The news broke on Wednesday: Defense contracting superstar General Dynamics (NYSE:GD) has decided to simultaneously distribute dividend checks to its investors and pink slips to its workers. Which -- I'm sorry, General -- begs the question: Is this any way to run an army?
Listen, as a shareholder advocate myself, I'm all for the idea of dividend hikes. Heck, keep this up and the folks over at Motley Fool Income Investor might just throw you a party (or recommend buying the stock.) But somebody in corporate PR might want to take note of the eminent inadvisability of:
- Announcing a 9% increase in the quarterly dividend to $0.38 per share on Wednesday, which pushes the yield up to 4.3%, then turning around and the very next day and
- lamenting the need to lay off 1,200 workers, blaming bad business at the Gulfstream jet division.
Listen, General D. I'm not questioning the need for the layoffs. You just cut earnings guidance 10% to $6.05 per share, and tough times call for tough measures. Why, I hear your archrival in the business-jet biz, Textron (NYSE:TXT), just had to cut its dividend.
Meanwhile, over at Boeing (NYSE:BA), they're still breaking the bad news about the last round of right-sizings (it takes time to dole out 10,000 pink slips). Fellow industrial heavyweight Caterpillar (NYSE:CAT) is wielding the ax on 20,000 redundancies, making Northrop Grumman's (NYSE:NOC) 750-person downsizing look like a comparative hatchet.
Share the pain
In explaining the layoffs Thursday, General CEO Nicholas D. Chabraja commented: "We regret the impact of these actions on our employees and their families, and are doing our best to minimize the number of workers effected." And maybe he does ... regret the impact.
I mean, if business is down, and there's no work for Gulfstream employees to do, then layoffs are of course the right decision for all concerned. It won't do employee morale any good, sitting around and twiddling their thumbs when there's no work to do. As for the company itself, well, paying employees for work that isn't there is part of what got General Motors (NYSE:GM) and Ford (NYSE:F) in their present fix, right?
Hey doc? The truth hurts
Still, that bit about "doing our best to minimize" sticks in my craw. Consider that the new $0.12-a-share annual dividend hike, times 386.1 million shares outstanding, works out to $46.3 million total. That's enough to pay $38,600 to each supposedly "unaffordable" worker -- $71,200 per non-contractor employee getting the ax.
Which gets me to wondering, Mr. Chabraja, maybe you needed to show these workers the door. But is this the best that can be done to minimize the number of workers affected?
Aside from the occasional prevarication, Rich actually admires General Dynamics -- as an investment. Find out why in:
