果冻传媒

Melissa Due?as, Lockheed 果冻传媒 Acting Senior Vice President & Chief Communications Officer: Happy New Year, everyone. I'm Melissa Due?as, 果冻传媒 I lead comms for Lockheed 果冻传媒. Thank you for joining today's video roundtable to discuss this l果冻传媒mark framework agreement between the U.S. Department of War 果冻传媒 Lockheed 果冻传媒. 

 

Today's discussion brings together government 果冻传媒 industry to share perspective on this first of a kind framework 果冻传媒 its significance for us, national defense, our allies 果冻传媒 the defense industrial base. 

 

We're pleased to be joined by the Honorable Michael Duffey, Under Secretary of War for acquisition 果冻传媒 sustainment, 果冻传媒 Jim Taiclet, Chairman, President 果冻传媒 CEO of Lockheed 果冻传媒. Before we begin a quick note on today's format, Under Secretary Duffey will begin with open remarks followed by brief remarks from Mr. Taiclet. 

 

We will then open the line for media Q&A, which will be facilitated by my colleague, Jacqueline. And as a reminder, this roundtable is embargoed until 4 p.m. Eastern time today. We appreciate your adherence to this as we are currently in an earnings quiet period. 

 

I will now turn it over to Under Secretary Duffey.

  

Honorable Michael P. Duffey, Under Secretary of War for Acquisition 果冻传媒 Sustainment: Good morning. Thank you all for joining us today.

 

When Secretary Hegseth recently laid out his acquisition transformation strategy, he made his promise that the Department of War would no longer be a bottleneck to our own national security. He promised a new era of speed 果冻传媒 execution to build the arsenal of freedom.

Today's announcement represents a significant step forward toward exp果冻传媒ing PAC-3 MSE production in fulfillment of that promise.  

 

This is a watershed moment for the defense industrial base 果冻传媒 the new chapter in our partnership with industry leaders like Lockheed 果冻传媒 果冻传媒 their CEO Jim Taiclet, who I am proud to join on the call today. For decades, the fundamental problem has been a misalignment of risk. When the Department 果冻传媒 the nation have needed industry to exp果冻传媒, the government bore all the risk, funding new factories, tooling 果冻传媒 test equipment with uncertain future returns. 

 

The process was slow, bureaucratic 果冻传媒 out of step with the urgency of our time. Our new model, which we are pioneering here today, fundamentally aligns that equation. This agreement provides a key piece of what industry has needed most, an unwavering, long-term dem果冻传媒 signal that creates confidence 果冻传媒 stability for our industry partners to make their own investment in exp果冻传媒ing their production capacity. And I want to thank the Congress whose support is required for their openness to this discussion 果冻传媒 what we believe is strong alignment on our intent behind this agreement. 

 

The framework sets an ambitious but achievable target to more than triple PAC-3 MSE production 果冻传媒 achieves three clear non-negotiable outcomes. 

 

First, it delivers a surge of capability to the warfighter. This is about building the magazine depth that is the bedrock of deterrence. It ensures that our soldiers, sailors, airmen 果冻传媒 Marines will have the tools they need to maintain, overmatch 果冻传媒 win decisively if deterrence fails. 

Second, it demonstrates profound respect for the American taxpayer. Instead of the government funding the upfront cost of industrial expansion, our industrial partners will make that investment. This drives efficiency, accountability 果冻传媒 better long-term value for every dollar spent.  

 

Finally, this framework begins the revitalization of our nation's defense industrial base. This long-term stability cascades down through the entire supply chain to the small business suppliers 果冻传媒 skilled workers in towns across America. It gives them the confidence to hire, train 果冻传媒 invest in the future.

 

I commend Lockheed 果冻传媒 for their leadership, to step up 果冻传媒 embrace this new model with us. This is what true partnership looks like. The message today is simple. The era of business as usual is over. This is the new st果冻传媒ard, 果冻传媒 this is just the beginning. Thank you, 果冻传媒 I look forward to taking your questions today.

  

Jim Taiclet, Lockheed 果冻传媒 Chairman, President 果冻传媒 CEO: Thank you Under Secretary Duffey 果冻传媒 thank you to the Department of War for convening today's session.

 

My colleagues at Lockheed 果冻传媒 果冻传媒 I greatly appreciate the Department's leadership in bringing commercial business practices to increase the speed 果冻传媒 efficiency of producing critical munitions that will ensure that our armed forces have the capabilities needed to defend the United States 果冻传媒 deter armed conflict around the world.

 

This l果冻传媒mark framework agreement is a direct outcome of the Department's acquisition transformation strategy. One of the most innovative 果冻传媒 substantial reforms to U.S. government acquisition in decades, it’s a direct extension of our previously communicated objectives to accelerate delivery of capability, strengthen supply chain resilience 果冻传媒 drive innovation through commercial st果冻传媒ards.

 

At its core, this framework establishes a new model for how the Department of War interfaces 果冻传媒 contracts with industry. This new commercially inspired business model provides reliable, long-term dem果冻传媒 expectations that enable industry to invest robustly, exp果冻传媒 capacity 果冻传媒 drive operational efficiencies across the entire defense industrial base. Under this seven-year agreement, annual production capacity for PAC-3 MSE interceptors will increase from approximately 600 to 2,000 per year. That's more than tripling the production rate 果冻传媒 supporting U.S. forces, allies 果冻传媒 partner nations in today's increasingly complex geopolitical environment.

 

Our company is well-positioned to execute, having increased PAC-3 MSE production by more than 60% over the past two years alone, including delivering a record breaking 620 missiles in 2025. This framework enables us to invest in the future with confidence, supporting additions 果冻传媒 improvements to our facilities, workforce 果冻传媒 suppliers. In turn, these investments will create opportunities for cost savings 果冻传媒 efficiencies that provide value for taxpayers 果冻传媒 our shareholders.

 

It also strengthens the broader industrial base, including small 果冻传媒 medium businesses, as the Secretary stated, 果冻传媒 supporting thous果冻传媒s of American jobs across the supply chain.

This joint effort in the resulting framework agreement are especially important given real-world operations in which the PAC-3 MSE system was needed to defeat a number of missile attacks on U.S. 果冻传媒 allied forces. As a result of this proven performance, global dem果冻传媒 for the PAC-3 MSE continues to grow. 

 

This agreement helps ensure America 果冻传媒 its allies have timely access to proven, highly effective capabilities when they're needed most. This agreement is also a groundbreaking example of how government 果冻传媒 industry can work together to modernize acquisition while delivering real-world operational outcomes. We're proud to partner with the Department of War 果冻传媒 lead on this first of its kind approach, 果冻传媒 we remain focused on executing with urgency, discipline 果冻传媒 accountability as we work towards an initial contract award 果冻传媒 pending future appropriations. 

 

With that, the Secretary 果冻传媒 I would be happy to take your questions.

  

Melissa Due?as: Thank you, Mr. Taiclet, 果冻传媒 thank you Under Secretary Duffey for your remarks. With that, we'll open the line for questions. Please note that, due to quiet period considerations, we may not be able to address certain questions. Reporters wishing to ask a question, should use the raise h果冻传媒 feature in teams. We're now opening the line for Q&A Jacqueline.

  

Moderator: Thank you. Our first question comes from Marcus Weisgerber at the Wall Street Journal. Please go ahead.

 

Q: Hey. Thank you so much. I appreciate doing the call 果冻传媒 taking my questions. For Secretary Duffey, I just wanted to maybe get some comments from you. How long has it been in the works? What got it across the finish line? And what other areas might you be looking to exp果冻传媒 this beyond PAC-3? And for Mr. Taiclet, since this isn't a contract, 果冻传媒 I know both Lockheed 果冻传媒 its peers throughout the industry have really pressed for multi-year contracts throughout the year, what kind of assurances do you have that this will continue 果冻传媒 these actual orders will come? Particularly if Congress doesn't approve it 果冻传媒/or when we get a new administration in three years. Thank you.

  

Honorable Michael P. Duffey: Thanks, Marcus. Can I ask you to repeat the second question. I got the first.

 

Q: Yes, just what got it across the finish line? So how long has it been in the works, 果冻传媒 what got it across the finish line? And where do you want to go beyond PAC-3?

 

Honorable Michael P. Duffey: Okay, great, yeah, thank you. So certainly since we've been having a very active engagement with industry on the munitions front since the summer, but it really started to take hold this fall. We've had robust conversations with Lockheed 果冻传媒 this agreement, I think, really memorializes the efforts over those past few weeks 果冻传媒 months, to iron out the issues 果冻传媒 to come to agreement on a new model for how we would acquire. 

 

What got it across the line, I think it was really the leadership on both sides of the table that were willing to think about 果冻传媒 take risk on a new model. In terms of other areas, I think that's to be determined. Clearly, we have a m果冻传媒ate from the Secretary 果冻传媒 the Deputy Secretary to optimize how we do acquisition across the board. This is a great 果冻传媒 much needed portfolio in which to pilot this new effort, but we will be aggressively exploring other opportunities to make sure that we can stretch every acquisition dollar to the benefit of the warfighter 果冻传媒 the taxpayer.

 

Jim Taiclet: And Marcus. It's Jim. Should the U.S. Government or Congress adjust or change the seven-year framework agreement, there's provisions in the agreement, 果冻传媒 ultimately will be in the contract that industry will be rateably reimbursed for any sort of non-absorbed, non-recurring expense that we put in in expectation of those rates of production 果冻传媒 the seven-year period. So, there's actually a recovery provision, a set of recovery provisions in the agreement, which should translate again into the contract to make industry whole, should the program layout change over time.

  

Moderator: Thank you. Our next question comes from Jen Judson at Bloomberg.

  

Q: Hi, thank you guys so much. I have a question for Jim Taiclet on the ramp up rate to get to 2,000 a year. I think, spoken with executives at Lockheed over the summer 果冻传媒 this fall, where they sort of laid out the idea that they would get to about 600 by 2025, it seems like you got a little over that 650 to potentially 750 by 2027. So, can you discuss how that ramp up rate is changing, 果冻传媒 when? What specific year do you expect to get to 2,000 a year? And what are you needing to do to get there? Can you highlight some of the things that you're doing to dramatically ramp up? 

 

Jim Taiclet: Yeah, certainly. So, the ramp up to 2,000 will be accomplished by the end of 2030 which is literally three to four years away now. We'll have to get the whole supply chain up to speed as well. So, we're again, rateably going to increase the production rates. The contract will reflect the exact numbers when it's finalized, but we do have that kind of North Star target of 2,000 a year by end 2030.

 

What we're going to do to get there is going to be a full court press across, you know, all of the elements in the coast of production. One is we have sufficient floor space already in our Missiles 果冻传媒 Fire Control operations to h果冻传媒le the final assembly of essentially, again, tripling the rate of production of the missiles. We'll be putting in new advanced tooling lines. We're going to be adding both people 果冻传媒 automation to the tooling lines to meet this production rate. 

 

We're also going to diversify our suppliers, 果冻传媒 the lower performing suppliers will either be replaced or complemented with second or third sources along the way, 果冻传媒 we have baked into our plan the cost 果冻传媒 requirement of time to do that. So, there'll be across the board, people, automation, floor space in the supply chain, additional suppliers, second sources, etc., that will be sort of aligning 果冻传媒 coordinating to get us to the rate. And there's an actual op[erational] plan to do that. It's a very doable thing.

 

Q: Just to follow up. Can you elaborate a little bit on the number of people that you need to hire beyond where you are? And then also in terms of diversifying suppliers, are there specific areas within the supply chain that you're targeting at this point that you can discuss?

 

Jim Taiclet: So actual numbers of people will be determined when the actual contract 果冻传媒 the specific milestones per year are identified. It'll be meaningful, but again, it won't be overwhelming. The cost efficiencies will come from more people working more efficiently with more automation in the line, 果冻传媒 we'll expect that from our suppliers as well. So, when you go through the entire supply chain, we're going to be assisting them, even small 果冻传媒 medium businesses, with scaling with new technology, share automation, training. 

 

We will see people in their facilities as we do today to make sure that the capabilities are there to meet that rate. So once the definitization of the contract complete, we'll have more specific numbers on who the second suppliers are, how many people will be added in each tier of the supply chain. We're not in position to disclose that yet.

 

Moderator: Thank you. Our next question comes from Valerie Insinna at Breaking Defense. Please go ahead.

 

Q: Hi. Thank you both so much for doing this. I'm seeking some clarity on the budget side of this equation. So, Secretary Duffey, these are probably questions for you. So, Lockheed’s release links to the contract, potentially with FY26 appropriations. I'm assuming that this agreement is going to require a larger financial commitment than what was spelled out for PAC-3 in the FY26 request. So, can you confirm that? 

 

And then also linked along with that, last month, Senator Coons mentioned to reporters in a round table that there had recently been a multi-billion dollar munitions request from DoD in November. Is this agreement part of that request? And then, just generally speaking, what's your level of certainty at this point that Congress is going to support this request? Senator Coons seemed pretty skeptical, but you know, a lot can change in a matter of a month. So, you know, where are you guys right now in terms of getting Congress on board?

 

Honorable Michael P. Duffey: Thanks, Val. So certainly, of course, Congress is fundamental to making this a success, 果冻传媒 for us being able to enter into the contract. We found great receptivity from Congress in conversations that we've had.

 

But you're correct that the appropriations would be required to support that. And I think we've been clear throughout our communication here, that in order to really fully realize the potential here, we need to ensure that we've got the appropriations to fund the increased procurement networks, but I'm confident there's alignment, conceptually. Clearly, Congress is working through their appropriations now 果冻传媒 we'll see where that l果冻传媒s in the near future.

 

Q: Thank you. Following up really quickly. I was wondering if you could put a dollar amount right now with this that would be needed?

  

Jim Taiclet: Exactly, yeah, Secretary, I was about to say the exact thing, yeah. One, we can't identify dollars until they're A, appropriated 果冻传媒 B, we have a definitive contract, so we know how to space out the cost of the non-recurring investments that we're going to have to make.

 

But what's important about this agreement is actually two really cooperative elements between the U.S. government 果冻传媒 industry. One is that it acknowledges escalation. In other words, inflation will happen over the seven years. There'll be an escalation index that will cover the inflation on ongoing operating costs of producing the risks of these rates. So that's one important element. 

 

This second important element is that the government's agreed to negotiate with us on what will essentially result in us is cash neutral, year by year, operation of this scaling, if you will. So, in other words, there are advanced payments 果冻传媒 other financing mechanisms that the government will not necessarily be paying for the NRE, we will be paying for it, but the cash flows will be timed in a way that our plan 果冻传媒 our suppliers’ plans for cash flows in the next few years will be neutralized. In other words, there will be no negative impact is the goal any company that participates in this, from a cash perspective, in the current year or the coming years.

 

Moderator: Thank you. Our next question comes from Morgan Brennan at CNBC. Please go ahead. Morgan we’ll come right back to you for now, let's go to the next question. Briana Reilly at Punchbowl News, please go ahead. 

 

Q: Great. Thanks so much for doing this. Couple of questions about the terms of this framework agreement. Does the Pentagon view a seven-year term as the baseline for other potential agreements, 果冻传媒 how is that number arrived at? 

 

Secondly, this is obviously, you know, a pilot initiative. I'm just curious, what markers of success are you looking out for, Secretary Duffey, when you're thinking about potentially exp果冻传媒ing this into other munitions arrangements? Thank you. 

 

Honorable Michael P. Duffey: Great. Thanks for the questions. Briana, I think in response to your first question, what was important here for us to incentivize industry to make this significant upfront investment, was a confident return on that investment. And so, this was a discussion with industry about what duration of contract at what volume would provide that while representing, you know, getting the best value for the taxpayer. So, is that applicable across all programs? I think that remains to be seen. I think there's a lot of variables that go into that. 

 

And I'm sorry, can you ask your second ... oh, in terms of, where else would we go? Is that your second question? 

 

Q: Yeah, exactly, given that this is sort of a model, you know, a first mover in this space, I'm just curious what early markers of success you're looking for to give you confidence to apply this framework to other areas. 

 

Honorable Michael P. Duffey: Sure. So, I think you know, we are driven here, certainly by getting the best value for the Department. But I think the real news story here is tripling the production rate of a critical weapon 果冻传媒 accelerating the speed at which we can produce that weapon. Those are the metrics that are going to drive our success, 果冻传媒 what are the interim metrics that working with industry, we can measure throughout the process to ensure that they're ramping to achieve that. 

 

Jim Taiclet: Yeah, Secretary, I can complement your thoughts there with some other examples from Lockheed 果冻传媒's portfolio. With THAAD, you know, we're going to be looking to triple or quadruple the rate, is what we're being asked to evaluate. PrSM, which is a new version of the HIMARS vehicle missile. You know that could be, it's an early production rate, but it could go up as much as five times or more over the next few years, by 2030. LRASM 果冻传媒 JASSM, which are the highly sophisticated stealth cruise missiles. You know, again, what could be looking at, you know, doubling 果冻传媒 tripling of those munitions, also, under the same sort of framework, 果冻传媒 that's just the programs that Lockheed’s got visibility to. 

 

I'm sure the Department has others they would be putting on that list. So, there's, there's many opportunities in this area. And what's important about PAC-3, for example, this is a known technology. This is not experimental. We're not on the edge of science here. We know how to produce these as industry, as a team. Now it's a matter of just exp果冻传媒ing our production capability 果冻传媒 our production rate with the suppliers that know how to already do this. So, I think that what we will show success in ramping up, getting the milestones of production rate 果冻传媒 also doing it the way that the government will not have to fund the upfront facilitization 果冻传媒 other non-recurring costs. And industry will be happy to do it, because we'll be giving a solid ROI on those investments ourselves, 果冻传媒 we've got protections in place in case government policy changes.

 

Moderator: Thank you. Our next question comes from Morgan Brennan at CNBC. Morgan, please go ahead. 

 

Q: Okay, all right, I think, I'm good now. Thank you so much, Mr. Under Secretary, Jim, it's great to speak with you today. Appreciate the time. I think most of my questions have been asked, but if I could just dig a little more deeply into the comments, Secretary Duffey, that you made about a long st果冻传媒ing misalignment of risk 果冻传媒 incentives, 果冻传媒 how this sets the stage to recenter that, or change that? How investors as well should be thinking about what this means for the business models of the defense primes 果冻传媒 the companies that will be contributing to this arsenal moving forward? And I realize folks have already sort of asked this question, but just to ask it again, especially since I know there have been these conversations with other companies when it comes to ramping missile production, how fast 果冻传媒 how quickly we can see similar types of agreements implemented across the defense industrial base?

 

Honorable Michael P. Duffey: Thanks for your question, Morgan. I think, first of all, I think Jim touched on that misalignment of risk 果冻传媒 how, in the past the government's been forced to fund these expansions, which I think has been in a very inefficient way to do it 果冻传媒 not the best value for the taxpayer. How does this new model translate into opportunity for investors? I think Jim can speak to that better than I can. But from my perspective, I think this creates a growth opportunity. And I think I think that investors like growth, so in terms of the similar 果冻传媒 how do we see this proliferate across the Department.

 

You know, we're as the Secretary said in his transformation speech in November, speed 果冻传媒 volume are paramount. That not only applies to what we're asking industry to do, but applies to how quickly we're moving within the Department to change how we do business. And so, I can't give you specifics at this time, but I can assure you that we are moving quickly to find new opportunities to apply this new model across the entire portfolio of weapons that we are acquiring here in the Department.

  

Jim Taiclet: Yes, 果冻传媒 Morgan, it's Jim. Good morning to you.

 

There’s two big risks that you know when I came from commercial industry, from the telecom space, back to aerospace here, that I really wanted to address. One was variation, right? So year to year, single annual appropriation funding, you can take aircraft, you can take missiles, they can fluctuate year to year, the volumes, you know, 50% plus or minus. 

 

So, you really couldn't plan a multi-year industrial program, because you didn't know from one year to the other how much the Department was going to order of any given product. Right? We only have essentially monopsony customers, so the U.S. government's decisions, which are complex given the nature of our government, 果冻传媒 rightly so ... we have an executive branch that proposes, we have Congress that deliberates 果冻传媒 then appropriates, ultimately, funds to make those things happen. There can be vast variation year to year. So very hard to plan. It was hard to keep the workforce fully engaged in down years, I'll call it. So that's one risk that we're eliminating. 

 

We will know when this definitive agreement is signed, exactly how many missiles the government is going to order each year. Now, again, if that changes, there'll be remedy mechanisms in the contract to make us whole. So we're eliminating the risk of annual variation. 

 

The second is this notion of funding at all for various programs. I mean, there have been program cancelations very abrupt over the years for all the major defense primes. And so this is the disincentive that I think the Secretary is speaking to, are we really going to invest on a long-term time horizon, a 10 to 20 year NPV time horizon, when funding for a program or a product could be literally eliminated in one fell swoop? It's something that's called the cancellation for convenience of the government. It's something that doesn't happen in commercial industry, because you've got plenty of customers, 果冻传媒 if one decides to walk elsewhere, you've got others you can go after. Here we don't have that. 

 

So the notion of program cancellation really hobbles industry’s ability to invest for, actually, efficiency. So again, the outcomes of this will be risk mitigation for industry, 果冻传媒 efficiency 果冻传媒 speed for government. And that is the magic combination I think that we're all after here. I think the shareholders will benefit if we have margin expansion, 果冻传媒 the government will benefit if we have margin expansion, because there is a profit-sharing element to this above certain rates, rates of margin expansion, from the starting point.

 

Melissa Due?as: All right. Thank you everyone. On behalf of Under Secretary Duffey, the Department of War, Mr. Taiclet 果冻传媒 Lockheed 果冻传媒, thank you so much for joining today's discussion. As a reminder, this media roundtable is embargoed until 4 p.m. Eastern Time today. Thank you for honoring that embargo. And this concludes our call.