Lockheed's Embattled Fighter?

It's common knowledge that the war in Iraq has spread U.S. armed forces thin, as troops and equipment remain locked into combating a messy insurgency for the indefinite future. Meanwhile, the Defense Department is determined to reform the military into a more agile, lethal force capable of meeting current and future threats. These factors have led to greater outlays for current operations as well as for weapons procurement and development.

At the same time, fiscal pressures and the lower-tech nature of current U.S. operations are creating some changes in spending patterns. Already Lockheed Martin (NYSE: LMT  ) has felt the effect of these developments. The Pentagon has preliminary plans to scale back purchases of that company's high-tech F/A-22 Raptor, originally designed to fight the Soviet Union, to 179 planes from 277. Still, the firm's gigantic $200 billion F-35 Joint Strike Fighter plane program so far has survived intact.

Now, however, some evidence suggests that the even the F-35 may not be immune to cutbacks. One of the F-35's selling points has been that U.S. allies' participation in development and production would keep costs down. Last year, one of the countries participating in the Joint Strike Fighter project, Norway, voiced frustration with Lockheed's leadership and threatened to pull out of the program. Now, there are signs that a critical player, Great Britain, could cut and run. Reuters reported yesterday that Mike Turner, CEO of BAE Systems, said he would not be surprised if Britain withdrew from the project.

Meanwhile, unmanned systems are becoming more capable. The Pentagon plans to lean more heavily on the new Predator B unmanned aerial vehicle for "hunter-killer" missions, according to TheWashington Post. The new Predator will carry 3,000 pounds of bombs or missiles, or both. While the small, slow-moving Predator can't replace manned planes in all respects, some may question whether the military needs as many fighters and bombers given the Predator's enhanced abilities.

At the moment, the federal government appears committed to the Joint Strike Fighter project. But Lockheed Martin and subcontractors on the F-35 including Northrop Grumman (NYSE: NOC  ) may have more trouble keeping the program aloft.

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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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