Lockheed Martin cuts F-35 costs, “very close” to deal with Department of Defense

The cost of Lockheed Martin’s F-35 has come down significantly since early production — but not necessarily due to pressures from President Donald Trump.

CHLOE
Marillyn Hewson, CEO of Lockheed Martin. (Stuart Isett/Fortune Most Powerful Women Summit)

Marillyn Hewson, CEO of Lockheed Martin. (Stuart Isett/Fortune Most Powerful Women Summit)

The cost of Lockheed Martin’s expensive and controversial military jet, the F-35, has come down significantly since early production. And the company anticipates further cost reductions — but not necessarily due to pressures from President Donald Trump.

Lockheed Martin CEO, president and chairwoman, Marillyn Hewson, met with Trump twice after inflammatory tweets concerning the cost of the F-35 program sent the company’s stocks plummeting last December. During a fourth quarter financial conference call Tuesday, Hewson said officials are “very close” to negotiating the deal that would ensure the sale of 90 F-35 fighter jets to the Department of Defense.

“President Trump recognizes that the F-35 is a very large program, the largest program in the Department of Defense,” Hewson said on the call. “He’s really focused on making sure that the cost comes down on the program. It’s not about slashing our profit margins, it’s about ‘How do we get the cost of the aircraft down today and in the future?'”

Hewson projected the per-unit cost of the F-35 fighter jets will fall to $85 million, from $100 million, by 2019.

Cost reduction strategies included acquisition of high yield contracts and efficiencies in labor, manufacturing techniques, materials and supply chain operations. Per-unit costs have already fallen close to 60 percent since 2006, and implementing the aforementioned strategies would serve to continue that trajectory, she said.

One investor pointed out that the cost reduction strategy didn’t seem to be any different than it was prior to Trump’s involvement. Hewson reiterated that the meetings largely consisted of sharing ideas between parties.

“I have welcomed the opportunity to talk to [Trump], because it gives me the opportunity to share with him what we have been doing in terms of bringing the costs down,” Hewson said.

“I have also had the opportunity to share with him things that the Department of Defense can do and how they might buy the aircraft differently in the future to continue to drive costs down. He welcomed that discussion.”

In 2016, Lockheed produced 46 F-35 jets, just under their goal of 53. They aim to deliver 66 of the planes in 2017. Despite critiques from investors that the company seemed overly optimistic, CFO Bruce Tanner said Lockheed anticipates higher profits from the program next year and in the future.

Multimedia business & healthcare reporter Chloe Aiello can be reached via email at caiello@denverite.com or twitter.com/chlobo_ilo.

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