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    F-35 Sales Drive Lockheed Profits Up, But Pentagon Still Blocking Deliveries

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    Lockheed Martin posted 3.8 percent growth in revenue while raking in $1.16 billion in first quarter profits as F-35 sales continue to grow. So why is the biggest buyer of F-35 aircraft, the US Department of Defense, refusing to accept deliveries of the aircraft?

    A spokesman for the Maryland-based contractor claimed April 12 that a dispute over repair costs sparked the government's decision to temporarily tell Lockheed "no thanks" to the jets. There was allegedly a "production error" found on more than 200 of the aircraft built and delivered to the Pentagon, according to Lockheed.

    "We'll get resolution to this soon," a company spokesperson assured the Washington Business Journal on Tuesday. The disputed repair bill is estimated to cost between $119 million and $180 million, Bloomberg reported last Thursday.

    For perspective, the Pentagon's acquisition of F-35s is estimated to cost more than $400 billion while aircraft operations and sustainment costs for the F-35 is projected at levels greater than $1.1 trillion.

    The company reported on Tuesday that it expects its aerospace business line to generate $5.47 billion in revenues in 2018 on the heels of 7 percent more F-35 sales.

    Just last fall, the Pentagon refused the company's newest F-35s when inspectors found corrosion on brand-new planes.

    Judging by recent comments made by the head of Naval Air Systems Command, it seems the corrosion issue is linked with the new repair bill, which is related to the cost of changing the factory lines so that in the future the same issue doesn't resurface.

    The initial corrosion problem "was a mistake made by the contractor and they should pay for that out of their bottom line, not our top line," said Vice Admiral Paul Grosklags, commander of Naval Air Systems Command, in remarks to Congress in early April.

    Officials in the Pentagon have grown increasingly critical of the program.

    "I will tell you, I am not satisfied with the collaboration and cooperation of Lockheed Martin," Vice Admiral Mat Winter told reporters in March, noting that the company could be "much, much more collaborative and cooperative."

    "The price is coming down but it's not coming down fast enough," the admiral said with regard to the Pentagon's acquisition of its next batch of fifth-generation combat aircraft.

    The company claims that it will still deliver at least 90 F-35s to the Pentagon by the end of the year.


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