F-35 program boosts Lockheed Martin's bottom line

An F-35 Lightning II performs a maneuver over Luke Air Force Base, Ariz. The planes will start arriving at RAF Lakenheath in England in 2021, and work will begin soon on remodeling buildings to accommodate new squadron operations and maintenance facilities and a flight simulator.


By MAX B. BAKER | Fort Worth Star-Telegram (Tribune News Service) | Published: January 24, 2017

Despite Lockheed Martin’s dogfight with President Donald Trump in recent weeks over the cost of the F-35 Lightning II, increased sales and profits from the stealth fighter boosted the company bottom line in the final quarter and for 2016.

Lockheed, the nation’s largest defense contractor, reported net sales in 2016 were $47.2 billion compared to $40.5 billion the previous year and that net earnings were $3.8 billion, or $12.38 per share compared to $3.1 billion, or $9.93 per share in 2015, the company reported.

Similar improvements were shown in the fourth quarter with net sales of $13.8 billion compared to $11.5 billion in 2015. Earnings from continuing operations in 2016 were $959 million, or $3.25 per share, compared to $817 million, or $2.63 per share, in 2015.

Helping Lockheed’s finances soar was the aeronautics division that builds the F-35. It’s net sales and profits jumped 23 percent in the fourth quarter. Sales jumped to $1 billion in part because of about $640 million for the F-35 program because of increased volume of production. Profits increased $104 million compared to 2015, with $80 million coming from the F-35 program because of increased volume, the company reported.

The aeronautics division’s operating profits in 2016 increased $206 million, or 12 percent, compared to 2015, with $195 million coming from the F-35 program.

“Our dedicated employees delivered outstanding performance for our customers in 2016, resulting in exceptional financial results,” said CEO Marillyn Hewson in a prepared statement. “Looking ahead to 2017, we remain focused on meeting commitments to customers, pursuing new business growth opportunities, investing in innovative solutions to drive affordability and prepare for the future, and returning value to our shareholders.”

The F-35 program, at $379 billion, is the most expensive weapon system in Pentagon history. Lockheed Martin has been working to reduce the cost of the F-35 to about $85 million by the 2019-2020 time frame.

In December, Trump tweeted that the costs of the F-35 program was “out of control,” and he pledged to trim billions of dollars on military contracts after he took office. Since then, Trump has met with Hewson several times, one time at the Trump Tower earlier this month in which she pledged to cut the costs of the Lightning II and to hire an additional 1,800 workers at the company’s Fort Worth plant.

Last week, officials at BAE Systems, said Lockheed had told them that the Trump administration wanted to cut the costs of the F-35 program by 10 percent. BAE, headquartered in London, is one of Europe’s biggest defense contractors and works with Lockheed on the F-35 program.

Whatever happens with the F-35 and the Trump administration will be felt in Fort Worth.

The Fort Worth plant employs 14,000 workers, with about 8,800 working on the F-35. Hiring of additional workers will begin in late 2017, speed up in 2018 and stretch out through 2020. Last year, the company built about 50 F-35s and current plans call for production to increase to about 160 a year by 2019.

The fight over lowering the cost of the aircraft also isn’t new.

After more than a year of tough negotiations, in November the Pentagon announced a $6.1 billion contract for production of the next 57 F-35s, reflecting a 3.7 percent reduction in the average price of the jets from what it paid in the last order and 58 percent less than when the first planes were produced.

Technical issues with software and other complex systems caused delays and boosted the F-35 costs. At one time, the program was so over budget and behind schedule that the Pentagon put it on probation. Two years and 44.5 billion were added to the program. But, since 2012, the plane’s performance has improved and the F-35 has won praise from its customers.

When the Air Force earlier this month picked the Naval Air Station Joint Reserve Base Fort Worth to land a squadron of F-35 Lightning II fighter jets, they praised the stealth jet recent performance.

“No matter how you slice it, the F-35’s stealth characteristics, maneuverability, interoperability and its ability to make other aircraft better through sensor fusion make it unmatched by any adversary,” Air Force Chief of Staff David L. Goldfein said.

©2017 the Fort Worth Star-Telegram
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