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MarketScreener Homepage  >  Equities  >  Nyse  >  General Dynamics    GD

GENERAL DYNAMICS

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General Dynamics : The self-licking ice cream cone

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01/12/2019 | 06:38am EDT

With his recent departure from his position as United States secretary of defense, General James Mattis is a clear example of the situation in Washington, D.C., derogatorily known as the 'self-licking ice cream cone'.

General Mattis retired from the US Marines Corps in April 2012 after a distinguished and successful career. Mattis ended his service as head of the United States Central Command that oversaw the wars in Iraq and Afghanistan, and was responsible for a region that includes Syria, Iran and Yemen.

Upon retirement, he joined the board of directors of General Dynamics, an aerospace and def ense company. In 2017 the company posted $30.9 billion in sales with the bulk of its revenue coming from US military contracts. In fact, after Lockheed Martin Corp. and airplane manufacturer The Boeing Co., General Dynamics is the third-largest holder of US government military contracts.

From 2013 until 2017, Mattis was a member of the board of directors of Theranos. The company has since been proven to have fraudulently sold a blood-testing technology that did not work. Its founder, Elizabeth Holmes, is currently under trial for fraud and conspiracy.

In August 2012, Holmes asked Mattis, who had expressed interest in testing Theranos's technology in combat areas, to help with a formal inquiry with the Food and Drug Administration about the company's intent to distribute its tests without FDA clearance. Within hours, Mattis forwarded his e-mail exchange with Holmes to military officials, asking, 'How do we overcome this new obstacle?'

Mattis was confirmed as secretary of defense by the United States Senate on January 20, 2017.

In 1992, Pete Worden, former director of Nasa's Ames Research Center, wrote a paper about the bureaucracy inside the space agency that he described as 'a self-perpetuating system that has no purpose other than to sustain itself.' A self-licking ice cream cone that never ends.

A recent report shows that 25 generals, nine admirals, 43 lieutenant generals and 23 vice admirals retired to become lobbyists, board members, executives or consultants for the defense industry between 2008 and 2018. They are a part of a larger group of 380 high-ranking government officials and congressional staff who shifted into the defense industry during that time. This is the self-licking ice cream cone of government and elected officials and the military-industrial complex or military-industrial-congressional complex described by President Dwight D. Eisenhower in 1961.

In the Philippines, perhaps the system is not a never-eaten ice cream cone but a never-ending 'Trip to Jerusalem.'

Government employees serve their tenure and are subject to mandatory retirement. But that does not stop them from moving to appointed positions. After a time in an appointed position-and with public exposure-it is time to move up the ladder to elected office.

While losing candidates for certain elected positions are not allowed to be appointed, they can bide their time until the clock runs out. Likewise, an appointed official who has spent time learning the ins and outs of a particular government department can be valuable in the private sector with a company that has to gain favor with that government department and its bureaucracy.

It can be a 'Trip to Jerusalem' because we keep seeing the same family names if not the same faces moving from chair to chair around the circle. However, unlike in the children's party game, chairs and positions are not removed. In fact, it seems like the government keeps adding more chairs to accommodate additional players.

(c) 2019 Business Mirror Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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Financials ($)
Sales 2019 38 554 M
EBIT 2019 4 557 M
Net income 2019 3 454 M
Debt 2019 9 984 M
Yield 2019 2,39%
P/E ratio 2019 14,00
P/E ratio 2020 12,63
EV / Sales 2019 1,50x
EV / Sales 2020 1,39x
Capitalization 47 892 M
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Number of Analysts 21
Average target price 203 $
Spread / Average Target 22%
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Phebe N. Novakovic Chairman & Chief Executive Officer
Jason Wright Aiken Chief Financial Officer & Senior Vice President
Les L. Lyles Independent Director
James Schine Crown Lead Independent Director
William A. Osborn Independent Director
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