Pentagon cuts cost of F-35 fighters by 4%: sources

Aircraft

The Pentagon will pay about 4 percent less for each new Lockheed Martin Corp F-35A fighter jet when it signs a deal worth $3.8 billion with the No. 1 U.S. defense contractor on Friday, according to sources familiar with the deal. Each of the 22 conventional takeoff and landing jets in the fifth production contract will cost around $107 million, excluding the engine, said the sources, who were not authorized to speak publicly.

That compares to a price of $111.6 million for the F-35As to be used by the Air Force that were included in the fourth contract with Lockheed.

The contract for 32 jets also includes 3 B-models for the U.S. Marine Corps, which can land vertically, and seven C-models to be used on aircraft carriers for the U.S. Navy. The Defense Department is negotiating a separate contract with Pratt & Whitney, a unit of United Technologies Corp , for the engines that will power the new warplanes. Pentagon officials hope to conclude that deal by year end. A senior defense official said the Pentagon plans to sign the deal with Lockheed on Friday, a long-awaited agreement that moves forward the most costly weapons program in U.S. History and should make future negotiations easier.

The deal gives Lockheed a 12-percent profit margin, according to Loren Thompson, a defense consultant with close ties to the company.

Lockheed shares closed 19 cents or 0.21 percent lower at $91.81 on the New York Stock Exchange on Wednesday. The government also expects to reach an agreement soon with Lockheed on early funding for a sixth group of F-35s, a step that could help reduce a potential $1.1 billion liability the weapons maker faced from work it had already done on the jets without a signed contract, the official said. The final amount of the contract will be determined on Friday, since it must factor in the exchange rate of the British pound, said the official, who spoke on condition of anonymity.

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