Author: Joey Roulette and Mike Stone
WASHINGTON, Dec 16 (Reuters) – The Trump administration is planning an executive order to limit dividends, buybacks and executive compensation for defense contractors whose projects are over budget and delayed, according to three sources with knowledge of the order.
President Donald Trump and the Pentagon have complained about the expensive, slow-moving and entrenched nature of the defense industry and have promised major changes to make the production of war equipment more flexible.
Industry groups have been on high alert over the closely watched proposal, which is linked to a Treasury Department initiative, two sources said.
Reuters could not determine exactly how the order would force defense companies to impose any restrictions. The language of the order could still change, said the source, who declined to be named because the information is confidential.
“Until a formal announcement is made from the White House, discussions about a potential executive order are pure speculation,” a White House official said.
Lockheed shares fell 1.6% and Northrop Grumman shares fell 2% in after-hours trading after online political news service Punchbowl first reported some aspects of the news.
Defense companies often buy back stock
Stock buybacks are common among defense companies, some of which also pay dividends. For example, Lockheed raised its dividend to $3.45 per share in October for the 23rd consecutive year. At the same time, it authorized purchases of up to $2 billion in stock, bringing the total number of committed repurchases to $9.1 billion.
Lockheed’s F-35 fighter jet is one of the most expensive U.S. defense programs and has been plagued by rising costs and delays. Many large defense projects take much longer to deliver products than initially promised and are much more expensive.
The U.S. military said last year that the $140 billion Sentinel intercontinental ballistic missile program, designed and managed by Northrop Grumman Corp. to replace aging Minuteman III missiles, would be years behind schedule and 81 percent over budget.
The largest defense companies, including Lockheed, Northrop Grumman, General Dynamics and Boeing, did not immediately respond to requests for comment about the executive order.
Pentagon Procurement Reform
U.S. Defense Secretary Pete Hegseth unveiled sweeping changes in November to the way the Pentagon purchases weapons, under an executive order Trump signed in April, allowing the military to acquire technology more quickly amid growing global threats.
The reorganization would give direct authority over major weapons programs to eliminate bureaucracy.
