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Chairman to Retire at General Dynamics in Wake of U.S. Sanctions

May 23, 1985|GAYLORD SHAW | Times Staff Writer

WASHINGTON — One day after the Navy slapped a series of economic sanctions on General Dynamics, David S. Lewis announced Wednesday that he would retire by the end of the year as chairman and chief executive of the nation's third-largest defense contractor.

Lewis, 67, said his successor would be Stanley C. Pace, the 63-year-old vice chairman of TRW Inc., another major defense contractor. He added that Pace would immediately "spend a great deal of time reviewing and improving" the accounting and billing practices "which have been the subject of such adverse publicity over the past several weeks."

Although one General Dynamics executive said the announcement's timing is part of an effort to "move as quickly as we can to put all of this behind us," government investigators said Lewis' departure would not affect long-running congressional and Justice Department inquiries into the operations of General Dynamics and other defense contractors.

Barred From Defense Jobs

"We are going full-bore ahead. This is not going to deter us," said an aide to Rep. John D. Dingell (D-Mich.), chairman of a House oversight subcommittee that has conducted extensive hearings on General Dynamics' dealings with the Pentagon.

It was before Dingell's subcommittee earlier this year that Joseph R. Sherick, the Pentagon's inspector general, disclosed that he was recommending that Lewis and other General Dynamics officials be barred from future defense business.

Sherick's recommendation was rejected Tuesday by Navy Secretary John F. Lehman when he announced that pending contracts with two General Dynamics divisions, worth up to $1 billion, would be frozen until the company reforms its policies and practices.

Lehman also canceled two contracts totaling $22.5 million and fined the company more than $675,000 for giving gratuities to then-Adm. Hyman G. Rickover.

But he said there currently is not enough evidence to suspend the General Dynamics executives from dealings with the Pentagon.

However, Lehman noted that, if indictments are handed down in the continuing Justice Department investigation, he will initiate debarment proceedings.

A Justice Department spokesman declined Wednesday to discuss the investigation, but sources said it is being conducted by a federal grand jury in New Haven, Conn.

Lewis, in an announcement issued from General Dynamics' headquarters in St. Louis, said he had been planning to retire since late 1983 but had delayed his departure because the company was under "extremely heavy outside pressure."

He said Pace would join General Dynamics as vice chairman June 1 and would become chairman "not later than Jan. 1, 1986."

Lewis was president of McDonnell Douglas Corp. before taking over as chief executive of General Dynamics in 1970.

Pace, who will retire May 31 after more than three decades with Cleveland-based TRW, was in Washington for meetings of the National Assn. of Manufacturers, of which he is chairman, when the announcement was made that he would be Lewis' successor.

At a news conference, Pace said he had signed a five-year contract with General Dynamics on Tuesday. He said Lewis had contacted him some time ago--he would not disclose precisely when--and he brushed aside questions about whether Pentagon officials had been told of his selection before Lehman's announcement.

Pace said one of the Navy secretary's demands--that General Dynamics adopt and vigorously enforce a code of ethics for officers and employees--"shouldn't take overlong at all."

And he said the company "appears to be on the right track" in resolving the accounting and billing practices criticized by the Pentagon.

"General Dynamics admits it has made some mistakes and is making progress to correct and avoid them in the future," he said.

More than 80% of General Dynamics' $7.8 billion in sales last year were under government contracts, and Pace said in response to questions that diversification away from such a heavy dependence on the Pentagon is "one of the issues that needs to be addressed" by the company.

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