Wed, Feb 20, 2008
Lockheed Risks Funding Cuts If Problems Continue
Lockheed Martin has tried to reassure the public and its
shareholders that recent problems with the F-35 Joint Strike
Fighter's Pratt & Whitney engines are just growing pains,
common in development of new aircraft. But those same shareholders
recently heard a JP Morgan analyst warn those problems threaten the
program's funding.
In a note to investors cited by Reuters, Joe Nadol wrote "While
this failure in and of itself should not be viewed as a serious
issue, the repeated delays that the program has experienced,
particularly those due to the propulsion system, are collectively
becoming a potentially damaging problem. We believe that F-35
development execution needs to improve quickly or the program could
become a source of funds for other priorities."
The Air Force has said it needs $20 billion a year more than the
Bush administration has proposed over the next five years, to keep
its fleet up to date and ready despite the wear and tear of the
wars in Iraq and Afghanistan.
The F-35 is planned for production of over 2,400 aircraft for
the US Air Force, Navy and Marine Corps, and for US allies. The
F-35 represents $300 billion to its builders over its 28-year
lifespan, and is considered a major component in Lockheed Martin's
profitability over the next 20 years.
Lockheed says the program remains on track, and its investors
apparently were not panicked by Nadol's remarks. The stock's price
has held steady near $107 per share for the past week, and Pratt
& Whitney parent United Technologies has maintained at about
$71 dollars.
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