NEW YORK - Lockheed Martin (LMT) shares are nosing down after President-elect Donald Trump said over Twitter that making F-35 fighter planes is too costly and that he will cut “billions” in costs for military purchases.
In early afternoon trading the defense contractor’s stock price was down $11.38, or 4.4 percent, to $248.11, knocking roughly $4 billion of the company’s market capitalization.
Trump didn’t mention any specific company in his tweet, but Bethesda, Maryland-based Lockheed makes the F-35 one-seat fighter aircraft and is a major U.S. defense contractor.
The F-35 program made up 20 percent of Lockheed’s total 2015 revenue of $46.1 billion. And U.S. government orders made up 78 percent of its revenue last year. The F-35 program directly or indirectly supports more than 146,000 U.S. jobs, according to the company’s website .
In a statement Monday, Lockheed said that it has worked to lower the price of the F-35 by more than 60 percent and said it expects the aircraft to cost $85 million in 2019 and 2020.
“We welcome the opportunity to address any questions the president-elect has about the program,” said Jeff Babione, general manager of the F-35 program. “It’s an amazing program.”
The nearly $400 billion price tag for the F-35 makes the program the Pentagon’s most expensive weapons acquisition ever. Despite the huge cost, the program has strong bipartisan support in Congress, where lawmakers view the aircraft as essential to national security.
After Mr. Trump’s questioning of the aircraft’s cost, the U.S. Department of Defense took to Twitter on Monday to tout the F-35’s strategic importance in the Middle East. “F-35s will help U.S. and Israel air forces operate more jointly and more effectively,” the agency wrote. “Together, we will dominate the skies.”
This is the second time in a week that Trump has blasted U.S. aircraft spending. Trump tweeted last week that costs to build the new Air Force One planes by Boeing (BA) were “out of control”, ended the tweet with “Cancel order!”
Boeing shares slipped more than 1 percent following Trump’s December 6 tweet, but have since topped their price at the time.
Israel and several other U.S. allies are also buying the F-35, expanding the program’s international footprint. Defense Secretary Ash Carter visited Israel on Monday as Tel Aviv received the first two next-generation F-35 fighter jets that will help preserve the country’s military edge in the volatile Mideast.
The F-35, which uses stealth technology to avoid being detected by radar, is being built in different configurations to be used by the Air Force, Navy and Marine Corps. The Navy’s version, for example, is designed to take off and land on an aircraft carrier.
Current plans call for the United States to buy nearly 2,500 F-35s. Close to $13 billion will be needed annually between 2016 and 2038 to hit that procurement number, according to the Government Accountability Office.
While the F-35 had massive budget overruns early on, the cost has stabilized and even dropped a bit following tough negotiations between the Pentagon and Lockheed Martin, according to Todd Harrison, a defense budget expert at the Center for Strategic and International Studies.
“Trump is unlikely to squeeze more blood out of this rock,” Harrison said.
Lockheed said that it has worked to lower the price of the F-35 by 60 percent and expected the aircraft to cost $85 million each in 2019 and 2020.
Companies from 45 states are involved in the F-35’s production, with Texas, Georgia, California, Arizona and Florida playing the leading roles in testing and manufacturing the jet fighter. The company is teamed with more than 1,250 domestic suppliers to produce thousands of components ranging from highly sophisticated radar sensors to parts of the aircraft’s fuselage, according to Lockheed Martin.
Overall, the F-35 program is responsible for more than 146,000 U.S. jobs, the company said.