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Between political uncertainty, a strong dollar and low oil prices hurting Middle East buyers, the largest American defense company is trying to play both defense and offense.
Lockheed Martin CEO Marillyn Hewson briefed reporters this week on how the company plans to move forward. Tellingly, she did not discuss what a Trump or Clinton (or Sanders) election would mean for her company or her industry. In fact, most of the vision she laid out didn't even touch on the U.S.
Instead, Hewson talked extensively about international markets. She also spoke about the long-term need for new technologies, like a plane that could fly more than 20 times the speed of sound.
The world has become "a complex threat environment," Hewson told reporters, a place of "unpredictable instability." On the other hand, she said, "we've begun to see defense budgets stabilize ... which adds some predictability."
For example, the Pentagon has increased spending this year for the first time in a long time, which is good news for programs like the F-35. Still, Hewson said there are fewer new American military programs on the horizon, and that is creating more intense competition among traditional players, along with new competition created by disruptive start-ups (like SpaceX). That's resulting in cases where Hewson said companies are "accepting unprecedented risk to gain or hold market share." In contrast, Hewson said, "we take prudent risks to do the right thing for shareholders, ... we do not commit to things we cannot do."
Her focus remains overseas, where Hewson said sales will continue to grow, but more slowly. Lockheed Martin's international sales were $9.5 billion in 2015, 21 percent of all revenues, a number the CEO still plans to grow to 25 percent. She expects much of the new business to come from Europe, facing its most serious security threat since the end of the Cold War. Aside from terrorist attacks, a resurgent Russia has "revitalized NATO," she said. This year, five of Lockheed's 53 F-35s scheduled for delivery will be assembled in Italy. Germany has selected Lockheed's Medium Extended Air Defense System, and there is potential interest in that system from Poland and Turkey.
Perhaps the most interesting news was about new technologies the company is investing in, especially in the area of "hypersonic" planes, which can go from six times the speed of sound to more than 20. Speed gives one an advantage in battle, and Hewson said Lockheed could develop, build and demonstrate a hypersonic aircraft the size of an F-22 for under $1 billion. A prototype could be flying by 2018.
"The technology could also enable hypersonic passenger flights, and even easier access to space," she said. The question is whether there's an appetite for such an aircraft right now. "Now is the right time," Hewson insisted. "We know we must continue to disrupt ourselves before our competitors do."
The company also provided updates on a variety of programs.
Lockheed Martin's Orion spacecraft could someday take astronauts to Mars. After a successful unmanned test flight in December 2014, the company is building the next version for a final unmanned flight in 2018 that will go 30,000 miles past the moon. Manned flights could begin in 2021, and it looks increasingly likely Orion will first go to the moon before heading to Mars. "The moon is a great place to demonstrate living off the land," said program manager Mike Hawes.
Lockheed's Skunk Works, where all of the company's legendary aircraft have been conceived, is pitching the Air Force on its design of an unmanned replacement for the U-2 called the TRX. There's still talk of a new SR-71 called the SR-72, though few details could be provided.
The company's cybersecurity division said it is now selling products that not only defend networks but can conduct offensive maneuvers against enemies. One system called Icarus can take control of someone else's drone, though the U.S. government is not yet a buyer.
Nothing matters more to Lockheed Martin than the success of the F-35 program, the most expensive in Pentagon history. The company said it is lowering the cost per aircraft from about $108 million now to around $85 million by 2019-2020.
Costs are being driven down with several initiatives, including the use of robots to coat certain parts of the aircraft. Previously that work had been done by hand, and often had to be redone.
One key to driving down the cost is to drive up production. Canada was originally going to buy 65 F-35s, but new Canadian Prime Minister Pierre Trudeau has reopened the competition after complaints about the jet's high price.
Lockheed's Mike Rein said whatever decision Canada makes should have "minimal" impact in bringing down the cost of the aircraft. He said original Canadian purchases would have amounted to 10 percent of all F-35s manufactured by the end of the decade, and even if those sales are lost, Lockheed is currently competing to provide fighters to three European nations. "The F-35 has never been in a competition and lost," he said.
Worldwide, 115 of the aircraft are currently in assembly, but the focus this year is to deliver the first combat-ready F-35 for its largest buyer, the U.S. Air Force. Much has been modified on the jet after several setbacks. Program manager Jeff Babione said the final version of the all-important software will be ready this summer, and the fuel system is being modified to handle maneuvering as the jet pulls several G's.
Then there's the ejection seat, which currently is deemed unsafe for pilots under 136 pounds. Babione said Lockheed is modifying the seat and the helmet, and those changes should roll out by early 2017. The new seat will have a "weight switch" that the pilot would move to "heavy" or "light" based on his or her weight. The helmet will be a half pound lighter with changes like having one visor instead of two. (The pilot would change out the visor based on time of day.)
Even as the ramp-up of the F-35 hasn't even peaked, there's already discussion of what a next generation aircraft might look like. Rob Weiss from Lockheed's Skunk Works said such a plane probably won't fly for 30 years, but the technologies need to be tested and "matured" now.
What kind of plane will protect America in 2046? "I can't reveal much," said Weiss, but he did say the next aircraft would need to be "revolutionary" in its looks, propulsion system and sensors, and whether it even has a pilot. Will it even be an airplane? "We do think there will be a new airplane out there eventually," he said.