Lockheed Martin Wins $6.4-Billion F-16 Contract

Lockheed Martin Corp., the nation’s biggest defense contractor that has been beset by plunging profit and problems across its product lines, on Sunday said it signed a contract worth $6.4 billion to sell 80 advanced F-16 fighter jets to the United Arab Emirates.

The contract, which came after two years of intense negotiations, is also a boon for Los Angeles-based Northrop Grumman Corp., which will outfit the fleet, to be called Desert Falcon, with an advanced radar system and electronic warfare technology that will make the planes among the most sophisticated of the F-16 series in the world. Northrop’s part of the program is estimated at $1 billion.

For Lockheed, the contract is a huge lift in an otherwise bleak year for the Bethesda, Md.-based company. Its stock lost more than half its value in 1999, and profit fell 60% from 1998. In addition, the company began an internal review that could lead to selling or shrinking key units.

Dain Hancock, president of Lockheed Martin Aeronautics Corp., said the deal “is very significant for the strategic relationship that exists between the governments of the United States and the United Arab Emirates, just as it is important for Lockheed Martin.”

The contract for the new Block 60 model F-16s must be approved by the Congress. It’s unlikely the contract will be blocked, although previously the Emirates had threatened to pull out of negotiations if the jets were not equipped with technology Washington considered too advanced.

But neither the Defense Department nor the Air Force have encountered any opposition during at least six briefings conducted on Capitol Hill since 1998.

The aircraft will be delivered between 2004 and 2007, the company said. Khaled al-Buainain, commander of the Emirates’ air force, said at a news conference Sunday in Abu Dhabi that the F-16 was chosen over the F-15, the Euro 2000, the French Rafale and the Russian Sukhoi.

The contract will add to Lockheed’s backlog of $49.9 billion and boost this year’s sales by $500 million to $600 million, said Byron Callan, a defense analyst for Merrill Lynch & Co.

Lockheed’s aeronautics unit, which makes the F-16 and F-22 fighters and C-130J transports, accounted for $5.4 billion of Lockheed’s $25.3 billion in sales last year.

The U.S. government is expected to announce by Tuesday that Greece will buy 50 F-16s from Lockheed, at a cost of about $2 billion, Hancock said.

Separately, Lexington, Mass.-based Raytheon Co. stands to get most of an additional $1.3 billion in contracts for munitions sales to the Emirates that the U.S. government will sign directly with the federation in April.

Northrop beat out Raytheon and ITT Industries for the portion of the F-16 contract to build the planes’ electronic warfare “suite.” The work will be done largely at Northrop’s Baltimore and Rolling Meadows, Ill., facilities.

“This program underscores our corporation’s core strengths in the highly competitive global marketplace for advanced electronic systems,” said James Roche, president of Northrop’s electronic sensors and systems sector.

The contract will also benefit the company selected to build the fleet’s engine--either General Electric Co. or United Technologies Corp.’s Pratt & Whitney unit. The winner was expected to be announced later this week.

On the New York Stock Exchange Friday, Lockheed Martin shares dropped 13 cents to close at $17, and Northrop rose 81 cents to close at $44.38.

Bloomberg News was used in compiling this report.