By Robert Donachie
President-elect Donald Trump came out swinging at the Pentagon Monday morning, and prominent defense contract companies are taking hits in the market as a result.
“The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th,” Trump tweeted out to his 17.2 million followers Monday morning.
The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.
— Donald J. Trump (@realDonaldTrump) December 12, 2016
Trump’s tweet was a reiteration of what he told Fox News host Chris Wallace last Sunday. “Look at the F-35 program with the money, the hundreds of billions of dollars,” Trump told Chris Wallace. “It’s out of control.”
Lockheed Martin, one week before Donald Trump secured the presidency, struck a $7.18 billion deal with the U.S. Defense Department to produce 90 F-35 fighter jets. This was the ninth contract between Lockhead and the Defense Department.
While the president-elect didn’t name any company in either his comments to Fox News or his tweet, Wall Street reacted immediately, kicking off a selling spree of Lockheed Martin stock Monday morning. The Maryland-based defense contractor’s shares fell 4.24 percent by 10:27 a.m Monday.
The F-35 is Lockheed’s largest source of revenue. The Pentagon is expected to build as many as 2,443 F-35 warplanes, spending as much as $391 billion in total. By directly calling out the F-35 program, investors may be sensing that holding value in Lockheed isn’t as safe as a bet under the incoming president, despite its history of securing lucrative government contracts.
Lockheed was not the only company to take a hit, other F-35 producers United Technology and BAE Systems were down Monday in early market trading.
The president-elect is making a habit of directly calling out specific business sectors or companies. He attacked Boeing last week, saying that the company’s cost for building a new Air Force One were “out of control.” After a meeting with the company’s CEO, Dennis Muilenburg, Trump said he would either renegotiate the costs or refuse to purchase new planes.
Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!
— Donald J. Trump (@realDonaldTrump) December 6, 2016
Trump also hammered United Technologies for planning to move more than one-thousand jobs to Mexico via its Carrier air-conditioning company. The company edged out a $7 million deal with the state of Indiana after the election, engineered in part by a phone call from Trump to United’s CEO, to keep 800 jobs in the state. The company is still expected to send around 1,300 to Mexico.