Sources say that top Israeli defense industry executives claim that the Ministry of Defense's negotiating tactics with Lockheed Martin Corp. (NYSE: LMT) for the purchase of the Air Force's next-generation combat jet are liable to cost them billions of dollars in lost contracts related to the plane and in reciprocal contracts that are the norm in deals of this size. The sources added that defense industry executives are bitter about the ministry's conduct in the negotiations, but have been divided whether to initiate a direct confrontation with the ministry, and some concluded that going public would serve their interests.
At issue is the largest arms deal in Israeli history - the procurement of more than 100 F35 Lightening II, also known as the Joint Strike Fighter (JSF), at a cost of $100 million each for a total contract of over $10 billion. The F35s are due to replace IAF F16s.
Two versions of the F35 are being built, as stipulated by the US military: a conventional version for the US Air Force, and a short takeoff and vertical landing version (STOVL) for the US Navy and the Marine Corps. The IAF is reportedly interested is the STOVL version because of the threat of missiles fired from Lebanon and the Gaza Strip that could damage runways at Air Force bases.
Defense industry sources claim that the IAF is effectively dictating tactics to the Ministry of Defense in its negotiations with Lockheed Martin. A top source said, "The IAF is having its way. It is protecting its own interests, which is fine, but the Defense Ministry should see the full picture from the state's perspective, and understand that Israel's defense relies on several legs, not just the Air Force. At this stage, the Air Force is speaking out of the Defense Ministry's mouth, and the ministry representatives are not bothering to present other interests in the negotiations."
The sources said that the IAF has set three goals in the negotiations for the F35 procurement: to obtain the planes as quickly as possible; to achieve maintenance independence, and not rely on the manufacturer; and to install Israeli systems in the planes. These demands are being presented to Lockheed Martin as government demands, and without any demand to give Israeli defense contractors any share in the work, as agreed between the parties in a letter of intent signed in late 2007.
A Ministry of Defense spokesman said in response, "The Ministry of Defense does not divulge details of classified negotiations for reasons of security, out of respect to its negotiating partners, and the understanding that it is better for the negotiations to take place far from the media's eye. We're at the start of a process, and casting blame at this early stage indicates the lack of wisdom and knowledge about the discussions underway. Such conduct is to be regretted."
The spokesman added, "We're dealing with the IAF's need to procure a plane that will provide the best response to the threats facing the State of Israel. Out of the same operational need, we want the defense industry to contribute its skills and experience to this program."
The F35 program spokesman at Lockheed Martin said in response, "One should be skeptical when listening to rumors. Before we can take any step for the transfer of work to Israel, we must have an agreement that gives a green light for the final execution of the deal. I know that such a document is in the pipeline."
Published by Globes [online], Israel business news - www.globes-online.com - on April 24, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008