Lockheed's F 35 deal ratchets up pressure to slash production costs
Channel: Best Of Youtube
Date: 2017-02-04

Lockheed to unveil $8.5 billion F-35 contract Lockheed to unveil $8.5 billion F-35 contract  
6 Hours Ago | 00:36
Lockheed Martin's new deal with the Pentagon for F-35 fighters lowered the purchase price by nearly 8 percent yet should still be profitable for the defense contractor, according to industry analysts.

That said, experts say Friday's agreement — valued at $8.7 billion, by some analysts — will step up the pressure on the defense giant to continue cutting the F-35 Joint Strike Fighter's production costs and it risks margin erosion too. 
"I'd say it's pretty aggressive price reductions," said Morningstar analyst Chris Higgins. "The key is Lockheed needs to reduce the costs at a faster rate than they are cutting the price."
Lockheed has been under pressure from President Donald Trump to reduce the costs of the F-35 — the Pentagon's largest weapons program ever. Trump also suggested that the government might want to buy some of Boeing's F-18 fourth-generation fighters as an alternative to the fifth-generation F-35 aircraft. 
"We're pleased to have reached an agreement with the U.S. Department of Defense for the next 90 F-35 aircraft," Lockheed said in a statement. "The agreement represents $728 million in savings and a nearly 8 percent reduction in price over our last contract for the air vehicle delivered by Lockheed Martin and our industry partners."
Added Lockheed, "The increase in the number of aircraft in this agreement enables us to reduce costs by taking advantage of economies of scale and production efficiencies."