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this article appears today in the WSJ
I post portions here because it may have a big impact on stock price somewhere down the line.
John
January 5, 2001


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Lockheed's Next-Generation F-22
Faces More Development Hurdles
By ANNE MARIE SQUEO
Staff Reporter of THE WALL STREET JOURNAL


Lockheed Martin Corp.'s next-generation F-22 fighter is again facing hurdles to its development after a senior Pentagon official recommended putting off initial production of the aircraft for at least nine months and possibly as long as a year.

In a Dec. 20 letter to Pentagon acquisitions chief Jacques Gansler, Philip E. Coyle, the Pentagon's director of operational test and evaluation, said the Air Force jet shouldn't go into initial production until additional tests are done to avoid "clearly unacceptable risk."


Critical Time

The recommendation comes at a critical time for the aircraft program, which faced extinction in mid-1999 when Congress tried to cut its funding. Eventually, the money was restored, but production was put off until the Lockheed plane met certain performance criteria. Delaying a production decision again could put the program in a precarious position, both economically and politically. Lockheed and the Air Force are concerned about supplier relationships and keeping costs from inflating as the production timeline slips.

In addition, the incoming Bush administration has said it will conduct a top-to-bottom review of all of the military's tactical-aircraft programs. The radar-evading F-22 is a top priority for the Air Force, which sees the advanced fighter replacing the aging F-15 as its highest performance aircraft.

Currently, the Air Force is scheduled to buy 339 of the aircraft at a total cost of $62 billion. The Defense Acquisition Board, which includes senior Pentagon and service officials, is set to meet this month to decide whether to provide $2.1 billion in funding that would allow Lockheed to build the first 10 F-22s. That meeting already has been postponed twice, though $353 million has been released to keep work going until March 31.

'Most Extensively Tested'

Top Air Force officials disputed the need for additional tests. "At this point in its development, the F-22's 830-plus flight-test hours makes it the most extensively tested fighter in history," said Gen. Michael Ryan, Air Force chief of staff, in a statement.


Lockheed, in an attempt to reduce the cost of this aircraft as well as other Marietta work, told employees this week they will cut 675 positions at the plant and outsource some manufacturing operations. The layoffs, which will begin in June and take place in the next 18 months, are expected to save the company about $25 million a year, a Lockheed spokesman said.



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