The Trump administration is trying to assert sweeping new powers over the defense industry in an effort to boost weapons production and ensure on-time delivery to the United States military and allies abroad.
Tapping into long-running frustrations in Washington over the way weapons are made and sold, President Trump on Wednesday signed an executive order prohibiting stock buybacks and dividend payouts at defense companies that haven’t made capital investments or are deemed “underperforming.”
It also gives Defense Secretary Pete Hegseth extraordinary powers to review compensation packages for defense contractors that buy back their own stock while failing to make sufficient investments in their facilities.
Mr. Hegseth, according the order, must compile a list of these companies within 30 days. Companies that make the list risk having their executives’ salaries capped and losing the administration’s support in making international military sales.
The order also mandates that future military contracts include provisions that tie executive bonuses to higher output and on-time deliveries.
The move marks a significant shift in the government’s relationship with the nation’s top defense companies, which include Lockheed Martin, Boeing, General Dynamics, Northrop Grumman and RTX, the parent company of Raytheon. And it comes as the Trump administration attempts to overhaul the weapons procurement process, which often results in weapons being delivered years late and over budget.
President Trump told Republican lawmakers at a retreat on Tuesday that he was putting defense contractors on notice, and that they had to start producing weapons faster.
“We have the best weapons in the world, but it takes too long to get them, including allies,” he said. “When allies want to buy them, they have to wait four years for a plane, five years for a helicopter,” he added, referring to the delivery of Boeing-built Apache helicopters to India. “We’re not letting that happen anymore.”
Separately, Mr. Trump lashed out at Raytheon, calling it “the least responsive to the needs of the Department of War” in a social media post and threatening to cut military contracts if the company did not restrict stock buybacks.
RTX did not respond to a request for comment.
Lockheed Martin said on Tuesday that it had struck an agreement with the Defense Department to more than triple production of its PAC-3 interceptor missiles over the next seven years. The agreement commits the government to seven years of orders, and puts the onus on the company to fund the expansion required to fill them.
Lockheed’s deal is being framed as a new model for how the Pentagon does business. The executive order could serve as a cudgel to get more defense companies to negotiate similar deals.
“Lockheed Martin shares President Trump’s and the Department of War’s focus on speed, accountability and results, and will continue to invest and innovate at scale to ensure our warfighters maintain a decisive advantage and are never sent into a fair fight,” the company said in a statement after the executive order.
Other defense companies either declined to comment or did not return requests for comment.
Yet the legal basis of the executive order is unclear. Decisions about executive compensation and stock buybacks are made by corporate boards, but the United States government holds enormous leverage over defense contractors who depend on federal contracts — funded by tax dollars — for most of their revenue.
Getting the nation’s top defense companies to invest more of their own cash in research and building more factories, and less on buying back their stock and bolstering executive pay packages has been a perennial, bipartisan problem in Washington.
For instance, a 2023 Defense Department study found that top U.S. defense contractors spent more on returning cash to shareholders in the form of dividends and stock buybacks between 2010 and 2019 compared to the previous decades, while spending on research and new or upgraded factories had declined.
Last month Senator Elizabeth Warren, Democrat of Massachusetts, and Representative Chris Deluzio, Democrat of Pennsylvania, sent a letter to Treasury Secretary Scott Bessent offering to work with him following his televised remarks suggesting that defense contractors were woefully behind in deliveries and needed to spend less on stock buybacks and more on research.
On Thursday, Ms. Warren said Mr. Trump should work with Congress rather than take unilateral action.
“If Donald Trump is serious about reining in abuse, I’m writing new legislation and he should push Congress to pass a bill with strong protections into law,” Ms. Warren said in a statement to The New York Times. “The American people deserve a defense industry that puts our national security above Wall Street’s profits and defense C.E.O.s’ paychecks.”
Others said that the reason defense contractors have been reluctant to expand production capacity is that there’s little predictability to government orders, so they don’t invest in factories or machinery that might never be used.
Jerry McGinn, director of the Center for the Industrial Base at the Center for Strategic and International Studies, a Washington think tank, said he analyzed over 80 missiles and ammunition accounts over 20 years. He found that the amount paid for a particular order can vary widely from year to year.
“Not surprisingly, this engenders high levels of uncertainty and instability,” he said.
The way to improve production is to give multiyear contracts like the deal Lockheed struck, not by micromanaging executive pay or limiting stock buybacks, he said.
“You want more capacity?” he said. “This is how you do it.”
Farah Stockman is a Times business reporter writing about manufacturing and the government policies that influence companies that make things in the United States.
The post Trump Seeks New Powers to Pressure ‘Underperforming’ Weapons Makers appeared first on New York Times.
