As with all fighter plane programs, Lockheed Martin's (NYSE: LMT) Joint Strike Fighter project is a daunting technological undertaking. As the company's website notes, the JSF, also known as the F-35, aims to set "new standards for lethality, survivability, and supportability." But growing discontent among countries contributing to the new fighter jet's development could make for some seriously bumpy flying.
The F-35 program represents a new paradigm in military product development, with the United States following a path blazed by the private sector. Just like Boeing (NYSE: BA) is spreading the manufacturing cost and risk of its new 787 airliner among many suppliers, the U.S., while selecting Lockheed Martin as project leader, has divided F-35 work among many countries.
However, this strategy requires keeping a lot of different players happy, and that part of the plan doesn't seem to be working. While the JSF is not likely to be cancelled, it might be scaled back unless Lockheed Martin plays its cards right.
Norway, a small participant in the JSF project, threatened to quit in 2004 because its contractors weren't getting enough work on the plane. Now Great Britain and Australia, far more significant players in its development, have threatened to scrap purchases of the jet unless the U.S. allows more technology transfers. The two countries were expected to be major buyers of the plane; the U.K. has a preliminary $21 billion order, while Australia has tentatively agreed to an $11 billion order.
While some might dismiss these threats as posturing, there is an ominous sign that Great Britain, at least, isn't bluffing. The U.K.'s defense minister informed members of Congress that his country has a "Plan B" if it doesn't purchase the JSF. He didn't provide any details, but the alternative plan is believed to involve the European-built Typhoon or the French Rafale fighter.
Losing the U.K. and Australian contracts would undoubtedly cause the cost per plane to balloon, and could force the U.S. government to cut back its own orders. Not only would Lockheed Martin take a hit, but JSF subcontractors, including Northrop Grumman (NYSE: NOC) and General Electric (NYSE: GE), would also feel major pain.
So far, Lockheed Martin hasn't taken a conciliatory attitude. The Sydney Morning Herald reports that the company warned that countries reneging on the JSF face stiff financial penalties. Though the F-35 hasn't yet entered service, it seems it's already facing its first major battle.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
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