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26 October 2001 |
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http://www.opensecrets.org/alerts/v6/alertv6_29.asp |
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In the shadow of the most devastating terrorist attack in history, the Pentagon today announced its most lucrative contract ever: a $200 billion deal with Lockheed Martin to build the Joint Strike Fighter, a next-generation combat jet that ultimately will replace aircraft used by the Navy, Air Force and Marine Corps. Awarded on a “winner takes all” basis, the contract calls for construction of 3,000 JSFs and was considered so momentous that Lockheed Martin and Boeing—the only two companies who competed for the contract—spent hundreds of thousands, if not millions, of dollars on advertising and other lobbying efforts in an attempt to sway federal officials in their favor. During the calendar year 2000, Lockheed Martin spent more than $9.8 million lobbying members of Congress and the Clinton administration, more than double the $4.2 million the company spent during 1999. Among the company’s newest lobbyists: Haley Barbour, the former chairman of the Republican National Committee. Boeing, meanwhile, reported $7.8 million in lobbying expenditures during 2000—about $400,000 less than its spending during the calendar year 1999. In July, Boeing hired Rudy de Leon, a former deputy secretary of defense under President Clinton, as its top Washington lobbyist—a move that angered some key Republicans, including Rep. J.C. Watts (R-Okla.) who called the hiring “a slap in the face” to the GOP. In terms of campaign spending, it was a battle of giant vs. giant. During the 1999-2000 election cycle, Lockheed Martin contributed just over $2.7 million in soft money, PAC and individual contributions to federal candidates and parties. More than two-thirds of that money went to Republicans. On the other hand, Boeing gave $1.9 million to federal parties and candidates, split almost equally between Democrats and Republicans. That doesn’t include Lockheed Martin’s $225,000 in checks written to the Bush-Cheney Inaugural Fund or Boeing’s $100,000 contribution to the same committee. Just months into the 2001-02 election cycle, contributions from the two companies have been far more even. Through June 30th of this year, Boeing had contributed just under $468,000 to federal parties and candidates, 58 percent to Republicans. Lockheed Martin, meanwhile, had contributed $550,875, more than two-thirds to the GOP. With all that money, it’s not surprising that the backroom politics over the deal got testy in recent weeks. Boeing, for example, accused Lockheed Martin of deliberately playing up its Texas ties in pressing for the JSF contract, hoping to score points with the Bush White House. (Lockheed Martin plans to build the planes at its plant in Fort Worth.) Meanwhile, Boeing elicited support from some of the most influential leaders on Capitol Hill, including House Speaker Dennis Hastert (R-Ill.), House Minority Leader Richard Gephardt (D-Mo.) and nearly every member of the Washington state congressional delegation. Gephardt last month sent a letter to the Pentagon urging it to award the JSF program to Boeing, which had planned to build the aircraft in St. Louis. Boeing was the No. 6 contributor to Gephardt’s 2000 re-election campaign, contributing $13,500.
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27 October 2001 |
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http://www.latimes.com/business/la-102701fighter.story |
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WASHINGTON -- Lockheed Martin was tapped by the Pentagon on Friday to design and build as many as 3,000 jet fighters that will form a key leg of U.S. military strength over future decades, dealing a serious blow to rival Boeing Co. The award, which could be the biggest military contract ever at a projected $200 billion, culminates an intense four-year battle between two of the world's largest defense contractors. Variants of the plane will be supplied to the Air Force, Navy and Marine Corps, as well as Britain's Royal Air Force and Royal Navy. Potential foreign sales are estimated at an additional $200 billion. The program also carries enormous economic consequences across the U.S., creating thousands of jobs at Lockheed's plant in Fort Worth as well as at major subcontractors in Southern California. Boeing acknowledged Friday that it may have to lay off employees at its military aircraft unit, headquartered in St. Louis. Versions of the Lockheed jet, equipped with state-of-the-art radar-evading technology, can take off on short runways, reach supersonic speed and then land vertically--a set of capabilities that no current fighter aircraft has. It eventually will replace the aging fleet of U.S. fighter jets, including the Air Force's F-16, the Navy's F/A-18 and the Marine Corps' AV-8B, and it will be the only new aircraft to enter production in the next decade. "This really is the contract of the millennium," said Christopher Hellman, analyst with the Center for Defense Information. "Nothing has or will come close." Lockheed will receive an initial $19-billion contract to build 21 prototype aircraft over the next four years, during what is termed the engineering and manufacturing development phase. Full-scale production will not begin until 2008, which will require funding approval from Congress. A separate $4-billion contract was awarded to Pratt & Whitney to develop the engines for the aircraft. Because of its size and with no other new fighter program planned for the foreseeable future, analysts believe the contract will set the agenda for the aerospace industry for several decades. "This program is so big that it rearranges the entire landscape in the military aircraft business," said Loren Thompson, managing director of the Lexington Institute, an Arlington, Va., defense policy think tank. "Lockheed will dominate the sector, and Boeing will become an afterthought." Pentagon officials said they picked Lockheed's contender, the X-35, over Boeing's X-32 because it was a "clear winner." "I would not characterize it [the race] as a squeaker at all, nor would I say by a mile," said Secretary of the Air Force Jim Roche, who made the final decision. "It became clear as we went through this process that the case built more and more strongly that the Lockheed Martin team was a clear winner from the point of view of best value for the government." Though Lockheed plans to assemble the plane, to be known as the F-35, in Fort Worth, Southern California aerospace companies are heavily tied to its design and production. Amid all the layoff announcements, particularly among technology firms, "this will provide a nice boost," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. The competing planes were developed at Palmdale's Air Force Plant 42, and Lockheed and Boeing conducted concept demonstration flights there and at Edwards Air Force Base over the last year. "It's the largest purchase of fighter aircraft ever," said Rep. Jerry Lewis (R-Redlands). "And it's going to have a very positive impact on the California economy, particularly among the state's aerospace subcontractors." Rep. Howard P. "Buck" McKeon (R-Santa Clarita), whose northern Los Angeles County district is home to the Lockheed's famed Skunk Works where the X-35 was developed, said the selection of the Lockheed team will mean more jobs for California than would have been created if Boeing had won the contract. "We knew there would be winners and losers," McKeon said. Those jobs will include engineers, designers and craftspeople, who will design software, engineer new stealth technologies and fabricate parts for the aircraft. Century City-based Northrop Grumman Corp. will be responsible for 20% of the work on the aircraft, meaning its work has a projected value of $40 billion, which would be a huge program in the defense industry by almost any standard. Northrop said it will need to hire 1,600 people in California, of which 1,200 will be based in the Southland, over the next 18 months. Northrop, which will build the center section of the fuselage and the weapons bay, as well as developing computer software and other electronic equipment, will locate the jobs in El Segundo, Hawthorne or Palmdale. "It's a fabulous win," Northrop Chairman Kent Kresa said. "What can I say, it's the largest defense program ever. We're delighted." Other Southland firms that will benefit include Parker Aerospace in Irvine, which will make hydraulic equipment and other components, and hundreds of smaller firms that will supply parts, analysts said. But the biggest winner will be Fort Worth, where city officials estimated the program would create 32,000 jobs. On Friday, hundreds of Lockheed employees watched the announcement on television at the company's massive aircraft plant. For their part, executives of Chicago-based Boeing insisted that losing the contract would not harm the company's military business. They noted that Congress has been pushing to build a new aerial tanker based on its 767 jetliner and to make more C-17 cargo planes. "It won't have a big impact in the near term," Boeing Vice Chairman Harry Stonecipher said in a recent briefing with reporters. "It will have an emotional impact. It will have a stock impact." After winning the contract, Lockheed immediately extended an olive branch to Boeing, saying it will allow Boeing to participate in the program if the Pentagon requests it. Defense analysts and some members of Congress have raised concerns that the winner-take-all contest could eventually leave the nation with only one maker of fighter aircraft and erode competition. "We have focused until now on winning the program. Going forward, if the government believes it is in the best interests of the country, the taxpayers and the services for Boeing to participate, then we will do what the government wants us to do," said Dain Hancock, president of Lockheed Martin Aeronautics Co. during a conference call with reporters. Although losing the contest would have virtually meant that Lockheed would have left the aircraft manufacturing business altogether, Boeing has other military programs to buttress the loss, analysts said. Still, one of the big fallouts for Boeing will be the loss of funding for design and engineering of fighter aircraft, which often helps with innovation in other airplane developments such as its commercial jetliners. "The competition for the Joint Strike Fighter really helped push the envelop for aircraft design and equally important for aircraft manufacturing," said John B. Goodman, partner in the aerospace and defense practice at research firm Accenture. The contest to build the airplane already had started to alter the defense industry. Shortly after being eliminated in the first round of JSF competition in 1996, McDonnell Douglas Corp. was acquired by Boeing. But the Pentagon's undersecretary for acquisition, Edward "Pete" Aldridge, insisted there is "plenty of work" for prime contractors such as Boeing and that the Pentagon opposes legislation forcing contractors to work together. In addition to Lockheed's F-22 fighter, which will be in production for another decade, the Pentagon is planning to develop unmanned aircraft and a next generation long-range strike aircraft to replace the B-2 stealth bomber. Such programs could provide the loser with the incentive to keep its fighter research and development teams together, he said. "So, it was our view that this winner-take-all strategy was not going to interfere with a long-term competitive role for the fighter aircraft," Aldridge said. Moreover, continued funding for the program is not assured. The Sept. 11 terrorist attacks and subsequent U.S. military campaign in Afghanistan may drain resources from the program, analysts said. "Current expectations are for 3,000 Joint Strike Fighters for the U.S. and possibly another 3,000 for non-U.S. customers," said Byron K. Callan, a defense analyst with Merrill Lynch & Co. "We would not be surprised to see a figure that is ultimately one-half or less of this total." But even at half, the total value of the contract would still exceed the $63 billion the U.S. is expected to spend on F-22 production and $65 billion for the new Virginia class of attack submarines, Hellman said. In the competition for the contract, Lockheed and Boeing developed radically different versions of the JSF. In 1994, with the prospects for shrinking defense budget, the Pentagon pushed the idea of a new fighter with a universal design that could be customized for the needs of the three services. Pentagon planners figured that on their own, each service could not develop a plane by itself. As such, the fighters would have to have the ability to fly supersonic, land vertically and on short runways. Lockheed opted for a new technology in which a large horizontal lift fan just behind the pilot of the Marine Corps version provides the thrust for the plane to hover and land. A shaft from the jet engine turns the fan. Boeing decided to improve on a 30-year-old approach similar to the British-made Harrier, in which the exhaust from the jet engine is diverted to nozzles underneath the plane to provide the vertical thrust. And while Lockheed stuck to a design similar to that of the F-22, Boeing produced a plane with a radically different look. The decision was announced after the stock markets closed as Pentagon officials sought to prevent volatility of either stock, but investors had been betting on Lockheed to win the contract. Still Lockheed shares should get a major boost Monday when the stock market reopens. In after-hours trading Friday, Lockheed stock was up 6% to $52.60. Lockheed shares had climbed nearly 30% since Sept. 11 on expectations of a military buildup. Times staff writer Andrew Blankstein contributed to this report.
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27 October 2001 |
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http://www.nytimes.com/2001/10/27/business/27PLAN.html?todaysheadlines |
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 WASHINGTON,
Oct. 26 — Ending a fevered five-year competition, the Pentagon
announced today that it had awarded what is expected to become the largest
military contract in American history to Lockheed Martin to build a new
generation of supersonic stealth fighter jets for the Air Force, Navy and
Marine Corps.
The contract, which was announced after markets closed today, is expected to be worth more than $200 billion and calls for Lockheed to build more than 3,000 of the relatively low-cost aircraft over the next two decades. Anticipated overseas sales and maintenance contracts could double Lockheed's revenues, industry analysts say. "The Lockheed Martin team was a clear winner," said James Roche, the secretary of the Air Force, who was in charge of the selection process. The decision was a blow to the losing bidder, Boeing, the nation's second largest military contractor after Lockheed. Boeing was already facing 30,000 layoffs in its commercial aircraft division and many industry experts had said that it could quit the fighter jet business if it lost this competition. Immediately after the announcement, Boeing's allies on Capitol Hill said they would offer legislation requiring that production on the jet be split between the two companies. They also vowed to push the Pentagon to increase its purchases of other Boeing aircraft, including cargo planes and refueling tankers, to mitigate the company's economic woes. "The Joint Strike Fighter decision today is obviously a real disappointment to us," Phil Condit, Boeing's chairman, said in a news conference where he also expressed the hope the contract would be split. "We are ready to bring our capabilities and skills to Lockheed Martin's team." Edward C. Aldridge, the undersecretary of defense for acquisition, technology and logistics, said at a news conference that the Pentagon would oppose legislation requiring Lockheed to share business with Boeing, arguing that the winner- take-all approach would keep costs down. But he said the government would not object to Lockheed and Boeing negotiating a voluntary deal. "We'll do what the government would like us to do," said Dain M. Hancock, Lockheed's president. More Chevrolet than Porsche, the Joint Strike Fighter, which will be known as the F-35, is intended to attack ground targets rather than engage in aerial dogfights, a mission that will go to the more nimble F-22 Raptor also being developed by Lockheed. As the Pentagon moves increasingly to unmanned aircraft, the F-35 could be the last piloted fighter to be built in the United States, experts say. Despite Boeing's problems, Lockheed Martin needed the contract more, analysts said. Based in Bethesda, Md., Lockheed makes the Air Force's F-16 and F-22 fighter jets, both of which are expected to end production in the next decade. Boeing, based in Chicago, makes an array of military transport and refueling aircraft, and is also a leader in developing pilotless military aircraft — all in addition to its commercial aircraft line. With so much money and so many jobs at stake, lobbying by the companies and their Congressional patrons was intense. Both companies spent millions on marketing, advertising and campaign contributions in the past year. And members of the Missouri Congressional delegation, where Boeing makes military aircraft, aggressively warned the administration that President Bush would lose votes in their state if Lockheed won. Until recently, the Joint Strike Fighter had been viewed as one of the Pentagon's more endangered programs, and the decision to award the contract underscored the prominent role air power has come to play in American military planning, one being reaffirmed by the war in Afghanistan. The Pentagon is now moving ahead with three fighter programs: the Joint Strike Fighter, the F-22 air- to-air combat fighter for the Air Force and F/A-18 E/F carrier-based jet for the Navy. Those programs together could cost more than $400 billion over the coming two decades. The Joint Strike Fighter contract alone is so large that it could force the Pentagon to delay, trim or cancel other programs, like the Navy's stealth destroyer and the Army's Crusader mobile artillery system. While today's decision is a major step forward for the Joint Strike Fighter, it does not ensure smooth sailing to the program's end. Lockheed must pass a series of Pentagon tests before it can begin full production later this decade. And there is no guarantee the program will receive full financing from Congress, where its support is narrowly centered on lawmakers from Texas, Lockheed's manufacturing base. Lockheed has said the contract will provide as many as 9,000 jobs, mostly at its plant in Fort Worth. In a sign of some of the opposition the program could face, the General Accounting Office, a research division of Congress, released a report last week concluding that the Joint Strike Fighter was likely to suffer cost overruns, performance failures and production delays unless an array of technological problems were resolved. The Joint Strike Fighter is the first Pentagon program in which a foreign country, the United Kingdom, is a partner, having invested $1.4 billion with the intention of buying 150 of the jets. Denmark, Norway, the Netherlands, Canada, Italy, Singapore, Turkey and Israel have also expressed strong interest in buying the planes. The program also represents a departure in the way the Pentagon procures weapons. In the past, each of the armed services has bought its own individually designed and manufactured jets. But the Joint Strike Fighter will essentially be the same plane, modified to fit each service's needs. The Navy version will be heavier and have longer wings, for landing on carriers. The Marine Corps version will be able to take off on shortened runways, hover and land vertically. The Air Force version will be faster and more maneuverable. All three will be capable of flying at supersonic speeds. By sharing 80 percent of their parts, the new planes will be less costly to build and repair, and will allow the services to share spare parts and maintenance crews, the Pentagon says. It will also allow United States fighter pilots to operate more easily in tandem with forces from other nations. The first of the new planes, which will cost $40 million to $50 million each, are scheduled to come off the production line in 2008 and be available for military operations by 2010. They will replace Air Force F-16's and A-10's, Navy F-14's and Marine Corps AV-8B Harriers and F/A- 18C/D's. The initial contract calls for the Air Force to buy 1,763, the Marine Corps 609, the Navy 480 and the Royal Air Force and Royal Navy 150. Because of its sheer size, the Joint Strike Fighter program has already reshaped the fighter jet industry. When the McDonnell Douglas Corporation was eliminated from the competition in 1996, it merged with Boeing. The Lockheed teams includes Northrop Grumman, which will build the central fuselage and design the plane's radar and stealth systems, and BAE Systems, which will fabricate parts of the fuselage. |
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