Facing a stagnant defense market in the United States, Lockheed Martin [LMT] is aiming to increase sales internationally by 5 percent in the next several years in part by continuing to drum up interest the F-35, Christopher Kubasik, the company’s president and chief operating officer, said recently.
Historically, Lockheed Martin’s share of international sales has hovered around 15 per cent, said Kubasik, who is slated to replace Bob Stevens as the firm’s chief executive in January.
Kubasik would only identify the countries at focus in Lockheed Martin’s effort as East Asian or Middle Eastern, but said the fifth generation multi-role Joint Strike Fighter coupled with company’s portfolio in missile defense and information technology will be at the center of increasing foreign sales.
“That’s exactly what we are seeing a lot of these countries interested in,” Kubasik said during the company’s annual media day.
Kubasik said Lockheed Martin this week submitted its F-35 proposal in South Korea’s competition for its next generation fighter jet. Boeing [BA] also confirmed submitting a bid based on the F-15, and the Eurofighter consortium had been expected to enter the Typhoon.
Kubasik, however, acknowledged the international market for the F-35 has softened given the global financial environment, coupled with the Pentagon’s decision earlier this year to delay procurement of 179 F-35s outside of the five-year budget plan.
The Pentagon reduced the number of F-35 buys because of cost overruns, development–known as concurrency–problems, and delays, saying the move will save and estimated $15 billion and give more time for the aircraft to mature. Italy has scaled back its planned purchases of F-35s while Australia and Canada delaying or taking a second look at the program.
“When the U.S. made a decision to push their aircraft out to the right, I probably was not all surprised to see that many of the other countries followed,” he said.
The cost of the Joint Strike Fighter program for the 2,443 planes the U.S. Air Force, Navy and Marine Corps plan to buy has risen to $395 billion–about $117 billion from the expected cost five years ago, the Government Accountability Office (GAO) said.
Japan last year committed to buying 42 of the planes but has warned that it might pull out if costs are not reined in. The United States developed the F-35 in partnership with allied countries. The United Kingdom is a top partner, while tier two and three countries are Italy, Netherlands, Turkey, Canada, Australia, Denmark and Norway. Israel has also has plans to buy F-35s.
Norway recently ordered its first two F-35s of a planned purchase of 52, and moved up the timeframe for acquiring the first two units, a move Kubasik said was a good sign for the program. He said that as more countries begin placing orders, costs will drop after a rather flat production rate over the next few years.
“When we get through that process we’ll start to see the price reduction as the volume ramps up,” he said.