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Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 309 | August 11-17, 2023

Lockheed Martin’s $1.7 trillion F-35 fighter jet is 10 years late and 80% over budget—and it could be one of the Pentagon’s biggest success stories

By Christopher Leonard | Fortune Magazine | August-September, 2023

Listen to the Extractive Summary of the Article

Since the F-35 program was announced in 2001, it has been the symbol of America’s dysfunctional military-industrial complex. The jet is 10 years behind schedule for final approval and almost 80% over budget, its production repeatedly stalled by defects and miscalculations. 

Nonetheless, Germany ended up buying nearly 40 of the jets, at a reported cost of $8 billion. Soon after Scholz’s speech, Canada announced that it wanted 88 planes. As the war in Ukraine dragged on, Greece, the Czech Republic, and Singapore all expressed interest in the F-35. And this came on the heels of massive new orders in 2021 from Finland and even the famously neutral Swiss. 

If the F-35 is such a boondoggle, why are so many governments clamoring to buy it? The answers to this question are vitally important to America and its allies, and to every U.S. taxpayer.  The F-35 is the largest program inside the Pentagon, by far, with an annual budget of about $12 billion. Taxpayers have invested heavily in the F-35 for more than 20 years, to the exclusion of other defense and domestic priorities. The opportunity cost is measured in hundreds of billions of dollars.  The program is also a measure of the health of Lockheed Martin, the largest weapons company that has ever existed. Lockheed brought in about $66 billion in revenue in 2022, virtually all of it for arms.

Ultimately, the F-35 is a test case of Lockheed’s and the Pentagon’s ability to deliver results. Put simply, the calculus runs like this: Either the F-35 was a massive waste of resources—the worst-ever example of the defense industry overpromising and underdelivering—or it was a savvy long-term investment that gives America and its allies a substantial advantage over their enemies.

Not surprisingly, Lockheed Martin and the Pentagon endorse the latter interpretation.

That leap has been a long time coming, and its course has been altered—and made more expensive—by myriad technological changes. But the system’s long, slow development illuminates the core of Lockheed Martin’s business strategy. The company is patient, quietly matching its engineering talent against the desires of the Pentagon until it achieves the right fit. It’s sort of like building a house when the client keeps asking you to add new rooms and, along the way, to invent a new kind of air-conditioning system. At the same time, Lockheed endures public humiliation in the town square of congressional hearings. One hangover from the F-35’s 2010 budget crisis: Every year, Congress’s General Accounting Office publishes an audit of the program, which inevitably (and accurately) reports that the F-35 is late and over budget—stoking more ugly headlines.

3 key takeaways from the article

1. Almost since the F-35 program was announced in 2001, it has been the symbol of America’s dysfunctional military-industrial complex. The jet is 10 years behind schedule for final approval and almost 80% over budget, its production repeatedly stalled by defects and miscalculations. 
2. The F-35 is the largest program inside the Pentagon, by far, with an annual budget of about $12 billion. Taxpayers have invested heavily in the F-35 for more than 20 years, to the exclusion of other defense and domestic priorities. The opportunity cost is measured in hundreds of billions of dollars. 
3. Either the F-35 was a massive waste of resources—the worst-ever example of the defense industry overpromising and underdelivering—or it was a savvy long-term investment that gives America and its allies a substantial advantage over their enemies.

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Topics:  Technology, War, Defense System