Lockheed, MBDA eye German contract for MEADS by year end

By Andrea Shalal

BERLIN (Reuters) - Lockheed Martin Corp (LMT.N) and Europe's MBDA hope to complete negotiations with Germany on the MEADS next-generation missile defence system by the end of the year, before next year's German elections, top company officials told Reuters.

Germany announced last year it had chosen the Medium Extended Air Defense System (MEADS) over Raytheon Co's (RTN.N) Patriot system, in a $4.5 billion deal, but said the companies would have to meet demanding performance milestones to retain the contract.

Thomas Homberg, managing director of MBDA's German unit, said the company planned to submit its final proposal with Lockheed at the end of July, and still hoped for parliamentary approval by the end of the year.

In an interview at the Berlin air show, Homberg said he hoped for parliamentary approval well before the German election, now scheduled for September 2017, since it was unlikely parliament would act close to the national poll.

Germany funded a quarter of the $4 billion invested by it, the United States and Italy to develop the new system as a successor for the Patriot air defence system fielded in the 1980s. The U.S. military has decided not to buy the system.

Homberg said he was confident Italy could still opt for MEADS or at least some components, and said he could not rule out that the Netherlands could also follow suit, despite a recent decision to modernise its Patriot units.

Homberg said he saw strong support for the programme in the German parliament and from the government, despite Raytheon's continued efforts to wrestle the contract away from MEADS.

"My sense is that Germany is very committed to the programme,” he said.

MBDA is a consortium that includes Italy's Leonardo Finmeccanica SpA (LDOF.MI), Airbus Group (AIR.PA) and Britain's BAE Systems Plc (BAES.L).

Rick Edwards, who heads Lockheed's missile and fire control division, said it was “infuriating” when opponents suggested that MEADS successful demonstration last year was a stunt, or that the programme was not ready for production.

“We’ve got a 10-year multi-billion dollar programme which proves that this open architecture (concept) works despite anything to the contrary," he said. "I would expect nothing less (from Raytheon) than fighting all the way down, but there’s a lot of money spent on this programme and it’s pretty darned mature.”

Raytheon officials told reporters on Wednesday that they remained in close touch with German officials in case the MEADS consortium was unable to complete negotiations, or meet the milestones set by the government.

Tim Glaeser, vice president of Raytheon's integrated air and missile defence business, said the company remained convinced it could meet Germany's needs "quicker, cheaper and with less risk."

Raytheon officials also said it was possible the decision could slip until 2018, if German lawmakers failed to act before the end of the year or in the first quarter of 2017.

Raytheon is in the running to supply a separate medium- or longer-range radar that Germany wants to integrate with the MEADS system.

Homberg declined to name potential suppliers, but said MBDA was working closely with the German government as it evaluated possible radar systems, and expected a decision would be made before the MEADS contact was finalised.

(Reporting by Andrea Shalal and Sabine Siebold; editing by Adrian Croft)