Harper's fighter-jet project hits pricing turbulence
The financial straits of Canada’s allies have caught up with the next generation fighter bomber that Ottawa plans to buy: Both the United States and the jet maker are now confirming the average cost of the F-35 Lightning will rise after order delays by cash-strapped governments.
It’s further heartburn for the Harper government, with Opposition parties contrasting Conservative plans to delay old-age security benefits in the years ahead with plans to sink upward of $9-billion into 65 stealth jetfighters.
The Pentagon this week confirmed it would postpone orders for 179 F-35s to save $15.1-billion and allow more time for testing. Italy announced Tuesday it would cut its order and Britain has said it will wait until 2015 to decide its purchase.
Acting Pentagon acquisition chief Frank Kendall told reporters on Tuesday that the U.S. decision and any delays in international orders would drive up the average price per unit of the F-35, the Pentagon's costliest weapons program.
Likewise, in Oslo, Lockheed Martin Corp. executive vice-president Tom Burbage told reporters that the U.S. decision to drag out its purchases of the F-35 would increase the price of the plane somewhat.
“It will raise the overall average cost of the total procurement of all the airplanes bought,” Mr. Burbage said.
Prime Minister Stephen Harper was unmoved by the news, telling the Commons the Conservatives are sticking with the F-35 purchase and it would stay within budget.
A spokesman for Julian Fantino, Associate Minister of Defence, declined to say how allies’ delays would affect Canada’s purchase or how the rising average cost would boost the price paid.
Mr. Fantino gave the impression this week that Canada is now open to changing its order. “We all know that the economic reality of the day is certainly vastly different from when we started back on this project in 1997,” he told CBC-TV Monday. “It would be ludicrous, I believe, for us to say that under no circumstances are we not prepared to discuss, to reconsider or consider.”
Canada has long said the jets would cost $75-million to $80-million each and officials say there is $800-million to $900-million set aside in the $9-billion jet purchase plan to handle rising costs.
Lockheed Martin told Reuters Tuesday it has informed Canadian officials the price of Canada’s planes would rise by a single-digit percentage as a result of the U.S. order slowdown.
Canada had originally planned to begin taking delivery of F-35s in late 2016 or early 2017, timing its order to ensure as many as possible were built in the same years as big orders from other allies. The cost of planes is affected by how many are built in the same year and Canada sought to find what officials call the “sweet spot” for pricing.
Delays by allies have thrown such calculations in disarray and officials say countries are now once again trying to figure out what years would now be least expensive.
Canada has convened an early March meeting with other buyers at its embassy in Washington to discuss the situation. “The entire program has not been without problems both in terms of timeline and cost estimates. And so having these discussions is a normal course,” Defence Minister Peter MacKay said.
Harper's fighter-jet project hits pricing turbulence - The Globe and Mail
The financial straits of Canada’s allies have caught up with the next generation fighter bomber that Ottawa plans to buy: Both the United States and the jet maker are now confirming the average cost of the F-35 Lightning will rise after order delays by cash-strapped governments.
It’s further heartburn for the Harper government, with Opposition parties contrasting Conservative plans to delay old-age security benefits in the years ahead with plans to sink upward of $9-billion into 65 stealth jetfighters.
The Pentagon this week confirmed it would postpone orders for 179 F-35s to save $15.1-billion and allow more time for testing. Italy announced Tuesday it would cut its order and Britain has said it will wait until 2015 to decide its purchase.
Acting Pentagon acquisition chief Frank Kendall told reporters on Tuesday that the U.S. decision and any delays in international orders would drive up the average price per unit of the F-35, the Pentagon's costliest weapons program.
Likewise, in Oslo, Lockheed Martin Corp. executive vice-president Tom Burbage told reporters that the U.S. decision to drag out its purchases of the F-35 would increase the price of the plane somewhat.
“It will raise the overall average cost of the total procurement of all the airplanes bought,” Mr. Burbage said.
Prime Minister Stephen Harper was unmoved by the news, telling the Commons the Conservatives are sticking with the F-35 purchase and it would stay within budget.
A spokesman for Julian Fantino, Associate Minister of Defence, declined to say how allies’ delays would affect Canada’s purchase or how the rising average cost would boost the price paid.
Mr. Fantino gave the impression this week that Canada is now open to changing its order. “We all know that the economic reality of the day is certainly vastly different from when we started back on this project in 1997,” he told CBC-TV Monday. “It would be ludicrous, I believe, for us to say that under no circumstances are we not prepared to discuss, to reconsider or consider.”
Canada has long said the jets would cost $75-million to $80-million each and officials say there is $800-million to $900-million set aside in the $9-billion jet purchase plan to handle rising costs.
Lockheed Martin told Reuters Tuesday it has informed Canadian officials the price of Canada’s planes would rise by a single-digit percentage as a result of the U.S. order slowdown.
Canada had originally planned to begin taking delivery of F-35s in late 2016 or early 2017, timing its order to ensure as many as possible were built in the same years as big orders from other allies. The cost of planes is affected by how many are built in the same year and Canada sought to find what officials call the “sweet spot” for pricing.
Delays by allies have thrown such calculations in disarray and officials say countries are now once again trying to figure out what years would now be least expensive.
Canada has convened an early March meeting with other buyers at its embassy in Washington to discuss the situation. “The entire program has not been without problems both in terms of timeline and cost estimates. And so having these discussions is a normal course,” Defence Minister Peter MacKay said.
Harper's fighter-jet project hits pricing turbulence - The Globe and Mail
