Lockheed wins $9 billion deal to supply fighter jets to Canada
Saturday, July 17, 2010
Bethesda defense giant Lockheed Martin said Friday that it secured a roughly $9 billion deal to sell the Canadian government 65 of its new fighter jets, a move that industry analysts called a positive sign for one of the company's biggest and most closely watched programs.
The Joint Strike Fighter aircraft, also known as the F-35 Lightning II, is among the Pentagon's most expensive weapons contracts. The U.S. government is scheduled to buy about 2,400 jets for more than $300 billion for the Air Force, the Marine Corps and the Navy.
But the fighter program has come under scrutiny for cost overruns and delays. In response, Defense Secretary Robert M. Gates earlier this year fired the general in charge of its development and promised to withhold more than $600 million in performance bonuses from Lockheed for missing various benchmarks.
James McAleese, a defense industry analyst in Sterling, said Canada's purchase comes at a good time for Lockheed, as the F-35 program is "under attack."
"Their production queue has been delayed for the U.S. Air Force and the Navy, so having allies ordering today is much more valuable in terms of protecting the program's stability and reducing the overall unit cost," he said.
Besides Canada, seven other U.S. allies -- Britain, Italy, the Netherlands, Turkey, Australia, Denmark and Norway -- have announced plans to buy the jets. Canada's purchase is one of its government's biggest arms deals. The fighter jets are to replace CF-18s and are expected to be delivered in 2016.
"Everyone has been watching the allies to see if they're going to blink or run away from the program, given its problems," McAleese said. "This gives more confidence that the F-35 will become like the F-16 [another fighter jet], which is known world wide for its successful export sales."
Canada's Defense Minister Peter MacKay said at a news conference Friday that "this is the best aircraft we can provide our men and women in uniform."
Tom Burbage, Lockheed's executive vice president and general manager of F-35 program integration, said of the Canadian government's purchase: "The Lightning II will help ensure Canada's national security, and also positions Canadian industry to immediately capture long-term work that will endure for the next 30 years."
Keith Knotts, who works on Lockheed's international development of the F-35 for Canada, said the sale of the jets to the government there gives a boost to parts suppliers who are looking for work producing components for the plane.
"They need to buy some of the technology and tooling that the F-35 requires and this purchase gives them that confidence that they invest because the government's going to buy the aircraft," he said.
Mackenzie Eaglen, a defense industry analyst at the Heritage Foundation, said that because the F-35 program has been "in the crosshairs" of Congress and the Pentagon, Canada's purchase is "helpful in the larger effort to reduce" the cost of the aircraft.
"This is helpful because it comes just as the Dutch government is debating whether to start walking away from its planned buy of F-35s," she said. "If that happens, it would be very volatile without other countries stepping in and placing orders and showing a commitment."
Lockheed's stock closed on Friday down $2.02, or 2.7 percent, at $73.93 amid a broader sell-off on U.S. markets.