On Thursday, U.S. President-elect Donald Trump put pressure on Lockheed Martin Corp saying he considered costs for the aerospace company’s F-35 fighter as excessive. He had requested Boeing Co to offer a price for an older aircraft that does not have the same stealth capabilities.
Employing the bully pulpit to bear down on them on projects he considers are too costly, Trump posted his Twitter message a day following his meeting with the chief executives of both aerospace companies.
Boeing shares climbed 0.7 percent while Lockheed’s dropped 2 percent in after-hours trading following Trump’s tweet.
Trump said, “Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price out a comparable F-18 Super Hornet!”
Accounting for 20 percent of last year’s income of $46.1 billion, the F-35 program is a vital sales generator for the company.
In an email, Boeing spokesman Todd Blecher said that the company was steadfast to providing the capability and affordability to attain national security needs.
Although the F-35 program has been plagued by complications and costs have rocketed to a projected $379 billion, it is considerably newer than the F-18, which lacks the same stealth capabilities.
Phillip Carter, a senior fellow at the Center for a New American Security, a Washington-based think tank, said, “They’re two completely different aircraft from different generations. It’s like comparing an old jeep to a Humvee.”
The F-35’s stealth capabilities pushed the cost up, but its usefulness had not yet been proven, said Dan Grazier of the Project on Government Oversight, a nonprofit that probes government contractors. However, canceling the program would be “disruptive”, he said
During the presidential campaign, Trump flaunted his negotiating skills as a businessman. He seems to be using similar methods as he prepares to take office on Jan. 20. It was unclear how his candid style would translate to international diplomacy or Pentagon procurement.
Trump conferred with the CEOs of Boeing and Lockheed on Wednesday at his resort in Palm Beach, Florida. Boeing Chief Executive Dennis Muilenburg told reporters there that he had assured costs would not get unbridled for a replacement to Air Force One. The presidential plane, another project Trump describes as too expensive.
On the other hand, Lockheed CEO Marillyn Hewson did not talk to reporters but said in a statement that the meeting was “productive”. On his part, Trump told reporters he wanted to slash the F-35 program’s costs.
If he does away with the F-35, such an effort by a new administration would have some precedent. In June 1977, then-President Jimmy Carter scrapped the B-1 bomber program. However, President Ronald Reagan, his White House successor, resurrected the program.
In a note to clients on Thursday, Cowen & Co aerospace and defense analyst Roman Schweizer wrote that Trump’s jockeying for leverage via his Twitter account would probably be an impediment for all U.S. defense contractors in the next administration,
“We have no idea how this plays out but believe ‘Twitter risk’ for defense companies could be a significant issue over the next four years. This is Lockheed Martin’s time in the barrel,” Schweizer wrote.