Saturday, December 16, 2017

© Reuters. FILE PHOTO: Lockheed Martin's logo is seen during Japan Aerospace 2016 air show in Tokyo© Reuters. FILE PHOTO: Lockheed Martin’s logo is seen during Japan Aerospace 2016 air show in Tokyo

By Mike Stone

WASHINGTON (Reuters) – The Pentagon halted shipments of Lockheed Martin (NYSE:LMT) Corp’s F-35 fighter jets for 30 days this fall after it discovered corrosion around fasteners and a fix was devised, the Pentagon and Lockheed said on Wednesday.

During maintenance, the Air Force detected “corrosion exceeding technical limits” where the carbon fiber exterior panel is fastened to the airframe. A lack of protective coating at the fastening point that would have prevented corrosion was identified as the primary problem, the Pentagon said.

The fastener issue on the current F-35 fleet is not affecting flights, nor is it a safety concern, the Pentagon said. Lockheed is investigating the extent of the corrosion issue across the fleet of more than 250 jets deployed to the U.S. military and its allies.

Trading volume for Lockheed’s shares spiked after the news and the stock briefly turned negative. They were last up 0.1 percent at $308.43.

Production was not stopped and deliveries for the fighter jet have resumed.

“While the issue was being evaluated, all F-35 deliveries to our customers were temporarily suspended by the F-35 Joint Program Office from Sept. 21 – Oct. 20 while we determined the corrective action plan,” Lockheed said in a statement.

The delivery pause was not expected to derail the Pentagon’s target of accepting 66 jets in 2017. Lockheed, the Maryland-based weapons maker, delivered 46 jets in 2016.

The Pentagon said in a statement that although the issue “needs be corrected to prevent potential future corrosion, it does not pose a safety of flight risk to the F-35 fleet or affect current operations.”

This is the latest of several production issues that have arisen in the 17-year history of the Pentagon’s most expensive weapons program. In 2016, a fix for insulation problems in the fuel tanks and lines of the jets caused a slowdown in deliveries.

The F-35 business accounts for about a quarter of Lockheed’s total revenue. During the third quarter, sales at Lockheed’s aeronautics business increased 14 percent to $4.7 billion, led by higher sales of the F-35 highlighting the program’s importance to Lockheed’s profitability.

In February, the Pentagon agreed to a deal for the tenth batch of the fighter aircraft and agreed to pay below $95 million per jet for the first time, compared with $102 million in the previous purchase, the lowest price up until that point. Around that time, the Pentagon said the price of a jet could fall 16 percent to around $80 million in future purchases.

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