AFTER TRUMP ATTACK, RTX DECIDES THAT WINNING MOVE IS NOT TO PLAY

(Bloomberg) -- When RTX Corp. executives’ phones started buzzing with the news that President Donald Trump had singled out their company for criticism, they quickly realized they had two options, both fraught: push back or keep quiet.

Trump had turned his ire on the company after announcing that defense contractors should be barred from issuing dividends or conducting stock buybacks. RTX, Trump said, has been the “least responsive to the needs of the Department of War” and the “most aggressive” spender on shareholders.

The claims were subject to dispute. RTX has many contracts across the U.S. military, including for jet engines and the popular Patriot missile system. Yes, the company spent $36.4 billion on shareholder returns since 2020, but that was nearly $6 billion less than Lockheed Martin Corp., the maker of F-35 fighter jets. 

But in the end, RTX executives led by Chief Executive Officer Chris Calio opted against publicly commenting on the posts or the executive order accompanying them, according to people familiar with the matter who asked not to be identified discussing private deliberations. Doing so risked attracting more attention, they said.

An RTX spokesman declined to comment on Friday.

RTX’s plan to keep its head down may be buttressed by the fact it’s far from clear the government can legally limit executive pay or force companies to spend in certain ways, people familiar with the matter said. 

James Angel, a finance professor at Georgetown University, said that buybacks are enshrined in the US tax code, which lays out how these investor incentives are taxed. The executive order included a directive to the Securities and Exchange Commission to change rules on buybacks.

“When Congress says, ‘sure, it’s legal, and here’s the tax you have to pay on it,’ it’s really hard for anyone to put a blanket ban on them,” Angel said.

The company’s silence fits with a familiar pattern playing out across corporate America in Trump’s second term. Firms that thought they were in the president’s good graces find themselves singled out for a perceived offense. Many remain silent. Some change course. Others seek go to the White House bearing gifts.

Both Netflix Inc. and Paramount Skydance Corp. launched charm offensives in trying to gain Trump’s favor in the battle to acquire Warner Bros. Discovery Inc. Jim Vena, chief executive officer of railroad Union Pacific Corp., visited Pennsylvania Avenue in September, having announced a deal to buy peer Norfolk Southern for $72 billion. The company subsequently made a donation to the new ballroom that will replace the White House’s East Wing.

“He didn’t ask me for a donation at any point, I want to make that clear,” Vena said in an interview last year.

It wasn’t known whether there was another reason for Trump’s broadside. The Pentagon declined to say what information it provided to the White House that formed the basis of Trump’s statements. But it would be difficult for the Defense Department to stop doing business with RTX, which makes Tomahawk cruise missiles, the SM-6, the US Navy’s top air-defense missile, and F-35 fighter jet engines.

Lockheed donated to Trump’s plan to build a new ballroom at the White House, while RTX didn’t. Both companies contributed to his inaugural committee, but Lockheed gave $1 million, compared with $500,000 for RTX. Northrop Grumman Corp. and General Dynamics Corp. did not contribute to the Trump Vance Inaugural Committee, according to filings made to the Federal Election Commission, nor the ballroom project, according to the list the White House released.

In a statement, Lockheed said it is “proud to support the 2025 inauguration and looks forward to working with the Trump-Vance administration to strengthen our national defense.” On the ballroom, Lockheed said it is “honored to support the new addition, so the White House continues to remain the powerful symbol of the American ideals we work to defend every day.”

The executive order issued this week proposes that future government contracts tie executive incentive compensation to delivery and production metrics, rather than free cash flow or earnings per share growth. Contracts deemed non-compliant could result in limits on an executive’s pay. Trump said in a Truth Social post that the cap would be $5 million.

Most chief executive salaries among S&P 500 companies would exceed that. Calio’s base salary was $1.4 million but had total compensation of more than $21.3 million, including long-term incentives, according to RTX’s annual report. 

Trump’s order doesn’t specify whether the cap would apply to cash or total compensation, or whether it applied to the entirety of a business or just defense-related work. About half of RTX’s business involves sales to non-military customers, people familiar with the matter said. 

RTX, like other major US defense companies, is expected to play a major role in building out Golden Dome, Trump’s proposed missile-defense system. The Congressional Budget Office has estimated that the space-based layer alone could cost more than $500 billion.

The company signed a deal last month with the U.S. Air Force to equip the X-62A simulation test aircraft with its Phantom Strike radar. It had fallen behind in recent years on deliveries of more than 600 SM-6 air-defense missiles to the US Navy, but internally the view is that supply-chain issues, not a lack of investment, were the issue there.

“We’re going to need to continue to see supply-chain health to get to these levels,” Neil Mitchill, RTX’s chief financial officer, said on the company’s third-quarter earnings call. “It’s a very interconnected supply chain within defense.”

In the same call, executives said their focus was on strengthening supply chains and putting more capital into the business, with Calio touting $600 million in investment in 2025, including $115 million on an expansion of its Redstone Raytheon Missile Integration Facility, in Alabama, which will increase production capacity by more than 50%. 

The challenge for defense companies is that dividends and buybacks are a good way of enticing investors given they have “average profit margins and little chance of breakout earnings,” according to Bloomberg Intelligence analysts Will Lee and George Ferguson.

“Political shifts and lack of long-term visibility have limited capital investments, while shareholders expect favorable payout and buyback policies given slow growth,” they wrote.

--With assistance from Siddharth Philip, Bill Allison and Tony Capaccio.

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2026-01-10T12:32:08Z