Lockheed yields to Trump
President-elect’s barbs prompt defense giant to agree to lower costs of its F-35 jet program.
For the second time in a few weeks, an aerospace giant emerged from a meeting with President-elect Donald Trump with news that the cost of a big-ticket program could be cut. It was the latest sign that defense contractors may have to play a new game when it comes to contract negotiations.
Lockheed Martin Chief Executive Marillyn Hewson told reporters Friday that the Bethesda, Md., defense giant is close to a new deal that would cut the cost of the F-35 Joint Strike Fighter program and also create jobs.
The fifth-generation fighter jet has frequently been targeted by Trump, who last week slammed the program for being “way, way behind schedule” and “many billions of dollars over budget.”
“We had the opportunity to talk to [President-elect Trump] about the F-35 program, and I certainly share his views that we need to get the best capability to our men and women in uniform and we have to get it at the lowest possible price,” Hewson said.
Her meeting followed a similar one with Boeing CEO Dennis Muilenburg in December, after which he told reporters that the company would build the next generation of Air Force One jets for less than $4 billion — a price tag Trump had slammed in a tweet earlier that month.
Such meetings between executives and the president-elect could set a precedent, said Richard Aboulafia, vice president of analysis at the Teal Group.
“It’s clearly his style,” he said.
Hewson also said Lockheed Martin would create 1,800 new jobs related to the program in Fort Worth as part of the new contract.
Lockheed Martin estimates the program accounts for 38,900 jobs in Texas, and the plane’s supply chain touches 45 states.
Lockheed shares rose $1.91, or nearly 1%, to $254.53 on Friday on the news.
In recent months, the president-elect has not been shy about taking to social media to criticize or heap praise on individual companies and military programs.
A Dec. 6 tweet bashed Chicago-based Boeing for what he referred to as the “out of control” cost of the Air Force One presidential airplane.
Weeks later he turned in Boeing’s favor at the expense of Lockheed, tweeting that he had asked the company to “price out a comparable F-18 Super Hornet” because of the F-35’s high costs.
He also briefly brought up the F-35 in Wednesday’s news conference intended to clarify his business conflicts, saying he would “do some big things” with the program and find a way to trim costs and improve the plane itself.
Voices on both sides of the political aisle have criticized the F-35 program’s cost long before Trump took up the issue. The 15-year-old program has been beset by various delays and has never flown in combat.
Each plane costs more than $100 million, though Lockheed and analysts expect the price will fall as the program matures and more planes are built.
“Regardless of how many you buy” of any weapons program, “the development costs are going to be about the same,” said Mark Gunzinger, senior fellow at the Center for Strategic and Budgetary Assessments. “So you could spread it out over many, or you could spread it out over a few.”
Still, Trump’s pick for Defense secretary, James Mattis, told lawmakers the president-elect backs the program.
“Many of our allies have bet their air superiority on the F-35 program, and it bonds us tightly together with them,” Mattis said during a hearing on his nomination last week. “The president-elect has talked about the cost of [the F-35] but he has in no way shown a lack of support for the program. He just wants the best bang for the buck.”