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Is It Time to Stick a New Engine in the Lockheed Martin F-35?

If you are an investor in United Technologies (NYSE: UTX  ) stock -- or in Lockheed Martin (NYSE: LMT  ) for that matter -- I've got some good news for you, and some bad news, too.

The first Lockheed Martin F-35 fighter jet arrived at Eglin AFB in 2011. Photo: Wikimedia Commons.

The good news: As of today, it's been more than a month since the engines on any F-35 fighter jets have spontaneously burst into flame, "severely damaging" the plane, and grounding most of the U.S. military's F-35 fleet while the incident was being investigated.

That's good news for Lockheed Martin, which has upwards of $1 trillion in future revenues riding on the successful rollout of the F-35 over the next 60 years. It's good news, too, for United Technologies, which builds the F135 jet engine which powers the F-35 Joint Strike Fighter.

And the bad news? Even though F-35s have returned to normal flight operations, and their F135 engines appear to be operating normally, there's a movement afoot to resume work on an alternate engine for the F-35 -- an alternate engine that would not be built by United Technologies.

The trouble with the F135
That's the upshot of a recent story in, which reports that the U.S. Senate Appropriations defense subcommittee is recommending that the Pentagon "reassess the value of an alternate engine program creating competition to improve price, quality and operational availability."

Why? On June 23, the United Technologies-built F135 engine of an Air Force F-35A fighter caught fire while taxiing toward take-off from Eglin Air Force Base in Florida. Blame for the incident has been attached to one of the integrally bladed rotors, or IBR, within the F135 engine, which apparently rubbed excessively against the engine shell, creating friction and bursting into flame. 

This was actually the second such incident with United Technologies' F135 -- although the one that got the most attention, affecting as it did an operational airplane. Late last year, a test engine that UTC had been running suffered a similar failure with its IBR. Investigation of the Eglin incident, which grounded F-35s across the nation for more than two weeks, revealed that several other F-35s were affected by "mild rubbing" in their engines.

Nevertheless, the flight ban was lifted on July 15. But the Senate doesn't seem convinced that this was a good idea.

Reintroducing the General Electric and Rolls-Royce F136 jet engine
Were money no object, the Senate seems to think that it would be a good idea to reintroduce competition to the F-35 engine market by allowing General Electric (NYSE: GE  ) and Rolls-Royce (NASDAQOTH: RYCEY  ) to restart development of their alternative engine for the F-35, dubbed the F136.

GE and Rolls-Royce shut down development of the F136 in December 2011, ending a five-year effort to develop an alternative F-35 engine (and to grab a piece of the trillion-dollar F-35 program for themselves). At the time, the Pentagon cited the estimated $2.9 billion cost of completing development work on the F136 as a key reason for canceling the program.

Restarting the program today would probably cost at least that much to complete development, and probably more, since it would have to ramp up from a standing start.

That figure alone -- $2.9 billion -- is probably a good reason why Congress will not authorize new funding for the F136 unless absolutely necessary. Loren Thompson, chief operating officer of the defense-oriented Lexington Institute, argues that the cost of restarting development would mean "the prospects for having an engine competition anytime soon are zero." And over at the Pentagon, where the Air Force is already famously strapped for cash, acquisition executive Frank Kendall says he has no interest in footing this particular bill.

The upshot for investors
The chances of Congress voluntarily voting to refund F136 development work seem slim, and will remain so, as long as the federal purse remains light, and the threat of sequestration looms over Pentagon budgets. Simply put, no one wants to spend $2.9 billion on a new engine unless they absolutely have to. The logic of saving money by sticking with a single engine, however, could go up in smoke the next time an F-35 jet engine bursts into flames.

With every headline describing an incident such as Eglin's in the future, expect to see United Technologies stock take a hit -- and expect to see the share prices of General Electric and Rolls-Royce tick a little higher.

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Read/Post Comments (14) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 12, 2014, at 1:07 PM, rlv1 wrote:

    Congress should have authorized the work already completed under the alternate engine program to be given to GE when the program was de-funded so as to continue the work without government funding. The outcome would have been a better engine at no additional cost to the US taxpayer. The proof is in the other aircraft that started with a P&W engine and were later fitted with a GE follow-on engine (F-14 as one example).

  • Report this Comment On August 12, 2014, at 1:09 PM, ilsm50 wrote:

    Get GE working, then compete the buys based on performance!

    Dozens of F-16 were lost before the Air Force resurrected the GE F-110 because P&W (F-100 flame outs) refused to warrant their unreliable engines.

    The US taxpayer cannot afford losing dozens of $200M a copy F-35's because of P&W ineptitude.

    The P&W F-100 debacle was called "engine wars" once the damage was recognized.

  • Report this Comment On August 12, 2014, at 2:10 PM, bobdurino wrote:

    I applaud your simplification of the F-35 Edsel Edition. Furthermore sequestration threats in 2016 reinforce my opinion that the Defense Secretariat, as in Office of, ziged when it should have zaged. Gates got it wrong, dead wrong.

    GE/RR should have continued through development to completion of the F-136. They didn't, why not? We are in a world of ever increasing costs because defense is inventing technology capable of defeating cyber war and swarms of in-coming.

    There are two conditions in defense program budget appropriations; 1. Add-on imperative, 2. Follow-on imperative. In this case, the F-136 is an add-on to a funded component in a defense contract. There is no mission creep, just mission correction.

    Taken in context, we live in a multi-polar world where competing regional powers seek to exert local control on territorial claims in order to break American hegemony. This is especially true of the Navy as they deploy carriers forward and project the power of the United States.

    Money in the defense of liberty, is no vice.

  • Report this Comment On August 12, 2014, at 3:47 PM, ilsm50 wrote:

    "Money in the defense of liberty, is no vice."

    Said the welfare queen in the pentagon who cares little that the shining Coup De Ville don't run.

    F-35 has nothing to do with the defense of liberty unless you think keeping useless design shops in the green is related to defending liberty.

    The GE engine should have been flown is half the current hundred or so untested F-35's paid for the welfare of Lockheed and P&W.

    It was downselected to pay off the UT political delegation.

    While GE was off the prime list due to political reasons.

    US navy flat tops are not useful unless US needs to defend Midway from a country dumb enough to pay for similar ships.

    Buying failed, untested stuff has nothing to do with the defense of lberty.

  • Report this Comment On August 12, 2014, at 5:13 PM, TheAncient wrote:

    No, it's well past time to dig a really deep hole to drop the F-35 program into then fill the hole then build something big and 'special' on top of that spot. This F-35 program has to be one of America's greatest and costliest scams.

  • Report this Comment On August 12, 2014, at 6:58 PM, gvonrichter1 wrote:

    Scheduled to be Americas last human piloted fighter--this bird has been a general pain in the neck. I was told it has better "metrics" than the F18 which I found out means it's more fuel efficient. We are spending a trillion dollars on a plane that gets better fuel economy? Good Grief---------On top of that we have to build a new class of aircraft carriers to accommodate this plane. How much money is too much? It might be time to pull the plug on this bird and go with a modified F22 which itself has had problems. I think we can only afford one lemon and not two.

  • Report this Comment On August 12, 2014, at 11:27 PM, southernshark wrote:

    It won't be our last manned fighter, even though the people who don't understand tech are all hot with drones and auto-fliers.

    Computers are just too easy to hack, confuse and short circuit to have them defending your nation. But the tech-wanna-bees buy right into the spiel.

  • Report this Comment On August 13, 2014, at 1:34 AM, TheKnid wrote:

    GE had access to all P&W data, all patents, and all work product on the development process. They are good at coming up with a better engine after design is complete and they have had a 5 year span to work over their design. So perhaps in in the future they will produce an engine equal to the 135 of today.

  • Report this Comment On August 13, 2014, at 10:58 AM, oldpapajerry wrote:

    Way back, a long time ago... 60-70 years ago, corporations like Lockheed, Martin, Douglas, Northrop and Hughes Aircraft, spent their own money on R&D of engines and airframes.

    Now, since the Federal Cost Plus guarantees, there is no incentive for the entrepreneurial spirit.

    These companies are waiting for the government to sign them up to do what ?, take the engine that the government has already spent a billion dollars on, out of mothballs and start developing it again.

    Does anyone in Congress really believe that GE, or R.R. has stopped working on the engines???

    Really, you don't believe that with a few modifications the test engines could not be modified to work in a variety of jets?

    How about this, we go back to the "old" way of doing things, put out a list of what you want the engine to do and the company that comes closest to the goal, wins the contract.

    No guarantees, no cost over runs, no time limits.

    Design seed money would be that which has already been spent, and all competitors would have access to the (government paid for) design plans, so as to eliminate making the same mistakes.

    So what will that do, first GE and Lockheed probably won't compete, without the government putting up the money first, but that will leave the field open to "new" small companies who believe in themselves, and with their investors are willing to take the risk, for a huge reward.

    It is called CAPITALISM we should go back to it, this Corporate Socialism obviously does not work.

    It results in higher costs, cost overruns, delays and poor workmanship.... why not the government will pay..


  • Report this Comment On August 13, 2014, at 11:22 AM, JosephLong65 wrote:

    NO!!! Not an alternative engine!!! A REPLACEMENT engine!!!

  • Report this Comment On August 13, 2014, at 6:00 PM, mrjama wrote:

    Wow, lots of GE employees on this board. The Pratt engine was chosen because it was superior to the GE engine, and its core design has been flying for years on the F-22.

    You can argue the merits of the F-35, but remember, the GE engine would be a half-decade behind in development, was judged technically inferior, and would have dozens of technical problems to overcome.

    The F-135 engine from Pratt is a far, far lower technical risk - one of the reasons it was selected.

    The argument for the alternate engine was always cost - but in 2011 the government realized that an alternate engine saves no money in the long run. Now, these GE employees want everyone to believe the GE engine would have fewer technical issues, which is completely ridiculous. The P&W engine core (on the F-22) has been flying for nearly a decade.

  • Report this Comment On August 14, 2014, at 8:13 AM, bnorth40 wrote:

    Put a R4360 in it!

  • Report this Comment On August 14, 2014, at 8:31 AM, ilsm50 wrote:


    I am AF maintenance guy from '60-80's

    The F-100 flew on the F-15 for years before it began destroying F-16's.

    The difference: two engines (F-15, F-22) and one engine (F-16, F-35)

    P&W engines were okay in the '60's when most planes were backed up in multi engine airframes.

    P&W has not been the choice for single engines since 1970, too many flame-outs, too few restarts and P&W never honored the reliability spec requirements for the product they delivered.

    The result after 40 odd F-16's became lawn darts (aka P&W caused smoking holes) USAF bought F-110 from GE.

    That is oral history from a veteran of "engine wars".

  • Report this Comment On August 14, 2014, at 1:49 PM, Haidozo wrote:

    The F-35 is Deja Vu, if you don't learn from history, you're doomed to repeat it. The F-35 is exactly that. Way back when, Robert McNamara was pushing the idea of a "multi-service/multi-role" fighter, The F-111 was the result. It was "supposed" be deployed from carriers as well as land bases. It was too heavy and the landing gear couldn't stand being "greased" into a carrier deck. Scrub that idea! Despite being very advanced for its time (variable sweep wing geometry, highly sophisticated ECM gear, etc.), it wasn't maneuverable enough to be a true dog-fighter, so it was relegated to the role of a supersonic bomber (FB-111). So, the question becomes why did we go down the path with the development of the Joint Strike Fighter, when we ALREADY had the FA-22 Raptor operational? It had passed all the testing; was the first fighter that could reach supercruise (supersonic) speeds without using AB; it has vectored thrust and integrated weapons systems that allow it to concurrently engage, and defeat, FIVE F-15's Eagles, which have been the benchmark no fighter could achieve for many years; and all the pilots that flew it raved about how great it was. Simple answer? Politics, all the decision-making clowns in charge up in Disneyland on The Potomac have their hands in somebody's pocket.

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Rich Smith

As a defense writer for The Motley Fool, I focus on defense and aerospace stocks. My job? Every day of the week, I'm monitoring the news, figuring out the winners and losers, and tracking down the promising companies for you to invest in. Follow me on Twitter or Facebook for the most important developments in defense & aerospace, and other great stories.

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