Hard-bar­gain­ing Trump flus­ters U.S. busi­nesses

Puni­tive tax, Air Force One tweets prompt fears

The Washington Times Daily - - FRONT PAGE - BY S.A. MILLER

Don­ald Trump promised to make bet­ter deals as pres­i­dent, and wasted no time bro­ker­ing what he said Tues­day would be a $50 bil­lion in­vest­ment in the U.S. by a Ja­panese tele­com com­pany, but his hard-bar­gain­ing style also is rat­tling some Amer­i­can busi­nesses.

Boe­ing’s stock price took a nose­dive af­ter Mr. Trump posted a Twit­ter mes­sage Tues­day morn­ing declar­ing that the Pen­tagon should can­cel its $4 bil­lion con­tract for a new Air Force One, just days af­ter the pres­i­dent-elect stirred fears of trade wars by threat­en­ing — also on Twit­ter — to slap a 35 per­cent puni­tive tax on com­pa­nies that move fac­to­ries abroad.

Whether mak­ing threats against Amer­i­can com­pa­nies or an­nounc­ing the cre­ation of tens of thou­sands of jobs in the U.S., Mr. Trump’s moves were en­tirely un­pre­dictable — a qual­ity that tends to un­nerve fi­nan­cial mar­kets.

Mr. Trump emerged from an el­e­va­tor in the lobby of Trump Tower ac­com­pa­nied by SoftBank CEO Masayoshi Son, sur­pris­ing re­porters there with an an­nounce­ment that the Ja­panese tele­com ex­ec­u­tive had com­mit­ted to a $50 bil­lion in­vest­ment in U.S.

startup com­pa­nies that would cre­ate an es­ti­mated 50,000 jobs.

It was the sec­ond time be­fore tak­ing of­fice that Mr. Trump scored on the jobs front. Last week he an­nounced that he helped con­vince Car­rier to re­verse plans to close its In­di­ana fac­tory and move to Mex­ico, sav­ing 1,100 jobs.

“He is one of the great men of in­dus­try,” Mr. Trump said of Mr. Son, with whom he met dur­ing a day oth­er­wise oc­cu­pied with in­ter­views for Cabi­net posts. “One of the truly great men.”

“I just came to cel­e­brate his new job,” said Mr. Son. “I said, ‘This is great, the U.S. will be­come great again.’”

Ear­lier in the day, it was Boe­ing that got taken by sur­prise. Mr. Trump tweeted: “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!”

The price tag cited by Mr. Trump in­cludes the life­time cost of the whole pro­gram, in­clud­ing research and de­vel­op­ment and the ac­tual build­ing cost for the two air­craft needed for the Air Force One fleet. The Pen­tagon or­dered the two spe­cial­ized air­planes last year, and they are sched­uled to be ready in 2023.

Shares of Boe­ing stock dropped by more than 1 per­cent in pre­mar­ket trad­ing af­ter the tweet, but the price climbed back by the end of the day.

Mr. Trump’s spar­ring with U.S. com­pa­nies comes as he stacks his Cabi­net with busi­ness ti­tans, in­clud­ing nam­ing hedge fund bil­lion­aire Steve Mnuchin as trea­sury sec­re­tary, bil­lion­aire in­vestor Wil­bur Ross as com­merce sec­re­tary and re­tail bil­lion­aire Betsy DeVos as ed­u­ca­tion sec­re­tary.

He in­ter­viewed Exxon CEO Rex W. Tiller­son for sec­re­tary of state Tues­day.

The jab at Boe­ing, which Mr. Trump later ac­cused of “do­ing a lit­tle bit of a num­ber” on tax­pay­ers, ruf­fled feath­ers at Amer­ica’s big­gest ex­porter and irked fi­nan­cial an­a­lysts.

“The chill­ing ef­fect on in­dus­try is huge, if you are a con­trac­tor,” Franklin Turner, a part­ner spe­cial­iz­ing in govern­ment con­tracts at law firm McCarter & English, told Reuters news agency. “To think that in 140 char­ac­ters the pres­i­dent can can­cel a pro­gram is ridicu­lous. There would be a de­tailed re­view by legal pro­fes­sion­als on the mer­its of the ter­mi­na­tion.”

Mr. Trump ex­pe­ri­enced sim­i­lar back­lash from Repub­li­cans on Capi­tol Hill when he tweeted about pun­ish­ing U.S. com­pa­nies with a 35 per­cent tar­iff on their prod­ucts. They warned he would start a trade war and that U.S. busi­nesses from au­to­mo­bile com­pa­nies to farms would suf­fer.

Doug Ober­hel­man, chair­man of the Busi­ness Round­table, con­ceded that Mr. Trump’s tac­tics could be un­com­fort­able for those tak­ing their turn “in the bull’seye,” such as Boe­ing or Car­rier.

“If we com­bine that with pol­icy of a very ag­gres­sive pro-job cre­ation en­vi­ron­ment, I think we’re go­ing to be happy with the end of that,” said Mr. Ober­hel­man, who is chair­man of Cater­pil­lar Inc.

Mr. Trump didn’t go into de­tails about the Boe­ing deal but said the price tag was just too big.

“We want Boe­ing to make a lot of money, but not that much money,” he told re­porters dur­ing an ear­lier ap­pear­ance in the lobby of Trump Tower.

Trump tran­si­tion team spokesman Ja­son Miller said that the de­tails of bud­get-cut­ting de­ci­sions would be an­nounced af­ter Mr. Trump takes of­fice Jan. 20. In the mean­time, he said, the pres­i­dent-elect was sig­nal­ing his in­ten­tion to be a care­ful stew­ard of tax­payer dol­lars.

“The mes­sage is clearly been sent that we are go­ing to look to save tax­pay­ers’ money,” he said. “Peo­ple are re­ally frus­trated with some of the big price tags that are com­ing out for pro­grams, even in ad­di­tion to this one. So we are go­ing to look for ar­eas where we can keep costs down and look for ways where we can save money.”

In a state­ment re­spond­ing to Mr. Trump’s tweet, Boe­ing said its cur­rent con­tract is only worth $170 mil­lion, pre­sum­ably not in­clud­ing sunk costs and later con­tracts should the pro­gram come to fruition.

“We are cur­rently un­der con­tract for $170 mil­lion to help de­ter­mine the ca­pa­bil­i­ties of these com­plex mil­i­tary air­craft that serve the unique re­quire­ments of the Pres­i­dent of the United States. We look for­ward to work­ing with the U.S. Air Force on sub­se­quent phases of the pro­gram al­low­ing us to de­liver the best planes for the Pres­i­dent at the best value for the Amer­i­can tax­payer,” the state­ment said.

The pres­i­den­tial air­craft is more ex­pen­sive than a 747 made for one of the air­lines be­cause of the ad­vanced com­mu­ni­ca­tions equip­ment, se­cu­rity mea­sures and other spe­cial fea­tures that make Air Force One a fly­ing Oval Of­fice.

Aerospace in­dus­try expert Richard Aboulafia called Mr. Trump’s crit­i­cism of the cost “com­plete mad­ness.”

“It’s ac­tu­ally what it costs to have two air­planes that can sur­vive a nu­clear war and trans­port the pres­i­dent in times of na­tional emer­gency, and any other time for that mat­ter,” he told Seat­tle’s Morn­ing News. “Is Boe­ing get­ting rich on this deal? No, far from it.”

The life span of the air­craft is about 30 years. The cur­rent fleet is more than 20 years old.

White House press sec­re­tary Josh Earnest, fly­ing aboard Air Force One, de­fended the con­tract to build a new plane and sug­gested Mr. Trump had in­cor­rect in­for­ma­tion.

“Some on the sta­tis­tics that have been cited, shall we say, don’t ap­pear to re­flect the na­ture of the fi­nan­cial agree­ment be­tween Boe­ing and the Depart­ment of De­fense,” Mr. Earnest told re­porters.

He noted the “unique tech­ni­cal re­quire­ments” of Air Force One and said Amer­i­cans “would ex­pect that fu­ture U.S. pres­i­dents would ben­e­fit from unique and up­graded ca­pa­bil­i­ties while they are trav­el­ing and rep­re­sent­ing the in­ter­ests of the United States around the world.”

He said the cur­rent Air Force One is near­ing the end of its pro­jected life, and said the ad­min­is­tra­tion’s work would en­sure that fu­ture pres­i­dents have a “modern pres­i­den­tial air­craft.”

AS­SO­CI­ATED PRESS

Pres­i­dent-elect Don­ald Trump promised to make Amer­i­can more busi­ness-friendly, how­ever, his tweets about the cost of Air Force One up­grades caused Boe­ing stock to drop.

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