RPT-INSIGHT-Expensive F-35 fighter at risk of budget "death spiral"

Fri Mar 15, 2013 5:35pm EDT
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By Andrea Shalal-Esa

WASHINGTON, March 15 (Reuters) - It's called the "death spiral," and America's newest warplane, the F-35 Joint Strike Fighter, is in danger of falling into it before the plane has even gone into service.

The term - recently invoked by top brass involved in the F-35 program - refers to a budgeting Catch-22 that plagues the defense industry. To keep the cost per airplane low, you need to build and sell a lot of planes. But in tough economic times, governments cut orders to save money. That pushes up the cost per plane, leading to more cancellations, pushing up the cost, leading to more cancellations. And so on.

The U.S. military is in the process of making tough decisions due to mandatory budget cuts from sequestration which went into effect March 1 and could lop off $46 billion of Pentagon spending this fiscal year.

Earlier this year, Pentagon budgeteers crunched the numbers on Lockheed Martin Corp's F-35 in an exercise that spoke volumes about the troubles facing the world's most expensive weapons system and the Navy's uncertain commitment to it.

Postponing orders for about 40 of the 260 Navy models of the plane, which will take off from and land on aircraft carriers, would save money in the short-term, according to several defense officials familiar with the analysis, which has not been made public.

But it would also add from $1 billion to $4 billion to the eventual price of the F-35 program, already at a record-setting $396 billion.

Seven years behind schedule and 70 percent over early cost estimates, the stealthy F-35 "Lightning II" appears to have overcome myriad early technical problems only to face a daunting new question: is it affordable in an era of shrinking defense budgets?   Continued...