Fighter Contract Gives Texas Economic Boost

From staff and wire reports Saturday, October 27, 2001

The Pentagon decision Friday to award a $200 billion contract to Lockheed Martin Corp. to build the next generation of stealth fighter jets wasn't just a victory for the company's Fort Worth-based aeronautics division, but for the entire Texas economy.

The deal, the biggest military contract ever awarded, will create a massive ripple effect, as Lockheed hires workers and subcontractors and buys services and material -- everything from concrete and lumber to electronics and testing equipment.

In an analysis for the Fort Worth Chamber of Commerce, Waco economist Ray Perryman calculated that the contract will generate $137.1 billion in total expenditures over its 40-year life and pour $2.5 billion into state coffers.

Central Texas could see at least 3 percent of the prize, or $6 billion, through subcontracts and increased demand for state services.

"That's a massive injection" into the state's economy, Austin economist Jon Hockenyos said. "That, in turn, helps the state of Texas, and all things being equal, means more state tax revenue and helps maintain state jobs."

Perryman said the deal assures the survival of the Fort Worth plant that otherwise probably would have closed once it completed its current contract to produce F-16s, the world's best-selling fighter jet, in 2010.

Lockheed Martin said employment at its Fort Worth plant will grow by more than 2,000 workers, to 13,500 by 2005. Perryman estimates that the contract will produce 8,323 permanent jobs during the 10-year engineering and development phase, with more in later years.

Friday, Air Force Secretary James Roche announced that Lockheed was the winner of an $18.9 billion engineering contract to produce 22 aircraft over the next 10 years and to set up the production line. That is expected to eventually lead to the go-ahead to build 3,000 F-35 fighter jets, once Lockheed establishes it can design and build the aircraft to the Pentagon's specifications.

Roche wouldn't release details of why Lockheed was picked after a five-year review, but said during the review process its proposal "emerged continuously as the clear winner."

The F-35 will replace the aging fighter jets of the Air Force, Navy and Marines, with modifications to fit the needs of each branch. It also will be used by Britain's Royal Air Force and Navy, which want 150 of the planes. Britain has committed $2 billion toward development.

Lockheed Chairman Vance Coffman said his company would honor the trust shown by the Pentagon "by building a truly remarkable, capable and affordable multirole fighter, on schedule and on cost."

The first 22 planes are expected to be delivered in 2008. However, the General Accounting Office, Congress' investigative arm, has twice warned that the jet could end up costing more and take longer to build because the technologies need more development. The Pentagon says its independent investigation found that the technologies are adequate.

Lockheed and Boeing waged a long and costly advertising and lobbying campaign for the contract, which establishes Lockheed as the nation's sole fighter jet manufacturer.

In Fort Worth, about 500 employees at the F-16 assembly plant gathered to watch the announcement on a big-screen television and burst into cheers when Lockheed was chosen.

"This was all about this company and this company's future," said Art Price Jr., Lockheed's director of procurement for the fighter.

"I've worked here 23 years. It's paid my mortgage; it paid for my kids' education. (The Joint Strike Fighter contract) will do the same for their kids," Price said, sweeping his arm in the direction of some younger workers.

Analysts said Boeing may be in a better position to weather the contract loss. It is developing a pilotless combat aircraft that could be highly lucrative and, unlike Lockheed, has a commercial airline business. It also has contracts with the Pentagon to continue building F-18s and F-22s until 2011.

Each of the new F-35s will cost about $40 million. The version with the ability for short takeoff and vertical landings will cost more, but less than $50 million, the Pentagon said.

The Joint Strike Fighter will lead the U.S. military into a new generation of planes in the next 25 years, replacing many of its aging relics in need of retirement. The supersonic attack plane will replace the Air Force F-16 Falcons and A-10 Thunderbolts, the Navy F/A-18 Hornets and Marine AV-8B Harriers.

The new wave of Joint Strike Fighters will cut down on the number of parts the military needs for its planes, while still allowing for flexibility among its various branches. For example, the Marine Joint Strike Fighter will be able to take off and land vertically, allowing more ease with short runways and aircraft carriers.

It's too soon to tell when the ripples from the contract will begin to touch Central Texas, but the region should benefit, said John Breier, vice president for economic development for the Greater Austin Chamber of Commerce.

"Any time one of our sister cities benefits in that large way, it's going to benefit our industry here," he said. Breier said Austin may be able to capitalize on its ability to help produce the technology necessary for a modern fighter plane, including software and semiconductors.

Nancy Evans, director of the University of Texas engineering career center, said the Lockheed contract will be a windfall for students looking for internships or permanent work. The opportunities will mean the state has a better chance of holding on to its engineering talent.

And the project means work for a wide variety of engineers -- aerospace, civil, electrical and computer, she said.

"It's great news," Evans said. "With the bulk of those jobs in Fort Worth, we definitely would benefit."

American-Statesman staff writers Claudia Grisales and Elizabeth Goldman contributed to this story.

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