Lockheed said to offer warranty for missile interceptor

* Interceptor deliveries have been delayed

* Holdup hinges on subcontractor’s safety switch

* Production is “badly needed” – U.S. general

By Jim Wolf

WASHINGTON, Aug 17 (BestGrowthStock) – Lockheed Martin Corp (LMT.N: )
has offered to assume additional liability to start production
of part of the multibillion dollar U.S. shield against
ballistic missiles, the head of the U.S. Missile Defense Agency
said on Tuesday.

Army Lieutenant General Patrick O’Reilly told reporters he
thought it was fair for Lockheed to take financial
responsibility for any costs related to production delays
involving interceptor missiles for its Terminal High Altitude
Area Defense, or THAAD.

“So I’m very open to do that with Lockheed,” O’Reilly told a
defense writers’ breakfast, adding, adding that the production
was “badly needed.”

A $419 million Lockheed production contract has been held up
because a subcontractor’s part has yet to pass all
qualification tests. The component, a safety device
manufactured by Moog Inc (MOGa.N: ) and called an optical block
switch, is designed to prevent accidental missile launch, said
Richard Lehner, an agency spokesman.

O’Reilly said Lockheed, the Pentagon’s No. 1 supplier by
sales, had offered to assume liability for any stop-and-restart
production line costs pending completion of the switch’s
qualification, expected in February.

Lockheed anticipates that delivery of its interceptors for
the first THAAD battery will start in the 4th quarter of this
calendar year, said Cheryl Amerine, a Lockheed spokeswoman. The
company had no immediate comment on any warranty offer.

THAAD operate alongside other elements of the emerging
missile shield, which the United States has said is designed to
thwart attacks that could be launched by countries like Iran
and North Korea.

THAAD Interceptor deliveries originally were supposed to
have begun in March, Lehner said.

The delayed production contract would cover 26 interceptors
and a third and fourth THAAD batteries, using funds
appropriated by Congress for this fiscal year. It also would
include an option for another 22 interceptors using fiscal 2011
funds, Lehner said.

O’Reilly said he had personally discussed the holdup with
officials of the United Arab Emirates, which is seeking THAAD
systems worth as much as $7 billion through a
government-to-government sale and would be the system’s first
overseas customer.

“They understand that we’re not going to sell them a product
at any lower standard than what we would accept ourselves and
they’re very appreciative of that fact,” he said.

“I personally will not start a production line unless it’s
100 percent qualified,” O’Reilly said. If Lockheed achieved
initial qualification of the safety switch in the next 30 days.
“we will go into production” — given the commitment to pay for
any production-line halt that might be required by the
remaining testing.

A spokeswoman for East Aurora, New York-based Moog, Ann
Luhr, said her company was barred by contract from commenting
on its programs as a subcontractor.
(Editing by Alan Elsner, Toni Reinhold)

Lockheed said to offer warranty for missile interceptor