By Mike Stone
WASHINGTON, July 29 (Reuters) - The U.S. Army awarded Lockheed Martin a contract worth up to $58.6 billion to produce Patriot interceptor missiles, the Pentagon said on Wednesday, as conflicts in Iran and Ukraine strain U.S. weapons stockpiles.
The U.S. has supplied large quantities of weapons to allies while also using munitions in its own military operations in Iran, raising concerns about inventories of key air defense and precision-guided weapons.
The Lockheed award converts a previous one-year deal worth $4.7 billion awarded in April into a seven-year draft agreement, creating a multiyear procurement plan for the interceptors from fiscal 2026 through 2032, the Army said.
Pentagon negotiators are pressing contractors to move much faster, with tentative production agreements struck earlier this year at the center of efforts to increase missile output. The administration of President Donald Trump has also steadily increased pressure on defense contractors to prioritize production over shareholder payouts. Trump signed an executive order in January to identify contractors deemed to be underperforming on government contracts while continuing to distribute profits to shareholders.
Industry executives have welcomed the production agreements, but said Congress must first appropriate funding before companies can invest more heavily in components and production capacity.
Exact terms and delivery dates for many Pentagon munitions deals are still under negotiation.
A similar framework deal had been struck with Raytheon's parent company RTX to boost production of Tomahawk cruise missiles from the current rate of about 60 per year for the U.S. to eventually 1,000 units annually.
Lockheed, a Bethesda, Maryland-based defense contractor, said the funding would allow it to follow through on a promise to triple PAC-3 MSE production capacity by the end of 2030 and increase jobs at its Camden, Arkansas, plant by 50%, to about 1,850 from 1,200. Lockheed previously announced Patriot PAC-3 missile interceptor production would go to 2,000 units annually.
Lockheed Martin said it is investing $8 billion to $9 billion through 2030 to modernize more than 20 U.S. facilities, including new munitions centers in Alabama and Arkansas.
PAC-3 MSE is a hit-to-kill interceptor used within the Patriot air defense system to counter ballistic missiles, cruise missiles and aircraft.
The Center for Strategic and International Studies, a Washington-based think tank, estimated this week that the U.S. military has fewer than 1,000 Patriot interceptors on hand and fewer than 250 THAAD interceptors -- two key air defense systems. Both have seen recent heavy use in the Middle East.
(Reporting by Mike Stone in Washington; editing by Chris Sanders)
