President Donald Trump announced that he would seek to rein in defense contracting companies while also calling for a 50% increase in U.S. defense spending.
The president signed an executive order on Wednesday targeting underperforming companies that fail to meet contractual obligations, specifically calling for a limit on stock buybacks and executive salaries.
“While we make the best Military Equipment in the World (No other Country is even close!), Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment,” Trump said in a social media post. “This situation will no longer be allowed or tolerated!”
The executive order states, “Effective immediately, they are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.”
It also calls on Secretary of War Pete Hegseth to identify defense contractors not meeting their obligations, which will then have the opportunity to submit a remediation plan. If the disputes remain unresolved, the secretary has the authority to “immediately pursue remedies including mutually agreeing to amend the underlying contracts, exercising authorities under the Defense Production Act, or pursuing other available contract enforcement mechanisms,” a fact sheet from the White House said.
Alex Plitsas, an expert with the Atlantic Council, told the Washington Examiner, “The president wants to see that money being reinvested in the U.S. defense industrial base, to increase production output at a time when it’s critical, and not see what he described was actions that are designed to increase profitability for the companies.”
Hegseth began his Arsenal of Freedom Tour this week, traveling around the country and speaking at various shipyards and manufacturing facilities to emphasize the need to bulk up the defense industrial base’s output.
In his first stop on the tour, at the Newport News Shipyard in Virginia, Hegseth said they want to “give longer, larger, more predictable contracts to companies that deliver on time and on budget, companies that invest in their people, that invest in more capability and more capacity, not companies that invest in stock buybacks or CEO salaries or more dividends.”
“For those who can’t adapt, who are too comfortable with the old slow ways of doing business, we wish them well in their other future endeavors, because we will find new partners who will adapt, who will invest, who will take care of their people, who will move at speed and at scale,” he added.
He is scheduled to make his next stop on the tour in Los Angeles on Thursday.
Hegseth has already announced an overhaul of the defense acquisition processes to make room for non-traditional and smaller companies to join the fray.
Trump singled out one defense company on Wednesday, Raytheon, now known as RTX, though it’s unclear what exactly prompted the direct criticism from the president.
Trump called RTX “the least responsive to the needs of the Department of War, the slowest in increasing their volume, and the most aggressive spending on their shareholders rather than the needs and demands of the United States military.”
“Also, if Raytheon wants further business with the United States Government, under no circumstances will they be allowed to do any additional Stock Buybacks, where they have spent tens of billions of dollars, until they are able to get their act together.”
The president announced his intent to seek a 50% increase in the defense budget, up to $1.5 trillion from the roughly $1 trillion previously expected. If the president’s request comes to fruition, it would bring the U.S.’s defense spending closer to the 5% of GDP benchmark it pushed on the NATO alliance.
Sen. Roger Wicker (R-MS), the chairman of the Senate Armed Services Committee, expressed his support for the increased budget, saying it “would mark the largest peacetime buildup in decades. It would provide unmatched security for the USA in this increasingly dangerous time. This is how we achieve peace through strength.”
TRUMP TARGETS RAYTHEON AS ‘LEAST RESPONSIVE’ CONTRACTOR TO DEPARTMENT OF WAR
The budget reached $1 trillion this year for the first time, with the inclusion of $150 billion in new funds that Congress voted to pour into Pentagon coffers via a reconciliation bill.
Trump has outlined multiple new defense projects, such as the Golden Dome and the ‘Trump class’ battleship, which will likely have significant price tags.
