Defense officials shocked by F-35 price jump

"Defense News": The IAF and Defense Ministry are trying to reduce extra features.

"Defense News" reports that Ministry of Defense and Israel Air Force officials are "stunned by projected program costs for their Israel-unique version of the F-35" Joint Strike Fighter (JSF), manufactured by Lockheed Martin Corporation (NYSE: LMT). IAF and Ministry of Defense officials are struggling to pare a hefty list of customized subsystems and add-ons that threaten to ground the aircraft as unaffordable.

"Defense News" states that, in September, US F-35 program officials gave rough price and availability data to their Israeli counterparts, who reacted with sticker shock to the price tag of $200 million per plane. Since then, both sides have been seeking a new configuration that can meet IAF performance and budget requirements. The IDF had expected to pay about $2 billion - $80 million per plane - for the first 25 aircraft.

Israel has an option to buy up to 75 F-35s.

"Defense News" quotes a US government source as saying, "Their budget was not in sync with the rough order of magnitude data they received. To put it mildly, they were overwhelmed. The customer was drawing from their experiences with the F-15 and F-16, which are third-generation, rather than a fifth-generation fighter with significant international content that is evolving and becoming real."

"Defense News" quotes a IDF General Staff official as saying, "It's unbelievable. First it was $40 million to $50 million, and then they [the IAF] told us $70 million to $80 million. Now, we're looking at nearly three times that amount, and who's to say it won't continue to climb?"

The new estimates are based on Israel's letter of request to the Defense Security and Cooperation Agency, the Pentagon section responsible for the deal, and not from Lockheed Martin. The new Pentagon estimate, based on Israel's letter of request for 75 planes, reaches $15.2 billion, including the aircraft, engines, electronic warfare and C4I systems, training and logistics support, and other services, and features, including "unique systems for sovereign requirements."

Lockheed Martin spokeswoman Cheryl Amerine told "Globes" in response, "The statements (by the Pentagon) to Congress (about weapons deals with foreign countries) are customary and conservative in order to ensure that the cost of all components of the deal reported do not deviate from the given ceiling.

"In addition, the letter of request of the Israeli government includes countless options intended to satisfy IAF specifications. In contrast to the eight countries partnering with the US in the manufacture of the F-35, which made their specifications during meetings over eight years, the US and Israeli governments are at the start of this process. We are pleased that the IAF has shown great interest in the F-35. We believe that the F-35 offers the best available capabilities at the best possible price."

Published by Globes [online], Israel business news - - on November 18, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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