United Technologies Corp.‘s (UTX) Pratt & Whitney unit recently announced that it was investing substantially to lower costs for the F-35 engine in the longer term. Of late, the company has been working extensively with the government in this respect.

The measures undertaken by the company include engineering changes, which might require government investment in some cases, extensive efforts to cut supplier costs and improve the production process of engines.

The estimated price for Pratt engine was slated to rise to $8.3 million per engine from $6.7 million, the biggest increase since 2001.

While the company’s efforts could result in prices dropping below the third lot of low-rate production engines, it would not be as low as the price after production of 250 engines.

Pratt & Whitney is trying to improve the quality of certain engine parts but the overall acceptance level is currently around 97%. Certain parts like the fan blades and turbines are particularly difficult to manufacture and result in a lower acceptance rate of around 70% to 80%.

United Technologies is closely following the ongoing argument between the Obama administration and the Congress over the funding of an alternate F-35 engine being developed by General Electric Co. (GE) and Britain’s Rolls-Royce Group Plc.

United Technologies was incorporated in Delaware in 1934. The company provides high-tech products and services to the building systems and aerospace industries worldwide.

We currently have a Neutral recommendation on United Technologies.

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