New Delhi: US President Donald Trump has trained his guns on American defence companies citing high costs, slow production and failure to “quickly enough” meet the needs of the US military and partners.
With an executive order he issued Wednesday directing Secretary of War Pete Hegseth to identify underperforming defence contractors, Trump ticked off leading defence player Raytheon—which manufactures the Excalibur munition for M777 guns and Javelin anti-tank missile, both of which are in use with the Indian Army.
In a post on his Truth Social account Wednesday afternoon, Trump said Raytheon was “least responsive” to the requirements of the Department of War.
“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, the slowest in increasing their volume, and the most aggressive spending on their Shareholders rather than the needs and demands of the United States Military,” he wrote.
Adding, “Raytheon seems to think this is the Biden Administration, and this is ‘business as usual’, IT’S NOT! Either Raytheon steps up, and starts investing in more upfront investments like Plants and Equipment, or they will no longer be doing business with the Department of War.”
The US President also said that if Raytheon wants further business with the US government, “under no circumstances will they be allowed to do any additional Stock Buybacks, where they have spent Tens of Billions of Dollars, until they are able to get their act together”.
He ended the post with a warning shot: “Our Country comes FIRST, and they’re going to have to learn that, the hard way!”
The immediate fallout of Trump’s executive order was a drop in the share price of American defence giants Northrop Grumman, Lockheed Martin and RTX (Raytheon), among others.
Northrop Grumman stock dropped 5.5 percent, Lockheed shares 4.8 percent, General Dynamics 4.2 percent and L3Harris Technologies 1.5 percent. Boeing shares too fell 0.8 percent, but the company doesn’t pay a dividend and hasn’t bought back significant amounts of stock lately.
RTX (Raytheon), which also manufactures the beyond visual range air to air missile AMRAAM, in use with Pakistan, also saw its stock fall 2.5 percent in regular trading. It fell another 3.4 percent after hours.
Asked about Trump taking on American defence companies, sources in the Indian defence establishment said the fallout could be good for India since deliveries of several orders from the US are delayed.
As examples, sources cited the contract for GE engines, Apache helicopters for the Army and Romeo helicopters for the Navy, deliveries of all of which were either delayed or fulfilled after much delay.
Sources said with India set to place more orders with American defence firms depending on operational requirements, Trump’s decision to tighten the screws would help not only the US military but also those in business with these firms. “Most of the contracts signed are through the Foreign Military Sales route which means the US government stands guarantee and backs the delivery schedule,” a source explained.
Trump’s executive order said that, effective immediately, defence contractors were not permitted to pay dividends or buy back stock “until such time as they are able to produce a superior product, on time and on budget”. It added that within 30 days Secretary of War and Pentagon chief Pete Hegseth will identify underperforming defence contractors who engaged in stock buybacks. As part of this process, Hegseth would then give the firms a hearing and an opportunity to submit a remediation plan.
Following this, the Pentagon will have 15 days from the day of the notification to review the remediation plan. If found insufficient, the government could initiate remedial measures.
The executive order also introduces a clause which will apply to any defence contracts going further. It will prohibit stock buyback if the defence firm is unable to deliver on its contract.
“Additionally, the Secretary shall ensure such future contracts stipulate that executive incentive compensation for contractors will not be tied to short-term financial metrics, such as free cash flow or earnings per share driven by stock buybacks, and instead will be linked to on-time delivery,” the order said.
In a rare admonition of the American defence industrial complex, Trump also termed executive pay packages in the industry “exorbitant and unjustifiable’ in a separate post on Truth Social. “No Executive should be allowed to make in excess of $5 Million Dollars which, as high as it sounds, is a mere fraction of what they are making now,” he wrote.
(Edited by Amrtansh Arora)
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