Donald Trump tweets, and Lockheed Martin stock drops
Memo to Corporate America: Be ready to be Donald Trump’s next target.
Defense giant Lockheed Martin Corp. found that out Monday when the president-elect again used Twitter to blast the F-35 fighter-jet program for costs he termed “out of control.”
The stock prices of Lockheed Martin, the project’s prime contractor, and of one of its suppliers quickly dropped. It was the same scenario that hit Boeing Co. last week when Trump tweeted that the development of new Air Force One jets was too expensive.
Never mind that Trump championed building up U.S. defense as part of his presidential bid. The F-35 contractors learned that any company can suddenly find itself on Trump’s bad side, especially those that do business with Uncle Sam.
“The clear message that’s being sent is that the president-elect is going to fight to save taxpayer money at every turn,” said Trump spokesman Jason Miller. “I would expect this to be wide reaching and impact all of government as we look to come up with better deals.”
Presidents have leaned on big companies in the past in hopes of enacting change. But what’s happening with Trump is novel, public-relations experts and business analysts said, because he’s using the lightning-fast communication tool of social media to spread his complaints to millions of people, with no prior warning. And he’s yet to take office.
“It’s a PR nightmare for the companies involved because you don’t want the president of the United States shining a spotlight on a practice that the public might find dubious,” said David Shulman, senior economist for the forecasting program at UCLA’s Anderson School of Management.
“What’s really unprecedented is that he’s not even president yet,” Shulman said. “If this becomes a weekly event, it’s going to have a negative impact on the business climate” even if Trump correctly points a finger “at the legitimate issue of the high cost of [defense] procurement,” he said.
Trump’s habit of identifying companies and programs that displease him has corporate PR departments trying to figure how best to respond, if at all.
Companies often settle for an initial “no comment,” then perhaps a carefully worded press release days after being criticized. That might no longer suffice, analysts said.
“Imagine if he suggests boycotting a company’s products,” Stan Steinreich, president of the public relations firm Steinreich Communications Group, wrote Monday on Fortune.com. “What if he casts aspersions about an executive’s comments?
“With Trump as president, corporations are going to have to move with the times and join the social media discussion much more rapidly than they generally have,” Steinreich wrote.
Or at least respond in some way quickly, as Lockheed Martin did Monday. Jeff Babione, executive vice president and general manager of the F-35 program at Lockheed Martin, said the company and its partners “understand the importance of affordability for the F-35 program.”
“We welcome the opportunity to address any questions the president-elect has about the program,” he said during remarks at Nevatim Air Base in Israel before an F-35 delivery ceremony there.
In his tweet, Trump did not identify Lockheed Martin or the other defense firms by name.
“The F-35 program and cost is out of control,” he wrote. “Billions of dollars can and will be saved on military (and other) purchases after January 20th.”
Lockheed Martin stock fell $6.42, or 2.5%, to close at $253.11 a share. Northrop Grumman, a big subcontractor on the F-35, fell $6.36, or 2.7%, to $232.07 a share.
Known as the Joint Strike Fighter, the F-35 is designed to be largely invisible to radar, fly faster than the speed of sound and incorporate advanced sensors, linking data with ships, planes and drones.
The new fighter would replace four aircraft, with three design variations to meet the unique requirements of the Air Force, Marine Corps and Navy. More than 3,000 planes eventually would be built for the U.S. and 11 other countries.
The program has been repeatedly criticized over the years for cost overruns and lengthy delays, though its cost has been declining recently. With a total estimated cost of $379 billion, it is considered the most expensive weapons program ever.
Although companies will keep feeling the pressure to respond to Trump, they shouldn’t always feel compelled to answer his complaints directly while remaining neutral and open to discussion, said Eileen Koch, chief executive of the public relations firm EKC PR in Los Angeles.
“If he’s just making a comment, sometimes it’s better not to get into a war of words with him; it’s better to take the high road,” Koch said. “You might be getting a minute of his thoughts and then he’s on to something else.”
Richard Aboulafia, aviation analyst for the research firm Teal Group, said Trump’s tweets about companies and programs are an appeal to his base.
“He’s got this real contradiction, which is he’s throwing money at defense but he’s told his base he’s draining the swamp,” he said.
Defense stocks had been on a tear before Monday; the iShares U.S. Aerospace & Defense ETF, which tracks the industry, was up nearly 12% from just before the election through Friday.
“One of his very top promises is to ‘rebuild’ the military and everyone’s talking about more money, and the upward trajectory in their share prices reflects that in anticipation,” Aboulafia said. “It’s very tough to institute reforms and go after very big programs in this kind of upward budget environment.”
In the meantime, what should contractors do if they’re called out by Trump on Twitter?
“It’s best not to respond,” Aboulafia said.
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Times staff writer Cathleen Decker contributed to this report.
3:30 p.m.: This article has been updated to include additional commentary and analysis.
The original article was published at 10:25 a.m.