General Dynamics rakes in contracts

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Shares of General Dynamics Corp. are rumbling forward this year as the maker of tanks and ships for the military has won a string of defense contracts.

In just the past two weeks the Falls Church defense giant landed contracts worth nearly $78 million, most recently a $10.5 million award from the Coast Guard, announced yesterday, to provide technical support and program management for the next four years.

The win follows other defense contracts for $24 million this week and $43 million last week.

General Dynamics' stock, GD on the New York Stock Exchange, is up about 11 percent since the first of this year, compared with 7 percent for the Standard & Poor's 500 Index.

"We see more of the same for the foreseeable future," said Paul H. Nisbet, an industry analyst for the financial firm JSA Research.

The company's stock closed yesterday at $81.74 a share, down $1.22, or about 1.5 percent, from Friday's close.

General Dynamics employs about 82,900 people worldwide and projected 2007 revenue of more than $27 billion. Three of the company's four business units focus on areas including aviation; land and expeditionary combat systems, arms and munitions; shipbuilding and marine systems; and technology.

Its private-sector unit focuses on business jets, such as the Gulfstream, and on technology.

"Their [information technology] operation has gone from virtually nothing 10 years ago to over $10 billion in sales," Mr. Nisbet said.

Underlying what appears to be a string of successes is a bidding controversy that threatens to cancel one of the company's biggest shipbuilding contracts.

A team lead by General Dynamics won a contract to build two prototype Littoral Combat Ships for the Navy at a target price of $220 million apiece. The midsized ships can move fast in coastal waters, offering the Navy more effective capabilities to destroy submarines and mines along shorelines.

As manufacturing started on the first prototype, design, production and management problems drove up cost estimates to about $400 million each.

The impatience of the Navy and Congress rose with the cost estimates.

This month, the Senate Appropriations Committee voted to cancel the second of two contracts for the General Dynamics team to build the ships. Although a final vote in Congress is required, the unanimous decision by the Appropriations Committee leaves little doubt that the contract is likely to be rebid. Competitor Raytheon Co. is considered a likely replacement.

General Dynamics has plenty of other contracts to keep its revenue flowing.

Among them is a $921 million Army contract announced in August for two phases of a battlefield communications network. One phase calls for General Dynamics and its partner, Lockheed Martin Corp. of Bethesda, to deliver portable broadband communications through satellite and radio links. The team agreed to develop and test parts of the battlefield system in the second phase of the contract.

The company's business strategy includes delivering the product while "remaining nimble enough to respond to changing needs," said Rob Doolittle, General Dynamics spokesman.

He mentioned as an example the Abrams battle tank, first delivered to the Army in 1982 but upgraded with new technologies and changing requirements.

"As a result, Abrams continues to be a desirable weapon system for the Army — versatile enough even for the current urban operations in Iraq — and Army plans call for its continued use through 2050," Mr. Doolittle said.

General Dynamics' net income was $513 million, or $1.26 per share, in the second quarter of this year, down from $636 million, or $1.56 per share, one year earlier. The drop resulted from one-time expenses, the company said. Revenue rose 11 percent to $6.59 billion from $5.93 billion in the second quarter of 2006.