Dear Mr. Berko: I bought 75 shares of Lockheed Martin in late 2016 at $260 a share after reading your column praising the stock. You said that it had good dividend growth and that revenues and profits would continue to grow at an uninterrupted pace. I also remember that in some other column, you claimed that wars and the “expectation of hostilities” are very profitable for business. For some reason, the government is stopping the manufacture of the F-35 fighter plane indefinitely. Why? What’s wrong here? Is Lockheed going to lose this contract? I am a little nervous about this and need to know whether you think I should take my short-term profit.
— F.P., Rochester, Minn.
Dear F.P.: Lockheed Martin Corp. (LMT-$312), with $50 billion in revenues, is the world’s largest defense contractor. LMT derives 65 percent of revenues from the U.S. Department of Defense, 15 percent from other U.S. government agencies and 20 percent from foreign military programs. War is a wonderful business for LMT. And it’s a super repeat business because planes wear down and get shot down and must be replaced, or they become damaged and new parts have to be procured and installed. It’s estimated that the government will spend over $1.4 trillion in the next 20 years to maintain its fleet of F-35s. That’s a hugely profitable maintenance contract. Meanwhile, production wasn’t stopped; shipments were halted temporarily, but they have recently resumed.
One problem is the F-35’s sticker price and sloppy cost overruns. The other problem is that the Trump administration was furious at the cost increases and threatened to kill the program. In 2011, Lockheed contracted with the Pentagon to build 2,400 F-35s at a cost of $49 million a copy, but thanks to 28 super-lobbyists on LMT’s payroll — plus multiple millions in “jam money” given to 37 members of Congress (also on LMT’s payroll) — the cost of an F-35 had zoomed to $136 million by 2016. Lockheed’s corrupt influence-peddling, using taxpayer dollars to line the pockets of flagrantly crooked congressmen, is why the cost of an F-35 exploded by $87 million in five years. Gen. Norman Schwarzkopf, who publicly detests most congressmen for their lack of probity, remarked that most members of the House and Senate are overjoyed when a lobbyist brings a briefcase to a dinner meeting.
Few of us realize how culpable and venal members of Congress can be.
