President Trump has shared his thoughts on many issues via social media over the last 12 months. From an aviation perspective, two costly programs namely the F-35 and 747-8 (new Air Force One) have been his strategic targets. In this post we will focus on the F-35 Program.
Trump v F-35 Program
The cost of the F-35 started out as a “bucket” sized project. Today it is “ocean sized” becoming the most expensive military acquisition program of all time.
During the election campaign, Trump promised to save billions off the F-35. On winning the election, he set about fulfilling this promise. First he appointed himself as chief negotiator and second he scheduled a meeting with Lockheed Martin .
His first goal – saving hundreds of millions of dollars off the next order of 90 F-35’s.
The following describes how, in only six weeks, President-elect Trump went about negotiating a $9 billion contract with Lockheed Martin.
Pre Meeting Missile is Fired by Trump
Trumps first meeting with Lockheed Martin took place shortly before Christmas 2016. Rather than the typical meet and greet the President-elect wanted to get right down to business.
In Trump’s book “The Art of The Deal” he wrote “Leverage: Don’t make deals without it”.
Another way to put it is with Theodore Roosevelt’s quote:
“If you’ve got them by the balls, their hearts and minds will follow.”
Leverage in this context means power and the President-elect wanted it before his meeting. Using his favored method, Trump released the tweet below. The 25 words resulted in the value of Lockheed Martin falling by $3 billion overnight.
Now that’s leverage! Bring on the meeting.
The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.
— Donald J. Trump (@realDonaldTrump) December 12, 2016
First Meeting – Lockheed Martin Holds Firm
With the world watching, Lockheed Martin’s CEO, Marillyn Hewson entered the meeting with the President-elect. An hour or so later the CEO emerged with smiles and no comment for the awaiting media. Not a good sign! Later the CEO released the following statement:
Lockheed Martin CEO's Statement on Meeting with President-elect Trump pic.twitter.com/xQtG8KFc4Q
— LM Newsroom (@LMNewsroom) December 21, 2016
The generic statement offered nothing in the way of action or agreement. As Trump expected agreement on savings he cannot have been happy. At first he was controlled and diplomatic. Speaking with the awaiting media after the meeting the President-elect noted “It’s a little bit of a dance. We’re trying to get costs down.” Source: Independent UK .
An unhappy President-elect increases his Leverage
It did not take long for Trump to express his real feelings about the meeting with the following tweet a little later.
Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!
— Donald J. Trump (@realDonaldTrump) December 22, 2016
His message is clear – I am not happy with the outcome of our meeting – you need to try harder!
With the pressure on, Lockheed Martin found itself in a difficult situation. Do they blow off the threat and continue to hold their ground or take the threat seriously as Trump is unpredictable enough to actually do it?
Lockheed Martin take President-elect Trump seriously
We did not need to wait long for Lockheed Martin to surrender to Trump’s pressure. In the space of three days their position moved from “productive” to “I have heard the message loud and clear” and “I gave President Trump my personal commitment to drive the cost down aggressively”! Not a bad few days work for a business man who has not even taken up his new role.
— Lockheed Martin (@LockheedMartin) December 23, 2016
Lockheed Martin promises significant cost reduction
Lockheed Martin met with the President-elect again mid January 2017. The language used after this meeting continued the shift towards full compliance with Trump’s demands via the statement below. The statement includes “Just had a great meeting with President-elect Trump” and “I told him we are close to a deal on a new contract that reduces the price for the next 90 aircraft significantly”. Are they now great friends?
— Lockheed Martin (@LockheedMartin) January 13, 2017
The Contract for 90 F-35’s achieves a saving of $728 million
Two weeks after Lockheed Martin’s meeting with President-elect Trump, the contract for the next 90 F-35’s saved $728 million. A coincidence?
The F-35 Joint Program Office claimed they negotiated this saving months earlier proving “they” were bringing the cost of the F-35 down, not the President. This claim may just be true when you consider the comments made by the head of the F-35 Joint Program Office Lt. Gen. Chris Bogdan on 19 December 2016.
- the price for LRIP10 contract would be reduced significantly;
- I fully anticipate that when we do settle LRIP10 you’ll see all three variants, the A, the B, and the C come down in price significantly;
- By “significantly”, somewhere on the order of 6 to 7 per cent per plane (it ended up closer to 8%).”
President Trump claimed that his direct intervention had saved $600 million. In a 30 January 2017 White House briefing President Trump claimed:
- We cut about $600 million off the cost of the F-35 fighter;
- Lockheed Martin had been responsive to his concerns about the high cost of the stealthy, high-tech war plane;
- They [the F-35 Program Office] were having a lot of difficulty. There was no movement. And I was able to get $600 million about off those planes. So I think that was a great achievement. All three quotes sourced from Reuters.
Lockheed Martin praises President Trump’s Involvement
Lockheed Martin settled any argument over who actually negotiated the savings with their statement on the new deal. In it, there is praise for President Trump’s personal involvement and no mention the F-35 Joint Program Office.
— Lockheed Martin (@LockheedMartin) February 3, 2017
President Trump Knows How to get Business Done
Trump’s intervention had impact. Lockheed Martin shifted its position and agreed to the full savings expected. The agreement bodes well for Trump’s presidency as he has been able to fulfill an election promise and place other government contractors on notice.
Just as importantly, President Trump has shown that his actions can and will speak louder than his words. THANK GOODNESS!
The F-35 is not the only success for President Trump over the same period. Boeing, contracted to design and build the new Air Force One Presidential 747-8 aircraft, experienced the same pressure placed on Lockheed Martin. The only difference is that Boeing made its public commitment on cost reductions after the first meeting with the President.
The Final Word
“We cannot solve our problems with the same thinking we used when we created them” – Albert Einstein