Trump targets Lockheed Martin's F-35 fighter jet costs

Updated

WASHINGTON, Dec 12 (Reuters) - Donald Trump on Monday criticized Lockheed Martin's F-35 fighter jet program as too expensive, the latest attack by the U.S. President-elect on large defense contractors.

The aerospace giant's shares dropped 4 percent after Trump's tweet, while shares of several other defense contractors also weakened.

"The F-35 program and cost is out of control," Trump said on Twitter. "Billions of dollars can and will be saved on military (and other) purchases after January 20th."

Last week, he also used Twitter to target Boeing Co for its "out of control" costs on a new fleet of Air Force One planes, urging the federal government to "Cancel order!"

Lockheed Martin's F-35 program leader, Jeff Babione, responded by saying the company understands concerns about affordability and has invested millions of dollars to reduce the jet's price.

Babione said Lockheed's goal was to reduce the price of the F-35 by 70 percent from its original estimates. "We project it to be about 85 million dollars in the 2019 or 2020 time frame," he told reporters in Israel.

A week before Trump won the Nov. 8 presidential election, the U.S. Defense Department and Lockheed Martin concluded negotiations on their ninth contract for 90 F-35 fighter jets after 14 months of negotiations, the Pentagon said.

Lockheed won the contract, valued at up to $7.18 billion, in late November and has received an interim payment.

Trump campaigned on a promise to cut waste in federal government.

Lockheed and its key partners, Northrop Grumman Corp , Pratt & Whitney and BAE Systems, are developing and building three variants of the F-35s for the U.S. military and 10 allies including Britain, Australia, Norway, Denmark, the Netherlands, Italy, Turkey, Israel, Japan and South Korea.

After Trump's Monday morning tweet, shares of Northrop Grumman were down 4.5 while shares of BAE Systems were 2.4 percent lower in London.

Shares of General Dynamics, Raytheon, and United Technologies were all lower Monday, as were shares of Boeing.

United Technologies Corp , which had a run-in with the President-elect over a plan to ship 2,100 jobs to Mexico from Indiana operations of its Carrier air conditioning unit. The company last week agreed with Trump to keep about 800 of the threatened manufacturing jobs in Indiana, and retain another 300 headquarters jobs, in return for state tax incentives.

The attacks on Boeing and Lockheed Martin raise concerns that the incoming Trump administration will threaten defense contractors' profit margins.

"His emerging habit of using Twitter as a bully pulpit could become a threat to controversial high profile programs," Cowen analysts wrote last week after Trump criticized the cost of Boeing's Air Force One replacement program. "Even if Trump only launches a bombastic Twitter shout-out, this more aggressive approach to contractor relations could impact the stocks."

Earlier this month, the Pentagon's chief arms buyer said he was hopeful that Lockheed F-35 block buy will proceed.

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