Leonardo Back in the Running with Boeing, Lockheed for Air Force Training Jet

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After parting company with two erstwhile U.S. partners, Italy’s Leonardo has finally found a U.S.-based partner that can’t refuse. The company’s U.S. subsidiary, DRS Technologies, will be the prime contractor on Leonardo’s bid to win the $16 billion contract for 350 new U.S. Air Force training jets, called the T-X for now, to replace the decades-old T-38.

Leonardo plans to submit a version of its M-346 trainer that the company is calling the T-100. The Italian firm had first teamed up with General Dynamics Corp (NYSE: GD), and when the two companies could not reach an agreement, Leonardo teamed up with Raytheon Co. (NYSE: RTN). That partnership ended about two weeks ago.

The break with Raytheon was reportedly due to a disagreement over the price of the training jet. The competition is likely to be based on price, with the two avowed contenders, Boeing Co. (NYSE: BA) and Lockheed Martin Corp. (NYSE: LMT), seemingly having the edge on that metric.

By setting up its subsidiary as the prime contractor, Leonardo may be able to drop the price low enough to be competitive in the bidding. Apparently Raytheon was pushing for such a move, but having to split low margins two ways was more than Leonardo was willing to do. The Italian firm will continue its partnership with CAE Inc. (NYSE: CAE), the Canada-based maker of ground-based training systems, for the M-346.

In a DRS Technologies press release from Wednesday, the company said the T-100 will be a U.S.-based program “that will bring significant economic benefits to the country through a newly established and skilled U.S. workforce.” A company spokesman told Defense News that the T-100 will contain at least 50% U.S. content, including the Honeywell International Inc. (NYSE: HON) engines.

Under the now-broken agreement with Raytheon, the companies had planned to build the T-100 in a new final assembly facility in Meridian, Mississippi. There is no word on whether that plan remains in place, but final assembly of the planes in the United States almost certainly will be a requirement of the contract.

Boeing and Saab have teamed up on a clean-sheet design for the T-X, and Lockheed has partnered with Korea’s KAI on a modified version of KAI’s T-50 training jet. Privately held Sierra Nevada is said to be working on an entry based on an existing design from Turkey, and Textron Inc. (NYSE: TXT) has not ruled out a bid but has said nothing else.

Prior to April 2016, Leonardo was known as Finmeccanica and its airplane division was known as Alenia Aermacchi.