By Joey Roulette and Mike Stone
WASHINGTON, Dec 16 (Reuters) – The Trump administration is planning an executive order that would limit dividends, buybacks and executive pay for defense contractors whose projects are over budget and delayed, according to three sources briefed on the order.
President Donald Trump and the Pentagon have long complained about the expensive, slow and convoluted nature of the defense industry, and have promised dramatic changes that would make the production of war equipment easier.
Industry groups were on high alert about the closely guarded proposal, which is tied to a Treasury Department initiative, two of the sources said.
Reuters could not determine exactly how the order would force defense firms to enact any restrictions. The sources, who declined to be named because the information is confidential, said the language of the order could still change.
A White House official said: “Until officially announced by the White House, discussion of potential executive orders is purely speculation.”
Lockheed shares fell 1.6% and Northrop Grumman sank 2% in after-hours trading after some aspects of the news were first reported by online political news service Punchbowl.
DEFENSE FIRM OF HIS FREQUENTLY BUYS BACK SHARES
Share buybacks are common among defense firms, and many pay a dividend. Lockheed in October, for example, raised its dividend for the 23rd consecutive year, to $3.45 per share. At the same time, it authorized the purchase of up to $ 2 billion of its shares, increasing the total amount promised for repurchases to $ 9.1 billion.
Lockheed’s F-35 fighter jet, one of the most expensive US defense programs, has been plagued by rising costs and delays. Many large defense programs take much longer to deliver a product than was initially promised and at a much higher price.
The $140 billion Sentinel intercontinental ballistic missile program that will replace the aging Minuteman III missiles, designed and managed by Northrop Grumman, will be years behind schedule and 81% over budget, the US military said last year.
The largest defense firms, including Lockheed, Northrop Grumman, General Dynamics and Boeing did not immediately respond to a request for comment on the executive order.
PENTAGON PROCUREMENT REVIEW
US Defense Secretary Pete Hegseth unveiled major changes in November to how the Pentagon buys weapons, allowing the military to acquire technology more quickly amid growing global threats, according to an executive order signed by Trump in April.
That restructuring will have direct authority over major weapons programs to eliminate red tape.