A US Air Force B-2 Spirit Stealth Bomber
Credit: Reuters photo
Washington: US President Donald Trump vowed to block defense contractors like RTX from paying dividends or buying back shares until they speed up weapons production, a rare presidential strike at Wall Street norms that sent defense stocks lower and signaled sweeping changes for America’s military-industrial complex.
Trump and the Pentagon have criticized the defense industry for what they say are high costs and slow production and have promised dramatic changes to make production of war equipment more nimble.
"Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly," Trump posted on Truth Social on Wednesday.
No word on how Trump plans to enforce limits
Trump did not say how he would enforce limits on dividends and buybacks, and defense stocks fell after his remarks, reversing recent gains following the high-profile use of U.S. military equipment to capture Venezuelan President Nicolás Maduro and his wife.
Shares of defense giant Lockheed Martin fell 4.8%, Northrop Grumman slid 5.5%, and General Dynamics fell 3.6% during afternoon trading in New York.
In a second and separate post on Truth Social, Trump wrote: "I have been informed by the Department of War that Defense Contractor, Raytheon, has been the least responsive to the needs of the Department of War." Raytheon is a unit of RTX.
Raytheon makes the Patriot missile defense system which has been heavily used in Ukraine, as well as Tomahawk missiles for militaries around the world.
An RTX spokesperson did not immediately comment on Trump's post which sent shares down 2% before recovering and climbing 2.5% in after-hours trading.
Trump decries executive pay packages
Trump also called executive pay packages in the defense industry "exorbitant and unjustifiable," and said they should be limited to $5 million, far less than what many executives earn.
The CEOs of the top defense companies typically make more than $20 million a year through a combination of cash payments and stock grants. Trump did not clarify exactly how the components would be capped.
"From this moment forward, these Executives must build NEW and MODERN Production Plants, both for delivering and maintaining this important Equipment, and for building the latest Models of future Military Equipment," he posted without naming specific companies or executives.
Share buybacks are common among defense firms, and several pay a dividend. Lockheed in October, for example, raised its dividend for the 23rd year in a row, to $3.45 per share. At the same time, it authorized the purchase of up to $2 billion of its shares, raising the total amount promised for repurchases to $9.1 billion.
Industry groups had been on high alert about the closely held proposal whose language had yet to be made public.
Lockheed's F-35 fighter jet, one of the most expensive U.S. defense programs, has been plagued by rising costs and delays. Many big defense programs take much longer to deliver a product than initially promised and at a far higher price.
The $140 billion Sentinel intercontinental ballistic missile program that will replace aging Minuteman III missiles, designed and managed by Northrop Grumman, will be years behind schedule and 81% over budget, the U.S. military said last year.
The biggest defense firms, including Lockheed, Northrop Grumman, General Dynamics and Boeing, did not immediately respond to requests for comment about Trump's comments.