- The U.K. remains firmly committed to buying 138 Lockheed Martin (NYSE:LMT) F-35 jets in spite of currency fluctuations caused by last month’s Brexit vote, but is pressing the U.S. Department of Defense to wrap up negotiations over the next two contracts for the potential $15B purchase.
- U.K. Defense Secretary Fallon says he is "chomping at the bit to get on with” the contracts, which would include nine short-takeoff and vertical-landing aircraft, noting that there is no alternative aircraft that can operate off the country’s two new aircraft carriers being specially outfitted to launch and recover them.
- The Pentagon has been negotiating with LMT since last year over a ninth and 10th production contract; U.K.-based companies including BAE Systems (OTCPK:BAESF, OTCPK:BAESY) produce ~15% of each aircraft as part of work-share agreements.
- LMT said yesterday that it is negotiating final contract terms but that current funding is “insufficient to cover the production process," and that it has ~$900M of potential cash exposure and $3B in termination liability exposure related to the contracts.