For a septuagenarian Wichita widow, Olive Ann Beech is quite a flirt. As chairman and co-founder of Kansas’ Beech Aircraft Corp., which she has run since her husband Walter’s death in 1950, she has been tempting—and turning down—various corporate suitors anxious to merge with her company for years. Now, after spurning such hopefuls as Lockheed and Grumman, Olive Ann may at last be ready to say “I do” —and to one of their major competitors: General Dynamics.
Mrs. Beech and General Dynamics Chairman David S. Lewis have been discussing merger prospects for some weeks. Though Olive Ann could come down with a case of wedding-day nerves once again, some veteran Olive Ann watchers believe that this time her merger intentions are for real. While still vigorous at 73, she is thought by many associates to be anxious to settle the future control of her company while she is still in active command. With some 20% of Beech’s stock held by Olive Ann, her two daughters (who have no role in management) and a nephew, Frank Hedrick, 67, Beech’s president since 1968. the company is very much a family affair. But after Olive Ann’s death or retirement, Beech could conceivably fall victim to an unfriendly takeover bid like that experienced by one of its major competitors, Piper Aircraft, at the hands of Chris-Craft Corp. in 1969.
Often a company looking for a merger is in some sort of trouble, but both Beech and General Dynamics are in strong shape. With military sales accounting for 55% of General Dynamics’ total revenues ($2.5 billion last year), the firm is the nation’s largest defense contractor. With nearly a decade of squabbles with the Pentagon regarding cost overruns on the F-111 fighter now behind it, General Dynamics’ current multi-billion-dollar contract to produce 500 hot, single-engine F-16 interceptors for four NATO countries and the U.S. promises to keep earning income for the company for perhaps the next two decades.
New Profit Records. A Beech deal would open up a new field for General Dynamics’ aerospace expertise. At Beech, which is the nation’s second largest maker of light aircraft (after Cessna), the big moneymaker has been the twin-engine turboprop King Air executive craft; it is popular with corporate customers because, although slower than a jet, it is more fuel-efficient and cheaper to buy (price: $600,000 to $1.6 million, depending on equipment, v. up to $3 million for some jets). Until now, Beech has shied away from entering the executive-jet business. But some industry experts believe that the market for turboprops like the King Air (1,500 are flying today) may soon reach the saturation point, and General Dynamics’ experience with jet power could help Beech expand into that field. This year, for example, industry analysts forecast that the light-plane manufacturers will sell 12,300 small single-engine prop jobs like the familiar Beechcraft Bonanza at a total wholesale cost of $375 million. Yet their sales of bigger jet craft, while projected at just 230 planes, will bring them almost as much revenue: $368 million, to be exact.
Though Olive Ann Beech never learned to fly, her managerial skills brought the company through some problems at the turn of the decade, when the Viet Nam-warped economy hit sales hard. Rebounding from a loss of $7.7 million in fiscal 1970, the company has set new profit records in each of the past four years. So, far this year, sales are 22% ahead of 1976, when the company earned $20 million on revenues of $346 million. Thanks in part to rapidly growing defense business—in the past two years Beech has won more than $150 million in contracts to build military trainers and utility transports —the company’s projection of over $400 million in sales for 1977 hardly seems unreasonable.
Fuel Costs Rise. Business is vigorous throughout the light-aircraft industry. No longer the ultimate expression of corporate and personal squanderlust. the private plane is now a ubiquitous —and often essential—means of air travel to smaller cities and towns across the country. One reason is the rise in fuel costs, which has forced commercial air carriers to cut service to many smaller airports, thus making private planes or autos often the only alternatives. With many light aircraft getting upwards of 20 miles per gal. at 110-plus m.p.h., the private plane is not only faster than a company car byt also often just as economical a means of transportation.
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