Hercules delay may cost Lockheed pounds 1bn

Lockheed Martin, the giant US defence contractor, is close to agreeing a deal to pay compensation to the Ministry of Defence for the late delivery of a pounds 1bn fleet of Hercules transport aircraft.

The group is expected to have to pay liquidated damages of at least $20m (pounds 12m) but it could also end up bearing some of the costs of bringing the fleet of C-130J aircraft into service. The 13-month delay in delivery could also affect any deal that Lockheed Martin wins to supply the RAF with more Hercules aircraft.

Lockheed had been due to begin delivering the first of the 25 aircraft to the RAF last November but they will not now start to arrive until January next year. The hold up has been caused by delays in getting FAA certification for the new aircraft. This has taken two years rather than than the 9 months forecast by Lockheed.

Meanwhile, Lockheed said it was in talks to bring GEC on to its Joint Strike Fighter programme alongside British Aerospace. BAe will be a main risk sharing partner if Lockheed wins the full production order - 3,000 jets worth $750bn. GEC is supplying flight controls and some avionics for two demonstrator aircraft. The US Defense Department will choose between Lockheed and a rival consortium led by Boeing in 2001.

Lockheed, which is also buying Northrop Grumman, another US defence contractor, is in talks about the possibility of the French fighter manufacturer, Dassault, and Germany's Deutsche Aerospace joining the JSF programme.

"We want to be a global company, not just one that sells its products overseas, and that means looking for global partners to help us," said Micky Blackwell, president of Lockheed's aeronautics division.

He said that it was not interested in joining forces with Airbus Industrie until the consortium was privatised.

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