By Tom Ozimek

The U.S. government will invest $1 billion in L3Harris Technologies’ rocket motor business, a rare direct-to-supplier partnership that the Pentagon said is designed to expand production of solid rocket motors used in major weapons systems as President Donald Trump presses for a major boost in defense spending and sharper oversight of the defense industry.

The Department of War said on Jan. 13 that it signed a letter of intent with L3Harris outlining the terms of a $1 billion convertible preferred equity investment in the company’s Missile Solutions business, which will be carved out into a separate company under the transaction.

The company produces propulsion systems and solid rocket motors for munitions, including the Patriot interceptor, Tomahawk, and Standard Missile, with the investment enabling Mission Solutions’ rapid expansion of capacity for the Pentagon’s critical missile programs.

The Pentagon said the investment aligns with the Trump administration’s new strategy of transforming the Department of War’s acquisitions process and is part of a “Go Direct-to-Supplier” initiative aimed at addressing single points of failure in the munitions supply chain by injecting upfront capital and stabilizing demand.

Michael Duffey, undersecretary for acquisition and sustainment, said the direct-to-supplier model is key to replenishing stockpiles, rebuilding the force, and restoring deterrence by securing critical components.

“We are fundamentally shifting our approach to securing our munitions supply chain,” Duffey said in a statement. “By investing directly in suppliers we are building the resilient industrial base needed for the Arsenal of Freedom.”

The Pentagon said the partnership would position it to negotiate multi-year procurement framework agreements for solid rocket motors, pending congressional authorization and appropriations.

L3Harris said the transaction would support the planned spinout and initial public offering of the missile propulsion business in the second half of 2026, with the government’s securities converting to common equity once the unit lists publicly. L3Harris would retain majority ownership and control of the new entity.

“We’re taking action to build today’s ‘Arsenal of Freedom’ by launching a pure-play missile solutions provider,” Christopher Kubasik, chairman and CEO of L3Harris, said in a statement. “Recent Trump Administration actions have placed renewed emphasis on strengthening the defense industrial base and reinvigorating competition following a 30-year wave of consolidation.”

Trump Ramps Up Pressure on Defense Contractors

The announcement comes as Trump has increasingly put pressure on defense contractors to reinvest in factories and output instead of shareholder payouts, warning that slow delivery of weapons and maintenance is no longer acceptable.

In a Truth Social post on Jan. 7, Trump told defense contractors broadly that “massive Dividends” and “massive Stock Buybacks” were coming at the expense of “investing in Plants and Equipment,” adding that this state of affairs “will no longer be allowed or tolerated!”

Trump also sharply criticized executive pay packages, saying they are “exorbitant and unjustifiable” given how slowly contractors are delivering equipment to the U.S. military and its allies, and said he would not permit dividends or buybacks until production problems are fixed.

“Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly,” Trump wrote. “From this moment forward, these Executives must build NEW and MODERN Production Plants, both for delivering and maintaining this important Equipment, and for building the latest Models of future Military Equipment.”

Trump later singled out Raytheon, saying it had been “the least responsive” to Pentagon needs and warning it could lose government business unless it increases investment in plants and equipment.

It was not immediately clear what legal or binding force Trump’s comments would have on major defense companies’ financial activity.

‘Arsenal of Freedom’ Tour

War Secretary Pete Hegseth has been promoting the Trump administration’s manufacturing push on a multistate “Arsenal of Freedom” tour of defense industrial base sites, describing the president’s call for a sharply higher military budget as both a signal to adversaries and a mandate for faster production.

“If you saw, the president announced the goal of $1.5 trillion for our national defense in 2027,” Hegseth told Lockheed Martin executives and workers during a stop in Fort Worth on Jan. 12. “That is a message to the world.”

Trump proposed the $1.5 trillion Pentagon budget on Jan. 7, saying the United States should spend more than $1 trillion in fiscal year 2027 to build what he called the country’s “Dream Military” during “very troubled and dangerous times.” The figure would represent a 66 percent increase from the fiscal year 2026 budget request of $901 billion.

Hegseth said the department would spend “every dime” of the military budget wisely and that the Pentagon would “find every savings” opportunity possible while demanding the “best capabilities in the world.”