Lockheed Martin (LMT) Considers Shifting F-35 Fighter Work From Canada
Shares of the Lockheed Martin Corporation (LMT) were trading up +1.73 or +0.72 percent to $242.39 in Friday’s premarket after news that the company is considering moving its F-35 fighter work away from Canadian companies due to the Canadian government’s uncertainty about purchasing the radar evading fighter. Lockheed Martin stock closed at $240.67 per share, up +0.29 or +0.12 percent in Thursday’s regular trading session.
Bethesda, Maryland based Lockheed Martin Corporation is the result of the $10 billion 1995 merger of Martin Marietta and the Lockheed Corporation, and is a major global aerospace and defense contractor.
Early this morning, news broke that Lockheed Martin was considering shifting work on its F-35 fighter jet away from Canadian companies. Canadian companies would account for approximately $1 billion in development and production work on the fighter jet by the end of this year.
Nevertheless, future work could be at risk if the Canadian government decides to omit a competition and order Boeing Company’s (BA) F/A-18E/F instead. According to a spokesman for Canada’s defense ministry, the reports were not accurate, however according to Lockheed Martin Vice President of Business Development for the F-35 fighter jet program, Jack Crisler, Lockheed has been unable to meet with the Canadian government to discuss the issue.
In a telephone interview from the Netherlands, where the F-35 will be featured at an air show on Saturday, Crisler said that “This is not anything punitive. It is just business.” Crisler said that Lockheed Martin was under pressure from other partner countries which have placed firm or accelerated orders in order to get more work from Lockheed Martin.
According to Crisler, F-35 supply chain contracts were awarded on a competitive basis in proportion to the purchase objectives of the nine partners that originally helped fund the development of the fighter jet. The nine countries are: the United States, Canada, the UK, Turkey, Norway, Italy, the Netherlands, Denmark and Australia.
Crisler said that if Canada held an open competition, Lockheed’s contracts with Canadian firms would be retained; nevertheless, Lockheed would need to reconsider in the event that the Canadian government decided on a sole source deal with Boeing. Crisler said that, “We are evaluating all that now. The most important thing is that we've got to protect the enterprise as we get ready to ramp up production.”
In related news, the Danish government reached an agreement with coalition parties yesterday to proceed with the purchase of 27 F-35A stealth fighters from Lockheed Martin, according to the Danish defense ministry. The deal is worth approximately $3.1 billion with the first four to be delivered in 2021, six in 2022 and the rest between 2023 and 2026.
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