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The Joint Strike Fighter: The Deal of the Century
8 November 2001
The consolidation of the U.S. defense industry during the 1990's left the jet fighter building business to primarily two companies: Lockheed Martin and Boeing. Analysts have warned that the recent decision to award Lockheed Martin a $19 billion contract for the next phase of development in the Joint Strike Fighter (JSF) program could mean that only one fighter jet company remains. "The loss could theoretically put Boeing out of the fighter business once [Boeing's] F-18 is completed," said Christopher Mecray, aerospace analyst at Deutsche Banc Alex. Brown. Boeing is also hurting from a sharp decline in orders of its commercial jet unit. Since early September Boeing stocks have dropped 30%. As a result, Boeing is preparing to layoff up to 30,000 workers by mid-2002.
But Boeing may still have a role in the JSF program, especially if legislators from Missouri have anything to say about it. In Boeing's corner are Senators Christopher Bond and Jean Carnahan, who have suggested offering legislation to require the military to split production and set up two production lines, one in Fort Worth and one in St. Louis to keep Boeing in the fighter business. "This debate should be about what is best for the nation, not Texas, Missouri or any one company," Bond said. Yet if that were truly the debate, maybe the DOD and members of Congress would be debating whether or not the U.S. should be developing three advanced fighter planes. Despite campaign promises by President Bush to "skip a generation" in weapons procurement, all three of the Pentagon's advanced fighter plane programs are moving forward. In addition to the USF, the Pentagon is developing two other advanced fighter planes: the F-22 raptor and the F/A-18E/F Super Hornet. The F-22 program is estimated at $63.4 billion for 339 aircraft, being developed by prime contractor Lockheed Martin and Boeing. The Super Hornet is a $47 billion project for 548 tactical attack aircraft (at $86 million a piece) to be used by the Navy and the Marine Corp, being developed by Boeing and General Electric (prime contractors, and Northrop Grumman a subcontractor).
Nevertheless, Texas Senator Kay Bailey Hutchison has promised to block any efforts by Missouri's delegation to require that work on the Joint Strike Fighter be shared with Boeing. Hutchison said that Lockheed Martin won the $300 billion contract fairly and that the legislation proposed by Sen. Bond would serve to undo the government's decision. However, Hutchison said she wouldn't oppose Lockheed voluntarily sharing some work with Boeing. Both Hutchison and Bond sit on the defense appropriations subcommittee, which has the lead Senate role in setting defense spending. The St. Louis Post-Dispatch reported that Jerry Daniels, chief executive of Boeing's military division, said last week that the company still hopes to get a "meaningful" piece of the Joint Strike Fighter work. Lockheed Martin asked Boeing to evaluate how they might contribute to the project. Boeing is also working on a sizable portion of the F-22 program and has a number of weapon contracts with the Pentagon including the F/A/-18, the F-15E Eagle, AV-8B II Harrier, T-45 Goshawk, and the C-17 Globemaster III. Boeing is also the prime contractor for the National Missile Defense system that the Bush administration is pushing so hard.
The JSF (also called the F-35) is being advertised as the "world's premier" strike platform to be unveiled in 2008 when the first 22 planes are delivered. The multi-role strike fighter will be used by the Air Force (in place of A-10s and F-16s), the Navy (F/A-18s), and the Marines (AV-8Bs). The UK is a full partner in the program. Denmark, Norway, the Netherlands, Canada and Italy have joined as partners and Singapore, Turkey and Israel are foreign military sales participants for this phase. Britain's Royal Air Force and Navy have committed $2 billion to the development and is planning to purchase 150 of the fighter planes. Northrop Grumman and British Aerospace, and possibly Boeing, are subcontractors. Each plane is projected to cost $40 million a piece.
If the program proceeds according to plan, the Pentagon will request 3,000 F-35s, making it the largest acquisition program in history. The total value of the contract could be worth more than $300 billion. Knowing the stakes involved in a deal of such proportion, the five-year competition between Lockheed Martin and Boeing was fought, not only by engineers and scientists, but also by high paid lobbyists and advertisements too.
The Center for Responsive Politics reported that Lockheed Martin spent more than $9.8 million lobbying members of Congress and the Clinton administration during 2000, more than double what the company spent in 1999. Boeing spent $7.8 million in lobbying expenditures during 2000, $400,000 less than 1999. Campaign spending (soft money and PAC) for the 1999-2000 cycle by Lockheed totaled more than $2.7 million, with two-thirds going to Republicans, while Boeing gave $1.9 million to candidates and parties with an even split between Republicans and Democrats. Boeing also kicked in $100,000 to the Bush-Cheney inaugural fund, while Lockheed gave $225,000. Lockheed also sweetened the deal by playing up its Texas connection. Work will be done in 27 states and Britain, with final assembly at Lockheed's Fort Worth plant, potentially leading to 9,000 new jobs.
The Lockheed team had one other "inside connection" - Air Force Secretary James Roche chose the winner. What's the big deal? Well, before being appointed to Secretary of the Air Force, James Roche served as corporate Vice President of Northrop Grumman and has worked for Northrop since 1984. Maybe a conflict of interest? Northrop Grumman has a significant role in the development of the JSF - three of its operating sectors -- Integrated Systems, Electronic Systems and Information Technology -- have been developing advanced technologies for JSF in areas that include aircraft systems, stealth, sensors and software engineering. Gleeful and confident, Lockheed Martin Chairman Vance Coffman said his company would build a "truly remarkable, capable and affordable multi-role fighter, on schedule and on cost." However the General Accounting Office (GAO) has warned numerous times that the jet is likely to cost more, take longer to build and have performance problems. In fact, the General Accounting Office released its' latest report on the Joint Strike Fighter just weeks before the Pentagon made its decision. The GAO report stated, "We disagree with DOD's assertion that technology is mature enough to move forward. The technology readiness level assessment conducted as part of our review of the JSF showed that critical technologies are not projected to be matured to levels that would stem risks at the start of engineering and manufacturing development. Our previous work has shown that when programs proceed in this fashion, they experience delays, rework, and substantial cost increases that could force the Department to divert much-needed funds from other important weapon system programs."