Articles

The F-35 hits an unusual snag: the US dollar

The F-35 program has hit another snag, this time not an expensive production mishap or overrun, but the strength of the dollar itself.


At Lockheed Martin's 2017 Media Day, Jeff Babione, general manager of the F-35 program, laid out the "blueprint for affordability," or the defense giant's plan to bring down the cost of the Joint Strike Fighter to below $85 million in the coming batches.

But therein lies a problem.

An F-35A Lightning II from Hill Air Force Base, Utah, takes off from Nellis AFB, Nev., Feb. 2, 2017, during Red Flag 17-01. This is the first F-35A deployment to Red Flag since the Air Force declared the jet combat ready in August 2016. (U.S. Air Force photo by R. Nial Bradshaw)

With about half of the F-35s Lockheed Martin intends to build in the next five years heading out to foreign countries, even in house belt-tightening and big initial investments to help ramp up to economies of scale can't offset the strong dollar.

Asked by a Wall Street Journal reporter if the dollar's high exchange rate with foreign currencies is a problem for the most expensive weapons system in the history of the world, Babione said, "I think it is."

"We've had some of our customers come up and raise the concern that this may potentially hurt their buys," said Babione, who noted that some elements of production cannot move outside of the country to help mitigate costs for foreign buyers.

"We have some 1,700 suppliers in seven countries around the world. Many of the countries that are buying the F-35 produce parts for the F-35," said Babione. But still, Babione concluded that currency exchange rates not withstanding, the best tactic is just to get the F-35's price down, period.

A pilot takes the F-35 Lightning II Joint Strike Fighter aircraft up for its first night flight near Edwards Air Force Base, Calif., Jan. 18, 2012. (U.S. Air Force photo)

"What I think I can do is drive the price down so whatever the exchange rate is, it's affordable," Babione said.

As of today, the most expensive F-35 is the Navy's troubled variant, which remains under a review announced by Secretary of Defense Jim Mattis as it's being compared to Boeing's F-18 Advanced Super Hornet package.

Meanwhile, U.S. Air Force Lt. Gen. Chris Bogdan told reporters that Lockheed Martin's blueprint for affordability was "just ok," and suggested revisiting the supply chain instead of simply seeking bigger upfront investments, as Defense News notes.

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