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WASHINGTON Lockheed Martin is negotiating to cut the price for the next group of its new F-35 fighter planes to at least 20 percent less than Pentagon officials projected last fall, Robert J. Stevens, the chief executive, said Thursday.
The company, which has been under pressure because of costly delays, is likely to build those planes under a contract with a fixed price, Mr. Stevens said. He said Lockheed could earn bonuses for meeting production milestones.
Defense Secretary Robert M. Gates recently revamped the F-35 program and removed the general in charge, after long delays caused the Pentagons projected costs to soar by 64 percent to $382 billion for 2,457 planes.
Mr. Stevens told reporters that the contract would start a transition to fixed prices for the stealth planes two years earlier than planned. He would not say what that price was likely to be for the next group of 32 planes.
But he said Lockheed was confident enough that it was regaining control of the F-35 program, the Pentagons largest, to start bearing more of the risk instead of leaving the federal government obligated to cover any cost increases.
Mr. Stevens also said that Lockheed, the worlds largest military contractor, had begun to trim spending throughout the company in recognition of the new reality we face, with military budgets tightening in response to economic woes.
To reinforce the need to cut costs, Mr. Stevens said that he would not attend one of the industrys most lavish promotional events, the Farnborough International Airshow outside London, next month. He said Lockheed would send only half as many people as usual.
Bruce L. Tanner, Lockheeds executive vice president and chief financial officer, said in an interview that it could save hundreds of millions of dollars through the cost-cutting, which began in February.
Last month Mr. Gates also called for cuts in the Pentagon bureaucracy to free more money for troops in the field.
The Air Force, the Navy and the Marines are all buying their own versions of the F-35, known as the Joint Strike Fighter. Eight other nations have invested in developing the F-35 and could buy hundreds of the planes.
Mr. Stevens said on Thursday that the $382 billion estimate over 25 years shows the potential if nothing changed in the program. But, he said, were determined to beat the government cost estimate.
The Pentagon has already ordered 31 of the planes. The contract now being negotiated would cover 32 more.
Not counting the research and development costs, the Pentagon recently projected that the 2,457 planes could cost an average of $92.4 million before adjusting for inflation, compared with an estimate of $50 million in 2002.
Mr. Stevens said that if the Pentagon kept buying the planes at the planned pace, Lockheed believed it could bring the cost down, by 2014 to 2015, to a level comparable to updated and fully loaded versions of older fighters. That would mean reducing the price of each F-35 to $65 million or less.
Lockheed in Talks to Cut Price of F-35 Jets by 20% - NYTimes.com
The company, which has been under pressure because of costly delays, is likely to build those planes under a contract with a fixed price, Mr. Stevens said. He said Lockheed could earn bonuses for meeting production milestones.
Defense Secretary Robert M. Gates recently revamped the F-35 program and removed the general in charge, after long delays caused the Pentagons projected costs to soar by 64 percent to $382 billion for 2,457 planes.
Mr. Stevens told reporters that the contract would start a transition to fixed prices for the stealth planes two years earlier than planned. He would not say what that price was likely to be for the next group of 32 planes.
But he said Lockheed was confident enough that it was regaining control of the F-35 program, the Pentagons largest, to start bearing more of the risk instead of leaving the federal government obligated to cover any cost increases.
Mr. Stevens also said that Lockheed, the worlds largest military contractor, had begun to trim spending throughout the company in recognition of the new reality we face, with military budgets tightening in response to economic woes.
To reinforce the need to cut costs, Mr. Stevens said that he would not attend one of the industrys most lavish promotional events, the Farnborough International Airshow outside London, next month. He said Lockheed would send only half as many people as usual.
Bruce L. Tanner, Lockheeds executive vice president and chief financial officer, said in an interview that it could save hundreds of millions of dollars through the cost-cutting, which began in February.
Last month Mr. Gates also called for cuts in the Pentagon bureaucracy to free more money for troops in the field.
The Air Force, the Navy and the Marines are all buying their own versions of the F-35, known as the Joint Strike Fighter. Eight other nations have invested in developing the F-35 and could buy hundreds of the planes.
Mr. Stevens said on Thursday that the $382 billion estimate over 25 years shows the potential if nothing changed in the program. But, he said, were determined to beat the government cost estimate.
The Pentagon has already ordered 31 of the planes. The contract now being negotiated would cover 32 more.
Not counting the research and development costs, the Pentagon recently projected that the 2,457 planes could cost an average of $92.4 million before adjusting for inflation, compared with an estimate of $50 million in 2002.
Mr. Stevens said that if the Pentagon kept buying the planes at the planned pace, Lockheed believed it could bring the cost down, by 2014 to 2015, to a level comparable to updated and fully loaded versions of older fighters. That would mean reducing the price of each F-35 to $65 million or less.
Lockheed in Talks to Cut Price of F-35 Jets by 20% - NYTimes.com
