US, Lockheed Talks For More F-35s Move to Senior Level: Sources

October 2, 2012

Talks between the Pentagon and Lockheed Martin Corp (LMT.N) about a fifth order of F-35 fighter planes have been elevated to a senior level as the two sides debate the last $100-million-plus dividing them, according to multiple sources familiar with the discussions.

"We're not that far apart," said one of the sources, who was not authorized to speak publicly about the negotiations, which have been underway for 10 months. "We should be able to close this. It's not intractable."

The comments suggest the two sides are moving closer to a contract agreement just two weeks after a key Pentagon official said the relationship between the U.S. government and the company were the worst he'd ever seen.

Lockheed and the Pentagon both declined comment on the negotiations, saying only that discussions were still under way. Both sides had hoped to reach agreement on a contract long before now, paving the way to begin negotiations on the next contract -- which links the sixth and seventh orders.

They are under pressure to clinch a deal and "obligate" the funds for the fifth batch of planes since unobligated funds are vulnerable to additional budget cuts due to start taking effect in January.

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