October 26, 2012
Credit: Credit: Lockheed Martin
U.S. weapons maker Lockheed Martin said on Thursday it faced a potential termination liability of $1.1 billion on the F-35 fighter program unless it received additional funding for production of a sixth batch of airplanes by year end.
Lockheed disclosed the potential exposure in a filing with the U.S. Securities and Exchange Commission a day after company officials cited “great progress” on the fighter jet program.
Chief Financial Officer Bruce told analysts on Wednesday that Lockheed expected to finalize a contract with the U.S. government for a fifth batch of fighter jets in the fourth quarter, which would help free up additional funding for planes in a sixth order.
He told reporters that failure to reach a deal on the fifth batch of planes by the end of the year would have little impact on Lockheed’s 2012 results because it had already received funding for about 75 percent of the work on those planes.
Company officials did not mention the potential liability exposure on the sixth batch of planes during media or analyst calls on Wednesday.
The potential liability stems from the fact that Lockheed and its suppliers have begun using their own funds to work on a sixth batch of F-35 fighter jets so they will be able to meet the Pentagon’s schedule for deliveries of the planes.
Lockheed received some initial “long-lead” funding for advanced procurement of materials for the planes that take a long time to order but that money ran out a while ago.
The Pentagon has refused to release any more money for the sixth batch of planes until the two sides resolve their difference and sign a contract for the fifth batch of planes after nearly a year of negotiations.