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CNN Saturday Morning News

Lockheed Martin Lands Huge Fighter Jet Contract

Aired October 27, 2001 - 09:22   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MARTIN SAVIDGE, CNN ANCHOR: Fighter jets were the subject, but two American megacompanies were the ones in the battle.

As CNN's Kitty Pilgrim reports, Lockheed Martin beat out Boeing for a huge contract and the rights to build America's next generation of fighter jets.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The manufacturer of the F-16 fighter will make the next generation of fighter jets that will last until the year 2040, be on the cutting edge of design, landing and taking off vertically when needed. The design beat out the bulkier Boeing aircraft, which tried out a radically different engine placement but won praise for innovation.

LOREN THOMPSON, LEXINGTON INSTITUTE: Lockheed ended up having a superior product because they tried a highly affordable evolutionary design. Boeing tried something a lot more revolutionary, and they had difficulty implementing it.

PILGRIM: The Lockheed team includes Northrup-Grumman and BEA Systems. The economic trickle-down to subcontractors will include Pratt and Whitney, Rolls Royce, and British Aerospace.

The Air Force will buy the bulk of the planes. They're also meant for the Navy, Marines, and Britain. That alters the takeoff capabilities of the design.

Lockheed shares are up 47 percent this year on a defense industry rally and speculation it would win the contract. Boeing has cut 30,000 jobs because of a fall-off in civilian aircraft business and has seen its stock languish. But analysts say the loss is sustainable.

BRETT LAMBERT, DFI INTERNATIONAL: Boeing's not going to go out of the defense business. They are too integrated into this -- into the U.S. government's planning for military systems. They offer a wide variety of other programs that they can perform on and continue to be quite profitable with.

PILGRIM: The Pentagon said a fixed sticker price of about $30 million, with the vertical lift versions from the Marines at about $40 million each. In the past, aircraft were designed first and priced later. Some wonder if cost overruns are inevitable.

PAUL NISBET, JSA RESEARCH: Definitely there is a sticker price in mind, but like other previous programs, the estimates will almost certainly go up quite substantially during the development process.

PILGRIM (on camera): Financial analysts say this was a critical win for Lockheed, one they couldn't afford to lose, possibly knocking them out of the defense business if they didn't win this contract outright.

Now those worries are over, this makes them the premiere fighter jet manufacturer in the world.

Kitty Pilgrim, CNN Financial News, New York.

(END VIDEOTAPE)

SAVIDGE: While it is still years away, U.S. military leaders are excited over the prospect of getting the Joint Strike fighter, at least getting it into service, and here's why. Some quick facts on the plane.

It's single seat, supersonic, and equipped with stealth technology. Lockheed Martin will build different versions of the plane for the Air Force, Navy, and Marines. As you can see, the jet also has the ability to land vertically.

It won't come cheap, though, about $30 million per plane, and the Pentagon wants to buy as many as 3,000 of them.

Other countries, though, could buy 3,000 more, adding tens of billions of dollars to the contract's worth. Lockheed says the X-35A can do the work of five planes, and eventually the new Joint Strike fighter will replace the F-14, the F-18, the AV-8B, better known as the Harrier Jump Jet, the F-16, and the A-10.

Joining me now to talk more about the Joint Strike fighter, CNN military analyst retired general Don Shepperd. And thank you for joining us again this morning, general.

MAJ. GEN. DON SHEPPERD (RET.), CNN MILITARY ANALYST: Morning, Martin.

SAVIDGE: Well, what are the tactical advantages that this sort of aircraft could offer?

SHEPPERD: Well, you showed them on the baseball card there. Very important is the idea of supersonic. It's also takes advantage of the technology from the F-22 in the stealth characteristics. It brings the Navy and the Marine Corps and the allies to whom we sell the airplane into the stealth, into the stealth area.

It's also cheap. I know $30 million doesn't sound cheap, but that's relatively cheap in today's fighter aircraft, Martin.

SAVIDGE: Right, it's not too much off the mark of some of the current aircraft that's out there.

SHEPPERD: That's true. I remember when we first bought the F- 16, the price tag was around, I believe, $8 million. In fact, I think it was even $6 million. And now we're paying $28 million for the new F-16s coming off the line.

This is a step forward. It puts the United States military and any coalition partners that buy the airplane decades ahead of anything else that's available on the market.

When you talk about the combination of the Joint Strike fighter and the F-22, you've got a powerful military combination there that takes us, again, the United States military and its allies, decades ahead.

SAVIDGE: If this aircraft were available today -- of course, it's not -- but if it were, how do you think it would change the air war going on currently in Afghanistan?

SHEPPERD: It -- in today's battle in Afghanistan, it wouldn't make a lot of difference right now. But in the early days of the war, you could have -- you could have put in fighter aircraft much earlier without having to worry about the air defenses.

Now, the airplane is designed for a much more sophisticated scenario than just Afghanistan, where we had fairly low-tech air defenses in small numbers. What this does to an adversary is, it makes their air defense system irrelevant. They have to replace their air defense system to cope with the combination of the F-22, the B-2, and the Joint Strike fighter. It's a major step forward.

SAVIDGE: When you have an aircraft, as they claim, that will fill the shoes of five different aircraft, it seems you have to make a lot of compromises. Are there areas here that the aircraft may not be so specific for because of generalities to fit all those different jobs?

SHEPPERD: Yes, we tried to make an airplane before for everybody. It was called the F-111. Didn't work out so well. But this is different. This is a fighter airplane that can be adapted. Now, you saw that the price tag for the Air Force version, around $30 million. The price tag for the more complicated and heavier Navy version will be around $40 million.

The manufacturers believe that they can adapt this aircraft to the needs of all services. The commonality of the Pratt and Whitney engine that goes from the F-22, the commonality of the stealth characteristics, is something that everyone can use. So it's much easier to adapt this airplane across the services than what we've had before.

SAVIDGE: What do you think it was that was the final decision or the straw that broke the camel's back, say, that made Lockheed Martin apparently more attractive than Boeing?

SHEPPERD: That's going to come out in the next couple of weeks as the companies are specifically debriefed on the details of the decision and why it was made. But Secretary Aldridge made a point yesterday in the announcement of saying that both concept demonstrators met the basic performance. Secretary of the Air Force ROST then said that the Lockheed was clearly superior on technical grounds and risk grounds.

That will be laid out in specific detail for both of the companies in the next couple of weeks.

SAVIDGE: And does that mean that Boeing could be in line first for something else to come down that may be needed militarily? Or does it not work that way?

SHEPPERD: Well, remember, Boeing is a very solid company. They have a big part of the big airplane market. They have the C-17, they have the F-18 ENF Hornet coming up. They are big in space. So it's a very, very solid company.

Now, the secretary was also asked that question, is Boeing going to get a big piece of this airplane? And basically the message was, that's up to Lockheed Martin to decide who they want as subcontractors.

The defense industrial base is very important, keeping manufacturers of big and small airplanes and keeping the lower-level suppliers available to do future products out there is very important.

SAVIDGE: And general, when do you think we'll likely see this aircraft in action?

SHEPPERD: Well, the first -- there are many humps to go here, many things to be considered. It'll go through many rough times. But basically, 2008 are supposedly the first deliveries, and this goes to stretch through the year 2040. This is huge, the $200 billion now with the possibility of $400 billion before it's over. This is a huge, huge award, Martin.

SAVIDGE: All right, retired general Don Shepperd, thank you very much for joining us this morning with your insights.

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