Downside of Dominance?
Monday, December 17, 2007
FORT WORTH -- Here in Hangar 8, three shifts of Lockheed Martin technicians assemble F-16s, one of the most powerful and widely used fighter jets in history. They work tediously by hand -- bolt by bolt, wire by wire -- turning the plane's belly into a colorful work of industrial art later covered by 18,000 pounds of aluminum. The saying around here: Kick the tire, light the fire and then watch the thing zoom away.
F-16s used to be built next door in a mile-long factory that employees travel through on Schwinn bicycles. Now Lockheed is using that space to develop the F-35 stealth fighter jet, including a version that can land vertically. That Lockheed is juggling two of the world's most feared fighters illustrates its dominance in the industry and the importance of fighters for Lockheed's business. The F-16 has consistently been one of the Bethesda firm's top three revenue-generating products in the past decade.
"It has just had incredible staying power," said Bruce Tanner, Lockheed's chief financial officer.
But the circumstances in Fort Worth show the tricky path companies face when producing expensive products for governments that will replace the expensive products that governments already know and can still use.
"Lockheed's most potent competitor in the fighter business is Lockheed," said Loren Thompson, a well-connected military analyst with the Virginia-based Lexington Institute. "Its older planes are competing with its newer planes for market share. This is the downside of their tremendous success."
Lockheed has sent F-16 production back to Hangar 8, where the plane was first built in the 1970s as a daytime dogfighter, with pilots firing heat-seeking missiles. There were no bombs on board. Through some engineering ingenuity, some well-timed upgrades and some political help, the F-16 became the dominant all-purpose fighter for the Air Force and its allies around the world. Only about 1,000 were supposed to be built. Today, there are 4,500. An F-16 has never lost an air-to-air battle, but it is now primarily sold only overseas. One big potential customer is India.
Some skeptics have wondered why U.S. officials are investing nearly $300 billion to develop and buy the F-35 when the F-16, which costs about $40 million per jet, has proven so popular and easily upgradeable that 24 countries have bought them, many as repeat customers.
"There's a pretty good argument to keep building new F-16s forever," said Michael O'Hanlon, a senior fellow and military analyst at the Brookings Institution. "It's hard to say you can get a better bang for your buck."
It is an argument that could be made by a new administration in coming years, particularly if there is a recession. The Congressional Budget Office, in its "Budget Options" report issued this year, said the federal government could save $87 billion by canceling the F-35 project and simply buying more planes that are currently in use, including the F-16.
Lockheed officials said they are responding to the needs of the customer, in this case, the Pentagon, which has dubbed the F-35 the Joint Strike Fighter because it will be used by the Air Force, Navy and Marine Corps. Though the F-35 will feature many of the F-16's tools -- sophisticated radar, missile firing systems, electronic warfare and ground-to-air communication systems -- the newer jet's system will be significantly upgraded. In particular, it will feature a faster, less detectable radar found only on 80 F-16s belonging to the United Arab Emirates.
But most importantly, according to Defense and Lockheed officials, the newer jet will be able to do one thing that an F-16 can't: go undetected by enemy radar.
"The F-16 is a tremendously capable plane that just keeps proving its worth, even in combat operations today in Iraq and Afghanistan and with nations around the world," said Bruce Lemkin, deputy undersecretary of the Air Force for international affairs. "But the F-35 is going to be a jump into another dimension of performance and capability."