Back in December, following his election win but prior to his inauguration, President Donald Trump made headlines with tweets criticizing America’s largest military contractors, Boeing and Lockheed Martin. If investors were spooked, however, recent developments should ease their fears, as these same companies are set to profit handsomely if Trump’s newly proposed budget is approved.
“Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control , more than $4 billion,” Trump tweeted Dec. 6. “Cancel order!”
Boeing’s stock reportedly fell by as much as 1 percent following Trump’s tweet, but later recovered. A similar effect followed another social media statement from the then-president-elect less than a week later, when Trump mentioned Lockheed on Twitter.
“The F-35 program and cost is out of control,” Trump tweeted. “Billions of dollars can and will be saved on military (and other) purchases after January 20th.”
Reuters went as far as to headline a story about the tweets “Trump attack on Lockheed Martin foreshadows war on defense industry,” and breathlessly warned of potential dire economic consequences of Trump’s radical spending agenda.
“Trump’s latest Twitter broadside sent defense shares tumbling and fanned concerns that the incoming administration will reduce defense contractors’ profit margins and cut broader federal spending, threatening U.S. factory jobs even as Trump promises to boost manufacturing employment,” the news agency reported.
Yet now that President Trump occupies the Oval Office, he appears to be changing his tune on contracting with longtime industry behemoths such as Lockheed and Boeing.
Ironically, it was once again Reuters that reported that the two firms “are the big winners in Trump’s defense-heavy budget,” following the White House’s announcement last Thursday that it would seek $30 billion in immediate additional military funding. If the proposal is approved, Boeing will be the single biggest beneficiary, with an increase in funding of up to $4.3 billion, while total additional funding for Lockheed could reach $2.4 billion.
Despite his earlier criticism of Lockheed’s F-35 fighter jet program, Trump has proposed a budget of nearly $600 million to buy five of the planes. In January, Trump claimed his criticism of Lockheed had led to the company cutting costs on the F-35 program by over $600 million, though that number applies the next 90 planes, Trump reportedly said, meaning those savings won’t be fully realized until about 2035 if the military keeps acquiring them at the rate Trump is proposing for 2017. Lockheed itself “did not address how Trump got to the $600 million figure,” according to CNBC.
Boeing, meanwhile, may not get the sweet $4 billion Air Force One deal they were originally hoping for, but the compensation of that same amount and then some in orders for 24 F/A-18 Super Hornets, two P-8 submarine-hunting planes, 20 Apache attack helicopters, and two C-40 passenger transports, should largely make up for it. Last week’s release of proposed budget documents “also saw Pentagon officials request $270 million for two new V-22 Osprey tiltrotor aircraft, which are built jointly by Boeing and Textron subsidiary Bell Helicopter, plus upgrades for existing V-22s.”
But if $4.3 billion more isn’t enough for Boeing, the company need not worry. Last Wednesday, prior to Trump’s announcement of the additional $30 billion request, Boeing announced a separate, five-year, $3.4 billion deal to sell 268 Apache attack helicopters, most of which will go to the Army but 24 of which will go to “a customer outside the U.S.,” a.k.a. Saudi Arabia. The Saudi Arabian National Guard “currently has 36 helicopters — up from having none less than two years ago — with an end goal of expanding to 156 aircraft,” according to Defense News.
On top of the two major deals for Boeing announced last week, which together add up to a staggering $7.7 billion, the company scored yet another major victory last week. The White House also announced last Thursday that Trump is nominating Patrick Shanahan, a Boeing executive, for deputy secretary of defense, the number two position at the Pentagon. Following last week’s developments, Boeing announced layoffs that could affect hundreds of workers at its commercial jet factories.
Twitter rampages aside, if anyone was seriously worried that a Trump presidency would be bad news for war profiteers, it appears they can breathe a sigh of relief.
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