(Reuters) - U.S. President Donald Trump vowed to block defense contractors from paying dividends or buying back shares until they speed up weapons production, a rare presidential strike at Wall Street norms that sent defense stocks tumbling and signaled sweeping changes for America’s military-industrial complex.
Trump and the Pentagon have criticized the defense industry for what they say are high costs and slow production and have promised dramatic changes to make production of war equipment more nimble.
"Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly," Trump posted on Truth Social on Wednesday.
NO WORD ON HOW TRUMP PLANS TO ENFORCE LIMITS
Trump did not say how he would enforce limits on dividends and buybacks, and defense stocks fell after his remarks, reversing recent gains following the high-profile use of U.S. military equipment to capture Venezuelan President Nicolás Maduro and his wife.
Trump also called executive pay packages in the defense industry "exorbitant and unjustifiable," and said they should be limited to $5 million, far less than what many executives earn.
"From this moment forward, these Executives must build NEW and MODERN Production Plants, both for delivering and maintaining this important Equipment, and for building the latest Models of future Military Equipment," he posted without naming specific companies or executives.
Share buybacks are common among defense firms, and several pay a dividend. Lockheed in October, for example, raised its dividend for the 23rd year in a row, to $3.45 per share. At the same time, it authorized the purchase of up to $2 billion of its shares, raising the total amount promised for repurchases to $9.1 billion.
Lockheed's F-35 fighter jet, one of the most expensive U.S. defense programs, has been plagued by rising costs and delays. Many big defense programs take much longer to deliver a product than initially promised and at a far higher price.
The $140 billion Sentinel intercontinental ballistic missile program that will replace aging Minuteman III missiles, designed and managed by Northrop Grumman, will be years behind schedule and 81% over budget, the U.S. military said last year.
Neither Lockheed nor Northrop Grumman responded immediately to Reuters requests for comment.
By Katharine Jackson and Bhargav Acharya
Editing by Caitlin Webber and Howard Goller
