Chris Bogdan: F-35 Industry Partners to Make ‘Upfront Investment’ Under Cost Reduction Deal

F35Lockheed Martin (NYSE: LMT) and its two primary industry partners in the F-35 program have signed an agreement with the Defense Department to develop strategies aimed at reducing F-35’s production costs.

The Blueprint for Affordability deal aims to bring the “fifth-generation” fighter aircraft program at a “fourth-generation” price point by the end of the decade, Lockheed said Thursday.

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BAE Systems, Lockheed and Northrop Grumman (NYSE: NOC) agreed to invest as much as $170 million in F-35 cost reduction measures through 2016.

The federal government could invest additional money from 2016 to 2018 if industry efforts to reduce costs are successful, according to Lockheed.

“Industry partners will make an upfront investment into cost cutting measures that the government and taxpayers will reap benefits from by buying F-35s at a lower cost, ” said Air Force Lt. Gen. Chris Bogdan, program executive officer for the F-35.

“By 2019, we expect that the F-35 with its unprecedented 5th generation capability will be nearly equal in cost to any other fighter on the market, but with far more advanced capability, ” Bogdan added.

Lockheed believes that reducing the unit recurring flyaway cost will also help foreign nations that plan to acquire the fighter aircraft.

The U.S. government is also exploring similar initiatives to help reduce the program’s sustainment and operational costs.

“We are taking these unprecedented measures in support of our customers’ affordability challenges, ” said Lorraine Martin, Lockheed’s F-35 program executive vice president and general manager.

“Our industry team knows what is at stake given the current budgetary and global security demands to reach these cost milestones, ” Martin added.

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