JSF Tooling Costs Jump

Defense News 12/17/07 By GAYLE S. PUTRICH

The Joint Strike Fighter program may have to buy several extra billion dollars’ worth of tooling to reach the goal of building 150 jets a year after 2013, sources said. Program managers are trying to put a price tag on the unexpectedly large tooling-cost estimates, which emerged during recent program reviews, sources said.

Tom Burbage, executive vice president and F-35 program manager for Lockheed Martin, said the original tooling cost estimate, put together in 2005 under specific Pentagon ground rules, included the cost of U.S. and U.K. planes only.
While there was some expectation of an increase with the addition of 800 partner aircraft, the sizable plus-up for tooling costs in recent estimates came as a surprise, Burbage said.
“The number was bigger than we thought it would be, but the set of assumptions we were working with was different, too,” Burbage said. “It wasn’t a mistake; it was a matter of changing the assumptions and getting the information from our suppliers.”
The exact cost remains unclear. Industry sources put the tooling increase somewhere between $2 billion and $3 billion. The increase would be spread over fiscal years 2008 through 2018 as an element of the total annual costs for those years, Burbage said.
Lockheed execs would not give a number because it is, at this point, “an estimate for budgeting purposes.” They still intend to drive down costs through negotiations with international suppliers and lean manufacturing methods.
Pentagon officials said it was too early to comment on funds needed in 2009, as the president’s budget request is still under construction.
In the meantime, Lockheed has enough money to cover tooling through the through the third lot of low-rate initial production aircraft, which will produce about two planes per month when it begins in 2009, Lockheed program spokesman John Smith said.
Ultimately, the cost will likely be split among the program’s international partners, who have been briefed on the situation. The working breakdown is to have 77 percent of the costs to be borne by the United States and 23 percent divided among the rest, sources said.
Several partner nations expressed frustration at the rising cost of the program, which for many is their priciest procurement effort.
“Italy is not happy about this situation,” one senior Italian official said. “Talks are now under way to establish how, when and who will bear those costs, which could be concluded within six months. It will not be simple. If the cost ceiling exceeds that in the original MOU [memorandum of understanding], we would need to amend it. It is possible that the division of the cost could be similar to the percentage shares held in the program by partners, 4 percent in the case of Italy.”
Britain’s new procurement chief, Baroness Taylor, was briefed on the cost increase during her October visit to the United States, sources said.

Andrew Chuter contributed to this report from London, Tom Kington from Rome.