GD's leadership change won't alter focus

General Dynamics moves forward under its new chairman and CEO, but its focus remains fixed on its core defense markets.

For General Dynamics Corp., times are good. So it's understandable that even though the company has a new chairman, it wouldn't want to alter its formula for success.

Jay Johnson, GD's chief executive officer since July 2009, took over as the company's chairman in May. Johnson moves into his expanded role at a time of growth for the Falls Church, Va., company. GD reports its revenue was $32 billion in 2009, up 9.2 percent from 2008, for a net income of $2.4 billion last year. It's ranked No. 6 on this year's Top 100 with $5.4 billion in information technology prime contracts.

"Operationally, I think [the leadership transition] went very smoothly, and we'll see a continuation of the same things that we think are the keys to our success," said Gerard DeMuro, GD's executive vice president in charge of the company's Information Systems and Technology group. "I don't see any change strategically or operationally."

DeMuro's group played a significant role in GD's overall growth last year. Its revenue grew by 7.6 percent in 2009, to $10.8 billion. The company expects the unit to add another $1 billion in revenue in 2010.

Johnson is committed to GD's decentralized business model, DeMuro said. That model, he added, is a key to the company's success and distinguishes GD from its competitors.

"We operate in a far more decentralized fashion than I believe most of our peers do, and that enables those people who are closest to their customers, their markets and their competition to act very rapidly and without a lot of interference from a centralized headquarters function," DeMuro said.

In addition to passing the chairman's torch, GD also made news through some of its recent contract wins.

The company announced in April that GD's C4 Systems unit, part of DeMuro's group, won a $164 million contract from the Army to begin initial production of the Warfighter Information Network-Tactical Increment 2. Meanwhile, GD Information Technology, also within DeMuro's group, announced in March a $228 million contract win to modernize the Federal Aviation Administration's telephony systems.

DeMuro said company officials think defense is still a strong market, and they love the complement that aviation brings. He also said GD foresees continued strength in its core businesses of intelligence, surveillance and reconnaissance, in addition to communications, command and control applications.

"In addition, much like many of my peers, we think there are going to be specific opportunities in cyber-related products and services and hardening of systems for cyber threats," he said, adding that the company also sees health care management as a growth area.

There also is increasing demand from the civilian agencies, DeMuro said, noting that one project that will have a huge cyber component is the new consolidated headquarters for the Homeland Security Department that is under construction in Washington, D.C.

GD is looking to hire more people in the coming year and is running an internal academy to develop employees' expertise in all aspects of cybersecurity, he added.

But even as GD looks to grow its workforce internally, the company has made some recent acquisitions. For example, it acquired Axsys Technologies in September 2009 to enhance the company's imagery business for surveillance, a business that DeMuro said will grow. In January, the company acquired Ascend Intelligence LLC, a software provider that already was working with the Defense Advanced Research Projects Agency.

Despite the projected growth, DeMuro said he recognizes the challenge that new austerity in agencies' budgets presents for industry.

"It's no mystery that the budget increases that we saw over the past half-decade are going to be flattening out," he said. "From a broad portfolio perspective, I think it will take some time for the budget priorities coming from the national security leadership like [Defense Department Secretary Robert] Gates to flow down, and I don't think it's clear yet exactly where those cuts are going to come."

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