Today it was Lockheed Martin’s turn to feel the Twitter burn from President-elect Donald Trump over the cost of the F-35 fighter jet program: Its stock dropped by as much as 5 percent after Trump’s complaint.
Share prices for other aerospace companies such as Boeing and Northrop Grumman went through twists and turns as well.
Trump set the stage for criticizing the $400 billion program on Friday when he complained about the cost of “some of the fighter jets that are being built.” Then, in today’s tweet, he specifically called out the F-35:
The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.
— Donald J. Trump (@realDonaldTrump) December 12, 2016
The program’s cost overruns have been the subject of sharp criticism for years. The development phase for the F-35, also known as the Joint Strike Fighter, was plagued by design problems and delays. But Lockheed Martin says many of those issues have been ironed out.
More than 180 of the planes have been sold to the U.S. armed forces and allies around the world. Japan’s first F-35 was officially delivered last month.
Lockheed Martin’s F-35 program leader, Jeff Babione, said his company has invested hundreds of millions of dollars to reduce the plane’s price more than 60 percent from original estimates. “We project the price of the aircraft will be $85 million in the 2019-2020 time frame,” he said in remarks delivered to reporters in Israel.
“We welcome the opportunity to address any questions the president-elect has about the program,” Babione said.
The scenario fit the pattern seen last week with Boeing: Last Tuesday, Trump complained that the multibillion-dollar cost of building two new Air Force One planes was too high and that the deal should be canceled. Boeing’s share price dipped, then recovered. Boeing CEO Dennis Muilenburg had a talk with Trump about the issue, and afterward the president-elect said “we’re going to work it out.”
Since then, Boeing’s shares have posted an additional rise of more than 2 percent.
Analysts said repeated controversies could complicate matters for defense contractors. “Even if Trump only launches a bombastic shout-out, this more aggressive approach to contractor relations could impact the stocks,” Cowen & Co. analyst Cai Von Rumohr said last week in a note to investors.
CNBC commentator Jim Cramer said Trump’s approach is not typical.
“I mean, the president … does he have the ability to say, ‘Listen, we’re going to take fewer product?’ He does,” Cramer said. “Does he have the ability to say, ‘Listen, we don’t like these prices?’ Historically, that’s not what the president has done. People within the Pentagon have negotiated, but very high level.”
There is precedent for canceling contracts, however. Shortly after taking office in 2009, President Barack Obama expressed concern about a plan for new Marine One helicopters – and the program ended up being canceled as the result of a Pentagon review. A downsized contract was awarded in 2014.
The original version of this report quoted a different figure from Lockheed Martin’s Jeff Babione for F-35 cost reduction, based on a report from Reuters.