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Speaker 1: Phoebe nova Kovac has been the CEO of General Dynamics

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Speaker 1: since two thousand thirteen. Since she took over, General Dynamic

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Speaker 1: shares have climbed over. On this episode, appear to Pere.

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Speaker 1: I meet with Phoebe nova Kovac at a General Dynamics

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Speaker 1: research facility in Sterling Heights, Michigan. There we spoke about

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Speaker 1: the future of the aerospace and defense industry and I

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Speaker 1: got to see there Abram's main battle tank up close.

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Speaker 1: When you became the CEO of General Dynamics in two

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Speaker 1: thousand and thirteen, there weren't that many women who were

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Speaker 1: aerospace defense executives. Did you ever think when you were

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Speaker 1: joining this company in two thousand one that you could

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Speaker 1: rise up to be the CEO? I never thought I'd

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Speaker 1: be the CEO. I think that would be highly aspirational

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Speaker 1: um and I I've always been a big believer in

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Speaker 1: you do well in life by doing the job in

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Speaker 1: front of you very very well, being part of a

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Speaker 1: team and servey that team. But I never could have

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Speaker 1: believed that this would happen. So you get tired when

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Speaker 1: people like me ask you what it's like to be

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Speaker 1: a woman and being CEO of an aerospace defense company

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Speaker 1: or you get asked that a lot. Um, I think some,

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Speaker 1: I think UM, I and you and I've talked about

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Speaker 1: this before. I approached this job primarily as a person,

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Speaker 1: largely one form by being a woman, um, but not exclusively.

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Speaker 1: So I think about myself as a person, and in

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Speaker 1: this position, not so much a woman. Your stock is

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Speaker 1: up a eight percent since you became a CEO. Do

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Speaker 1: you think under President Biden defense spending may level off

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Speaker 1: and therefore may be harder for aerospace defense companies to

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Speaker 1: do as well? So I think defense spending historically has

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Speaker 1: been driven by the threat or the perception of threat um,

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Speaker 1: and it is not a particularly safe world at the moment.

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Speaker 1: That's number one. Number two. President Biden has been a

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Speaker 1: lifelong supporter of national security. So this budget that he

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Speaker 1: submitted to Capitol Hill was a nominal increase um. Importantly,

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Speaker 1: all of our programs were fully supported because of their

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Speaker 1: criticality to the war flight. Most of the large aerospace

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Speaker 1: defense companies have moved to Washington. Do you see the

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Speaker 1: Pentagon leaders from time to time? Do you go see

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Speaker 1: the secretaries of Army or air Force, or Defense or

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Speaker 1: Navy or what do you do in terms of interacting

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Speaker 1: with them. So I think it's important that we know

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Speaker 1: our customer UM, both on the uniform military side, and

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Speaker 1: we tend to try to know them as well. UM.

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Speaker 1: And then with each change of administration, we try to

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Speaker 1: get to know the primary decision makers so we can

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Speaker 1: get inside their decision space help them think about again

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Speaker 1: what we can provide. So I spent some time with

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Speaker 1: all of them. In our major customers, so that would

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Speaker 1: be primarily the Army and the Navy. The American people

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Speaker 1: obviously have a high regard for our military, but they

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Speaker 1: don't tend to think of the defense contractors as highly

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Speaker 1: as they do with the military. So do you think

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Speaker 1: there's any reason for that? So I don't know that

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Speaker 1: they're particularly not the love but this is the way

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Speaker 1: I think about it. UM. If the US cannot avoid

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Speaker 1: war through diplomacy or deterrence, UM, it goes to war,

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Speaker 1: and it goes to war. With the US defense industrial base,

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Speaker 1: we cannot go to war as a nation without US.

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Speaker 1: We make all the products and services that provide our

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Speaker 1: service people with the weapons, systems and protective devices they

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Speaker 1: need to survive and win. Because of consolidation in recent years,

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Speaker 1: we now have essentially five major defense companies, and you

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Speaker 1: think that's enough. Should we have more competition, or you

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Speaker 1: think that's okay. So competition is driven in the defense

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Speaker 1: industry by two things. One the number of new weapons

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Speaker 1: systems coming out, and they're relatively constrained, to say it,

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Speaker 1: compared to um the eighties when you had a lot

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Speaker 1: more defense companies, and to the complexity of each of

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Speaker 1: the weapon systems. So the capitalization requirements for defense companies,

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Speaker 1: the large defense primes, and we are one of them,

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Speaker 1: are significant. So given those capitalization requirements and given that

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Speaker 1: the intimacy that we need to have with our customer,

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Speaker 1: I think we're pretty well balanced at the moment. And

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Speaker 1: by the way, when you think about competition, we have

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Speaker 1: a monopsity buyer with enormous purchasing power. So while we

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Speaker 1: may be in duopolies or some people in monopolies, we

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Speaker 1: are up against a very powerful customer. So there's a

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Speaker 1: lot of shaping that happens um in our contractual discussions

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Speaker 1: with our customer. Sometimes people say that the defense budget

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Speaker 1: is very high because the cost overruns of new weapons

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Speaker 1: systems or so forth. Is that a fair criticism that

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Speaker 1: sometimes they are cost overruns that are very very high.

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Speaker 1: So if you think about the complexity of modern weapons systems,

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Speaker 1: it is not unusual for some of them to have

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Speaker 1: early on in the production of the development some cost overruns.

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Speaker 1: But it's incoming upon us as a defense industry is

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Speaker 1: that once we understand the technology and then how to

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Speaker 1: build it and how to build it effectively, continued to

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Speaker 1: take costs out as we go down our learning curves

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Speaker 1: and that's an important part of the value equation we

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Speaker 1: have with our customer's taking driving costs out of systems.

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Speaker 1: So today one of the biggest challenges for General Dynamics

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Speaker 1: and one of the biggest opportunities. So I think in

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Speaker 1: in any business, UM, the challenges are solving complex problems

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Speaker 1: that come to you. You know, the problems that come

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Speaker 1: to me and my senior leadership team for for resolving

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Speaker 1: tend to be highly complex and middlesome. UM. So your

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Speaker 1: ability to solve those complex problems are an important element.

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Speaker 1: I think of the value that we add UM to

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Speaker 1: the company, and then I think opportunities. You always want

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Speaker 1: to make sure that you've got a creative enough mind

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Speaker 1: and open enough mind to be able to see around

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Speaker 1: square corners. What am I missing? You know? The why

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Speaker 1: questions are really powerful. Why are we not doing this?

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Speaker 1: Or why are we doing this? I ask those questions

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Speaker 1: a lot, and in the answers you can sometimes tease

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Speaker 1: out some real opportunities, some hidden things. But thinking creatively

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Speaker 1: about opportunities and problems, it's really important. And what about

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Speaker 1: the industry generally think they have big challenges now as

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Speaker 1: the defense budget probably comes down a bit, So I

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Speaker 1: think that, um, we are all responsible and and we

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Speaker 1: have an obligation UH to find the latest and best

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Speaker 1: technologies that we can for our customers and deliver them

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Speaker 1: in the most cost effective manner we can. And I

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Speaker 1: think that that's a challenge in an opportunity for all

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Speaker 1: of the big defense companies. Let's go through the major divisions.

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Speaker 1: You have a General Dynamics, So UM one is the

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Speaker 1: Marine Systems. Now you before you became CEO, you were

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Speaker 1: the head of Marine Systems? Is not correct? I think

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Speaker 1: I've got it right. There were sixty eight submarines now

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Speaker 1: in the entire U. S. Navy fleet. Do we really

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Speaker 1: need a lot more submarines or we just kind of

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Speaker 1: replacing the ones we have? Or do we need more

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Speaker 1: than sixty eight, which I think the number we have.

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Speaker 1: So I personally believe that the more submarines the better.

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Speaker 1: And while people maybe jaundice that in um skeptical of

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Speaker 1: my view given where I sit, I think from a

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Speaker 1: national security perspective, US underwater supremacy is critical to our

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Speaker 1: national security and the more submarines that we can put

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Speaker 1: in the water, the better off we are to protect

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Speaker 1: our shores as well as to protect our assets overseas.

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Speaker 1: So it takes a long time to build a submarine,

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Speaker 1: is it like three years, four years, five years? So

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Speaker 1: they attack boats when we're on about our twenties something

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Speaker 1: attack boat which is the Virginia class submarine takes about

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Speaker 1: um seventeen months to build. Um we are building the

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Speaker 1: ballistic missile submarine replacement in the Columbia class, which is

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Speaker 1: replacing the Ohio class. It's part of the nuclear deterrent.

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Speaker 1: That will take us eighty four months. So these are long,

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Speaker 1: complicated build cycles. And what does it cost to build

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Speaker 1: a submarine? I assume it's uh not uh, you know, cheap.

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Speaker 1: So the Virginia classes about two billion dollars a submarine.

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Speaker 1: But there are highly survivable weapons systems and by the way,

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Speaker 1: as we've come down our learning curves, Um, we have

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Speaker 1: driven costs out of out of those submarinings. So again

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Speaker 1: that's part of the value proposition with our customer. Let's

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Speaker 1: talk about another division, the land division, which is I

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Speaker 1: assume that division that makes this tank. All right, So

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Speaker 1: why are tanks so important today? Because with cyber and

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Speaker 1: and kind of missiles being launched off of submarines and

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Speaker 1: so forth, do we really need tanks to kind of

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Speaker 1: help the military that much? So? Since the dawn of

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Speaker 1: human time, wars are ultimately one if they can't be avoided,

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Speaker 1: their one with boots on the ground or taking territory.

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Speaker 1: I don't see that paradigm changing anytime soon. If we

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Speaker 1: get into a really hot war, you need your tanks,

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Speaker 1: you need your army to take land. You have an

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Speaker 1: aerospace division and they are the principal product is Gulf

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Speaker 1: Street jets. Is that right? Yes? Um, as a reason

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Speaker 1: why you're not in the military jet business unlike some

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Speaker 1: of your competitors, Well, UM, General Dynamics before the big

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Speaker 1: sell off, you would call General Dynamics and the height

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Speaker 1: of the Reagan build up as the largest defense industry

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Speaker 1: that comes at the CEO at the time, UM believed,

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Speaker 1: and I think appropriately so to some extent, UM that

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Speaker 1: it was important to UM sort of liquidate at the

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Speaker 1: end of the Cold War, and so he systematically went

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Speaker 1: through and sold off units and defense, including UM what

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Speaker 1: was at the time, UM General Dynamics, UM fighter jet business.

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Speaker 1: So we're out of that business, all right. So you're

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Speaker 1: in gulf Stream now. Glof Stream is mostly a business

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Speaker 1: jet business, I thinks, okay, And so with COVID, I

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Speaker 1: assume business people weren't flying around as much, were they

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Speaker 1: buying as many jets. So golf Stream is a pretty

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Speaker 1: cyclical business where economy facing and as is as goes

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Speaker 1: the world economies, that tends to draw I have our demand,

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Speaker 1: and this was the third economic perturbation that I have

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Speaker 1: seen since I've been a General Dynamics. So what we

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Speaker 1: have learned is to be a good cyclical and that's

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Speaker 1: drive out costs faster than your revenue declines. So last

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Speaker 1: year we were the only successful aerospace O e M

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Speaker 1: to make a profit, a significant profit at a billion dollars,

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Speaker 1: and we did that by reacting very very quickly to

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Speaker 1: the change in the marketplace. So demand was down as

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Speaker 1: a result of the economic perturbations caused by COVID, but

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Speaker 1: demand is nicely begun to recover and we are in

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Speaker 1: a very strong position in that recovery. So let's talk

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Speaker 1: about your last division, which is your information division, which

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Speaker 1: I assume is mostly cyber related things and things you

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Speaker 1: can't probably talk too much about. But is that where

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Speaker 1: the greatest growth is going to be for aerospace defense

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Speaker 1: companies in cyber and other kinds of information technology. So

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Speaker 1: cyber is embedded in almost every single one of our programs,

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Speaker 1: including the main battle tank, the upgrades that we make

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Speaker 1: and the continual improvements that we make to upgrade the technology,

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Speaker 1: and for example, that platform all include cyber protection of

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Speaker 1: multiple UM multiple layers. So cyber is a growth area

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Speaker 1: and has been for quite some time in the defense

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Speaker 1: industrial base. We are very active and have been for

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Speaker 1: twenty years in the cyberspace and will continue to see growth,

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Speaker 1: But I don't see it as the exclusive growth in

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Speaker 1: our in our business. What's driving real growth on the

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Speaker 1: defense side of submarines. So one area we didn't talk

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Speaker 1: about that is an area that some people think is

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Speaker 1: important in aerospace defense is space. So UM some companies,

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Speaker 1: some of your competitors are building things for the space world.

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Speaker 1: Are you thinking about getting into space? So we have

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Speaker 1: some components, some lines of business that serve UM largely

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Speaker 1: as a merchant supplier some of the space companies, and

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Speaker 1: that's a good place for us. We've made our large

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Speaker 1: capital bets elsewhere. Let's talk about your own background for

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Speaker 1: a moment and how you came to be the CEO.

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Speaker 1: So where did you grow up? I grew up pretty

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Speaker 1: much all over what day was in the Air Force,

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Speaker 1: and we spent a lot of time in Europe during

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Speaker 1: the Cold War, and I got a real sense of

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Speaker 1: being an American. UM. Germany was still relatively poor UM

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Speaker 1: in the sixties coming out of World War two, UM,

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Speaker 1: and not the major industrial power that it is today.

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Speaker 1: And we had a real sense of what the United

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Speaker 1: States had done to save Europe. Your father wasn't Serbian

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Speaker 1: immigrants the United States? Is that right? So my father's

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Speaker 1: family suffered from totalitarian regimes, both on the fascist side

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Speaker 1: and the communist side, and they were fortunate enough to

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Speaker 1: escape with their lives and during World War two, and

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Speaker 1: it was their dream to come to the United States.

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Speaker 1: Because when you have suffered from both types of totalitarian ism.

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Speaker 1: You you treasure democracy, in particular market based democracy. And Uh.

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Speaker 1: He is an avid patriot, as is my mother. UM,

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Speaker 1: and they they imbued me with that same sense of patriotism.

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Speaker 1: So you grew up in various places in Europe and

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Speaker 1: United States, and then you went to college at Smith.

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Speaker 1: So did you study aerospace defense at Smith? Or what

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Speaker 1: did you study? I was a government major and the

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Speaker 1: philosophy minor um and uh, and I got a superb

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Speaker 1: labor arts background and education. So I learned to write

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Speaker 1: and I learned to think in college. Those are two

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Speaker 1: critical values. So most people that graduate from Smith probably

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Speaker 1: don't wind up in the CIA, be my guess. Most Yes.

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Speaker 1: So when you were interviewing for jobs at the end

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Speaker 1: of your college career, UM, did you tell people I

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Speaker 1: want to be in the CIA or how did you

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Speaker 1: happen to get into the CIA? Well, I had a

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Speaker 1: sense of service to my nation, um, and it seemed

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Speaker 1: a good place for me. Um so much in life,

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Speaker 1: as you and I've talked about before, his finding place

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Speaker 1: and Uh, it was the agency was opening its stores

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Speaker 1: to women, um. And so it was a good opportunity

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Speaker 1: for me and I really enjoyed the service that I

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Speaker 1: was able to provide. How long were you in the CIA?

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Speaker 1: About four or five years? And were you a c I,

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Speaker 1: a agent or your spy or undercover? You can't say

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Speaker 1: even today. So we were what we're called case officers.

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Speaker 1: So you might, in the common parlance, think about those

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Speaker 1: spies when you were doing that. Could you tell anybody

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Speaker 1: what you were doing or what did you tell people

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Speaker 1: you were doing as a career, Well, we had various

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Speaker 1: um uh stories that we told approved stories, and I

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Speaker 1: think we'll leave it at that. Okay, but your parents

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Speaker 1: that they even know my parents. So after you did

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Speaker 1: that for a while, you decided to go to where

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Speaker 1: to school? Yes? So the Cold War was winding down

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Speaker 1: and um yes, and decided to go to business school?

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Speaker 1: All right? She went to Wharton. And then after you

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Speaker 1: have a Wharton n b A. I assume it's easy

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Speaker 1: to get a job. Was it easy for you get

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Speaker 1: a job? It was extremely difficult. I had a rather

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Speaker 1: a kind of classic background, and I was seven months pregnant,

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Speaker 1: so it was very hard to get a job. You

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Speaker 1: have a c I A background, your seven months pregnant,

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Speaker 1: and you find that employers aren't interested in hiring women.

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Speaker 1: Like that. I had a number of interviews. I remember

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Speaker 1: one in particular. I wanted to work for a steel

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Speaker 1: company because I like making things. Um, the tangible value

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Speaker 1: of seeing, you know, the fruits of your labor. And

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Speaker 1: I walked in and now here they are at a

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Speaker 1: hiring fair or and I walk in and they say,

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Speaker 1: we're not hiring and so what I understand, You're not

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Speaker 1: hiring me? Um, as I wattle out of there. So

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Speaker 1: you finally got a job at the Office of Management

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Speaker 1: and Budget, which runs the budget of the United States government.

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Speaker 1: So what did you do there? So? I started out

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Speaker 1: as a budget examiner and was fortunate enough to work

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Speaker 1: my way up and ended up running the National Security Division,

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Speaker 1: which was responsible for all defense and intelligence spending. UM.

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Speaker 1: Submissions to the to the Congress. Okay, so after a

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Speaker 1: while you decided I had enough of this. The government

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Speaker 1: salary is good, but not that good. You decide you

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Speaker 1: want to go in the business. Um. And you you

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Speaker 1: got a position in two thousand one with General Dynamics. Yes,

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Speaker 1: I had to stop over for four years at the

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Speaker 1: Pentagon and then to General Dynamics. And I went there

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Speaker 1: because I remember thinking very distinctly in these seminal times

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Speaker 1: in your life when you have perhaps a bit of epiphanies.

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Speaker 1: I sat at my desk one afternoon, thinking I can't

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Speaker 1: afford to put my children through college. And I happened

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Speaker 1: to know a number of CEOs, including the CEO of

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Speaker 1: General Dynamics, and I called him and I said, I'm

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Speaker 1: going to be leading year soon if you ever would

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Speaker 1: be interested, and called a couple of the other CEOs,

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Speaker 1: and and I was fortunate enough to go with General Dynamics. Okay,

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Speaker 1: So she went to General Dynamics in two thousand one,

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Speaker 1: And what was your initial job there? So I was

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Speaker 1: in strategic planning, but think about that, more special projects

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Speaker 1: for the CEO. And I ultimately kept a series of

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Speaker 1: jobs um as I moved up the chain at General Dynamics.

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Speaker 1: But I was also the chief of staff to the

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Speaker 1: then CEO, and I learned a lot about how a

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Speaker 1: very very effective, powerful CEO manages a company. I learned

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Speaker 1: a lot watching a superb CEO operate. And you said, hey,

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Speaker 1: I can do this job as well as this guy.

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Speaker 1: At some point, No, that would be the height of Hebrews.

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Speaker 1: And I've never suffered from that. I think I was

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Speaker 1: the beneficiary of a lot of learning. So I was

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Speaker 1: blessed with that. Today, as you look at the opportunities

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Speaker 1: that women have to be chief executives, you think they're

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Speaker 1: much better than when you were coming along. And what

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Speaker 1: do you advise young women who want to be a

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Speaker 1: CEO about the best way to prepare to be a CEO?

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Speaker 1: So I think there are more opportunities for women that

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Speaker 1: there certainly were in the late seventies when I entered

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Speaker 1: the workplace, and that is throughout the food chain. I tell,

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Speaker 1: whether it's young women or young men, if you want

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Speaker 1: to do well in this world, be a part of

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Speaker 1: a team, serve your team well, and do the job

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Speaker 1: in front of you as best as you possibly can.

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Speaker 1: And in functional organizations, the rest takes care of itself,

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Speaker 1: and a dysfunctional organizational bets are off get out of it.

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Speaker 1: What would be the skill set that a CEO really

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Speaker 1: needs to be success on today's environment? So I think

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Speaker 1: a good leader needs fundamentally good character, good characters required.

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Speaker 1: I think a a smattering and a and a wholesome

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Speaker 1: um capability set in whether it's intellect or finance, or

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Speaker 1: ability to think strategically or solve complex problems. All those

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Speaker 1: things are really important, and frankly, perseverance. I mean, sometimes

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Speaker 1: you just have to never, never stop, never to quit,

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Speaker 1: never give up. So you have three daughters and so, um,

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Speaker 1: you've obviously got a private sector jobs you can help

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Speaker 1: support them and get them through college. And you have

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Speaker 1: now getting four grandchildren grandchildren. Okay, so what do you

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Speaker 1: do for rest and relaxation to spend time with your

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Speaker 1: children grandchildren? Well, that's joyful, but I wouldn't call it

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Speaker 1: RESTful relaxing. Um. Three toddlers and one newborn is haurly relaxing. Um.

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Speaker 1: But my husband and I walk a lot, hike a lot,

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Speaker 1: and uh, and we talk a lot. He's finishing his

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Speaker 1: doctorate at Princeton Theological Seminary and ethics, and so I

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Speaker 1: find those kinds of conversations really stimulating and interesting. They're

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Speaker 1: a respite for me. But there are also a lot

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Speaker 1: of mental gymnastics to kind of keep up. Other people said,

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Speaker 1: it seems in Congress to have a spouse who is

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Speaker 1: getting a degree from Princeton Theological Seminarians. Very spiritual presumably,

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Speaker 1: and you're in the aerospace defense business. Is anybody mentioned

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Speaker 1: that seems unusual or not well. I think it probably

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Speaker 1: is a bit unusual, but I think when you're in

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Speaker 1: leadership positions, it's important to look at all of your

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Speaker 1: decisions through immortal prism, irrespective of the industry that you're in,

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Speaker 1: and to make sure that you're doing the right thing

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Speaker 1: um and to constantly question I am I doing the

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Speaker 1: right thing? Is this the right thing? And if you

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Speaker 1: don't ask yourself those questions routinely, then I think you

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Speaker 1: can you run the risk of failing to see potential error.

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Speaker 1: So what's the greatest pleasure of being the CEO of

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Speaker 1: Jenathan Amis and what's the biggest downside? Well, I think

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Speaker 1: these jobs are sub great privilege. I don't think I

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Speaker 1: see a particular downside. The pleasures the people and the team.

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Speaker 1: We have a highly functional, um, very transparent, very cohesive

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Speaker 1: team and frankly, you know, he was an interesting outcome

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Speaker 1: from COVID. UM crises bring out the worst and the

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Speaker 1: best in people, and while we entered the COVID crisis

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Speaker 1: as a very coherent, powerful team, we emerged even stronger

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Speaker 1: forged and that brings me a lot of satisfaction. Thanks

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Speaker 1: for listening to hear more of my interviews. You can

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Speaker 1: subscribe and download my podcast on Spotify, Apple, or wherever

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Speaker 1: you listen