Trump targets defense giants’ shareholder payouts as cost overruns mount, sources say
By Joey Roulette and Mike Stone
WASHINGTON, Dec 16 (Reuters) – The Trump administration is considering an executive order that would limit dividends, buybacks and executive pay for defense contractors whose projects are over budget and behind, according to three sources with knowledge of the decision.
President Donald Trump and the Pentagon have bemoaned the expensive, slow-moving and sedentary nature of the defense industry and are promising dramatic changes that would make war equipment production more agile.
Industry groups are on high alert about the closely held proposal, which is linked to a Treasury Department initiative, two of the sources said.
Reuters was unable to determine exactly how the order would force defense firms to impose any restrictions. The sources, who declined to be named because the information is confidential, said the language of the order could still change.
A White House official said: “Until formally announced by the White House, discussions of possible executive orders are pure speculation.”
Lockheed shares fell 1.6% and Northrop Grumman lost 2% in after-hours trading after aspects of the news were first reported by online political news service Punchbowl.
DEFENSE FIRMS OFTEN BUY SHARES
Share buybacks are common among defense firms, and many pay dividends. Lockheed, for example, raised its dividend to $3.45 per share for the 23rd year in a row in October. It also allowed its shares to be purchased for up to $2 billion, bringing the total amount committed for buybacks to $9.1 billion.
Lockheed’s F-35 fighter jet, one of the US’s most expensive defense programs, has been negatively affected by rising costs and delays. Many large defense programs need to deliver a product over a much longer period of time and at a much higher price than originally promised.
The $140 billion Sentinel intercontinental ballistic missile program, designed and managed by Northrop Grumman to replace obsolete Minuteman III missiles, will be years behind schedule and 81% over budget, the US military said last year.
The largest defense firms, including Lockheed, Northrop Grumman, General Dynamics and Boeing, did not immediately respond to a request for comment on the executive order.
PENTAGON PURCHASING CARE
U.S. Defense Secretary Pete Hegseth in November announced sweeping changes to how the Pentagon purchases weapons, under an executive order signed by Trump in April; This allows the military to acquire technology more quickly in the face of increasing global threats.
This restructuring will have direct authority over major weapons programs aimed at cutting through red tape.
