Look what’s clicking on FoxBusiness.com.
President Donald Trump signed an executive order on Wednesday to prevent defense companies from paying dividends or buying back stock until they improve production and delivery performance.
“Effective immediately, they will not be permitted to pay dividends or repurchase shares in any way until they are able to produce a superior product, on time and on budget,” the order reads.
Trump and the Pentagon have criticized the defense industry for what they describe as high costs and slow production. The government has promised to make changes to boost the production of military equipment.
“I am committed to ensuring that the United States military has the most lethal warfighting capabilities in the world,” the order read. “Our country can only be at peace if we remain strong. The performance of America’s defense industrial base is critical to this capability. After years of misplaced priorities, traditional defense contractors have been incentivized to prioritize investor returns over the nation’s warfighters.”
BOEING SECURES $8.6 BILLION CONTRACT TO BUILD JETJETS FOR THE ISRAEL AIR FORCE
President Donald Trump has signed an executive order banning defense companies from paying dividends or buying back stock until they improve their performance. (Yuri Gripas/Abaca/Bloomberg via Getty Images/Getty Images)
“While the United States produces the best military equipment in the world, we are not producing it fast enough to meet the needs of our military and partners,” it added. “As a result, in these perilous times, it is imperative that our defense contractors are held to the highest standards designed to ensure the advancement of core national interests, including with respect to the timeliness and quality of the defense items they deliver.”
Trump made similar comments on Truth Social earlier on Wednesday.
“I have been informed by the War Department that the defense contractor Raytheon has been the least responsive to the War Department’s needs,” he wrote.
Raytheon is a unit of the defense contractor RTX.
TRUMP ANNOUNCES PLANS TO BAN INSTITUTIONAL INVESTORS FROM BUYING SINGLE-FAMILY HOMES
President Donald Trump and the Pentagon have criticized the defense industry for what they describe as high costs and slow production. (Getty Images / Getty Images)
Defense stocks fell after Trump’s posts, erasing recent gains following the use of US military equipment to attack Venezuela and capture President Nicolás Maduro and his wife from the Latin American country.
Shares of defense giant Lockheed Martin fell 4.8%, Northrop Grumman fell 5.5% and General Dynamics fell 3.6% in afternoon trading in New York.
RTX shares fell 2% before recovering and rising 2.5% in after-hours trading.
Trump’s order said that within 30 days, Pentagon chief Pete Hegseth will identify defense contractors who are underperforming on their contracts and engaging in stock buybacks. Hegseth would then engage with these companies and give them the opportunity to submit a recovery plan to the Pentagon for review within 15 days of notification.
If Hegseth determines that a recovery plan is insufficient, steps can be taken to implement solutions, including through enforcement action.
Pentagon chief Pete Hegseth will identify defense contractors that are underperforming on their contracts and engage in stock buybacks. (Getty Images / Getty Images)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Within two months, Hegseth would have to ensure that future defense contracts include provisions prohibiting share buybacks if the company does not perform well on its contract.
“In addition, the Secretary will ensure that such future contracts provide that management incentive awards to contractors will not be tied to short-term financial metrics, such as free cash flow or earnings per share resulting from share repurchases, and will instead be tied to on-time delivery,” the order said.
The order directed the U.S. Securities and Exchange Commission to consider regulations to implement the proposed restrictions.
Reuters contributed to this report.
