General Dynamics Corporation
List of Deals
General Dynamics Corporation was founded by John Holland in 1899. Known at that time as the Electric Boat Company, Holland's enterprise was originally intended to assist the Fenians, a secret organization in New York City whose goal was to end British domination of Ireland. The Fenians commissioned Holland to construct a submarine capable of destroying British naval vessels. Holland could not avoid law enforcement, and his research was thwarted. Holland then received support from Congress, obtained financial backing, and established Electric Boat to continue his work on secure, legal grounds. Holland was unable to sell his submarine design to the U.S. Navy and accepted financial assistance from Isaac Rice. Rice offered his assistance in exchange for an interest in Electric Boat. Rice then convinced Holland to give up his patent rights and management authority, effectively taking over control of the company. Rice also managed to sell submarines to the U.S. Navy.
In 1904 and 1905 Electric Boat conducted its first of several unscrupulous dealings when it sold submarines to Japan and Russia, who were at war. The company also sold submarines to the British Royal Navy. Given the company's beginnings, this move was especially ironic. Holland continued to improve the design of his submarines.
World War I resulted in the full recognition of submarines' potential, as German U-boats caused serious disruptions in British shipping. During the war, the company lost money due to the poor decision to devote its resources to the construction of disposable cargo vessels rather than submarines. The company was financially viable enough to acquire several companies by 1915, including Electro Dynamics (involved in ship propulsion), Elco Motor Yacht (builders of pleasure boats), and New London Ship & Engine of Groton, Connecticut (manufacturers of diesel engines and civilian ships). At this time, the company's name was changed to the Submarine Boat Corporation. After the war, the Navy decided to devote most of its budget to surface ships. As a result of this, the company changed its name back to the Electric Boat Company.
Just before World War II erupted, Electric Boat came under investigation by the U.S. government; it was accused of being a "financial beneficiary" of foreign wars. It was also discovered that the company had inadvertently given design secrets to officials of the increasingly hostile government of Japan. Electric Boat was accused of profiteering, graft, and unethical business practices, but when the U.S. government was forced to reassess its position on military preparedness upon witnessing German re-militarization and hostile Japanese activities, the government ordered submarines and patrol/torpedo boats from Electric Boat. The company was operating at full capacity during the war, and due to a labor shortage, began to hire women as welders and riveters.
The company experienced a sharp decline in orders for its products after the war. As a result, Electric Boat's stock fell in value from $30 per share to $10. The company reorganized and diversified into related commercial and defense industries. Electric Boat purchased Canadair, which produced flying boats and modified DC-4s. A series of events, including the Berlin Blockade, Soviet detonations of an atomic bomb, and the war in Korea, stimulated demand for new aircraft, including the T-33 trainers, F-86 Sabres, and DC-6s built by Canadair. By the early 1950s Canadair's importance overshadowed Electric Boat. With the profits generated by Canadair, Electric Boat purchased Convair, a manufacturer of a variety of civilian and military aircraft.
In 1952 a new parent company called General Dynamics was established to manage the operations of Convair, Canadair, and Electric Boat. Convair led the development of the American nuclear aircraft program; this program, however, was later found to be impractical, and the project was abandoned. Electric Boat experienced more success with nuclear power; in 1955 it launched the first nuclear submarine, the Nautilus.
The company became seriously jeopardized when Convair's jetliner program failed. Convair developed a commercial jetliner, but was unable to introduce it due to delays caused by contractual obligations to TWA. This delayed entry into the market forced the company to write off the entire passenger liner program, losing $425 million. General Dynamics was so weakened by this that it became an easy target for a takeover. Henry Crown of Material Services Corporation merged his company with General Dynamics for a 20 percent share of the new company's stock. His proposal was accepted in 1959.
In the early 1960s the U.S. Defense Department invited American defense contractors to bid for the production of a new aircraft, the F-111, with which the department intended to replace its aging fleet of B-52 bombers. General Dynamics entered the competition and was selected for the project. The Air Force and Navy amended their design specifications and requested the addition of so many devices that the prototype could barely fly. The F-111's utility as a replacement for the B-52 was greatly diminished. When the aircraft's role was reassessed, the project was identified by congressional critics as an example of gross mismanagement, organizational incompetence, and financial irresponsibility.
In 1963 the company purchased the Quincy shipbuilding works from Bethlehem Steel. Quincy was an outdated facility requiring costly improvements, but held promise as a builder of surface ships. In 1971 the Electric Boat division of General Dynamics and its chief competitor, Newport News Shipbuilding, were awarded contracts to manufacture a new submarine, the 688 or Los Angeles class. In the following years the company won contracts for liquefied natural gas tankers for Burmah Oil Company (1972), the Trident ballistic-missile submarine (1974), and the F-16 lightweight fighter aircraft (1975).