August 10, 2007 / 2:50 PM / 12 years ago

Lockheed Martin to repay jet fighter payments

NEW YORK, Aug 10 (Reuters) - Lockheed Martin Corp. (LMT.N), the world’s No. 1 defense contractor, said on Friday it would repay $265 million to the U.S. Department of Defense after billing it too much on the Joint Strike Fighter jet program.

The overbilling, which Lockheed said was inadvertent, happened over the course of five years of development work on the United States’ newest fighter jet, from the first fees paid in 2002.

It concerned work on the plane by Northrop Grumman Corp. (NOC.N) and UK subcontractor BAE Systems Plc BA.L, according to Lockheed, although it said those companies were not to blame for the billing error.

The repayment is “not expected to have a material effect on our financial condition or results of operations,” Lockheed spokesman Tom Jurkowsky said.

News of the error percolated through Washington on Thursday after Lockheed informed customers — including the Pentagon, U.S. Air Force and U.S. Navy — of the error.

The plane, technically known as the F-35 Lightning II, is the largest ever single U.S. acquisition program, at a total projected cost of $299 billion. Along with U.S. forces, eight countries, including Britain, Italy, Australia and Canada, have committed to buy the jet.

The billing error is the latest setback for Lockheed in a series of recent problems with its most important customers.

In April, the U.S. Navy terminated Lockheed’s contract to build a second shore-hugging Littoral Combat Ship that encountered major cost overruns.

The same month, the U.S. Coast Guard stripped Lockheed and Northrop of their lead roles in its $24 billion modernization program, amid delays and cost overruns.

Earlier this month, the U.S. National Reconnaissance Office deemed an experimental U.S. spy satellite built by Lockheed at a cost of several hundred millions dollars to be a total loss after it failed to respond.

Lockheed said it would pay back the overbilled $265 million in the next few days, and was working with the Pentagon to establish what amount of interest to pay separately.

The company said it had notified customers as soon as it discovered the error, and had started a review to find out how the error was not discovered earlier. (Reporting by Bill Rigby)

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