Okay, well, welcome. I want to just say I'm really excited to have Phebe Novakovic back with us, the Chairman and CEO of General Dynamics. We've got a lot to talk about here. You know, to start.
Before we get started.
Oh, okay. Yes.
In an homage to FD, we're invoking the forward-looking earnings. Okay?
Okay, good. I just want to start with, you know, Phebe, if you can give us a sense of right now, what you see as the biggest opportunities and challenges at General Dynamics.
Let me walk through each of our groups, because the opportunities and challenges vary by the group. At Aerospace, it is the smooth production and delivery and entry into service of new airplanes. At the Marine group, it is stabilizing the industrial base so that we can capitalize on the considerable growth we've already gotten by improving our throughput, increasing our solid productivity even higher. That will increase revenue even further than what we currently anticipate, and improve margins. At Combat, it's about being nimble enough to be able to serve the needs of U.S. and their allies in this increased threat environment, particularly in Europe.
At Technologies, it's to put the impact of the supply chain challenges we had at Mission Systems behind us, continue to grow, as we have been at GDIT, and have Mission Systems regain that growth. I think with each one of those significant opportunities, comes significant operating challenges, one of the keys is to continue to ensure that our operations are really disciplined and highly leveraged and effective.
You know, if we start with Aerospace.
Of course.
Of course, yes. You know, last year, you know, I was down in Savannah and saw, you know, with you and saw what was happening there. One of the things you could not miss, sort of walking through the facilities, is sort of the breadth of your product line right now for the large cabin market, which, you know, seems more complete than anyone else has. Can you talk about how you have what advantages you have with this breadth of products for customers, and how that offsets any cost of complexity, having this number of models?
Let's come back to complexity, because I think that is a predicate that I'm not sure I share. Let's talk about this fleet of airplanes that we've developed. They're all new, modern, highly advanced airplanes, and we designed and produced them to meet various customer missions and requirements. In general, each one of these airplanes is separated in performance by about 1,000 nautical miles, and roughly, crudely, about $10 million in price. That allows customers, and they have great clarity around that, this, to pick the kind of airplane that they need to suit a particular mission, and sometimes it's different airplanes from the same organization or same person to meet different missions. With respect to operations, there is an enormous amount of commonality among all of these airplanes. They share the same technologically advanced cockpit.
They have similar, but different sized wings, and they're all produced in purpose-built, modern facilities. We are clearly the most efficient producer, lowest cost, highest quality producer. I think that it's pretty straightforward, and we don't see a lot of complexity from an operational perspective in moving each one of these airplanes down their respective line.
You know, just on that, and one of the things that we have thought of, to some extent, that in the past, often people who, say, have bought Gulfstream, stay with Gulfstream. Perhaps people who buy from some of your competitors may want to stay with them. Do you see opportunities here to actually gain share and make inroads into customers that may not fly Gulfstreams today?
Clearly, that's an opportunity. We have believed, and experience is proving this hypothesis out, that all new modern airplanes stimulate incremental demand, either from additional airplane purchasers or from other people's airplanes. There are switching costs that are not insignificant from moving from one producer to another. We've been pretty good about being able to capitalize on that. Look, we don't chase market share. It's a good way to go broke if you're measuring yourself on market share. We chase profitability. With an eye on that, it ensures, along with this, you know, our fleet of new airplanes, it ensures additional market penetration.
Well, I mean, two of the most important models here are the G700 and 800. Can you update us on where they stand in terms of the certification process?
The G700 has done beautifully in the certification process. We are now at a point where the certification process is about compliance. Technical issues are behind us. That said, we expect to be done with that process the beginning of September. We do not, however, control certification, that could come in the third quarter, more likely in the fourth quarter. I think this is what's important. By the way, the pilot certification will follow 10 days later, and that's an important thing to keep in mind. I think critically, and critical import here is that we have built and will have ready for delivery all of the airplanes we had intended to deliver this year.
It's simply a question of having enough time to manage the logistics of delivering these airplanes to the host of customers. We believe that we will be able to deliver all, if not substantially all, of the airplanes we had anticipated this year. It's just a question of timing and sufficient logistical time to get these into the hands of the customers.
I'm just curious, you know, I remember in Savannah.
Oh, excuse me. By the way, 800 will follow six to nine months later.
Okay.
Go ahead.
Because I remember in Savannah, we talked a little bit about the fact that certification's become a little bit more challenging in terms of how software validation is done. Some of this, I think, has all been in the wake of what happened with the Max. I mean, do you see the fact that this is taking a little longer than it was, having to do with some of these differences in how the FAA is working on certification?
Oh, clearly. There is a more stringent and exhaustive certification process than there was before. It's unalterably the case. We don't control it, and it's very hard to estimate, particularly since it's new. I think the important thing to, from our point of view, is this airplane has done beautifully, and it's extremely mature. There have been no surprises other than on the upside. It has performed better than our, than our, than we had originally anticipated during design. That is all good and wholesome. It just takes time on a process we are in, not in control of.
The market, the business jet market overall became very hot, you know, over the last two years. I mean, you're projecting a book-to-bill of about 1.0 this year, as are sort of others in the, in the industry. Can you characterize how that book-to-bill of 1 kind of plays out if you think of corporate customers versus high-net-worth individuals versus international?
Our plan presumes, as you know, a 1:1 book to bill, and we continue to believe that is reasonable. We have very strong demand from North American public and private companies. Europe is moderate, Mideast is strong, and parts of Asia are very strong. Not China.
Yeah.
We have seen a bit of a diminution in high-net-worth individuals. So far, the remainder of our potential customers and customers have been pretty robust.
And, and-
The pipeline remains quite good.
Does the um, the broad portfolio you have, I would think that may work well with the corporate customer, who may have large fleets.
It works extremely well, particularly with corporate customers, both private and public, because they often have different missions, as we talked about a little bit earlier. Each one of these airplanes meets different missions, and they will buy a assortment of airplanes to meet those different requirements, and some high-net-worth individuals do the same.
Now, one of the things that gets discussed a lot with respect to business jets is, what if there is a recession? We've seen in past periods, recessions have had a strong impact on that, on demand. How do you think about Gulfstream should we see an economic recession?
That's a hypothetical, let's postulate a few things. Let's assume we see a recession that is defined by two consecutive quarters of negative GDP. Let's also presume that we have a book to bill about 0.5-0.75.
In that kind of a period?
In that kind of a period, we should do just fine. We are not immune from the economic cycles, and if there's a serious recession or one of greater duration, we're likely to see a bit of an impact. We have a very sticky backlog, so that helps mitigate that. We've been through cycles before, and one of our hallmarks is acting like a good cyclical. Cut supply faster than demand declines. If should we see as a, as a nation, that kind of economic prospects in front of us, that's exactly what we'll do.
From what I read, and many of you are better experts at macroeconomic, you know, projections than perhaps we are, but from what I see, people are talking about a, you know, mild recession, and we should be just fine in that.
Um, now-
By the way, it remains to be seen in a relatively minor recession, whether demand is even impacted at all.
Well, if you go back a ways in time, at one point, you were able to get 20% margins in Aerospace. Clearly, you've got new products that are coming in. One would not expect that today. As you look forward. Is that a target that you can think about?
We certainly anticipate that. In the near term, we're looking at high, high teens margins. We'll get better and better and better as we come down our learning curves on each one of these airplane models. There's good operating leverage here.
You do see a path as these mature.
Yes.
a few years down the road, to be able to get back to that?
We do.
Does that come, if you think of in terms of pricing versus, cost reduction, operational improvements, I mean, what are the main things that will allow you to get to that eventually?
You can never anticipate where price will be, although we hold price very dear. It will be primarily driven by, we're expecting some price improvement, but primarily by the operating efficiency, as we get better and better and better. We have superb operations at Gulfstream. I think you saw some of that when we were down there. It's a highly efficient business with superb operating leverage. We ought to take advantage of that.
When you look at the services business within Aerospace, I mean, you've got Jet Aviation, you've got the Gulfstream services business. This is an area that I would, at least as we've seen in the past, can be much more impacted by a recession. I mean, how do you think of that?
Service will grow as the fleet grows, with some perturbation over time of mix, including special mission. We have special mission work that we do, modifying airplanes, we count that as service. Again, it depends on the type of recession. A mild recession, a somewhat diminution in flight hours has very little impact on service. It's about 30%-40% of Aerospace revenue. I expect that will lessen as we get more and more airplanes into-
Mm-hmm.
The 700 and 800 are in service. Again, we've got good operating leverage in service, and so there, we can manage those fixed costs pretty well. I don't imagine that being a real headwind in a mild recession.
You already have a pretty high percentage of the service work on your, on your aircraft.
Extremely high.
I mean, is that-
We've captured almost everything we want to capture.
That's what I was going to ask.
Mm.
There's no goal to increase that. You're pretty much already where you want to be.
You can always do a little bit better, but we like to take care of our airplanes, and our customers like us to take care of our airplanes.
Let's switch over to defense. How do you view the Biden budget, and how did GD fare in that?
Over the last few years, the budget has fully supported our programs, and for the most part, this one, too. Congress has added in the past where they see fit, and we would anticipate some of that again. We've done quite well in the budget environment. Again, the defense budgets are driven by threat, and the world is, unfortunately, not a safe place.
All of us are watching the drama in Congress right now. It looks like we may get to some resolution with respect to the debt ceiling. When you watch what is going on in Congress, we can get to that point, but we're not at a point where we have agreement on actually what the budget's going to look like until, hopefully, later this year. How do you look at this?
There is always sturm und drang about spending, perhaps amplified this year because of the debt ceiling. You know, we have a long history of, let's just look at the appropriations, what do we get? That gets driven by the relevancy of your major programs, and we are very well positioned in terms of the relevancy of all of our major defense programs, so we should fare pretty well.
If we go to Marine, your top line is really picked up recently. How, how should we think of this? Are we at an inflection point here? I remember when we were sitting here a few years ago, we talked about 2023 as a point where Columbia class could really start to ramp up. How should we think about the trends for Marine top line from here?
Marine top line will grow because it's a national imperative for Navy surface ships, but heavily because of the nation's need for submarines. Columbia will drive that growth for Virginia. We need to get the industrial base stabilized so that we get material delivery on time. Particularly on Virginia, so you get the material delivery on time. We continue to improve our strong productivity, as I noted earlier, that drives additional throughput, which drives additional revenue and improves margins. It's really on the Virginia program, getting things stabilized and returning to the real operating efficiency that the industrial base is capable of, and we see considerable growth that could be amplified the faster we can get the Virginia issues behind us.
Columbia is increasing and will become an increasing driver of our growth as we get further into the first ship. We've already started on the second ship. We'll have the third pretty much dear to fourth heel to toe. The revenue there is very good, and margin expansion is the key.
Over the past few quarters, you've talked about a number of those issues, supply chain, material costs, labor. I mean, when you look at labor, say, today, one of the concerns we've had is that not just here, but in quite a few defense companies, is bringing people back post-pandemic has been hard. Not just because you need the number of people, but in these complex projects, you may have, like, 100 or so critical people, highly skilled people, that you might have lost. How do you think of that?
We haven't had difficulty having people, bringing people back because they didn't go home. However, one of the remnants of COVID, and one of the primary impacts, was a massive disruption in the labor market across the economy. That is felt and was felt in shipbuilding because it's a heavily labor-intensive business. There was a phenomenon that happened, that we saw during COVID, a higher number of more experienced shipbuilders, and workers throughout the submarine industrial base, go home. They retired. We had a couple of quarters where we were increasing hiring, and it was a little spotty, but since the third quarter, we have met the preponderance of our hiring goals.
Because we have a very robust training program, these new shipbuilders are coming out of training at a higher proficiency level, with a higher performance than we had seen in the past. COVID hit the labor force, but we are beginning to see that behind us. The more people we get through our pipeline, the more people we get trained, again, that'll help our throughput and our productivity. We see that beginning to mitigate, and nicely.
Now, one of the challenges also, I mean, you've got material costs have risen over the past.
Mm-hmm
... couple years. How do you think about the impact of rising material costs on these programs and their margins?
The majority of most of our contracts, particularly shipbuilding, are covered. We've got provisions in that, in those contracts that cover inflation, but it is without profit.
Mm-hmm.
That has been a bit of a drag on margins, but the industrial base and the customer are adjusting to inflationary behaviors that we haven't seen in quite some time. Costs will increase, and that's another reason we have to become increasingly efficient, is to offset some of those costs, and we have done that, frankly, throughout the business. We need to still work through inflation, but so far it hasn't been a major issue for us.
When you go, I think of in a comparison here, if you look at commercial aircraft, for example, and probably this is true at Gulfstream, One of the challenges is you've got a lot of small suppliers, where material is a pretty important part of their cost structure, and when those costs go up, it can make it quite difficult for some of them to actually continue to operate in some cases. How do you deal with that?
Both at Gulfstream and also heavily on Marine group, we have increased long lead funding so that there is certainty out in the supply chain, so they can buy in the product mass and material mass that they need to buy, and that helps offset their costs. As you'll note, the Navy, as well as the Congress on the Marine group side, has funded quite a bit of supply chain, provided quite a bit of supply chain funding, and that is largely to mitigate some of the impact of inflationary pressures on the smaller suppliers. And that has helped considerably and will continue to help. We've got to work through all of this, but none of it is impossible to manage. It's basic blocking and tackling.
The sooner the supply chain knows that they've got certainty, the better it is for them.
Mm-hmm
... the better they're able to adjust. You've seen an increase, in particularly, on the Marine group side of long lead funding, and the Navy's been quite proactive, as has the Congress, in recognizing that.
I think traditionally of Marine as a kind of 9%-10% margin business. Certainly back when you were running it, you know, you were up there in that level. I mean, as you work through these issues, how long do you think it might take to get back to that kind of a margin?
We've got to get, as I've noted several times, some of the Virginia challenges behind us. I think as we get further into Block V. We're almost done with Block IV. We're working on Block V. As we get further into Block V and some of the challenges are behind us, and Columbia continues to grow, we should be in that 9%-10% margin, where certainly that is a goal for us, and it is achievable. It's just, again, you know, methodically, systematically, in a disciplined fashion, working through, you know, some of the Virginia challenges, but it is well within our capability.
... Let's switch over to Combat. Now, can you talk about how the war in Ukraine has affected your growth outlook for Combat Systems?
Well, unfortunately, the threat environment has gotten far worse, and prior to the invasion, we had anticipated flat to, on occasion, negative growth in Combat. We're now looking at low single-digit growth. There's increased demand in Europe for combat vehicles, both tracked and wheeled, for munitions within the United States, and elsewhere, and for bridges. All of those factors combined to give us some anticipated growth that we otherwise had not seen, and that growth can increase, depending on how quickly and nimbly, and our agility, our ability to get contracts, you know, cycle the demand from a demand signal to an actual contract and increase funding. We're working on that. Customers are working on that, but we have yet to quite see that, but we do see some uplift here that we hadn't seen before.
Again, something to remember about Combat, they have superb operating leverage. This is a very, very efficient group, so the revenue comes, and the margins are there, so you get increased earnings.
I mean, we've seen I mean, I think of this as almost three different things for, related to the war in Ukraine. There's a delivery of munitions that ultimately, when things would have to be replenished, and other things as well, that we would have to re-replenish. There are sort of direct supplies to Ukraine, and then there's the broader European market with others interested in weapon systems and so forth. I know on the munition side, you've talked about, the potential to actually have some significant new contracts. Yet, when we look at the budgets, it's challenging because we actually saw the munition budget go down in the Biden budget, and we're trying to understand how this all fits together.
Can you describe how we should think about your munitions business?
We've been working very closely with the Army and the Administration on increasing that funding. We have several contracts in place and are moving munitions production to the left to meet the needs. We can go even faster working with our customer. I'd say the Administration has been very forward-leaning. The money that has been in munitions has been adequate. They will provide more when needed. I'm not concerned about the funding. It's simply getting these contracts in place. We've got several now so that we can increase production even faster than we've anticipated. We've already brought it to the left. Our goal is to bring it even further to the left, 'cause we need to replenish our stores and provide for others as well. It's possible. It's just, again, going to take some time to work through.
You know, you talked about the direct supply for the Ukraine or for Ukraine. That typically has been or so far has been out of stores. We have some work associated with that. Often, training will come with that. The increased general demand because of the overall threat environment, and I'd say the first category, munitions, and that third category of the general demand environment, because of the threat, are where the growth engines are.
In that general threat, I mean, you've gotten, you know, new things coming into European Land Systems. How are you thinking about the growth potential in ELS versus Combat as a whole?
ELS should see some very nice growth. Europe is full of bridges, and rivers, and they need more bridges. We are the primary supplier of tactical bridges. There is considerable demand for that, as well as wheeled and combat vehicles, and so it's simply a question of getting that demand into contracts, and we've seen increasing growth there. We see that nicely but as a relative comparison to our other two businesses in that group, we've talked about munitions, and with respect to Land Systems, we see increased demand for their combat vehicles. Mobile Protected Firepower, which is the Army's signature new program, will get full funding. Abrams will be nicely funded. Abrams has become a very important strategic asset for many of our allies and the United States.
Stryker will, funding may be a bit more lumpy, but it's got a lot of support because that's a very powerful, versatile, platform. We see growth there, where we had otherwise seen kind of flat.
It looks like, I mean, those budgets, and we had seen those budgets as actually in decline a year ago.
Mm-hmm. They were.
It looks like that's no longer the case, that we may actually see.
You see a fair amount of foreign military sales on Abrams in particular. I think the world has recognized the superiority of that weapon system. It is unparalleled.
Well, how does this work when, like, for instance, The decision to provide 31 Abrams to Ukraine, those were sort of, as I understood it, they were kind of moved up in the beginning of the queue, and they slid back. In other words, does volume of work on the Abrams go up, or does the line stay somewhat stable, it's just pushed back, so it's a longer run?
We expect throughput on that line to increase. Less so where we're not impacted as much by where we're taking older models of tanks and sending those, but particularly the newer models and the FMS sales as well as U.S. sales, we do see additional throughput on that line.
Mm-hmm.
That is a highly efficient line.
You mentioned Mobile Protected Firepower. What's the status of OMFV, the Optionally Manned Fighting Vehicle? This has been going on for a long time.
Yes. That program has a lot of down selects. We had one. I think there's another this year. There may be more. I think the Army anticipates full rate production in the next decade. There's a ways to go on that program.
Okay. You talked about the attractiveness of the business in terms of operating leverage. You know, several years ago, you had a strong mix of international work, and you were able to get margins above 15%, I mean, in the 15% range. As you get more operating leverage there, can we expect that, or should we think of this as more of a 14% type business?
I think of this business in the mid to high 14%, and a 14% on a regular basis. You know, if you look back over the last decade, we've had four instances, four years, where margins were 15%. They've never been lower than 14.2%, largely driven by mix. This is, again, a very, very solid business, and I'd say in the mid to high 14% is good, steady running rate.
If we, if we now jump over to Technologies. you know, we've seen a lot of IDIQ awards, for GDIT over time. We've seen, but revenues have been fairly flat, backlogs have been fairly flat. What are the growth prospects here between Mission Systems and GDIT?
Okay, let's unpack that. Let's take a look at GDIT. Since we got through the integration of CSRA, they have been growing, as we had anticipated at the time, of low single digits. That growth has not abated, and it's been profitable growth. You know, it's a danger to chase revenue alone. If you're gonna chase revenue, it has to be profitable revenue, and that has been our focus. GDIT has continued to grow, and we anticipate that it will. The challenge for that group has been Mission Systems and some of the supply chain challenges that they have, that has caused negative growth, decline in revenue for them. We see the impact on us as largely behind us by the end of the year.
Not that the supply chain is fixed, but we've been able to mitigate it through a whole series of actions that Mission Systems has taken, and quite effectively, so that that impact will be behind us, and they'll continue to grow. You know, that group, as a whole, has about $110 billion of qualified pipeline. About $80 billion of that is GDIT, and the remainder is Mission Systems. There's a nice, rich opportunity set here. The key is pursuing profitable growth. That has always been our mantra.
Well, if I think back on that, you know, you had periods where, I mean, these weren't always together and look like they do today, but in the Mission Systems side, in a sense, you were able to get some very high margins. I mean, you know, on some things that you had IDIQ contracts on that were sole source, you could depend on it, you know, much higher margins than you would typically get in a services business. I mean, are you able to see that kind of high margin performance today, so that if you turn around the Mission Systems once it comes back, should we expect that to positively impact margins?
They should have a positive impact on margin. That business, given its portfolio, tends to be, as you quite rightly point out, a higher margin business. Their key is to tap into those areas of growth where they have expertise and is in their core, where they can continue to enjoy and produce good, solid margins.
One thing that has struck me is, I mean, we've got a number of other defense companies here tomorrow, and in their businesses that are electronics-oriented, they face very similar challenges in terms of supply chain. When you look at it, though, is this something that is primarily tied to semiconductor availability, or is it a broader mix of things?
Not exclusively semiconductors, but heavily. What Mission Systems has been able to do, as I noted and alluded to earlier, is take a series of steps over the last two years to mitigate that impact, either product substitution in concert with the customer, long lead funding, and material buys, sometimes 18 months in advance. All of those actions that they've taken have helped mitigate the impact of that. It's still out there, but their job is to, let's see if we can't get this, the effect on us, behind us, and we're pretty confident that we can do that, and they can get back to a growth profile. Because they have dragged on the group's growth.
Mm-hmm.
While GDIT has been growing, they have not.
Yeah, but a lot of the things that we have heard have been that this is not about highly specialized chips either. A lot of it is more, not quite commodity, but chips that there are other industries where demand is so high that often defense companies...
Defense
-get overlooked.
Back in the line.
Yes.
That's why it is so important to get stability of funding in and put your chit in early, so that you can get in that queue. We've been able to do that pretty nicely. As I say, this isn't, as a nation, behind us.
Yeah.
It's incumbent upon us, and I think Mission Systems has done a very good job and to manage that impact and have workarounds. Some of that's flexibility from the customer in terms of product substitution. That's been a significant part of it.
Well, does it also suggest that, because it's hard to see in the financials overall, that you may be building inventory there, where you're just waiting for, like, one more chip or component, and then you can deliver? What I'm getting at is.
There is an inventory build.
Is there a surge that we might expect?
There is an inventory build, and we have seen that surge, happen on, depending on a quarter, some quarters more than others. Ultimately, we are building some of that in working capital, and it's got to unwind and will.
Just going over to GDIT, one of the things that you've highlighted before, was the large number of protests that have gone on over the last two or three years. Is that still the case? Is that still an inhibitor to more growth in GDIT?
It certainly is. I think that's true for that entire industry. Protests are, seem to be the new normal. It has taken longer from the initiation of an RFP to the execution of a contract. That interval has increased. I also think that may be the new normal. We have anticipated all of that in our growth projections for GDIT. We are looking at, you know, low single-digit growth, consistent low single-digit growth, which brings more earnings.
That's where I was going with this is, you know, at first it sounded like we're going through a period where there are a lot of protests, and this is an issue that holds you back and others in the space, but you think maybe we should be thinking of this as not going away anytime soon?
Well, that's certainly our view. I think it's unfortunate, but it is what it is. So we have accommodated our growth projections accordingly. I think if this is a new normal, you need to plan for it, and if it turns out that the deliberation process can go faster, that's all good and wholesome. I think it's better to plan for the reality that you see today, and that's what we've done.
Because it's just hard to look at this and see when the money is out there.
Yeah, it's not good.
That it should be growing.
Should.
Sort of, in a sense, where does that money go if you can't get any work started?
Well, you do start work. It's just taking longer to get it, as I said.
Yeah
... the execution of the, you know, the RFP hits the street to the execution, it's of the contract, it's just moving everything to the right. I think the government needs, to the extent that they can, deal with that. Right now, it is what it is, and we have to accommodate that.
Yeah. If we kind of pull this all together, you've guided to 105% cash conversion for the year. Beyond 2023, should we expect cash conversion to continue above 100%?
On or about that, yes.
Yeah. In terms of deployment, I mean, you're retiring debt this quarter. When you think forward, how do you think about the balance in terms of debt reduction, dividends, share repurchases going forward?
We will retire our debt, and after some minimal investment, you know, sustaining investment in the business, free cash flow will be deployed and allocated to share repurchases and dividends, and I think that's appropriate.
M&A, is there anything you're missing that you feel you, that you might need or might be helpful?
We very much like our portfolio.
Yeah.
If there's a bolt-on here and there, bolt-on meaning relatively small, that might be in the core of one of our businesses, we might look at that, but there's nothing particularly of note on the horizon.
I'm interested, if I go, you know, way back, even when Nick was running the business, it's always appeared to me that at corporate, you really give a lot of latitude to the four individual businesses, in terms of, I mean, certainly not, you know, performance objectives. You're making resource allocation decisions. How do you think of the way you manage your portfolio of four businesses?
At the corporate level, we set the strategy, the corporate culture, and I say strategy, the big strategy for the company, and we control all the deployment and allocation of capital. It's up to the individual businesses to execute their small, you know, small, we call it small f, their business' strategic plan. To the extent that they may stumble at that, there's, they get a lot of help. It's a very balanced governance model, I think.
Mm-hmm.
It gives the businesses a lot of agility to execute effectively, that which they know best. You know, when you're on the front line and you're facing an enemy, the guys on the front line pretty much know what they're facing. For big strategic decisions, they go back to the, you know, the big, big commands. Well, that's kind of how we operate. Leave the day-to-day tactical execution of the business to the businesses, assuming they continue to meet their objectives, and we control the overall strategy. Corporate culture is important. We set that corporate culture. You know, the corporate culture is the character of the entire institution, and it is one of our main objectives at the corporate headquarters to ensure that we all have what we call our ethos. Ethos is a more powerful word than ethic.
It means your fundamental moral character, and it is the rules by which we conduct this business. That is a big part of what we do, and then the deployment of the capital. It all sits at the corporate headquarters, and we deploy it where we believe we can get the best long-term return on those investments for profitable, sustainable growth.
As you think about it today, where are the priorities in terms of where you want to deploy capital across the businesses?
We have gone through a major investment period at Gulfstream, clearly, and all these new airplanes, at the Marine group, and building the capacity to handle the considerable growth and capitalize on that growth that is before us, and in the Technologies group at GDIT to shore up our existing IT business. I think those large capital investments are behind us, I think that capital deployment will be sustaining in terms of the business, ensuring that R&D is at a wholesome level. CapEx is declining and will continue to decline, that leads into your former question about the deployment of capital. I think our objective is to take shareholder-friendly actions.
Shareholders have been patient through this investment period, and our free cash flow, after all of our debt reduction, should be inappropriately devoted to dividends and share repurchase. Dividend is an important strategy for us. We continue to maintain our dividend posture, and I think that's important going forward.
Well, I'm just interested, when you talk about the process, how you manage processes from corporate, since you've been CEO, has that evolved at all, or is it pretty much the same as where you started?
I'd say that we have matured our governance and business model. It's become increasingly sophisticated, more agile, faster, quicker. You know, we really shoot for agility, and agility is the ability to make quick, accurate decisions, and we find that our business model allows us to do that. That's very wholesome because you're likely to make better decisions in a faster timeframe. I'd say we have matured all of that, and it is a well-humming machine. We're very pleased with where we are right now, in terms of execution and our strategy and the coherence of our businesses.
Well, to wrap up, maybe, you could tell us, if you look at the next 12 months, what are your, like, two or three top priorities?
Well, clearly, it's the introduction, the smooth introduction and production of the new airplanes. At the Marine group, it's fixing the industrial-based challenges and increasing our throughput. At Combat, it's growing profitably, even faster than we had anticipated. In the Technologies group, it's ensuring that Mission Systems get through its supply chain challenges, and they then add to the growth that GDIT has been experiencing. As a leadership team, that's what we're focused on.
Well, great. Well, Phebe, thank you very much for joining us today.
It's been my pleasure always. Good to see you.
Good to see you.
Thank you all for coming.