By Karen Kaplan
Day Staff Writer
Groton - The end of World War II in 1945 put to rest many fears and anxieties, but leaders of the defense industry who were coming off a four-year business boom needed to find ways to grow their companies’ sales and revenues in a postwar economy.
At Electric Boat, where submarine production requirements had begun plummeting months before the war’s end, President John Jay Hopkins already had a vision. According to “The Legend of Electric Boat,” by Jeffrey L. Rodengen, Hopkins would lead the shipyard as president through a 10-year period of major growth and diversification.
Even before the Second World War’s end, EB was cutting back on its submarine work. The company turned to producing steel castings, or parts, converting military ships for commercial and leisure use, building pleasure craft, making military and commercial planes, building metal truck bodies and designing bowling alley pin-pickup devices.
Clear vision
But the honeymoon era of nondefense production would not last long. Rodengen wrote that “Hopkins had a clear vision of what shape the postwar world would take.”
“He saw that the need for defense was a permanent need, and not one that could be satisfied by improvisation in a time of crisis. ’’
‘‘ ‘Grow or die’ were words by which Hopkins lived, and this was the discipline he imposed on the company,” says “Dynamics America,” a history of General Dynamics published by the company and edited by John Niven, Courtlandt Canby and Vernon Welsh.
The text says Hopkins had three goals: to build EB into a major diversified establishment, responsible for any element of defense it could handle; to build EB into a powerful commercial player; and to fill a role both in the U.S. and in Third World nations.
In 1947, Hopkins’ first year as president, he bought Canadair Limited, a Canadian aircraft company. In 1950, he accepted a challenge by Capt. Hyman G. Rickover to build the world’s first nuclear submarine.
“With Canadair a subsidiary and the Nautilus under construction, Electric Boat was clearly a misnomer,” Dynamics America says. In April 1952, a few months short of seven years after the end of the war, Hopkins restructured EB to create General Dynamics Corp.
Multidisciplinary firm
“General Dynamics, by then a sprawling, multidisciplinary firm and an integral part of America’s military-industrial base, ‘was engaged in engineering and manufacturing activities wherein nearly every phase of the science of dynamics is applied,’ ’’ wrote Rodengen, quoting from the company’s 1952 annual report.
“(There was) hydrodynamics and thermodynamics at the Electric Boat division, aerodynamics at Canadair Limited, electrodynamics at the Electro Dynamics division and the new science of nucleodynamics in the field of industrial applications of atomic energy,” the report continues. Historic texts tell how Hopkins started building up the fledgling company to become the industry giant he envisioned.
“With submarines, aircraft and missiles already combined in the company’s manufacturing portfolio, Hopkins established the General Atomic Division in 1955,” Rodengen wrote, to explore nuclear energy. “(In 1955) in his last major acquisition, he acquired Stromberg-Carlson, to add fast-developing electronics technology to the growing corporation.”
Convair, founded in 1908 as Gallaudet, another aircraft company that produced jet fighters, nuclear-powered aircraft and bombers, became part of General Dynamics in 1954. Liquid Carbonic, founded in 1888, was added to the group in 1957. Material Service, founded in 1919, was taken on board in 1959.
Potential for growth
Says Neil Ruenzel, EB spokesman, “Hopkins saw the potential for growth, and he started acquiring various companies that would fit into the mix.”
Two years before Hopkins’ death in 1957, the USS Nautilus, the world’s first nuclear sub, left the EB docks.
For some 30 years afterwards, neither General Dynamics nor EB saw a great deal of change, says Ruenzel and Norine Lyons, General Dynamics spokeswoman. Defense spending increased a lot in 1980 when then-President Ronald Reagan boosted the Pentagon’s budget. By 1985, Lyons says, defense spending bolted up to $400 billion in today’s dollars. At that pace, the budget would have jumped to some $600 billion, again in today’s dollars, by 1990.
But the Cold War ended in 1989, drastically cutting the perceived need for submarines and other defense-related businesses that General Dynamics still held at the time.
“Everyone in the defense industry started to get ready for a surge in spending. Everybody was gearing up for a $600 billion defense budget that never happened,” Lyons says. “By 1991, people were calling for a peace dividend, and spending continued to fall.”
Procurement spending
She says that the budget by then had plummeted some 40 percent from its 1985 peak at $400 billion, and procurement spending - the part of the budget that goes for ships and aircraft and tanks, corresponding exactly to several of General Dynamics’ subsidiaries - was falling by 70 percent.
By 1991 a new management team took charge of the Falls Church, Va.-based company and its many subsidiaries.
“They started looking at things like how we could run our business more efficiently, and size it more appropriately, and manage them for cash, not throw money into R&D (research and development) without a promise that it will be supported in the future,” Lyons says. “And then the company took a long hard look at the businesses it had.”
There were many, including EB and its submarine business; and others involving space, tanks, aircraft and other pursuits. Some weren’t destined to last.
“We got out of a number of different product lines, paid down debt and restored GD to financial health,” Lyons says. Some of the divisions that were sold included Cessna Aircraft, which produced small planes; missile systems; electronics; tactical military aircraft; space launching systems and rockets; and commercial aircraft.
By 1994, GD was finished streamlining and began stabilizing, Lyons says. Its two remaining businesses included EB and Land Systems, a Michigan-based division that made tanks.
“We were in good solid financial shape, our debt was gone and we were strong and healthy,” says Lyons. “So we looked at the businesses we had left.”
The company decided it was in the right place to start acquiring new businesses again. In 1995, General Dynamics purchased Bath Iron Works, a Bath, Maine-based shipyard that makes destroyers, for $300 million. One year later, it bought Teledyne Vehicle Systems for $55 million. A year later, in 1997, it acquired two defense systems from Lockheed Martin, to make armored vehicle components, for $450 million.
Later that year, the company acquired Advanced Technology Systems of Greensboro, N.C., a company that produces a lot of the technology in the company’s shipbuilding business, including ship automation, communications systems and intelligence systems, for $267 million. And a couple months later, still in ’97, it bought Computing Devices International for $500 million.
California shipyard
In late ’98, GD purchased Nassco, a California shipyard, for some $415 million. Nassco is the parent company of National Steel and Shipbuilding in San Diego, which specializes in Navy supply ships and commercial work.
The acquisition gave GD its first major West Coast presence and gave it a new shipbuilding specialty for its Marine Group, which includes EB. It also gives GD control of three of the six major Navy shipbuilders and continues a trend among shipyards to operate on both coasts.
This May, six years after it sold off its last aircraft company, GD said it wanted to get back into the aerospace business and unveiled a $5.3 billion proposal to acquire Gulfstream Aircraft Corp. in Savannah, Ga., the premier manufacturer of specialized business jets. That purchase is still pending.
And last month, GD said it is preparing to acquire three business units of GTE for its Information Systems division, for $1.05 billion.
More than 40 years after the buildup orchestrated by GD founder and President John Jay Hopkins, General Dynamics is on a buying spree again. The purchases no longer hinge completely on the domestic defense budget.
In April, Nicholas Chabraja, GD chairman, said even though the company’s bid to purchase rival Newport News (Va.) Shipbuilding was withdrawn when the Pentagon opposed the deal, the company is scanning the market for opportunities.
“We’re going to aggressively pursue
businesses that are within our core competencies,” Chabraja said. “I think
there are some very attractive things that we can do today.”