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Pentagon sees deal with Lockheed, Pratt on next F-35 lot by end May

A Lockheed Martin F-35B Lightning II joint strike fighter flies toward its new home at Eglin Air Force Base, Florida in this U.S. Air Force
A Lockheed Martin F-35B Lightning II joint strike fighter flies toward its new home at Eglin Air Force Base, Florida in this U.S. Air Force

WASHINGTON (Reuters) - The U.S. Air Force general who runs the F-35 fighter jet program for the Pentagon said he expected to reach agreements with both Lockheed Martin Corp and engine-maker Pratt & Whitney by the end of May for the next order of fighter planes.

Lieutenant General Chris Bogdan told reporters he expected Pratt, a unit of United Technologies Corp, to lower the cost of the engine it builds for the fighter plane by more than the "weak" 2.5 percent reduction seen in the last contract and forecast some "tough negotiating ahead."

Bogdan said Pratt had not met any of the targets it set in 2009 for lowering the cost of the engine. He said reduced order quantities had limited the company's ability to lower costs, but overhead costs were also likely to blame.

"It's not just the quantities," Bogdan told reporters after a hearing of the Senate Armed Service Committee's airland committee. "It's just not going down as fast as I want it to."

The Pentagon's F-35 program office is negotiating contracts with Pratt & Whitney for a seventh and eighth batch of F135 engines to power the new warplane. It is negotiating a separate contract with Lockheed for the eighth batch of jets.

The Pentagon finalized a contract with Pratt that was worth $1.1 billion for 38 engines in a sixth batch last October, which pushed the cost of the common configuration engine built for the Air Force and Navy models down by 2.5 percent. It did not provide the exact cost of the engines.

Bogdan said he hoped and expected to finalize agreement with both companies around the same, possibly around the end of May, but said he would "not rush into a bad deal."

Pratt spokesman Matthew Bates said the company had already cut the cost of the engine by 40 percent, and was continuing to work on reducing overhead and production costs, but the key to bigger cost reductions would be to increase order quantities.

Bates acknowledged that the company had not met its cost reduction targets, but said that was largely because the U.S. military had scaled back its orders for the new fighter plane in recent years.

(Reporting by Andrea Shalal; Editing by Sandra Maler)

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