Potential Canadian pullout from F-35 program troubling, but not fatal

While Canada’s newly elected leader is seriously considering pulling that nation out of the global partnership building the F-35 joint strike fighter, the action is not expected to slow down the production ramp-up underway at the Lockheed Martin plant in Fort Worth.

Prime Minister Justin Trudeau, elected in a landslide last month along with a Liberal Party government, pledged during the campaign to end the country’s involvement in the $391.1 billion F-35 program and open new bidding to replace its aging warplanes. Canada, one of eight global partners that helped develop the futuristic fighter jet, is on tap to buy at least 65 airplanes.

So far, Canada has not officially informed the Pentagon that it is backing out. After last week’s terrorist attacks in Paris, the CBC quoted Trudeau as saying that Canada will “do its part” in fighting ISIS but that he is committed to withdrawing warplanes from the coalition’s bombing mission in Syria.

Lockheed Martin said it has not received any notification from the Canadian government that its status has changed and Canada is considered “a valued partner and we will continue to support them through their decision to replace their aging CF-18 fleet,” said Michael Rein, director of F-35 communications for Lockheed Martin.

While a Canadian withdrawal would not be welcome news to those involved with the F-35, Lt. Gen. Chris Bogdan, the Pentagon’s program executive officer, downplayed its impact during testimony before Congress last month. He said Canada’s exit would boost the cost of each plane to the United States and the other partners by about $1 million.

Bogdan also told the House Armed Services Committee that the money Canada has spent to help develop the fighter was committed and that the overall program “is at a pivot point … where we are moving from slow and steady progress to what I call a rapidly growing and accelerating program.”

As the rollout continues, he said, he’s confident that the cost of an F-35 will decline to its target of $80 million to $85 million, down from its 2013 cost of $112 million.

Richard Aboulafia, an analyst for the Teal Group in Washington, D.C., said he doesn’t think Trudeau’s talk of backing out is “terribly significant” as long as Lockheed continues to build more airplanes and drive down costs. He said the $1 million cost bump mentioned by Bogdan could be absorbed in some other way.

“It definitely doesn’t help,” Aboulafia said of Canada’s withdrawal. But “unless you start to see more countries backing out, I don’t think it’s a problem. … It’s not a problem with the plane; it’s a change in foreign policy.”

Canada already spent millions

The United States and eight other countries — Australia, Canada, Britain, Denmark, Italy, the Netherlands, Norway and Turkey — banded together to build and develop the F-35. Israel, Japan and South Korea are also foreign military customers.

The F-35 has three variations: the F-35B is designed for short takeoffs and vertical landings and will be used by the Marines; the F-35A, for use by the Air Force is lighter, and sleeker; and the F-35C, with its bigger wings and tail span, is being built for the Navy for carrier landings.

The F-35 would replace several U.S. military aircraft including the AV-8B Harrier, the F/A-18 Hornet and the A-10. In Canada, the F-35 was expected to replace the CF-18 Hornet.

To meet that demand, Lockheed Martin’s plant is in the midst of a $1.2 billion reconfiguration. The plant expects to hire 1,000 additional employees for its assembly line alone and build almost 200 planes a year by the end of the decade.

As a partnership member, Canada provided money toward its development and also saw some of its companies win production contracts. Since 1997, Canada has spent $309.3 million on the program, according to the Ottawa Citizen. The country spent $204.3 million for its production, sustainment and development phases since 2006, the newspaper reported.

Canada was also on tap to help pay 2.1 percent of the cost for future sustainment, Bogdan said.

The cost of the aircraft became a political liability in Canada. The previous conservative government supported the aircraft, and the liberals not so much. But even the conservatives worried about the rising cost of the airplane, which fell behind schedule, went over budget and in 2010 was put on probation. Eventually, two years and $4.5 billion were added to the program.

Since then, the joint strike fighter has hit its marks, staying on schedule and on budget, Bogdan told the Armed Services Committee. The Marine Corps declared the F-35B, the most complicated version, combat-ready in July. In September, Norway took delivery of its first aircraft.

This month Lockheed Martin was awarded a preliminary contract valued at up to $5.37 billion to build 55 more F-35s. The Pentagon hopes to finalize the deal by year’s end under an “undefinitized contract action.” This allows Lockheed to get $625 million in immediate funding to prevent major delays in production.

This ninth batch of joint strike fighters includes 41 F-35As for the Air Force, Norway, Israel and Japan; 12 F-35Bs for the Marine Corps and British navy, and two F-35C carrier variants for the Navy.

“I believe the program is in better position today than it was one, two, three years ago,” Bogdan told Congress. “It is a growing and accelerating program that is making solid progress. … The project is fundamentally on track.”

Return flight

While the F-35 program has moved further down the runway, it hasn’t been enough to convince Trudeau and his followers.

In a mandate letter to the newly appointed Canadian Minister of National Defence this month, Trudeau told him to work with other government officials to launch an “open and transparent competition to replace the CF-18 fighter aircraft.”

“We have promised Canadians a government that will bring real change — in both what we do and how we do it,” Trudeau wrote. “Over the course of our four-year mandate, I expect us to deliver on all of our commitments.”

Until Canada makes it decision, it will remain a valued partner, said Joe DellaVedova, spokesman for the Pentagon's F-35 program. The F-35 Joint Program Office will continue to provide Canada with the data it needs to make “an informed decision.”

“Similar to actions taken by other nations, the government of Canada is working to launch an open and transparent competition to replace their legacy aircraft,” DellaVedova said.

Maj. Gen. Morten Klever, the Norwegian F-35 program director, said that a 1 percent bump in the price per plane does not significantly alter its overall costs but that Norway will do its own analysis to verify those estimates.

An important factor will be the addition of new foreign military customers over the past few years, which has bolstered production numbers. So cutting or adding to a partner’s orders does not have the same effect, he said.

“The F-35 partnership is very valuable to us, and we would very much regret to see anyone leave. But given the maturity of the program, it will have less of an impact today than it would have had only a few years ago.” Klever said.

While there isn’t any penalty for dropping from the F-35 formation, if Canada does, the F-35 program may drop some Canadian suppliers. There isn’t a set rule once a partner reduces airplanes or leaves the program, Bogdan said.

“It is my opinion that the remaining partners, and our industry partners, are going to have a discussion about what to do with all of the industry in Canada that is building pieces and parts for the airplane,” Bogdan said.

It also is possible that the competition Canada is planning could lead it back to the F-35, according to Washington defense analyst Loren Thompson, who is also a consultant to Lockheed.

“There is no plane in the world that can match the performance features of the F-35 at the likely price. That is what Canada is going to learn when it does a competition,” Thompson said.

He also said Canada “may rethink its opposition to the plane” when it realizes that it would be the only NATO member without those capabilities. If the Canadians drop out, they may return.

“Obviously they are not going to buy in the time frame we want. But if it wants to be an equal partner in NATO, it will come back some day to the F-35,” Thompson said.

This story was originally published November 18, 2015 at 3:37 PM with the headline "Potential Canadian pullout from F-35 program troubling, but not fatal."