President Trump has put defense contractors on notice.
He declared Wednesday that he “will not permit” defense companies to issue dividends or purchase their own stocks until they invest more in production and research.
Mr. Trump also called for executive pay at defense companies to be capped at $5 million until they build “new and modern production plants.” He complained that firms aren’t building military equipment fast enough or maintaining it properly.
“Defense contractors are currently issuing massive dividends to their shareholders and massive stock buybacks, at the expense and detriment of investment in plants and equipment. This situation will no longer be allowed or tolerated,” Mr. Trump said on Truth Social.
“Therefore, I will not permit dividends or stock buybacks for defense companies until such time as these problems are rectified – likewise for salaries and executive compensation. Military Equipment is not being made fast enough! It must be built now with the dividends, stock buybacks and over compensation of executives, rather than borrowing from financial institutions or getting the money from your government,” Mr. Trump said.
The president’s comments triggered a massive stock sell-off across the defense sector. Shares of several major defense companies fell, with Northrop Grumman Corp. falling by 3%, Lockheed Martin down 2.4% and General Dynamics dropping by more than 2%.
The companies did not immediately respond to requests for comment.
Mr. Trump said that until defense contractors address his complaints about the industry, their salaries should be capped at $5 million.
“As high as it sounds, [it] is a mere fraction of what they are making now,” he said. “Additionally, the maintenance and repair of equipment, once sold, is far too slow, and must be immediately enhanced. As president, I am demanding that maintenance be ‘spot on, on time.’”
Mr. Trump did not say how he planned to enforce his demands, and it was unclear if the president’s statement would result in any industry changes.
The White House has repeatedly hammered the defense industry, accusing it of poor maintenance and slow production.
In November, Defense Secretary Pete Hegseth railed against what he said was a painfully slow defense procurement process. He said weapons are often over-budget, years late, and sometimes obsolete by the time they reach the Pentagon.
Mr. Hegseth told U.S. defense companies should invest their own money to improve the speed and volume of production. Officials from defense companies such as Lockheed and Northrop Grumman were in the audience.
The Biden administration had also complained about the defense companies’ stock buybacks and dividends. In February 2024, under President Biden, Navy Secretary Carlos Del Toro told defense companies that “many of you are making record profits as evidenced by your quarterly financial statements.”
