Boeing sweats under Donald Trump spotlight as SoftBank feels the warmth4 min read . Updated: 08 Dec 2016, 02:13 AM IST
The president-elect jumped into corporate affairs again on Tuesday, tweeting first to criticize one company and then to hail another
New York: First came Ford and Carrier. Now Boeing and SoftBank are experiencing the power of Donald Trump’s Twitter feed.
The president-elect jumped into corporate affairs again on Tuesday, tweeting first to criticize one company and then to hail another. He began at 8.52am New York time by calling out Boeing Co. over costs to develop new Air Force One jets. Just over five hours later, he celebrated a $50 billion investment in the US by Japanese telecommunications firm SoftBank Group Corp.
The tweets, coming after Trump last week announced a deal with United Technologies Corp. to cancel plans to close a US factory, dominated news and moved markets even as details in both cases remained sketchy and the impacts unclear. Trump again showed a willingness to use his bully pulpit to criticize or congratulate companies over actions affecting American workers and government spending.
“This is extraordinary," said Mohan Tatikonda, a professor at Indiana University’s Kelley School of Business. “For a president to get involved at the level of spot locations, spot companies, spot plants, is I think unprecedented."
The president-elect’s moves had consequences for the market, with Boeing falling as much as 1.5% before regular trading. The shares rose less than 0.1% to $152.24 at the close in New York.
Sprint Corp., which is controlled by SoftBank and is the No. 4 US wireless carrier, rose 1.5% to $8.17 at the close. T-Mobile US Inc., which has long been mentioned as a possible merger partner for Sprint, rose 1.8% to $55.99 on speculation that SoftBank chief Masayoshi Son’s pledges could aid an eventual deal.
A president who’s too eager to pick winners and losers may prompt business owners to seek special treatment in Washington instead of focusing on improving operations, said Anne Krueger, an economics professor at Johns Hopkins University’s School of Advanced International Studies.
“The rule of law is what prevents crony capitalism, and the minute you have the president-elect, politicians or bureaucrats meeting with business owners to dispense special favours it unlevels the playing field," said Krueger, a former first deputy director of the International Monetary Fund. “We all ought to be screaming now because if we don’t, we’re going to be a third-world country before we know it."
Trump’s tweet about Air Force One— “Cancel order!" he said—came days after Boeing chief executive officer Dennis Muilenburg called on him and Congress to ensure that US companies have the tools to compete in a global economy. Trump said costs for the presidential aircraft program could exceed $4 billion.
Boeing, the largest US exporter, is currently working under a $170 million contract “to help determine the capabilities of this complex military aircraft," spokesman Todd Blecher said in an e-mail.
Boeing executives told officials on Trump’s transition team that the cost of a new version of Air Force One could be lowered if the government agrees to reduce its technical requirements, Bloomberg News reported.
The Pentagon already is budgeting $3.2 billion for research and development, military construction and acquisition of two of the Air Force One planes through fiscal 2021, said Kevin Brancato, the lead government contracts analyst for Bloomberg Government. Boeing 747-8 planes average about $225 million each, he said, which means most of the expenses will go to outfitting the planes with special capabilities for presidential use. They include advanced communications and classified defensive abilities that make them flying fortresses.
Trump’s willingness to attack the program— one of the most visible symbols of the American presidency—and go after specific companies generates uncertainty over the scrutiny government contractors may face under the new administration, said Jeff Windau, an Edward Jones analyst.
“That’s something that investors are at least taking notice of today," he said.
Intervention of this magnitude has little precedent, but past president such as Lyndon Johnson and John F. Kennedy were known for such practices. Johnson, for instance, fought inflation and targeted high prices on products as varied as eggs, steel and televisions.
Johnson’s impact was limited. But he didn’t have Twitter.
“Mr. Trump’s leadership style and communication style is abetted by the social media capabilities we have today," Tatikonda said. “With Mr. Trump we will continue to see different kinds of executive models and ways of leadership than we’ve ever seen before."
Following a series of meetings on Tuesday with business leaders, the president-elect tweeted that SoftBank will invest in the US and create 50,000 new jobs. Son, CEO of the Tokyo-based telecommunications company, told reporters the funding would go to “new companies, startup companies in the US." The money will come from SoftBank’s previously announced $100 billion technology fund, Bloomberg News reported.
Trump followed up the tweet with a second saying the company “would never do this had we (Trump) not won the election!" On Sunday, Vice president-elect Mike Pence said on ABC’s This Week that Trump would decide whether to intervene with specific companies “on a day-by-day basis."
While Trump has turned Twitter into a powerful tool, the companies in his sights may not do the same.
“I know the right answer is not going to be tweet back, so don’t expect us to be doing that," David Melcher, president and CEO of the Aerospace Industries Association trade group, said after Trump’s Boeing statement. “The president-elect is going to have to decide how he wants to use that tool going forward." Bloomberg