F-35 partner disputes Trump’s ‘big savings’ claims

By Benjamin Katz

Bloomberg

The head of BAE Systems, Europe’s biggest defense contractor and a partner on the F-35 fighter jet, has contradicted claims by President Donald Trump that he was responsible for lopping $728 million off the price tag for the Pentagon’s latest warplane order.

The contract’s lower price, valued at $8.2 billion, is due to savings achieved through a long-planned increase in production, Chief Executive Officer Ian King told analysts after releasing the company’s full-year earnings Thursday. On a per-plane basis, savings on the order for 90 of the Lockheed Martin jets exceeded the $600 million that Trump initially said he had achieved.

“In terms of the projected prices, they were all to do with the ramp-up in rates and were well-advertised,” King said. “But if somebody wants to take credit for that finalization, negotiation, then they can take credit for that negotiation if they wish.”

Trump took on Lockheed CEO Marillyn Hewson, tweeting that costs on the military program, the Pentagon’s most expensive, were “out of control.” Defense Department officials and Lockheed had been negotiating for more than a year and “were very close on price prior to President Trump’s involvement,” Frank Kendall, the Pentagon’s chief weapons buyer under President Barack Obama, said this month.

The new contract is the 10th tranche in a $379 billion program. Lockheed has been more circumspect than BAE about Trump’s claims. It credited economies of scale and production efficiencies for the savings in the new pact, but also said in a statement that Trump’s personal involvement “accelerated the negotiations and sharpened our focus on driving down the price.”

BAE Chairman Roger Carr told Bloomberg TV last month that Trump was seeking a 10 percent discount on the price. Excluding the propulsion system, the London-based company has a 15 percent work-share on each plane, including construction of the fuselage, tail and wing parts.

The Pentagon’s F-35 program manager, Lt. Gen. Chris Bogdan, told a House panel last week that “I am in the throes of negotiating” the next order of 120 airplanes that’s “going to be somewhere in the order of above $10 billion.”