FORT WORTH, Texas _ Despite Lockheed Martin's dogfight with President Donald Trump in recent weeks over the cost of the F-35 Lightning II, increased sales and profits from the stealth fighter boosted the company's bottom line in the final quarter of 2016 and for the year.
During a Tuesday conference call wrapping up 2016, Lockheed CEO Marillyn Hewson said that the company is "very close" to reaching a contract with the Pentagon that will reduce the price of the F-35 to below $100 million for the first time, heeding Trump's desire to produce the plane at an affordable price.
"President Trump realizes it's a very large program. ... He wants to make sure the American taxpayer is getting the lowest possible cost," Hewson said of her multiple meetings with the president. She called their talks "very productive" and a "good dialogue."
In December, Trump tweeted that the costs of the F-35 program was "out of control," and he pledged to trim billions of dollars on military contracts after he took office. Last week, officials at BAE Systems, said Lockheed had told them that the Trump administration wanted to cut F-35 program costs by 10 percent.
Trump met with Hewson at the Trump Tower before his inauguration where they discussed the F-35. At the time Hewson pledged to cut the Lightning II's costs and to hire an additional 1,800 workers at the Fort Worth plant. Hiring of additional workers would begin in late 2017 and stretch out through 2020.
Lockheed, the nation's largest defense contractor, reported net sales in 2016 were $47.2 billion compared to $40.5 billion the previous year and that net earnings were $3.8 billion, or $12.38 per share compared to $3.1 billion, or $9.93 per share in 2015, the company reported.
Similar improvements were shown in the fourth quarter with net sales of $13.8 billion compared to $11.5 billion in 2015. Earnings from continuing operations in 2016 were $959 million, or $3.25 per share, compared to $817 million, or $2.63 per share, in 2015.
Still, even with those positive numbers, Lockheed, which is based in Bethesda, Md., saw its stock drop 1.77 percent to $252.91. Partly to blame may be Lockheed's admission that it has found "material weakness" in financial reporting at Sikorsky helicopter, a company Lockheed bought in July 2015. The company also lowered its outlook for return on pension assets from 8 percent to 7.5 percent.
But helping Lockheed's finances was the aeronautics division that builds the F-35 at its Fort Worth plant that employs 14,000 people, with about 8,800 working on the stealth fighter.
Lockheed's net sales and profits jumped 23 percent in the fourth quarter. Sales jumped to $1 billion in part because of $640 million it took in through the F-35 program. Profits increased $104 million compared when compared to 2015, with $80 million coming from the F-35 program because of increased volume.
For the year, the aeronautics division's operating profits in 2016 increased $206 million, or 12 percent, compared to 2015, with $195 million coming from the F-35 program. Sales increased $2.2 billion, or 14 percent, attributable to about $1.7 billion for the joint strike fighter.
The F-35 program, at $379 billion, is the most expensive weapon system in Pentagon history. During the conference call Tuesday, Hewson said the company has reduced the cost of the F-35 by more than 60 percent since the first batch of planes were produced and said the price would drop to $85 million by 2019.
Hewson said that reduction "demonstrates a learning curve as efficient as any achieved on any modern tactical fighter aircraft."
