{"id":8502,"date":"2020-05-03T11:05:00","date_gmt":"2020-05-03T15:05:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=8502"},"modified":"2020-05-06T14:03:49","modified_gmt":"2020-05-06T18:03:49","slug":"general-dynamics-history","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/general-dynamics-history\/","title":{"rendered":"General Dynamics History: How a Vision Became a Legacy"},"content":{"rendered":"\n

What made General Dynamics Corporation so successful? Did the short terms of its CEOs make a difference?<\/p>\n\n\n\n

General Dynamics Corporation is one of the largest and best known major companies. Discover General Dynamics’ history, how General Dynamics thrived, and how they applied lessons from one of its most successful CEOs<\/a>, Bill Anders<\/a>. <\/p>\n\n\n\n\n\n\n\n

General Dynamics: New Vision for an Old Company<\/h2>\n\n\n\n

General Dynamics history shows that it is an aerospace and defense corporation. After the end of the Cold War<\/a>, it and many other defense companies faced a large contraction of spending as US national defense priorities shifted. Incoming CEO Bill Anders successfully led a turnaround that made General Dynamics the industry\u2019s profit leader, instilling fundamentals that continue to this day.<\/p>\n\n\n\n

General Dynamics Performance<\/strong><\/h2>\n\n\n\n

From 1991 to 2008, General Dynamics history showed a 23.3% annual return rate, compared to 8.9% for the S&P 500 and 17.6% for major conglomerates. <\/p>\n\n\n\n

$1 invested at the beginning would have been worth $30 by 2008. This outperformed the S&P by 6.7 times, and its peers by 1.8 times. <\/p>\n\n\n\n

General Dynamics History<\/strong><\/h2>\n\n\n\n

In 1989, the Berlin Wall fell, and with it fell the US defense industry\u2019s business model. Accustomed to selling large weapons systems such as missiles and bombers, the defense industry now found its wares obsolete amidst new national priorities. Within 6 months, the price of leading defense companies had fallen 40%.<\/p>\n\n\n\n

General Dynamics’ history as a defense company meant it was one of the worst affected companies. In 1991, it had $10 billion of revenue but negative cash flow, as well as $600 million of debt, and thus had a market capitalization of just $1 billion. That year, Bill Anders joined as CEO. <\/p>\n\n\n\n

Bill Anders: 1991-1994<\/strong><\/h3>\n\n\n\n

Anders was an air force fighter pilot and astronaut who held the rank of major general at NASA and was well-respected at the Pentagon. At 45, he left government for the private sector, first for General Electric and then for conglomerate Textron. An independent thinker<\/a> and blunt communicator, he was a misfit for bureaucratic cultures.<\/p>\n\n\n\n

In 1989, he was made an offer to join General Dynamics company, first as vice-chairman for one year and then to rise to CEO. He spent the year studying the industry with fresh eyes, where he came upon his strategic insight: during the Cold War, defense companies had become bloated with excess capacity. Now that much of their wares weren\u2019t needed, defense companies had two options: 1) shrink down dramatically to retain margins, or 2) acquire businesses to grow.<\/p>\n\n\n\n

In turn, his strategy for General Dynamics Corporation had three key ideas:<\/strong><\/p>\n\n\n\n

  1. The company would only stay in businesses where it could be #1 and #2 (a famous Jack Welch<\/a> idea).<\/li>
  2. The company would leave commodity businesses with low returns.<\/li>
  3. The company would stick to its strengths. Namely, it would leave commercial businesses and stick to defense and government contracts.<\/li><\/ol>\n\n\n\n

    In his three years as CEO, Anders implemented a rigorous focus on margins and generating more cash:<\/p>\n\n\n\n