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By Neil Baumgardner and Calvin Biesecker
General Dynamics (GD) yesterday said it has signed a definitive agreement to acquire General Motors' (GM) defense unit for $1.1 billion in cash, a move that will make GD the sole prime contractor for the Army's $4 billion Stryker Interim Armored Vehicle (IAV) program and also give it a worldwide market presence with the LAV family of light armored vehicles.
"This is a business that we believe has best-in-class products in medium-weight armored vehicles," GD Chairman and CEO Nicholas Chabraja yesterday told an analyst conference call. "This creates some critical mass for us in vehicle technology, particularly with respect to wheeled vehicles."
The debt-financed acquisition adds to GD's position as the United States' largest manufacturer of armored vehicles, including the M1 Abrams tank in service with the Army, Marine Corps and foreign customers and the Advanced Amphibious Assault Vehicle being developed for the Marines.
General Motors Defense (GMD), based in London, Ontario, is best known as the popular wheeled LAV, with more than 3,000 sold to the Canadian, Australian and New Zealand armies, Saudi National Guard and the U.S. Marine Corps since the late 1970s. GMD, then known as Diesel Division General Motors, first produced the LAV in 1977 under license production based on the Piranha from Switzerland's MOWAG. Eventually, GMD's sales of the LAV outpaced MOWAG, which has sold more than 1,800 Piranhas worldwide, including to Denmark, Ireland, Sweden and Switzerland.
In 1999, GMD bought MOWAG, unifying the LAV and Piranha family of light armored vehicles under one roof. Last month, GMD's MOWAG subsidiary acquired the Duro military truck unit from Switzerland's Bucher Industries (Defense Daily, Nov. 21).
GMD also owns Goleta, Calif.-based GM Defense Delco Systems, which makes turrets for the LAV family of vehicles. GMD gained control of Delco after GM sold its former Hughes Aircraft business to Raytheon (RTN) in 1997. Additionally, GMD has a subsidiary in Adelaide, Australia responsible for manufacturing turrets for the Australian army's LAVs. Overall, GMD has 2,400 employees.
Chabraja said GMD is expected to report sales this year of about $965 million and operating earnings over $115 million. He declined to...