Trump drops Twitter bomb on Lockheed Martin's expensive stealth fighter
Dec 25 2016
Boeing's Muilenburg said he gave Trump a "personal commitment" that the cost of a new one will not get out of control.
Lockheed stock fell 2 percent, while Boeing's rose 0.7 percent following Trump's tweet. His latest remark, targeting the top players in the aerospace and defense space and nearly pitting them against each other, goes on to justify the title. Boeing's stock ended near the unchanged mark. "It would not be suitable for the Air Force either - the extra weight of a carrier fighter makes it less than ideal for the Air Force". The F/A-18 is cheaper, but unlike the F-35, it is not stealth. "We've come a long way through the development, I think it's important to remember here too the 35 and the 18 are very different".
Moreover, by plunging himself personally into the complex arena of government contracting, Trump appeared to short-circuit a process that requires rigorous decision-making about what the Pentagon needs, an effort to create a level playing field, reviews by experts in defense policy and military hardware and congressional oversight. In fact, it could be the best environment for investing in defense stocks in a decade, Ron Epstein, a defense analyst with Bank of America Corp. said in a December 7 presentation.
Compare that to what Trump said during a speech last week in Pennsylvania: "How about the F-35 fighter?"
Like the current Air Force One planes, the future planes will have to be modified with equipment for in-flight refueling, radiation hardening, secure communications, anti-missile systems and other features that most 747s don't need.
First and foremost, the F-35 is a stealth fighter, shaped to be almost invisible to radar.
Trump has already met face-to-face with the CEOs of top defense contractors Boeing and Lockheed Martin. The $379 billion F-35 Joint Strike Fighter is meant to replace the F-18 and several other jets across the Air Force, Navy and Marine Corps. The Pentagon had requested just two F-18 Super Hornets for the fiscal year that began in October, though Congress has indicated in spending bills that it would like to buy at least 12 more.
"I know that President-elect Trump wants the very best capability for our military at the lowest cost for taxpayers, and we're ready to deliver!"
Trump's meetings with Boeing and Lockheed were held separately in Palm Beach, Florida, and included senior defense officials. "Primarily the F-35. We're trying to get the cost down", Trump said Wednesday.
Trump's jockeying for leverage via his Twitter account is likely to be a hurdle for all US defense contractors, Roman Schweizer, aerospace and defense analyst at Cowen & Co, wrote in a client note on Thursday.
Still, Trump's dissatisfaction with the program, which has been dogged by problems while costs have reached an estimated $379bn, is a clear risk for Lockheed. He added that Lockheed Martin continues to work on making the versatile fighter less expensive to build and maintain.