Pentagon F-35 chief calls for slower production

Reuters News
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Posted: Dec 01, 2011 11:48 PM
Pentagon F-35 chief calls for slower production

By Andrea Shalal-Esa

WASHINGTON (Reuters) - The Navy admiral who runs the Pentagon's biggest weapons program is calling for slower production of the radar-evading F-35 Joint Strike Fighter built by Lockheed Martin Corp until a surprising number of problems with the airframe can be fixed.

The comments by Vice Admiral David Venlet, first published in an interview posted on AOL Defense, come at a critical time for the $382 billion weapons program, which is under tough scrutiny as the Defense Department struggles to find $489 billion in budget cuts over the next decade.

The Pentagon has already restructured the F-35 program twice in recent years, with the number of jets in the next contract falling to 30 from 42. Venlet did not say how much further he thought production should slow.

Lockheed and the Pentagon are also at odds over the terms of a contract for a fifth batch of low-rate initial production jets, and how much the company should have to pay for design changes that emerge from flight testing of the new warplanes.

Venlet said he was not questioning whether to proceed with the program, or whether to buy all 2,447 jets planned, but he said he was surprised at the number and cost of "analyzed hot spots" that had cropped up over the past year.

He said the required changes were not a safety matter and did not impede the plane's ability to perform its missions.

"Most of them are little ones, but when you bundle them all up and package them and look at where they are in the airplane and how hard they are to get at after you buy the jet, the cost burden of that is what sucks the wind out of your lungs," Venlet was quoted as saying in the AOL Defense article.

As a result, he said, it would be "wise to sort of temper production for a while here until we get some of these heavy years of learning under our belt and get that managed right."

Venlet also criticized the Pentagon's decision to speed up deliveries of the new planes by having Lockheed building production model airplanes even as flight testing was still under way.

Lawmakers and government watchdog groups have long questioned that approach, called concurrency, saying it added risk and cost to the program.

"Fundamentally, that was a miscalculation," Venlet told AOL Defense.

He said more changes were required than hoped and new planes had to be torn apart for structural modifications to ensure they would last the full 8,000 flight hours planned.

Still, Venlet said it was too late to radically change course.

"I have the duty to navigate this program through concurrency. I don't have the luxury to ... say how much I dislike it and wish we didn't have it," he said.

Lockheed, the Pentagon's biggest supplier, told investors on Thursday that the F-35 -- which will eventually account for about 20 percent of the company's revenues -- was progressing well and was ahead of schedule on flight testing.

The company argues that slowing production will reduce the economies of scale that Lockheed is counting on to lower the cost of building the plane.

But Venlet said slowing production would cut the cost of replacing parts in jets that are being built before testing is complete. He said fatigue testing was still in an early stage, but had already resulted in redesign costs that could add $3 million to $5 million to cost of each plane.

The last low-rate production contract had an average price of about $111 million per airplane, far above the target cost of about $65 million when the plane is in full production.

Lockheed Chief Financial Officer Bruce Tanner told Reuters on the sidelines of an investor conference on Thursday that Pentagon officials were expected to give the company a final "should cost" proposal for the next batch of planes next week.

Top Lockheed officials have been meeting frequently with Pentagon official to discuss costs on the weapons program as well as the Pentagon's demand that Lockheed shoulder more of the cost of design changes that come up during testing.

Tanner told the conference hosted by Credit Suisse and Aviation Week that it was unusual, if not unprecedented, for the Defense Department to make such a demand for a program that was still in development.

In its third-quarter earnings, Lockheed notified investors that it faced a potential liability because the government was refusing to pay for certain parts that Lockheed was already buying for the next phase of production unless the dispute over concurrency cost risks was resolved.

Tanner said Lockheed was discussing the issue in good faith, but could not understand why the government had changed its approach on the concurrency issue abruptly in August.

"We are willing to negotiate concurrency," Tanner said, adding that he wanted the Pentagon to help pay its suppliers "sooner" -- before that issue was settled. (Reporting by Andrea Shalal-Esa)