Pentagon pays off Lockheed's $1 billion F-35 subsidy
By MAX B. BAKER | The Fort Worth Star-Telegram (Tribune News Service) | Published: August 19, 2016
The Defense Department is repaying a massive subsidy Lockheed Martin pumped into the F-35 Lightning II program earlier this year to keep the mile-long Fort Worth assembly line moving.
Orlando Carvalho, Lockheed’s executive vice president for aeronautics, said Thursday the company has received money that has “significantly improved” the its cash position. While no one at either the Pentagon or Lockheed is confirming the amount, credible sources say it is close to $1 billion.
In reporting its second-quarter earnings in July, Lockheed executives said that while overall profits were up, it was paying $1 billion to prevent a disruption in the F-35 program. They also said Lockheed would not sustain that level of self-funding.
The payment came as the Pentagon and Lockheed continue negotiating contracts for the next 149 fighters. The company had hoped to reach a deal by mid-year but has been unable to do so, Carvalho said following a speech to the Fort Worth, Texas Chamber of Commerce.
“We were providing a certain amount of subsidy to the line while we were seeing if we could get the negotiations finished,” Carvalho said. “We’ve received that, and that has significantly improved the situation on the cash.”
Pentagon officials, while big supporters of the jet fighter, have expressed some concerns about software problems with the F-35, which has been described as a flying computer. They have also been keeping a close eye on bringing the overall program costs down.
The money was released to keep the production line going as we continue to negotiate a fair deal for the F-35.
“The money was released to keep the production line going as we continue to negotiate a fair deal for the F-35,” said Joe DellaVedova, spokesman for the Pentagon’s F-35 program. “We want to make sure our international partners and U.S. services get the best deal.”
The Pentagon approved the money through what is known as an undefinitized contract action, which allows a contractor to begin work while payment details are worked out. This procedure has been used in the past to pay for the F-35’s development.
The F-35 program, at $379 billion, is the most expensive weapons system in Pentagon history. It has been troubled, and Lockheed has been working to smooth the transition to full production.
Lockheed is in the midst of a $1.2 billion upgrade of its Fort Worth plant as it ramps up F-35 production. The company has said it plans to hire up to an additional 1,500 employees by the end of next year — 1,000 assembly-line workers and an additional 500 supervisors and support staff, Carvalho said.
The company addressed concerns raised about the software on the Air Force version of the F-35 earlier this year, describing the software now as “rock solid,” Carvalho said.
“We feel good about getting all of that finished, delivering the full avionics and the mission systems, and ultimately supporting full operational capacity of the airplane,’ he said.
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