Canada F-35 Deal: U.S. Fiscal Cliff Could Sink Embattled Deal

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OTTAWA - A detailed report crunching all of the numbers, contingencies and eye-popping price points of the Harper government's cherished stealth fighter program is due to be officially made public Wednesday, but experts say it may have a short shelf life as the U.S. heads for its so-called fiscal cliff.

The federal scene has been whipped into a frenzy since a series of leaks last week suggested an independent analysis of the cost of the Lockheed Martin-manufactured F-35 could reach past $45 billion over the lifetime of the aircraft.

An analysis done by the accounting firm KPMG will present a range of cost options for the multi-role fighter, depending upon how long the air force intends to fly the plane, and is expected to peg the cost of each individual aircraft at around $88 million.

But the formula for determining the price tag is more complex and depends on the total number of orders the U.S. aircraft giant receives in any given production year.

If one of the nine nations committed to the oft-maligned program reduces or cancels its orders, the price goes up for everyone else.

With Washington poised to slash defence spending, either voluntarily or by the force of a congressional deadline, there is the real possibility the U.S. could dramatically reduce the number of F-35s it intends to buy from the current 2,243.

For American budget hawks "this is a target shining like a bonfire in the dark," said Paul Malliet, a former air force colonel who worked on Canada's acquisition of the current CF-18 fleet.

"It has gotten so expensive, and I wouldn't be at all surprised that this program isn't recognizable in six months."

The program was reset by former Pentagon chief Robert Gates a few years ago because of soaring costs and development delays. At that point, the U.S. Marine Corps version of the jet was put on hiatus until glitches were worked out.

The volatility in the program is one of the reasons the Harper government chose to conduct a market analysis of possible options to replace the CF-18s.

Other experts are also convinced the report being presented Wednesday will have a short shelf life.

"The KPMG assumptions on unit costs were relevant to last year's acquisition plan, not next year," said Winslow Wheeler, a U.S. aviation analyst, and outspoken critic of the stealth fighter program.

"I fully expect that the F-35 in this country will take a significant hit when the fiscal cliff negotiations are finished, whenever that is, and that will have impact on the F-35 unit costs for everybody."

The problem of what to use to replace Canada's current crop of 77 CF-18s should the stealth fighter program become too expensive — or fall apart entirely — is the cause for some hand-wringing in defence circles.

The government and the air force invested a lot of their public relations efforts in casting the offerings of potential rivals as technologically inferior.

The notion of "what if" has crossed the minds of senior officials in Washington, where there has been renewed speculation that the U.S. might be prepared to offer up an export version of its other stealth fighter — the F-22 Raptor.

Allowing allies to buy the advanced interceptor has been prohibited by legislation.

Yet, a recent U.S. Congressional Research Service report, released on Oct. 25, 2012, noted that the F-22 is seen as a possible "hedge against difficulties in the F-35 program."

The notion, however far-fetched, might solve U.S. defence needs, but allies could be left high and dry, Wheeler noted.

"As unaffordable as the F-35 is, the F-22 is almost comical," he said.

Lockheed Martin's production line for the Raptor has been shut down since the Pentagon cancelled further orders after taking delivery of its 195th aircraft. Even if it could be restarted, the unit cost could exceed $200 million per plane, Wheeler said.

Another aspect is the amount of money each partner nation has poured into the research and development of the F-35, a sum that currently totals $335 million for Canada.

Through a memorandum of understanding, Ottawa is committed to dishing out an additional $550 million over the lifetime of the project, not including what it gives separately to Canadian industry.

According to public accounts records, $43 million is earmarked over the next couple of years for Mississauga, Ont.-based Magellan Aerospace's participation in the F-35.

The Harper government underscores it has not put any money towards the purchase of new planes.

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