his company agreed with the Pentagon that it should use some of its potential profit to get the program back on track.
Senior Lockheed officials were meeting this week with top Pentagon officials to hammer out a final plan for funding the program in fiscal 2011 and the coming years, Geisel said.
"Much of the information that's recently been reported is pre-decisional and we continue to work with the (Office of the Secretary of Defense) to come to resolution," he said.
He said the possible changes being discussed would not affect the U.S. government's plan to buy a total 2,443 F-35s for the three military services, or the dates that the services have set for starting to use the new fighter jets.
"The program is not in trouble. We are a little behind on delivery of the (system design and development) aircraft, about six months, but the rest of the aircraft will be delivered within the next four to six months."
Geisel also noted that the Pentagon was shifting to a more conservative approach when budgeting all weapons programs as a result of an acquisition reform law passed in 2009.
He also noted that Pentagon cost estimators had reduced their estimate of the extra money needed to complete the program's development by $1 billion, and now forecast a delay of just 13 months, about half that initially projected.
Bloomberg on Wednesday reported that Defense Secretary Robert Gates had directed the military in a Dec. 23 budget document to delay the F-35 program, cutting planned purchases by 10 aircraft in fiscal 2011 and a total of 122 through 2015.
Gates cut the purchase of F-35s by 10 planes in 2011 to 42; by 17 in 2012 to 45; by 52 in 2013 to 77; by 20 in 2014 to 90; and 23 in 2015 to 107, it said, citing the document.
Bloomberg said the Pentagon would use more than $2.8 billion that had been budgeted for buying airplanes over those years to continue its development instead.
The money would be used to complete scheduled flight testing more quickly and work on issues such as software, said a source familiar with the program who confirmed the Bloomberg report, but was not authorized to speak publicly.
He said the Pentagon could potentially add back in the production airplanes if Lockheed and the program were able to beat their cost and schedule targets.
Defense analyst Loren Thompson said the Pentagon was essentially putting money back into the development phase of the program that had been removed by the Bush administration, reducing the likelihood of more serious problems later on.
"This really is not bad news for the company. They are shifting money from production to do more test and reduce risk on the program," he said.
"But the government is building incentives into the development program so that some of the production planes taken out might be put back in of the program results are good."
No comment was immediately available from the Pentagon's F-35 office.
WASHINGTON, Jan 6 (Reuters) - Lockheed Martin Corp (LMT.N) on Wednesday said it was continuing work to sharply reduce the costs of the F-35 fighter and did not believe the program was in trouble despite a report that the Pentagon will cut production of 122 airplanes through 2015.
Lockheed spokesman Chris Geisel said the company was running about four to six months late on finishing the final four of 19 developmental aircraft, which in turn prevented completion of all the flight tests planned by the end of 2009.
But he said the gap was narrowing between Pentagon and Lockheed projections about the cost and time required to complete the development program and the company was continuing its drive to lower overall costs on the program.
"It is Lockheed Martin's intent to continue the ongoing steep reductions in F-35 cost during low-rate initial production so that the government can buy more aircraft within the existing budget," Geisel said.
Concerns about the F-35 program -- the Pentagon's most expensive weapons program at roughly $300 billion -- have mounted in recent months, amid declining tolerance by Pentagon officials and lawmakers for cost overruns and schedule delays.
Last month, the U.S. Senate Armed Services Committee said it was "deeply concerned" about the program after a closed-down discussion with Pentagon officials about a strategy to keep costs down and get development efforts back on track.
Air Force Secretary Michael Donley last month told Reuters he expected a shake-up of the F-35 program, including adjustments in schedule, but said there were no plans to reduce the total number of fighters to be purchased.
Lockheed Chief Executive Robert Stevens said his company agreed with the Pentagon that it should use some of its potential profit to get the program back on track.
Senior Lockheed officials were meeting this week with top Pentagon officials to hammer out a final plan for funding the program in fiscal 2011 and the coming years, Geisel said.
"Much of the information that's recently been reported is pre-decisional and we continue to work with the (Office of the Secretary of Defense) to come to resolution," he said.
He said the possible changes being discussed would not affect the U.S. government's plan to buy a total 2,443 F-35s for the three military services, or the dates that the services have set for starting to use the new fighter jets.
"The program is not in trouble. We are a little behind on delivery of the (system design and development) aircraft, about six months, but the rest of the aircraft will be delivered within the next four to six months."
Geisel also noted that the Pentagon was shifting to a more conservative approach when budgeting all weapons programs as a result of an acquisition reform law passed in 2009.
He also noted that Pentagon cost estimators had reduced their estimate of the extra money needed to complete the program's development by $1 billion, and now forecast a delay of just 13 months, about half that initially projected.
Bloomberg on Wednesday reported that Defense Secretary Robert Gates had directed the military in a Dec. 23 budget document to delay the F-35 program, cutting planned purchases by 10 aircraft in fiscal 2011 and a total of 122 through 2015.
Gates cut the purchase of F-35s by 10 planes in 2011 to 42; by 17 in 2012 to 45; by 52 in 2013 to 77; by 20 in 2014 to 90; and 23 in 2015 to 107, it said, citing the document.
Bloomberg said the Pentagon would use more than $2.8 billion that had been budgeted for buying airplanes over those years to continue its development instead.
The money would be used to complete scheduled flight testing more quickly and work on issues such as software, said a source familiar with the program who confirmed the Bloomberg report, but was not authorized to speak publicly.
He said the Pentagon could potentially add back in the production airplanes if Lockheed and the program were able to beat their cost and schedule targets.
Defense analyst Loren Thompson said the Pentagon was essentially putting money back into the development phase of the program that had been removed by the Bush administration, reducing the likelihood of more serious problems later on.
"This really is not bad news for the company. They are shifting money from production to do more test and reduce risk on the program," he said.
"But the government is building incentives into the development program so that some of the production planes taken out might be put back in of the program results are good."
No comment was immediately available from the Pentagon's F-35 office.
(Reporting by Andrea Shalal-Esa; editing by Carol Bishopric, Bernard Orr)
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