An­other Trump tweet jab, again in the de­fense sec­tor

Lock­heed Martin shares, Boe­ing up

Kuwait Times - - BUSINESS -

Shares Lock­heed Martin slipped while ri­val Boe­ing’s rose Fri­day af­ter a tweet from Pres­i­dent-elect Don­ald Trump ap­peared to pit the two de­fense in­dus­try giants against one an­other in a bid to lower prices for govern­ment con­tracts.

It was just the lat­est tar­geted jab at US cor­po­ra­tions that may have led to volatile trad­ing.

Dur­ing his cam­paign, Trump lam­basted Ford for beef­ing up op­er­a­tions abroad. He said he would not eat Oreo cook­ies that may soon be made in Mex­ico and vowed to get Ap­ple to make iPhones in the US. Now it’s Boe­ing and Lock­heed, the de­fense con­trac­tors, who are de­fend­ing their busi­ness prac­tices af­ter Trump tweeted late Thurs­day: “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!”

Trump tweeted ear­lier this month that he is look­ing to cut “bil­lions” in costs for mil­i­tary pur­chases. Boe­ing Co spokesman Todd Blecher said, “We have com­mit­ted to work­ing with the pres­i­dent-elect and his ad­min­is­tra­tion to pro­vide the best ca­pa­bil­ity, de­liv­er­abil­ity and af­ford­abil­ity.”

Lock­heed Martin Corp., based in Bethesda, Mary­land, said ear­lier this month that it has worked to lower the price of the F-35 one-seat fighter air­craft by more than 60 per­cent and that it ex­pects the air­craft to cost $85 mil­lion in 2019 and 2020.

The F-35 pro­gram made up 20 per­cent of Lock­heed’s rev­enue of $46.1 bil­lion last year. And US govern­ment or­ders made up 78 per­cent of its rev­enue last year. The F-35 pro­gram di­rectly or in­di­rectly sup­ports more than 146,000 US jobs, ac­cord­ing to the com­pany’s web­site.

Lock­heed Martin’s stock de­clined $3.21, or 1.3 per­cent, to close Fri­day at $249.59. Two weeks ago, Trump threat­ened to can­cel Boe­ing’s con­tract to build Air Force One be­cause of “out of con­trol” costs.

Chicago-based Boe­ing re­lies less on that con­tract than Lock­heed does on the F-35 pro­gram. Its shares ended up 35 cents to $157.81 Fri­day af­ter ear­lier drop­ping to $156.51. Trump met with the CEOs of Boe­ing and Lock­heed Martin Corp. Wed­nes­day and CEOs from both com­pa­nies said that they had dis­cussed low­er­ing costs of the F-35 and Air Force One projects.

Boe­ing and Lock­heed are also among the com­pa­nies pur­su­ing a con­tract for re­plac­ing Min­ute­man mis­siles in the US nu­clear ar­se­nal. Rep­re­sen­ta­tives for the two com­pa­nies de­clined to com­ment on whether that con­tract came up dur­ing the meetings this week.

CEO re­sponse

The chief ex­ec­u­tive of Lock­heed Martin Corp told Pres­i­dent-elect Don­ald Trump on Fri­day that she was com­mit­ted to driv­ing down the cost of the com­pany’s F-35 fighter jet, a day af­ter Trump took aim at the cost of the F-35 in a Twit­ter post.

CEO Mar­il­lyn Hew­son said she spoke with Trump on Fri­day af­ter­noon and as­sured him that she had heard his mes­sage “loud and clear” about re­duc­ing the cost of the F-35.

Trump, in a tweet posted late on Thurs­day, sug­gested that an older air­craft made by ri­val aero­space com­pany Boe­ing Co could of­fer a cheaper al­ter­na­tive to the F-35.

“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!” Trump said. Hew­son, in a state­ment posted on Twit­ter, said she had had “a very good con­ver­sa­tion” with Trump on Fri­day.

“I gave him my per­sonal com­mit­ment to drive the cost down ag­gres­sively,” she said in the state­ment. Lock­heed shares closed down 1.3 per­cent on Fri­day, near­ing their low­est lev­els since the Nov. 8 elec­tion. They were the big­gest drag on a basket of de­fense-re­lated stocks. Boe­ing’s stock ended near the un­changed mark.

Trump had met with the chief ex­ec­u­tives of both Lock­heed and Boe­ing on Wed­nes­day.

Boe­ing’s F-18 is an older gen­er­a­tion air­craft that lacks the stealth ca­pa­bil­i­ties of the F-35.

One US of­fi­cial said it was im­pos­si­ble to tell what Trump meant by his tweet, given the im­por­tance of stealth tech­nol­ogy as a way to counter ad­vanced de­fenses of near-peer states, like Rus­sia or China. — Agen­cies

FORT WORTH: This July 7, 2006, file photo, the Lock­heed Martin F-35 Joint Strike Fighter is shown af­ter it was un­veiled in a cer­e­mony in Fort Worth, Texas. — AP

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