Lockheed, Pentagon to seal $34b F-35 deal

Bloomberg

Lockheed Martin Corp and the Pentagon are set to announce a final agreement on a long-awaited contract for the next-generation F-35 jets that would be the biggest yet, according to three people familiar with the decision.
The purchase of the stealthy F-35 for US and allied militaries is likely to be valued at about $34 billion for 478 fighters. The announcement is expected after US financial markets close on Tuesday, said the people, who weren’t authorised to speak publicly.
The deal concludes years of discussions aimed at lowering the price for the advanced fighter to about $80 million for some variants, while guaranteeing production stability for Lockheed’s largest source of profit, said Bloomberg Intelligence analyst Douglas Rothacker.
“It’s a big positive for the company,” he said. “It’s a huge show of support from the government that they’re going to extend a contract of this size for their most important weapons programme.”
Falling production costs will open up additional international sales opportunities for the F-35, Ken Possenriede, chief financial officer for Bethesda, Maryland-based Lockheed Martin, said during the company’s earnings call. Lockheed is on track to hit the $80 million target in production lot 13, he said, about the middle of the multiyear contract.
Lockheed rose as much as 1.3% to $375.45 after Bloomberg reported that the so-called block buy talks were concluded. The stock had advanced 42% this year through Friday, double the gain of the S&P 500.
The latest agreement brings to about 978 the number of US and allied jets on contract out of a planned total of at least 3,100. The jet is still months away from the completion of rigorous combat testing against the toughest Russian and Chinese threats.
Officials disclosed earlier this month that a formal “full-rate” production decision would be delayed as much as 13 months until the tests are complete, using a high-fidelity simulator that’s still not running.
The F-35 has faced years of delays and cost overruns. The long-term cost of operating and supporting the fleet of fighters over more than six decades has increased to $1.196 trillion, according to the Pentagon’s cost assessment of major projects.