Is It Time to Kill Lockheed Martin's $398.6 Billion F-35 Program?

Oil leaks, fires, and groundings. Is it time to put the F-35 out of its misery?

Jul 12, 2014 at 9:32AM


An F-35B Lightning II aircraft lands aboard the amphibious assault ship USS Wasp (LHD 1) during the second at-sea F-35 developmental test event. Source: U.S. Navy courtesy of Lockheed Martin by Andy Wolfe.

Thanks to an engine fire, Lockheed Martin's (NYSE:LMT) F-35 has been grounded. Further, thanks to this grounding, the F-35 won't fly at Britain's Royal International Air Tattoo, or RIAT, and could miss the Farnborough International Airshow, which starts on July 14.

Moreover, this latest development is just part of a series of problems plaguing the F-35, which now has a revised price of $398.6 billion just for accusation and development. Accordingly, this leads to the question: Is it time to kill the F-35?

Sky-high costs and massive problems
The F-35 is no stranger to problems. In addition to its recent engine fire, the F-35 is billions over budget, almost a decade behind schedule, and plagued by technical flaws. Plus, critics like Sen. John McCain are quick to point out that while the F-35 is supposed to reach initial operating capability in 2016, it will only do so by using a less lethal version of the software. 


F-35 Lightning II. Photo credit: Lockheed Martin via Northrop Grumman.

Furthermore, both Boeing (NYSE:BA) and USAF Col. Michael W. Pietrucha have questioned the F-35's ability to survive evolving threats, and this isn't the first time the F-35's been grounded due to engine problems. In early 2013, the F-35 was grounded due to a crack in the plane's engine -- and that's not the only issue.  

Chronic engine problems
Unfortunately, the F-35's recent engine fire isn't the first glitch to face United Technologies' (NYSE:UTX) Pratt & Whitney made F135 engine. In fact, according to, some of the F135's engine problems include: burning hotter than desired, repeated problems with the turbine blades, problems with the redesigned engine including failure to meet specifications, significant test failures, and a major oil leak -- which happened on June 13, just 10 days before the June 23 engine fire. 

More importantly, as points out, these complications -- many of them recurring -- could indicate that the F135 engine has serious design and structural faults. 

No "kill" order, yet...
So far the good news for Lockheed is that despite all of its problems, U.S. lawmakers still seem committed to supporting the F-35. Florida Sen. Bill Nelson described the recent engine fire as a "hiccup," and even longtime F-35 critic Sen. McCain said, "In some ways [the F-35's] too big to fail, but it's a debacle. We've been fighting this battle of cost overruns and glitches for a number of years," reports The Hill


F-35. Photo credit: Lockheed Martin via Northrop Grumman.

Plus Frank Kendall, Under Secretary of Defense for Acquisition, recently told the House Armed Services Committee that, "There's a growing body of evidence that this may have been an individual situation, not a systemic one. But we don't know that for certain at this point in time."  

The bad news is that the problems facing the F-35 continue to crop up, and one has to wonder how long the Pentagon will continue to support this program. Further, as Reuter's reports, a failure to appear at both the RIAT and Farnborough could cost Lockheed F-35 sales, as several countries are "weighing orders" for the F-35 and a grounding isn't exactly the best sales pitch.

What to watch
When it comes to Lockheed's bottom line, arguably no program is as important as the F-35. In 2013, the F-35 made up 16% of Lockheed's total consolidated net sales, and when Lockheed reported its first-quarter results for 2014, it said, "Aeronautics' net sales for the first quarter of 2014 increased $200 million, or 6 percent, compared to the same period in 2013. The increase was primarily attributable to higher net sales of about $190 million for F-35 production contracts due to increased volume."  

As such, anything that negatively, or positively, impacts the F-35 program is something to watch. Hopefully, whatever caused the latest engine problem will be an "easy" fix, and Lockheed's F-35 will return to the skies. However, the recurring engine problems could be cause for investor concern -- no matter how advanced it is, a warplane isn't much good without a working engine. Consequently, this is something investors should continue to closely monitor.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Katie Spence has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers