General Dynamics Showing Strong BizJet Resurgence as Defense Stands Firm  

Gulfstream’s New G400 and G800 Business Jets. Image

General Dynamics held its own in 2021 thanks to the diversity of it products in aerospace and defense markets.  While defense has seen a slowdown in some sectors, further exacerbated by supply chain issues, commercial aerospace is resurging thanks to demand for business jets.

For 2021, General Dynamics reported sales of $38.5 billion, up 1.4 percent from sales of $37.9 billion in 2020. Net income for the year was $3.3 billion, compared to $3.2 billion in 2020.

Aviation

At the start of the COVID-19 crisis, Gulfstream was among the hardest hit, with its sales and backlog dropping to $8.08 billion and $11.6 billion, respectively, in 2020.  Now the trend has reversed itself, with sales slowing moving up about 1 percent in 2021 to $8.14 billion and backlog jumping 40 percent to $16.3 billion.

While great for the bottom line, the increase in demand for Gulfstream products continues to be impacted by the effects of the pandemic.  Owing to supply chain issues, deliveries slowed in 2021 to 119 aircraft, down from 127 in 2020. The company hopes to increase deliveries to 123 in 2022, but is running into issues with wing supply, which will require more tooling to increase production, the company said.  Once these are addressed, Gulfstream is expected to deliver 148 aircraft in 2023 and 170 in 2024 should demand continue.

According to Forecast International’s Civil Aircraft Forecast, Gulfstream is expected to rank second, behind Cessna, with Bombardier third, in unit production in the years ahead.  However, due to the larger, higher-priced business jet models Gulfstream produces, the company will rank at the top in terms of dollar value.

Meanwhile, defense markets remained relatively unchanged.  The sector did soften somewhat due to ongoing pandemic-related slowdowns and supply chain issues.

Marine

The company’s top-performing sector continued to be shipbuilding, especially Electric Boat, which was awarded a major contract to build ballistic missile submarines for the U.S. Navy.  In late 2020, the company received a $9.5 billion option exercise from the U.S. Navy for the construction and test of the first two Columbia class submarines. Adding to the backlog at EB was an $820 million contract awarded in late 2021 for lead yard services related to the construction of Virginia Block V boats. Both programs are critical to the U.S. Navy and are therefore not likely to run into trouble with funding.

As it prepares for the work, Electric Boat has been investing heavily in its infrastructure, with a reported $1 billion spent in 2020 alone and more to come as the unit goes on a hiring spree. In early 2022, the company said it is looking to hire some 3,000 workers – a reported 20 percent increase over 2021.

Bath Iron Works, meanwhile, is building Arleigh Burke destroyers, while NASSCO is building T-AKE supply ships.  Here the company lost out in a competition to build the FFG(X) – or Frigate, Guided (Experimental) – a new class of multimission guided-missile frigates for the U.S. Navy.  In April 2020, the Navy selected Fincantieri Marinette Marine’s FREMM design.  BIW may get a chance yet to build some FFG(X) frigates, as the Navy is looking to award a “follow yard” contract for additional construction. A second yard could be selected in 2022, with production beginning in 2023.  With the third  and final Zumwalt class delivered to the Navy in early 2022, BIW’s current production backlog consists of seven Arleigh Burke class destroyers currently under construction.

Land Systems

General Dynamics Land Systems has had a difficult time in the recent past, but some new wins have brightened the unit’s outlook.  These successes could fuel upcoming opportunities in future competitions.

GD lost out on Australia’s LAND 400 Phase 3 in late 2019 and LAND 400 Phase 2 in 2016.  Earlier, General Dynamics and teammate AM General failed to win the Joint Light Tactical Vehicle program, which was awarded to Oshkosh in 2015. The unit suffered another blow when it was shut out of the Amphibious Combat Vehicle Increment 1.1 program in late 2015.

On the positive side of the ledger, the company did win the U.K.’s Scout SV competition.  Renamed Ajax, this program will see the procurement of some 589 armored fighting vehicles for the British Army.  Production under this roughly $5.6 billion program should run through 2024.  General Dynamics European Land Systems was tapped to provide 227 Piranha AFVs to Romania under a $1 billion order.

In 2020, the unit won the U.S. Army’s Small Multipurpose Equipment Transport recompete with the award of a $249 million contract; Spain’s $2 billion Dragón IFV program; and the U.S. Army’s $1.2 billion IM-SHORAD contract.  At the end of 2020, it was awarded a $4.6 billion contract to produce M1A2 SEPv3 Abrams main battle tanks for the U.S. Army.

More recently, the Abrams was selected to meet a requirement of  Australia.  Under a $3.5 billion order, Australia will procure 75 M1A2 SEPv3 Abrams tanks under the LAND 907 Phase 2 project. In addition, as part of LAND 8160 Phase 1, the country will receive  29 M1150 Assault Breacher Vehicles (ABVs), 17 M1074 Joint Assault Bridges (JABs), six M88A2 Hercules Combat Recovery Vehicles, and 122 AGT1500 gas turbine engines.

Upcoming competitions include the U.S. Army’s Mobile Protected Firepower program (for which it and BAE Systems were selected in late 2018 to go head-to-head in the final round), the U.S. Marine Corps’ Armored Reconnaissance Vehicle contest (versus Textron Systems), and a recompete of the Optionally Manned Fighting Vehicle (OMFV) effort.  A Czech AFV replacement effort is currently on hold, as the Ministry of Defense there decreed that none of the applicants met the requirements.

Increased tensions in Europe may also bode well for the division.  With Russia maintaining a bellicose posture, many Eastern European countries are expected to push military vehicle procurement to the forefront in response.

Finally, the Land Systems operation will continue to provide lucrative MRO services to existing fleets of vehicles, especially the Abrams tank and Stryker IFV, which are in service around the globe.

Information Technology

As part of an overall strategy to reduce its dependency on defense manufacturing, General Dynamics expanded its other operations in aerospace and IT services. General Dynamics dramatically expanded its Information Systems and Technology division in 2018 with the $9.6 billion acquisition of CSRA.  The firm, a pure-play IT services provider to the U.S. government, focuses on modernizing legacy systems and provides network and asset protection.  CSRA was one of the largest systems integrators for the government, providing IT and mission- and operations-related services across the U.S. federal government to the Department of Defense; the intelligence community; and homeland security, civil, and healthcare agencies, as well as certain state and local government agencies.  It is also a major range-service contractor, providing operations and maintenance services for aircraft flight tests, weapons tests and development, and manned and unmanned space missions.  CSRA now operates as General Dynamics Information Technology.

In 2020, General Dynamics merged its Mission Systems and Information Technology business units into a single reporting unit, the Technologies division.  According to the company, the two units will continue to be managed separately, as the teams know best how to manage their respective operations. The new structure should help the operation in the development of future federal IT bids.

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About Richard Pettibone

A military history enthusiast, Richard began at Forecast International as editor of the World Weapons Weekly newsletter, eventually moving to the company's premier newsletter service, World Aerospace & Defense Intelligence (WADI). Richard is the current editor of the Defense & Aerospace Companies, Volume I (North America) and Volume II (International) services. The two books provide detailed analyses of major aerospace and defense contractors. As a contributor to Aviation Week & Space Technology's 2005 and 2006 Aerospace Source Book, he authored the Prime Contractor & Major Manufacturer profiles. Find out more at www.forecastinternational.com

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