LDN - Business

Exclusive: Lockheed says U.S. may take 'fresh look' at its India F-16 plan

[February 09, 2017] By Sanjeev Miglani and Mike Stone

NEW DELHI/WASHINGTON (Reuters) - U.S. defence firm Lockheed Martin wants to push ahead with plans to move production of its F-16 combat jets to India, but understands President Donald Trump's administration may want to take a "fresh look" at the proposal.

With no more orders for the F-16 from the Pentagon, Lockheed plans to use its Fort Worth, Texas plant instead to produce the fifth generation F-35 Joint Strike Fighter that the United States Air Force is transitioning to.

Lockheed would switch F-16 production to India, as long as the Indian government agrees to order hundreds of the planes that its air force desperately needs.

Trump has criticised U.S. companies that have moved manufacturing overseas and which then sell their products back to the U.S. In his first few weeks in office, he has pushed companies, from automakers to pharmaceutical firms, to produce more in the United States.

In Lockheed's case, however, the plan is to build the F-16 to equip the Indian Air Force, and not sell them back into the United States.

Lockheed said it has been talking to Trump's transition and governance teams as well as the U.S. Congress for several months on its plans, including the proposed sale of F-16 planes to India, a spokesman told Reuters in Washington.

"We've briefed the Administration on the current proposal, which was supported by the Obama Administration as part of a broader cooperative dialogue with the Government of India," the spokesman said.

"We understand that the Trump Administration will want to take a fresh look at some of these programs, and we stand prepared to support that effort to ensure that any deal of this importance is properly aligned with U.S. policy priorities."

India is expected to spend $250 billion on defence modernisation over the next decade, analysts say, and there is concern that a veto on making the F-16 in India would not only hit Lockheed, but also threaten other military contracts to come up in India for Boeing <BA.N>, Northrop <NOC.N> and Raytheon <RTN.N>.

The White House did not respond to requests for comment on the plan to build the plane in India.

A person close to Lockheed said company officials did not know what the Trump administration planned to do about the proposal to shift F-16 production to India.

"They're following it closely and talking with the White House. But if they don't move production to India, there's no way they'll get the India contract," the person said.

One argument to be made was that moving to India would preserve some component production in the United States. "Twenty-five percent of something is better than zero percent of nothing," the person said.

NO THREAT TO U.S. JOBS

Lockheed has said that moving F-16 assembly to India would create 200 engineering jobs in the United States to help support the production line in India.

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A U.S. Lockheed Martin F-16 flies during an air display at the Farnborough International Air Show, Hampshire, July 19, 2004. REUTERS/Toby Melville

It has also said that about 800 workers in the United States making the non-Lockheed parts for the F-16 would keep their jobs if construction shifts to India.

"We are offering to make the F-16 Block-70 aircraft with a local partner in India. This is an offer exclusive to India," Randall L. Howard, head of F-16 business development, told Reuters ahead of India's biggest air show beginning in Bengaluru next week.

In India, the F-16 is up against SAAB's Gripen combat aircraft, which the Swedish firm has also offered to make locally, as Prime Minister Narendra Modi drives a Make-in-India campaign to build a domestic aerospace industry and reduce costly imports.

The Indian government is expected to decide this year on which company will build a single-engine fighter plane, in collaboration with a local partner. A defence official said the process was at a very early stage.

The Indian air force alone needs 200-250 fighters over the next 10 years, its former chief Arup Raha said before he left office in December.

Negotiating arms contracts with India can take years, and industry officials said there was no guarantee Lockheed would win the contract even if it moves production to India.

Defence ties between India and the United States have grown rapidly, with U.S. arms sales of more than $4 billion in 2012-15, mostly under government-to-government foreign military sales, upstaging long-term supplier Russia and even Israel.

Lockheed's executive director for international business development, Abhay Paranjape, said his team has met with representatives from 40 defence and aviation firms in India to help build the ancillary network for the aircraft assembly programme.

"We want to be prepared, that's why we started the ground work," he said, adding Lockheed has also scouted possible factory sites in India.

Lockheed has a joint venture with India's Tata Advanced Systems Ltd to make airframe components for the C-130J Super Hercules transport plane and the S-92 helicopter.

"The capability for building components exists here, it's been proven with the C-130s. The challenge now is to pick the right partners," Paranjape said.

(Additional reporting by Andrea Shalal in BERLIN; Editing by Ian Geoghegan)

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