Originally created 10/27/01

Pentagon chooses Lockheed Martin for $200 billion jet contract

WASHINGTON -- The Pentagon chose Lockheed Martin Corp. over Boeing Co. on Friday to build its high-tech, next-generation fighter jet, a contract that will be worth at least $200 billion, the largest in Defense Department history.

Air Force Secretary James G. Roche announced Lockheed and its partners were the winner of a $25 billion engineering and manufacturing development contract that eventually is expected to lead to the go-ahead to build 3,000 supersonic F-35 jets with radar-evading capabilities.

Roche wouldn't release details of why Lockheed was picked but said during the review process its proposal "emerged continuously as the clear winner. ... We looked at performance. There was no aesthetics, there was no beauty contest."

He applauded both companies' efforts and said they will be briefed in detail on the decision in coming weeks.

Lockheed chairman Vance Coffman said his company would honor the trust shown by the Pentagon "by building a truly remarkable, capable and affordable multirole fighter, on schedule and on cost."

Boeing chairman Phil Condit said the contract loss will cause the company to lower its revenue forecast by a $1 billion next year, to about $55 billion. He expressed hope Lockheed would seek help from Boeing for the project. Lockheed officials said that's a possibility.

The F-35 will replace the aging fighter jets of the Air Force, Navy and Marines, albeit with modifications to fit the needs of each branch. It also will be used by Britain's Royal Air Force and Navy, which want 150 of the planes. Britain has committed $2 billion toward development.

The first 22 planes are to be delivered in 2008.

Lockheed and Boeing waged a long and costly advertising and lobbying campaign for the contract, which establishes Lockheed as the nation's sole fighter jet manufacturer.

Lockheed, based in Bethesda, Md., has said the contract would add up to 9,000 jobs at its Lockheed Martin Aeronautics division in Fort Worth, Texas, which currently employs 11,000. Employees there gathered to watch the announcement and burst into cheers when Lockheed was chosen.

Lockheed will develop the jet with Northrop Grumman Corp. and BAE Systems of Great Britain. Work will be done at facilities in 27 states and Great Britain, with major subassemblies in El Segundo, Calif., and Samlesbury, England, and final assembly at Fort Worth.

Chicago-based Boeing had predicted it would add 3,000 new jobs for its Seattle facility and another 3,000 engineering jobs and 2,000 production jobs at its St. Louis plant.

Sen. Kit Bond, R-Mo., said the Pentagon was wrong to place the future of America's air defenses with just one company. Bond said he may offer legislation that would require the military to split production between the companies to keep Boeing in the fighter business.

"It would be a national security disaster if we allowed that repository of unique engineering know-how to be scattered to the four winds," Bond said.

Analysts said Boeing may be in a better position to weather the contract loss. It is developing an unmanned combat aircraft that could be highly lucrative and, unlike Lockheed, it has a commercial airline business. It also has contracts with the Pentagon to continue building F-18s and F-22s until 2011.

Lockheed shares surged 6.7 percent in after-hours trading after finishing the regular session on the New York Stock Exchange at $49.92, up $1.02. Boeing shares fell 7.5 percent after finishing trading up $1.78 to $37.68, also on the NYSE.

The Defense Department gave Boeing and Lockheed $660 million each in 1996 for research and development of prototypes that could take off quickly, land vertically and on carrier decks, throw off radar and provide all the high-tech cockpit gadgetry demanded by modern warfare.

The plane is designed to replace the Air Force's F-16 and A-10, the Navy's F/A-18 and the Marine Corps' AV-8B Harrier.

Boeing's test model, dubbed the X-32, is more compact than Lockheed's X-35. The X-32 has a gaping air intake on the front and dual lift nozzles underneath, while the X-35 achieves its short takeoffs and vertical landings with a single thruster and a lift fan at the top of the plane.

Both Boeing and Lockheed's planes for the Marines, the Royal Air Force and the Royal Navy can land vertically. Versions for the Air Force and Navy are designed to land conventionally.

Each F-35 will cost about $40 million. The version with the ability for short takeoff and vertical landings will cost more, but less than $50 million.

The General Accounting Office, Congress' investigative arm, twice warned the jet could end up costing more, take longer to build and have performance problems because the technologies need more development. The Pentagon has said its independent investigation found the technologies are adequate.

On the Net:

Lockheed Martin: http://www.lockheedmartin.com

Boeing: http://www.boeing.com/defense-space/military/jsf

Joint Strike Fighter Program Office: http://www.jast.mil/IEFrames.htm

Department of Defense: http://www.defenselink.mil


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