FORT WORTH – General Dynamics Corp. said today that it has reached an agreement with California-based defense giant Lockheed Corp. for the sale of its 20,000-employee Fort Worth Division for $1.5 billion in cash.
In a joint news release, the two defense titans said they expect the deal to be closed in the first quarter of 1993. GD and Lockheed, maker of the F-117A stealth fighter, announced the sale at 6 a.m.
“This combination will further the much needed consolidation of the nation’s defense industry while preserving key capabilities within the defense industrial base,” said GD Chairman William Anders and Lockheed Chairman Daniel Tellep.
“It is a unique opportunity to create a strong, efficient and highly focused military aircraft competitor well suited for the post-Cold War environment.”
The combination creates a $6.5 billion military aircraft company, ranking No. 1 in the defense industry. Lockheed will become the second-largest U.S. defense contractor.
In a release to employees, Gordon England, manager of Fort Worth Division, said the facility will benefit from the sale.
“In my judgment, this consolidation is critical for the Fort Worth Division,” he said. “We will directly benefit from Lockheed’s world class expertise in advanced airplane technologies.”
Teams from both GD and Lockheed will be at the division working on a transition plan. The teams will be headed by England and Ken Cannestra, president of Lockheed’s Aeronautical Systems Group.
England, who officials said would stay on after the transaction is complete, said the division’s operations should remain unchanged for the “forseeable future.”
“No near-term changes in management or employment levels are anticipated as a result of this transaction beyond those previously announced,” he said in the statement to employees. “Certainly, over time, some people could move between organizations, and some parts of our organizations could be consolidated.
“On a larger scale, however, I expect that our mainline activities on the F-16 and other programs will remain intact.”
GD’s stock jumped $4.75 to close at $101 a share yesterday as Wall Street defense analysts began to speculate that the announcement of the deal was imminent. Trading in the stocks of both Lockheed and GD was stopped when the market opened this morning. GD opened just before 10 a.m. at 107.50, up $6.50. At 10 a.m., Lockheed was trading at $56.88, up $4.63. Lockheed said it will finance the acquistion with a combination of short-term and long-term debt.
Rep. Pete Geren, D-Fort Worth; Rep. Joe Barton, R-Ennis; Texas Gov. Ann Richards; and Fort Worth Mayor Kay Granger were informed of the sale late yesterday by company officials.
“I think it will be very good for Fort Worth,” Granger said last night. “With the downsizing of defense, which will be accelerated under ( President-elect Bill) Clinton, we are in a better position for the future under Lockheed.
“Because of the job we do in Fort Worth with the F-16, I think it can only mean good things for General Dynamics’ Fort Worth operations. “Lockheed can open the door to technology that we don’t have now.”
“I think overall it’s a positive,” Geren said today from his Washington office. “People who have worked out there have been wondering what the future was going to be.
“This is a good match. It’s really more of a merger when you consider the size of the Fort Worth Division. It marries the complementary strengths of these two organizations.
“Lockheed has tremendous strengths in advanced technologies and GD has tremendous strengths in manufacturing aircraft and winning foreign military sales.
“Together, they appear to be a match made in heaven.”
The sale of the Fort Worth Division marks the first time GD has designated one of its four core businesses – jet fighters, submarines, tanks and space launch systems – for sale. Analysts say the sale of the unit signals the dismantling of GD, a company that flourished during the Cold War buildup but has fallen on hard times as Congress has moved to pare the defense budget.
The two companies have been negotiating for several months while GD has gauged the interest of other defense titans, including Boeing Co. and Northrop Corp., on their interest in the local division.
For 50 years, GD’s Fort Worth Division has been one of the main forces powering the Tarrant County economy. The plant’s bread-and-butter F-16 Fighting Falcon has for the past 20 years provided income for as many as 30,000 families in and around Tarrant County.
GD produces the F-16 in Fort Worth and along with Lockheed and Boeing is developing the F-22 Advanced Tactical Fighter, the Air Force’s 21st-century fighter.
A key question will be what Lockheed will do with GD’s work on the $60 billion ATF program. Lockheed is the prime contractor on the program, and GD and Boeing are the two major subcontractors.
Analysts say Lockheed wants to consolidate its ATF work with GD’s, which would raise its 35-percent stake to 67.5 percent. They say Lockheed could opt to consolidate its F-22 work either in Fort Worth or at the company’s facility in Marietta, Ga.
Lockheed spokesman Bob Slayman said today that he knows of no plans to shift work from Fort Worth to Marietta. “The broad objective here is to expand business,” Slayman said. “There may be some shifting of activities, but that will be one of the subjects for the transition team.”
Granger said GD officials did not tell her what the sale would mean for the ATF program here. The Lockheed acquisition could mean greater job security for some Fort Worth workers if the company decides to move an aircraft-modification facility to Tarrant County from Ontario, Calif.
GD officials have been putting together a plan that would bring the facility to Carswell Air Force Base. GD workers could use the hangars at the base, which is scheduled for closure by the Pentagon. Some sources at GD say if Lockheed moved the facility here, it could bring with it some 1,500 to 2,500 jobs.
Copyright 1992, 1994 STAR-TELEGRAM INC.
Author: Michael D. Towle; Star-Telegram Writer