General Dynamics C4 Systems, a business unit of General Dynamics Corporation (GD), has announced the laying-off of about 5% of its workers from a workforce of 10,000. The workforce is spread over 200 sites across Canada and the U.S.
The lay-off was precipitated by defense-budget cuts that are forcing the company to streamline its operations. The job cuts would be announced over the next fortnight.
General Dynamics’ operating unit, General Dynamics C4 Systems Inc. focuses on the development, design, manufacturing and integration of secure communication, information and technology solutions. C4 Systems is a part of General Dynamics’ Information Systems and Technology (IS&T) segment.
General Dynamics was the fourth largest U.S. defense contractor in terms of revenue in fiscal 2010, following sector leaders like The Boeing Company (BA), Lockheed Martin Corp. (LMT) and Northrop Grumman Corp. (NOC). The company is one of the two contractors equipped to build nuclear-powered submarines in the U.S.
General Dynamics’ revenue exposure is spread over a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; shipbuilding design, repair and construction; and information systems, technologies and services. Diversification of revenue through exposure to a number of uncorrelated markets will keep the overall growth momentum steady.
Looking forward, key drivers of growth for the company include a diversified revenue exposure, its stable business of U.S. military vehicles, and strong cash flow generation.
However, the company is largely tied to the U.S. defense budget, where the threat of budget cuts is looming large. Also, we have become slightly cautious about the company’s recent G650 crash and risks related to the execution of key projects. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Headquartered in Falls Church, Virginia, General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation.
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