Trump pressures Lockheed, says told Boeing to price out fighter aircraft

HONOLULU/LOS ANGELES (Reuters) - U.S. President-elect Donald Trump heaped pressure on Lockheed Martin Corp on Thursday, saying he viewed costs for the aerospace company’s F-35 fighter as too high and had asked Boeing Co to offer a price for an older aircraft that lacks the same stealth capabilities.

U.S. Army Lieutenant General Michael Flynn looks at U.S. President-elect Donald Trump as he talks with the media at Mar-a-Lago estate where Trump attends meetings, in Palm Beach, Florida, U.S., December 21, 2016. REUTERS/Carlos Barria

Trump posted his Twitter message a day after the president-elect met with the chief executives of both aerospace companies, using the bully pulpit to press them on projects he says are too expensive.

In after-hours trading following Trump’s tweet, Lockheed shares fell 2 percent and Boeing’s rose 0.7 percent.

“Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!” Trump said.

Lockheed declined to comment. The F-35 program is a critical sales generator for the company, accounting for 20 percent of last year’s revenue of $46.1 billion.

The Pentagon did not immediately respond to a request for comment. Boeing spokesman Todd Blecher said in an email that the company was committed to providing the capability and affordability to meet national security needs.

While the F-35 program has been dogged by problems and costs have escalated to an estimated $379 billion, it is significantly newer than the F-18, which does not have the same stealth capabilities.

“They’re two completely different aircraft from different generations,” said Phillip Carter, a senior fellow at the Center for a New American Security, a Washington-based think tank. “It’s like comparing an old jeep to a Humvee.”

Dan Grazier of the Project on Government Oversight, a nonprofit that investigates government contractors, said the F-35’s stealth capabilities drove the cost up, but its usefulness had not yet been demonstrated. He said canceling the program, however, would be “disruptive.”

On the campaign trail, Trump touted his negotiating skills as a businessman, and he appears to be using similar tactics as he prepares to take office on Jan. 20. It was not clear how his blunt style would translate to Pentagon procurement or international diplomacy.

On Wednesday, Trump met the CEOs of Lockheed and Boeing at his resort in Palm Beach, Florida. Boeing CEO Dennis Muilenburg told reporters there that he had guaranteed costs would not get out of control for a replacement to Air Force One, the presidential plane, another project Trump calls too expensive.

Lockheed Chief Executive Marillyn Hewson did not speak to reporters but said in a statement that the meeting was “productive.” Trump told reporters he wanted to cut the F-35 program’s costs.

If he scrapped the F-35, such a move by a new administration would have some precedent. Then-President Jimmy Carter canceled the B-1 bomber program in June 1977, although it was resurrected by his White House successor, Ronald Reagan.

Trump’s jockeying for leverage via his Twitter account is likely to be a hurdle for all U.S. defense contractors in the next administration, Roman Schweizer, aerospace and defense analyst at financial services firm Cowen & Co, wrote in a note to clients on Thursday.

“We have no idea how this plays out but believe ‘Twitter risk’ for defense companies could be a significant issue over the next four years,” Schweizer wrote. “This is Lockheed Martin’s time in the barrel.”

Reporting by Emily Stephenson and Jeffrey Dastin; Additional reporting by Mohammad Zargham and Idrees Ali in Washington and Andrea Shalal in Berlin; Editing by Sandra Maler and Jonathan Oatis