After a whirlwind of construction, next month Italy is planning to induct its first F-35A into a brand new $1 billion final assembly and check-out facility (FACO), fabricated specifically for the single-engine, stealthy fighter.

While the military sees the ribbon-cutting as a major milestone in its plan to modernize Italy's skilled aerospace workforce, the leadership of its top aircraft maker, Alenia Aeronautica, is far less excited as debate continues in Italy's political arena about actually purchasing the stealthy Lockheed Martin fighter.

Despite inconsistent political support for the program, Italy's military leadership is eagerly moving ahead, and not only with plans to conduct final assembly of Italian F-35As at Cameri. The military is also in talks to produce 55 of the fighters for the Netherlands, and are offering the facility as an alternative to Lockheed Martin's massive FACO in Fort Worth.

The Mediterranean country's ministry of defense funded construction of the facility near Milan at Cameri AB, the existing hub for Tornado and Eurofighter Typhoon repair and overhaul. The hope was to assemble around 250 fighters (including the Italy's original plan for 131 F-35s and the Netherlands' original plan for 85) to break even on the investment, according to senior Italian military officers. Production expectations may have waned owing to cost increases in the aircraft's per-unit price, but the Italian military's support for the F-35 and the FACO has not.

The true value of the investment, measured in economic impact and jobs, will come with decades of repair and overhaul work for the F-35, the officers say. And, they see the Cameri FACO as the leading contender for a regional maintenance, repair and overhaul (MRO) center for European and Israeli aircraft, according to Lt. Gen. Domenico Esposito, who heads the Italian air force's procurements at the general directorate for air armaments. Esposito admits the investment is a gamble, as there is no guarantee of either full-rate FACO work or long-term maintenance work in volume. “It is a big risk for us,” Brig. Gen. Guiseppe Lupoli, chief of fixed-wing procurement for the Italian air force, tells Aviation Week. “We would like to keep the aerospace industry [relevant in Italy, and] F-35 improves the technology.”

“What is important to me? To enter the project. In one or two decades we will improve our capability,” Esposito says. Italian defense officials estimate there could be $18.6 billion in economic opportunities for local businesses with potential MRO work.

For the defense ministry, the FACO represents its hope that Italy can improve its edge in aerospace, since the F-35 incorporates stealth, integrated avionics and advanced onboard processing in a way that legacy Italian fighters such as the Tornado and Typhoon do not.

In chasing the F-35 work, however, there is no guaranteed share for Italy as there was with the Typhoon, which had a clear workshare agreement among the partners.

The mantra for the U.S.-led F-35 program and its nine partners since development began in 2001 has been that no country will gain work at a cost to the program—any country seeking special technology or work must do so with no impact on the aircraft's price.

“Before, we were just playing in a safe situation,” says air force Lt. Gen. Claudio Debertolis, secretary general of defense and national armaments director for Italy. “With the Joint Strike Fighter, I have to gain the work for Italy.” Full final-assembly and eventual repair work could support jobs for about 10,000 workers in Italy, including Alenia and a host of small businesses around the country, says Debertolis, who heads up the industrial policy function for the Italian defense ministry.

The military is making “relatively small” investments with small businesses in areas such as materials and tooling to position them for F-35 work. Debertolis hopes this will not only invigorate the aerospace community, but also spark Alenia to become more competitive for the benefit of the Italian military, as well as a stronger competitor in the global market. “Alenia was used to being protected, to have a guaranteed profit [and] now, for the future, they need to be more competitive,” he says.

Alenia, however, is less optimistic. The Eurofighter employs people today, while the F-35 has no guarantee of significant employment. Perhaps most troubling to Alenia is that the company is carrying the financial liability for the time it will take for its workers to become as efficient as those working in Fort Worth for the last five years.

It is called a learning curve—the time it takes workers to reach optimum efficiency. Already producing the fifth lot of aircraft, Lockheed Martin's workers have cut costs more than $100 million per F-35A and are working down a strong learning curve as volume buys are expected to increase. But Lockheed also had the benefit of cost-plus contracts with the Pentagon for the first four years of production, allowing the company to pass most learning curve costs—such as excess work owing to supply issues—on to the government.

Alenia, in contrast, will not have that advantage. The first of six jets to be on contract—three each in low-rate, initial production (LRIP) Lots 6 and 7—will be under a fixed-price contract between both the Pentagon and Lockheed Martin and, accordingly Lockheed Martin and Alenia.

The F-35 program will not assume the cost for these early years of Italian work. Esposito says the Italian ministry of defense, for now, is also unwilling to underwrite the work. “We don't want to pay for the loss,” says Debertolis. “So, they have to be competitive. They have to reduce their profit margin. Our small industry is already used to that.” Lupoli, however, notes that “There is no upfront guarantee for the gap [but] we will come to the table” to discuss the issue depending on the size of the loss.

Though not offering direct reimbursement for operating in the red on early LRIP lots, the Italian air force paid for the FACO facility and is helping with risk-reduction measures. This includes the use of air force facilities to begin building F-35 wings. Lockheed Martin and Alenia signed a long-term agreement in February for production of the first 130 wing “equivalents” (or 130 of each of the major wing components). Six years of guaranteed work helps mitigate Alenia's risk in underwriting the learning curve on the wings.

The pair then inked a deal in late April for wings for LRIPs 6 and 7, including $60 million in non-recurring engineering cost. Alenia has already delivered six initial F-35 wing components to Fort Worth, starting with the “carry through,” or wingbox sections. It will begin building full wings within the next two years in LRIP 7 and deliver fewer components and more full wings until LRIP 11, when the company is expected to have its first all full-wing delivery to Lockheed Martin.

Some in Lockheed Martin have been skeptical about whether Italian workers will be able to work down the learning curve on the wings and deliver the same quality product at the same cost. This uncertainty is only bolstered by a previous rivalry between the companies stemming from soured relationships over the C-27J (Lockheed Martin was Alenia's U.S. marketing partner early in the tactical airlifter project), and the U.S. Marine One helicopter replacement program (Alenia's sister company, AgustaWestland, was partnered with Lockheed Martin until the Navy canceled it).

Debra Palmer, vice president of the FACO and international F-35 production for Lockheed Martin, says the company is actually “impressed by the lack of parts shortages on the wing . . . . Their parts discipline is amazing.” Parts shortages contributed to $1.2 billion in cost overages for early lots of F-35s rolling off Lockheed Martin's production line. “The marriage of lessons learned we had along with the demonstration of discipline they had on parts management will bode very well for the FACO,” Palmer says.

Italy plans to begin full FACO operations in LRIP 6, which is now being negotiated between the Pentagon and Lockheed Martin. As of now, the Netherlands is not expected to buy from the Italian line until LRIP 10, at the earliest. So, unless Italy can garner more customers for its FACO, it will only produce Italian aircraft until then.

Italy's FACO capacity is set at two aircraft per month, while Lockheed Martin's is up to 24 per month. The Italians opted not to have the “moving” production line, which moves aircraft through the stations at a set pace. Italian officials say that their FACO may eventually prove to be more efficient without the moving line. Lockheed Martin installed it expecting to roll one aircraft out per day, a prediction which is far from being realized.

Despite aggressive marketing in Europe by the Eurofighter consortium—which includes Alenia—for the Typhoon as an alternative to the F-35, the company's CEO, Giuseppi Giordo, says the two programs can coexist in Italy. “What we would like to have is a return in terms of quality of the work, not only a return in quantity of the work,” he says. In the near-term, “the real issue is not the recurring price, the real issue is the learning curve factor,” Giordo notes.

Before the ribbon is even cut, Italy has overcome significant hurdles to the FACO project. The U.S. government was opposed out of security concerns, but came around after seeing the physical location of Cameri, its inherent security and measures taken by the industry partners. Some prominent Italian politicians were skeptical. The U.K., the only Tier 1 F-35 development partner, passed on the FACO idea because it could not come up with a suitable cost-benefit case.

Italy's defense ministry, however, expanded the assumptions. While the U.K. studied only building aircraft for its own military, Italy widened the net to include final assembly of other partners' aircraft as well as MRO work, which could stretch to 2050. The FACO has 11 final assembly workstations, including four for the electronic mating and assembly system, and five MRO workstations. Seven of the FACO stations can be switched to support MRO in the future. The inclusion of the MRO in the financial assumptions shifted the math in Italy's favor when studying the FACO and helped get support for the project when it kicked off in 2009.

It remains to be seen, however, whether Rome will continue with plans to buy the F-35. Like other F-35 partners, the country is struggling with the economic downturn, and the program's dubious cost and schedule slips are not reassuring. Italy has already trimmed its buy to 90 from 131, including 15 F-35Bs each for the air force and navy.

However, Lupoli says the first F-35 to roll out of Italy's FACO is slated to be delivered for use at Amendola AB in the south of Italy in 2016.