Secretary of the Navy Carlos Del Toro speaks to Sailors assigned to Naval Special Warfare (NSW) units in the San Diego area Nov. 8, 2021. (U.S. Navy photo by Mass Communication Specialist 2nd Class T. Logan Keown/Released)
WEST 2024 — In no uncertain terms, Navy Secretary Carlos Del Toro today sent a stark warning shot to industry: There will be consequences if you prioritize profits over delivering what you promised to the Navy and Marine Corps.
During his keynote speech here before an audience packed with industry officials, Del Toro said that he had taken notice of their “record profits” announced in recent earnings calls.
“While I am very happy for you, you can’t be asking for the American taxpayer to make greater public investments while you continue in some cases to goose your stock prices through stock buybacks, deferring promised capital investments, and other accounting maneuvers that — to some — seem to prioritize stock prices that drive executive compensation rather than making the needed, fundamental investments in the industrial base and your own companies at a time when our nation needs us to be all ahead flank,” he said.
To that end, Del Toro said he had directed the Navy’s legal staff to “leverage all legal means at our disposal to ensure that the American people are getting what they paid for” through an initiative he called the “Taxpayer Advocacy Project.”
“But I also want you to know that the Department of the Navy is holding companies accountable for poor performance and misconduct — and now I’ve directed a deep dive into holding individuals accountable for chronic poor performance or misconduct as well,” he said.
“Not just to hold personnel responsible for their own actions, but to deter those who even [are] considering taking similar actions in the future. We must endeavor to ensure that contracts with the Navy are delivered on time and on budget — the global strategic situation demands it,” he continued.
The suggestion of legal action and calling out industry for purportedly goosing their stocks rather than investing in their facilities — or more pointedly, investing for the benefit of the Pentagon — was a break from Del Toro’s usual image of a secretary whose history as both a retired surface warfare officer and business owner made him a natural ambassador to industry.
It’s also not the usual tone of trade conferences like WEST or its contemporaries, where the tight relations between industry and the Pentagon generally are on full display. Lockheed Martin, for instance, was named the “premiere sponsor” of this year’s conference and whose executive was given time to speak at the same podium just moments before Del Toro took the stage.
However, then-Chief of Naval Operations Adm. Michael Gilday throughout his time as the service’s top officer took similar shots at industry for one reason or another. So far Gilday’s successor, Adm. Lisa Franchetti, has shown to be more guarded in her public remarks, focusing solely on the Navy and improving its sailors and capabilities.
The secretary’s message to industry was pointed: You owe it to the Navy to do better. Or else.
“And for those of you who think I will not hold firm, you obviously don’t know me very well,” he added.
