In a move signalling direct intervention into the US military-industrial complex, former President Donald Trump has vowed to block major defence contractors from paying dividends or buying back their own shares. He declared this action is necessary until these companies significantly accelerate the production and maintenance of military equipment for the United States.
Trump's Truth Social Ultimatum to Defence Giants
The announcement was made by the Republican leader on his social media platform, Truth Social, on Wednesday. This rare public threat sent shockwaves through the market, causing shares of major defence companies to tumble. Trump asserted that while the US produces the world's best military hardware, the pace is unacceptably slow.
"Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly," Trump posted. He expressed frustration with what he termed "exorbitant and unjustifiable" executive pay, proposing an annual cap of $5 million. However, the post lacked specific details on how these proposed limits on dividends, buybacks, or salaries would be enforced.
Market Jitters and Programme Delays
The uncertainty stemming from Trump's post led to an immediate drop in defence stocks. This reversed recent gains that followed the high-profile use of US military equipment in Venezuela under Operation Absolute Resolve. The operation last week targeted the Latin American nation and its leader, Nicolas Maduro, over narco-terrorism suspicions.
The threat directly impacts firms like Lockheed Martin, which routinely returns capital to shareholders. Notably, Lockheed recently increased its dividend for the 23rd straight year to $3.45 per share and authorised up to $2 billion in share repurchases. This brings its total planned buybacks to a staggering $9.1 billion.
Trump's criticism comes amid well-documented delays and cost overruns in key defence projects. The F-35 fighter jet programme continues to grapple with rising costs. More dramatically, the $140 billion Sentinel intercontinental ballistic missile project, managed by Northrop Grumman, is reported by the US military to be running 81% over its original budget.
A Call for New Plants and Suspended Payouts
In his full Truth Social statement, Trump emphasised a dire need for modernization. He called for new production plants, improved maintenance facilities, and faster delivery timelines for military hardware.
"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 directed.
The former President argued that the funds for this industrial overhaul should come from suspended corporate payouts, not new borrowing. "MILITARY EQUIPMENT IS NOT BEING MADE FAST ENOUGH! It must be built now with the Dividends, Stock Buybacks, and Over Compensation of Executives, rather than borrowing from Financial Institutions, or getting the money from your Government," he added. Trump concluded with a stern warning, stating he needs the changes implemented "spot on, on time."
The proposal marks a significant potential shift in the relationship between the US government and its defence industrial base, placing shareholder returns in direct conflict with production speed and capacity expansion.
