The U.S. government will invest $1 billion in L3Harris Technologies’ expanding rocket motor business, according to a Reuters report. The move is intended to help secure a steady supply of solid rocket motors needed for a broad range of missile systems, including Tomahawks and Patriot interceptors.
The agreement is also the latest example of the government taking a more direct role in supporting key parts of the U.S. industrial base. Earlier, the government took a 10% stake in chipmaker Intel in a deal structured to discourage the company from selling its manufacturing unit. The U.S. government has also invested in critical mineral producers.
“We are fundamentally shifting our approach to securing our munitions supply chain,” said Michael Duffey, under secretary of defense for acquisition and sustainment. “By investing directly in suppliers we are building the resilient industrial base needed for the Arsenal of Freedom.”
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L3Harris said it plans to sell new equity in its rocket motor business and create a new company backed by a $1 billion government convertible security investment. The government securities will automatically convert into common equity when the company goes public later in 2026.
Chris Kubasik, L3Harris’ CEO, told reporters he expects annual growth rates for the new missile business to be in the mid-to-high teens. L3Harris shares rose 1% following the news.
The announcement comes as the Trump administration has stepped up pressure on defense contractors over production timelines and costs. U.S. President Donald Trump signed an executive order last week tying share buybacks, dividends, and executive pay to weapons delivery schedules. Trump and Pentagon officials have argued that the defense industry has been marked by high costs and slow production, and they have pledged major changes to address the problem.
The investment also follows earlier signals that such a move was under consideration. U.S. Commerce Secretary Howard Lutnick said in August that the Trump administration was weighing equity stakes in major defense contractors, including Lockheed Martin, making the L3Harris investment less surprising.
However, Reuters reported that the Pentagon’s stake could draw backlash from rivals, given the potential for conflicts of interest. The U.S. government would hold an ownership position in a company that regularly bids on major defense and other government contracts.
A spokesperson for Northrop Grumman, the other major rocket motor producer, said the company maintains industry-leading investment levels and remains focused on delivering capabilities quickly to the military. Meanwhile, TD Cowen analyst Gautam Khanna said in a note that competitors to the new rocket motor entity could be placed at a disadvantage following the government investment.
Duffey, the Pentagon’s chief weapons buyer, told Reuters in a statement that the department “remains committed to full and open competition, and would not include consideration of this investment in procurement decisions.” He also said the Pentagon “does not direct contractors as to which solid rocket motor is included in a particular missile.”
The investment marks the Pentagon’s first direct-to-supplier partnership of this kind, reflecting a new strategy in which the department seeks to negotiate and invest directly with critical suppliers as a cost-saving measure and a way to strengthen production capacity.