Jet Cancellation Cited in General Dynamics’ Loss
General Dynamics posted a massive $530.1-million quarterly loss Wednesday, resulting from writeoffs on the recently canceled A-12 attack jet and several other troubled defense programs.
Meanwhile, the Pentagon said it is so concerned about the financial condition of General Dynamics and its A-12 partner, McDonnell Douglas, that it decided to defer seeking a repayment of $1.35 billion from the two.
Pentagon spokesman Pete Williams said that the government was entitled to the money but that it would defer efforts to collect it “to avoid putting extreme financial pressure” on the companies--the nation’s two largest defense contractors.
The Pentagon canceled the A-12 under punitive terms known as default, which entitled the Pentagon to demand a full refund for payments on goods that were not delivered. Williams said the department would await the outcome of litigation between the companies and the government before seeking repayment, although the firms would be liable for interest payments.
General Dynamics said Thursday that it took a $858.9-million charge against profit in the fourth quarter; sales were $2.598 billion, compared to $2.635 billion the year earlier.
For the year, the defense contractor lost $577.9 million on sales of $10.2 billion, compared to earnings of $293.1 million on sales of $10 billion in the year before. General Dynamics took total writeoffs of $1.3 billion in 1990.
“Our results for 1990, which are impacted by substantial special charges, reflect the unprecedented market uncertainties of our industry,” said William A. Anders, chairman and chief executive.
Aerospace analyst Paul Nisbet branded as ridiculous the entire A-12 termination, which is resulting in a monumental legal battle between the government and the two firms, and said similar actions by the Pentagon were threatening the entire defense industry.
“What we have seen is a political weapon created by (Defense Secretary Dick) Cheney, which has never been used before,” Nisbet said. “It presumes these companies are guilty and lets the matter drag on until nobody gives a hoot anymore.
