Lockheed's $29 Billion Helicopter Running Short of a Needed Part
(Bloomberg) -- Timely delivery of Lockheed Martin Corp.’s $29 billion CH-53K King Stallion helicopter for the U.S. Marine Corps may be jeopardized by a potential shortage of specialized metal components two years after the bankruptcy of a key supplier.
In an illustration of how even the biggest defense contractor depends on its supply chain, the Navy’s aircraft development and acquisition command has assembled a team with Lockheed to assess options for ensuring a steady supply of the parts. General Robert Neller, the Marine Corps commandant, is monitoring the issue.
The Navy is looking for an alternate company capable of a manufacturing process called “thin wall casting” to forge very precise, narrow passageways for coolants and lubricants to flow inside a metal housing. The process is designed to save weight, a crucial consideration in aircraft manufacturing.
The Navy plans to buy 200 of the helicopters, a lucrative opportunity that was the prime motivation for Bethesda, Maryland-based Lockheed’s $9 billion acquisition of Sikorsky Aircraft from United Technologies Corp. in 2015. The Marines are scheduled to declare the helicopter operational in December 2019.
The Naval Air Systems Command team is “addressing this issue” with weekly meetings “to maintain focus,” Neller’s spokesman, Lieutenant Colonel Eric Dent, said in email.
He said the Marines also can use special authorities under the Defense Production Act. The law provides for actions such as targeted investments in a crucial contractor.
President Donald Trump signed a memo in February that authorized use of funds under the act “to ensure the industrial base for thin wall castings” as “essential to manufacturing cutting-edge components for next-generation rotorcraft platforms.”
The Navy has earmarked $16 million in Defense Production Act funds that can be spent on one or several companies as an alternative source for the helicopter parts, Navy spokesman Greg Kuntz said. The companies would be required to match the allocated dollars. The Navy will seek “possible solutions” from industry in a solicitation later this year, Kuntz said in an email.
“You’ve got a problem,” Neller told reporters last week, “if there is a single point of failure somewhere in the supply chain” and “if there is only one place that makes this widget.” He said “it’s a big deal” because the Marines need “that airplane and we need it soon.”
The potential bottleneck was flagged with few details in the Trump administration’s defense industrial base report released this month under a section entitled “Fragile Supplier.” It noted “one company illustrates the interaction of single-source risk and fragile supplier.”
The supplier wasn’t named.
The report said the subcontractor declared bankruptcy, citing a decline in military and commercial helicopter orders. “Without a qualified source for these castings, the program will face delays, impeding the DoD’s ability to field heavy lift support for Marine Corps expeditionary forces,” the report found.
Melissa Chadwick, a spokeswoman for Lockheed’s Sikorsky unit, said in an email that the company has “rigorous processes in place to ensure the quality, safety and delivery of parts for the CH-53K,” and “we continue to work with our military customers to invest in strengthening our existing supply chain and to explore multiple sources for components.”
The Navy’s budget plan for fiscal 2019-2023 calls for increasing procurement spending on the CH-53K to $2.3 billion in 2023, up from $756 million last fiscal year and $1.3 billion proposed for this fiscal year.
The current projected acquisition cost, including development, is $139.5 million per aircraft, according to Navy figures. That’s 20 percent more than the original baseline set in 2005. A 1982 law would require notifying Congress if the overrun reaches 30 percent over the baseline.
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