Boeing-Versus-Lockheed Jet Rivalry Reopened by Trump Tweet
Boeing-Versus-Lockheed Jet Rivalry Reopened by Trump Tweet
(Bloomberg) -- President-elect Donald Trump upended years of Pentagon procurement planning with a tweet announcing he had asked Boeing Co. to price an upgrade of its F-18 Super Hornet jet that could replace Lockheed Martin Corp.’s F-35, the most expensive U.S. weapon system ever.
“Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!” Trump said Thursday in a post on Twitter.
That probably isn’t possible.
Lockheed’s $379 billion F-35 Joint Strike Fighter is intended to be the mainstay of the Air Force, Navy and Marine Corps, replacing several older planes including early models of Boeing’s F-18. Advanced development of the F-35 started in 2001, and Lockheed is planning to build more than 3,000 of the aircraft for the U.S. and allied forces, a project that will create tens of thousands of jobs at factories across the country and overseas.
In his trademark, 140-characters-or-less style, Trump did more than pit two iconic U.S. companies against each other: he sidelined decades of policy and practice in how the government spends billions of dollars annually on military hardware.
Moreover, by plunging himself personally into the complex arena of government contracting, Trump appeared to short-circuit a process that requires rigorous decision-making about what the Pentagon needs, an effort to create a level playing field, reviews by experts in defense policy and military hardware and congressional oversight.
Trump’s comments were “bizarre,” Richard Aboulafia, a military aircraft analyst with the Teal Group, said in an e-mail. “The Navy remains the only U.S. customer for the Super Hornet, while the Marines are completely dependent on F-35Bs and the Air Force is sticking with the F-35A,” he said. “Thus, Trump’s tweet is both late to the game and completely irrelevant.”
The exact impact of Trump’s tweet wasn’t immediately clear. The Defense Department has scaled back purchases of the F/A-18E/F model, which lacks stealth and other high-tech capabilities of the F-35, and would require extensive design changes to be comparable to the newer plane. The Pentagon had requested just two F-18 Super Hornets for the fiscal year that began in October, though Congress has indicated in spending bills that it would like to buy at least 12 more.
Trump also didn’t provide enough information to assess what role he’d want a new Boeing bid to play controlling what he claims are out-of-control costs. If carried out into a actual acquisition program that survived court challenges and opposition from the Texas congressional delegation, where much of the F-35 is assembled, the move would accomplish for Boeing what it could not achieve in a head-to-head competition -- win a piece of the Joint Strike Fighter program it lost to Lockheed Martin back in the 2001 selection.
Trump’s tweet notwithstanding, there were clear military reasons for the Pentagon to go with the F-35.
The Air Force, which plans to buy 1,763 of the F-35A model jets, would not fly Boeing’s minimally stealthy “fourth-generation” Super Hornet, which is designed for aircraft carrier operations.
The Marines decided against buying the Super Hornet “and instead waited for the F-35B in part because the F/A-18E/F” is a conventional takeoff aircraft and the Corps “prefers aircraft capable of vertical operations,” said the Congressional Research Service in a July report.
Loren Thompson, a defense analyst with the Lexington Institute who has followed the program since Lockheed Martin beat Boeing in the winner-take-all contract, said, “Mr. Trump needs to understand all the costs of substituting one plane for the other.”
Super Hornets “require escort aircraft to compensate for their lack of stealth and” capability to gather, fuse and distribute data from weapons sensors, he said. Even the Navy’s initial doubts about the aircraft-carrier version of the F-35 “disappeared after a series of very successful sea trials for the new fighter,” he added.
The Navy’s current plan is to rely on the F-35 during the opening days of a conflict “because it is invisible to enemy radar, and then shift over to use of Super Hornets,” Thompson said.
Moreover, “Boeing offered a stealthier version of the F/A-18 in 2013 that did not gain traction with the Navy or other customers,” Byron Callan, a defense analyst with Capital Alpha Partners, LLC said in a note to clients. “The F/A-18 could not be used on Navy amphibious ships whereas the F-35B can.” Since the Air Force does not operate F/A-18s “there would be costs to integrate that type into its inventory,” he wrote
Lockheed shares fell 1.2 percent at 10:12 a.m. New York time, while Boeing declined 0.3 percent.
In an e-mailed statement, Boeing spokesman Todd Blecher said, "We have committed to working with the president elect and his administration to provide the best capability, deliverability and affordability across all Boeing products and services to meet our national security needs."
Trump’s repeated frustrations with the F-35’s costs have been echoed by others. The F-35 program has had $81 billion in obligations for the last 10 fiscal years. Yet it has also had repeated challenges, with defense officials saying recently it would need as much as $500 million extra to finish its development phase.
From inadequate wing strength in some models to delays in live-fire testing of the jet’s gun system for attacking ground targets and enemy jets in dogfights, the F-35’s travails have provoked outrage on Capitol Hill. But with few, if any, alternatives to the jet’s technological prowess, the program continues. Lockheed last month received a $1.28 billion Pentagon down payment to continue production of the jet while negotiations continue on a contract valued as much as $7.19 billion for 90 aircraft, the biggest order yet.
“Beyond the program itself, we believe Trump’s tweets are a message to the broader contractor community to keep costs down,” Seth Seifman, an analyst at JPMorgan Chase & Co., said in a report. “How persistently and comprehensively the new administration will reinforce this message remains unclear.”
In a sign of how spread out the F-35 program is, that latest down payment will fund work on the F-35 in Fort Worth, Texas; El Segundo, California; Orlando, Florida; Nashua, New Hampshire, Baltimore; Nagoya, Japan and Warton in the U.K., according to the Pentagon.
While the development and sale of the F-35 is an international effort, some U.S. allies have backed out of the program, at least for now. Canada recently announced it would seek to buy F-18s to upgrade its fighter fleet, six years after former Prime Minister Stephen Harper said the country would buy 65 F-35s and begin deploying them by 2019. Now, Prime Minister Justin Trudeau’s government wants to wait before it commits to the latest-generation fighters, using current inventory and the F-18s well into the 2020s.
In the U.S., the fiscal 2017 defense authorization would allow an additional $9.9 billion for the F-35 this fiscal year. The total includes $3.3 billion in funding for the Navy and Marine Corps versions and modifications, and $4.8 billion for the Air Force F-35 variant and modifications.
Trump summoned the chief executives of both companies to his Mar-a-Lago resort in Florida on Wednesday, as well a group of top Pentagon officials, to discuss the costs of the F-35 program and also Boeing’s proposed replacement for Air Force One, the presidential aircraft. Boeing CEO Dennis Muilenburg said he told Trump the new Air Force One would be built for less than $4 billion, less than what Trump said the plane would cost.
Lockheed CEO Marillyn Hewson said in a statement after the meeting that she had assured Trump the company would continue efforts to reduce the F-35’s costs. She didn’t announce any new promises. When asked about the president-elect’s latest missive, Lockheed spokesman William Phelps said the company had no comment.
--With assistance from Roxana Tiron Margaret Talev and Thomas Black To contact the reporters on this story: Tony Capaccio in Washington at firstname.lastname@example.org, Alex Wayne in Washington at email@example.com. To contact the editors responsible for this story: Bill Faries at firstname.lastname@example.org, Michael B. Marois