General Dynamics 2011 Annual Report Download - page 4

Jay L. Johnson
Chairman and
Chief Executive Officer
General D y nam i cs Annual Repor t 2 0112
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders,
For General Dynamics, 2011 was a year of continued
focus on operating performance, excellent cash
generation and accelerating Aerospace growth.
Our company’s success is anchored by a strong
foundation of relevant products and services, a
commitment to continuous improvement, and an
innovative workforce.
As economic headwinds impact U.S. defense
spending, the strength of General Dynamics’ portfolio
is ever more apparent. Our Aerospace segment,
driven by market leader Gulfstream, is preparing to
deliver two new aircraft to the world, the G650 and
G280. These aircraft highlight the importance of our
sustained investment in new products and are at
the forefront of technological development among
business aircraft.
Following a decade of growth, we are now in a
new era where defense spending is declining. Despite
this reality, our diverse defense businesses remain
resilient and valuable assets and we continue to
feel confident about the relevance of our portfolio.
Our facilities are key parts of the defense industrial
base which must be maintained. We have solid
incumbency in the Army and Navy force structures.
We can leverage our incumbency, innovation and
experience both to bid as a prime competitor for new
development programs, and to provide our customer
with steady and dependable proven solutions.
As of this writing in early 2012, the defense
market is shrouded by the uncertainty of
sequestration which could impose $500 billion
of additional defense spending cuts over the next
nine years if the Congress does not act. If enacted,
sequestration would place extreme fiscal pressures
on our customers, with wide-ranging effects on our
industry and the security of our nation. However
sequestration is resolved, it is clear that defense
spending will continue to be a part of addressing our
nation’s economic problems.
Amidst a backdrop of continued deficit focus
and political divide, we were pleased by the support
our programs received in the fiscal year 2012
defense budget. For fiscal year 2013, the President
has requested Defense Department base-budget
funding of $525 billion, including $168 billion for
investment accounts. Our core shipbuilding and
tactical communications programs fared well in the
proposed budget. Conversely, funding for our primary
U.S. vehicle programs, Stryker and Abrams, declined
significantly. These funding levels reflect lower
Army investment spending as the Pentagon shifts
priorities. We will work with all of our stakeholders
to ensure they understand the industrial base
implications of significant funding reductions.
As we confront a fast-changing business
environment, we continue to focus on maximizing
profitability. Over the past few years, we have cut
overhead costs, improved manufacturing processes,
divested certain non-core assets, and right-sized
businesses to better position ourselves for the future.
These actions will enhance the affordability of our
products for our customers, improve the profitability
of our business for our shareholders and strengthen
our competitive positioning for the long-term benefit
of our company and our employees.
Report on Operations
Company revenues were $32.7 billion in 2011, a mod-
est increase from 2010, as initial deliveries of the
G650 drove double-digit volume growth in our
General Dynamics A nnual Report 2011 3