ARLINGTON, Va. — U.S. President Donald Trump's criticism about the price tag of the F-35 "was fair," said Lockheed Martin CEO Marillyn Hewson, though she stopped short of confirming whether his demands for cost cuts actually influenced reductions.
Hewson, in an interview with Defense News on Tuesday, credited Trump for his astute understanding of volume and the need to drive down costs — an understanding that comes with business savvy, she noted. While Hewson opted to not remark on Trump's approach for critiquing programs costs — specifically choosing to "set aside tweets" and focus instead on their interactions — she did describe his demand for a close look at cost as constructive.
"He wanted to first understand the capabilities of the systems and spent time with military leadership understanding the actual programs," Hewson said. "Then we had a good dialogue about how do we get through the current negotiations, how do we continue to bring the price down, how do we get to a point where we can get to a more economic order quantity — multiyear, block buy or something like that. He recognizes the capability was needed of the F-35, but he also recognized he wanted to get the best price. I was encouraged by those discussions and continue to be."
In February, the Pentagon and Lockheed Martin came to an agreement on the 10th lot of F-35 joint strike fighters, with the cost per plane on the most common F-35A model dropping below $100 million for the first time.
Trump took credit for the cost reductions, even as analysts were quick to point out they were in the works before his election.
Hewson declined to elaborate on whether any cost savings were new, saying: "I’m not going to get into the details of the negotiations — I don’t think that’s appropriate." Instead she pointed to the savings themselves as reinforcement that the program is on track: a 62 percent reduction in costs from Lot 1 to Lot 10; and an 8 percent reduction on the air vehicle; and a 7.6 percent reduction overall from Lot 9 to Lot 10.
"That says a lot," she said. "Production was ramping up, of course, to 90 aircraft, but there are other elements associated with that."
"We’re continuing to work on taking costs out," she added. "We will, through volume, get reduced costs, and if we do smart buying — combining lots, multiyear buying or economic-order quantity — we’ll get a better deal throughout our supply chain because people can plan and invest if they have more volume to work from."
Hewson also pointed to great dividends of savings from the Blueprint for Affordability, an initiative that involves upfront investments from Lockheed and primary suppliers Northrop Grumman and BAE Systems to drive down program costs. That effort, combined with the Sustainment Cost Reduction Initiative, is expected to save F-35 customers more than $5 billion.
Beyond the F-35, Hewson credited Trump for his support of increased domestic defense spending and for his demands of NATO allies to make good on stated goals to spend 2 percent of GDP on defense, saying that "anytime the leader of the free world states priorities, it’s helpful to the rest of the countries." Even the America First policy touted by the Trump administration, which some have argued could disenchant global customers and partners, Hewson deemed a market positive.
"We’re a net exporter of military equipment. We don’t build military equipment outside of the U.S. and import it back in," as you might see happen with other manufacturing industries, she said. "As a net exporter, having the support of U.S. government, advocacy when we go into these various countries with the systems that we’re selling, is important to us."
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full interview with Lockheed Martin's CEO.