General Dynamics Q2 2010 Earnings Call Transcript

David Strauss - UBS Investment Bank

And just as a follow-up, low single-digit growth, what are you assuming for the guns, bullets, the stuff that has exposure to the supplementals? And then also, what does that assume for EFV?

Jay Johnson

I would characterize the weapons systems and ordnance pieces as slow, steady growth as well. And what was your last?

David Strauss - UBS Investment Bank

EFV.

Jay Johnson

EFV, as you know, is in the SDD 2 phase right now, and depending on what you read, it may or may not be a risk. But we're providing our seven vehicles for the Marine Corps to test. For us, it's about $250 million, I think a year going forward and it's not due to reach an LRIP until '15 or '16. So it's not a major muscle mover in the sense that it impacts us heavily in the next couple of years. So we'll see how it develops within the Pentagon.

Operator

[Operator Instructions] And our next question comes from the line of Myles Walton with Deutsche Bank.

Myles Walton - Deutsche Bank AG

Jay, I was wondering if you could give us some color on the timing in the step-up in the G650 production rates over the next few years as you go towards three to four month. And also what should we think about in terms of incremental margins of that mix coming in, even in '11 and beyond?

Jay Johnson

Myles, first of all, let me just say, since you opened the 650 door, let me just say that we're very pleased with what's happening with the 650 right now in test. We've got four in flight test right now in all corners of the flight envelope. They're performing exceptionally well. We're very pleased, so we're on track, okay? Now then to your specific question, I believe, you've heard me say before that in terms of production rates and margins, I'm a little less fulsome than you would like me to be at this stage, because we're just not into full-rate production yet. But I would report that -- and you know the facility we have and you know the production capability and capacity that we built into this airframe, so we're very bullish for the longer term. But right now, I'm going to stay with 17, 33 and 33 for production in '12, '13 and '14, and the margins will be respectable margins, but growing as we mature that program. And I'm very bullish on the longer-term margins for the 650. It's going to be a game buster airplane for both the customer and for Gulfstream.

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