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Lockheed's F-16 Hits Export Targets : With U.S Air Force orders curtailed, the versatile warplane has found new customers abroad. But competitors have the same territory in their sights.

October 18, 1994|JILL LEOVY | SPECIAL TO THE TIMES

CALABASAS — For 16 years, the banana-shaped profile of Lockheed Corp.'s F-16 "Fighting Falcon" has been the pride oS. fighter crews, who nickname the jets and scrub them spotless with orange-scented cleanser.

But the F-16's days as an American emblem are waning. Although the U.S. Air Force has bought 2,000 of them--and recently dispatched 84 to the Persian Gulf in response to Iraqi troop movements--it is ending orders this year due to post-Cold War budget cuts.

So today, most new F-16s coming off Lockheed's Fort Worth assembly line are destined for other countries. Over the years, 17 foreign countries, with U.S. approval, have bought the versatile, single-engine warplane. And overseas customers, including Singapore, Egypt, Portugal and Taiwan, now account for 90% of Lockheed's impressive $11-billion F-16 backlog.

Some new foreign sales have been controversial, but they have helped make the F-16 one of Lockheed's most profitable programs. Lockheed took over the F-16 project and the Fort Worth production plant from General Dynamics in March, 1993, and has since restructured its operations. The revenues from the Fort Worth plant are estimated by analysts at $3 billion per year, nearly 25% of Lockheed's total sales. "The F-16 is a mature program. It no longer requires large investment, so it's throwing off a lot of cash," said Loren B. Thompson, a defense consultant and policy analyst.

Lockheed's next-generation jet fighter, the F-22, which it is developing with the Boeing Co., won't be delivered to the U.S. Air Force until 2004, if all goes well.

Given that lag, Lockheed is not about to let the F-16 market slip away. In its aggressive effort to keep the F-16 alive, the firm has laid off hundreds of workers to save costs, supplied both sides of an arms race between Greece and Turkey, pushed hard for new sales in developing countries like Chile, and agreed to transfer unprecedented levels of technology as part of a sale of planes to South Korea. The deal allowed South Korea to manufacture most of the plane itself.

Arms-control advocates say such an agenda heightens the risk of high-tech warfare in the developing world. With the Cold War over, the United States should seize its chance to limit global defense trade, said Lora Lumpe, director of the Washington, D.C.-based Arms Sales Monitoring Project of the Federation of American Scientists.

Others argue grimly that if the U.S. doesn't sell fighter planes, Russia, Britain or some other country will. Political realism dictates that export limits focus on more lethal technology. "It's the way it is," said Kenneth Watman, researcher at the Rand Corp, adding, "That doesn't mean I like it."

From Lockheed's point of view, the company is doing what it takes to make money in what has become an increasingly competitive international market for Cold War products. Joe Stout, a Lockheed spokesman, also argues that sales of American fighter planes allow for U.S. control of contract terms, training and spare parts.

Lockheed believes there's a market for 500 to 800 new fighter aircraft worldwide in the next few years. But overall, the market for military hardware is constricted. U.S. foreign military sales dropped from a record high of $33.2 billion last year to $12.6 billion in fiscal 1994, according to the Pentagon.

Tooth-and-nail competition for foreign contracts pits Lockheed against other makers of fighter aircraft. These include Lockheed's domestic rival, McDonnell Douglas Corp., which makes the F/A-18 "Hornet", a fatter, twin-engine jet used by the U.S. Navy. McDonnell Douglas also makes the F-15 "Eagle" an air-combat fighter that costs about $50 million. Last year McDonnell Douglas won a major victory at Lockheed's expense when it landed a $2-billion deal to build 21 new F-15s for Israel.

Lockheed is now vying with McDonnell Douglas again for a potential multibillion-dollar contract from the United Arab Emirates, which wants as many as 80 fighter planes. Experts say the contest is shaping into another highly competitive duel, with the likely result that the tiny gulf state will someday own planes as good as those of the U.S. Air Force.

Nor has Lockheed neglected the domestic market. The company is an enthusiastic backer of a Pentagon proposal dubbed a "high-tech yard sale" by Tom Cardamone, editor of Arms Trade News in Washington, D.C., and a critic of the plan. The Pentagon idea is to sell as many as 360 used F-16s abroad next year. Money raised would be spent on new F-16 Lockheed planes for the Air Force. Potential recipients are countries that would have trouble affording planes otherwise, such as the Philippines, Tunisia and Morocco.

If Congress signs off on the plan, Lockheed also stands to gain by doing modification work on the old F-16s before they are parceled out. Lockheed has also tried to get the Pentagon to buy a few more F-16s by reducing the price to $20 million per plane, down from about $23 million from its latest sale.

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