US Secretary of Commerce Howard Lutnick said that senior Pentagon officials "are thinking about the possibility" of the government becoming an investor in one or more of the top defense companies, including Lockheed Martin, RTX (formerly Raytheon), Northrop Grumman, General Dynamics, and Boeing, in an interview with CNBC on Tuesday.
“The debate on defense is huge,” Lutnick said during an appearance on CNBC’s Squawk Box. He explained that Lockheed Martin, which derives most of its revenue from the US government, is "essentially a branch of the government." However, Lutnick emphasized that the economic decisions about this move would be made by the Secretary of Defense and their deputy: "They're on it, and they're seriously considering it."
Lutnick's comments came shortly after the US government completed a $9 billion deal to purchase a 10% stake in Intel, which was seen as a move to strengthen US technological independence amid growing tensions with China.
Potential shift in the US defense industry
If the US does proceed with acquiring shares in defense companies, it would mark a significant shift, with potentially wide-ranging effects on the capital markets, the ownership structure of the US defense industry, and the level of government oversight over major contractors supplying the US military’s weaponry.
Lockheed Martin, the world's largest defense contractor by revenue, is responsible for developing and producing the F-35 fighter jet. Such a move could also raise regulatory, ethical, and security concerns, especially given the high profitability of these companies and their partial reliance on public funding.
According to CNBC, no official decision has been made yet, but the discussion within the administration is ongoing. If the proposal moves forward, it could have significant repercussions not just in the US but also among its global defense partners.