Lockheed’s Profit on F-35 Will Rise With New Pentagon Contract

Lockheed executives have said the company earned about 4 percent during its decade-long effort to design and develop the plane.

The company signed the latest contract, to build 32 planes, on Friday. It came after a year of contentious negotiations with the Pentagon, which has dealt with a series of cost overruns and delays in creating the sophisticated jets.

The F-35, the Pentagon’s largest program, could cost $396 billion if the military builds more than 2,400 planes for the Air Force, Navy and Marines.

Pentagon officials said the price of each plane would drop by 4 percent in the fifth batch from the fourth. Excluding the engines, its target price is $105 million for each of 22 planes for the Air Force, $113 million for each of three planes for the Marines and $125 million for each of seven planes for the Navy.

The Pentagon will require Lockheed to cover a slightly larger share of any cost overruns than it did on the last batch. The company will also have to fix some of the technical problems with the planes without earning a profit on that work.

The effort to develop three versions of the same plane has been complicated, making the program a tempting target for budget cutters. But Pentagon officials said basic versions of the planes were performing well in flight tests, and the Air Force approved plans on Monday to begin training pilots at Eglin Air Force Base in Florida.

Col. Andrew Toth, a wing commander there, said the Air Force hoped to begin operating the new planes in 2016.

Article source: http://www.nytimes.com/2012/12/18/business/lockheeds-profit-on-f-35-will-rise-with-new-pentagon-contract.html?partner=rss&emc=rss