* Company sees labor costs coming down
* Says nearly 1,000 test flights completed to date
* Unit cost said on track to reach $67 mln by 2018
By Andrea Shalal-Esa
WASHINGTON, Oct 24 (Reuters) – Lockheed Martin Corp
on Wednesday said it was making “great progress” on the F-35
fighter jet program, with F-35 deliveries exceeding those of
F-16 fighters and C-130J transport planes combined for the first
time in the third quarter.
Chief Operating Officer Chris Kubasik, who takes over as CEO
next month, said there were 94 F-35 jets in various stages of
production at Lockheed plants in Fort Worth, Texas and Marietta,
Georgia, plus a final assembly plant in Italy run by Alenia, a
subsidiary of Finmeccanica SpA.
He said the program, restructured three times in recent
years to slow production and work out lingering technical
challenges, had completed nearly 1,000 test flights in total.
Test flights were 25 percent ahead of plan as of September.
“This program is making great progress and it really has a
lot of momentum,” Kubasik told reporters on Wednesday during a
discussion about Lockheed’s third-quarter earnings.
He said labor costs were coming down faster on the F-35
program than any previous fighter jet program in over 40 years.
Lockheed is on track to hit its target unit “flyaway” cost,
excluding development, of $67 million in fiscal 2012 dollars by
2018, he added.
The program was in the limelight again last month, when the
Pentagon’s future F-35 program manager, Major General
Christopher Bogdan, said ties between Lockheed and the
government were the “worst” he’d ever seen.
Kubasik said Bogdan visited Lockheed’s mammoth Fort Worth
plant last week for what officials described as a “very
productive” visit. This week, the new Air Force Chief of Staff
General Mark Welsh, toured the plant.
Chief Executive Bob Stevens, who retires at the end of the
year, said the F-35 program was challenging from the very
beginning since its three variants will replace 10 warplanes now
in service. He said Lockheed was working closely with the
government to resolve remaining challenges.
“We will do everything that we must do to have very high
quality relations and get everything about this program right
because the stakes for the country and for our friends and
allies are just too damned high to set the bar anywhere else,”
Stevens told analysts during a separate call.
He said the program had an unprecedented level of
transparency which was good, but also sometimes had “lousy”
consequences since people came to the wrong conclusions about
how difficult it would be to resolve a technical issue.
“We’re happy to pick yourselves up and move ourselves
forward,” he said. “When we’re not doing well we’ll redouble our
efforts to get this right.”
Chief Financial Officer Bruce Tanner told analysts that
Lockheed expected to finalize a contract with the government for
a fifth batch of fighter jets in the fourth quarter, which would
help free up initial funding for the sixth batch of fighters.
Lockheed and the Pentagon have been negotiating the fifth
production contract since December 2011, but Kubasik said
Lockheed was still responding to requests for information from
the government.
One government official who is close to the negotiations
said the contractual process had been exceptionally trying, with
Lockheed often providing reams of extraneous data instead of
simply providing the cost data that had been requested.
Kubasik told reporters that work on those planes was already
50-percent completed under an earlier preliminary contract,
which meant the government could assess actual production and
labor costs on the program, as opposed to relying on estimates.
He said Lockheed had also reworked a computerized logistics
program after it ran into security challenges earlier this year.
He said work on the system, known as the Autonomic Logistics
Information System (ALIS) was 94 percent complete, and it was
being tested now at Edwards Air Force Base in California.
The Marine Corps needs the software to be working when the
first F-35 arrives at an air base in Arizona next month to kick
off creation of the first operational F-35 squadron.
“By all accounts people are very satisfied with the progress
we’ve made on ALIS,” he told reporters.
Kubasik said the Pentagon had also approved Lockheed’s plan
for fixing a troubled cost-tracking system, and he expected the
Pentagon’s Defense Contracts Management Agency to scale back its
withholding of payments on the program from 5 percent to 2
percent early next year.
