Speaker 1: Phoebe nova Kovac has been the CEO of General Dynamics
Speaker 1: since two thousand thirteen. Since she took over, General Dynamic
Speaker 1: shares have climbed over. On this episode, appear to Pere.
Speaker 1: I meet with Phoebe nova Kovac at a General Dynamics
Speaker 1: research facility in Sterling Heights, Michigan. There we spoke about
Speaker 1: the future of the aerospace and defense industry and I
Speaker 1: got to see there Abram's main battle tank up close.
Speaker 1: When you became the CEO of General Dynamics in two
Speaker 1: thousand and thirteen, there weren't that many women who were
Speaker 1: aerospace defense executives. Did you ever think when you were
Speaker 1: joining this company in two thousand one that you could
Speaker 1: rise up to be the CEO? I never thought I'd
Speaker 1: be the CEO. I think that would be highly aspirational
Speaker 1: um and I I've always been a big believer in
Speaker 1: you do well in life by doing the job in
Speaker 1: front of you very very well, being part of a
Speaker 1: team and servey that team. But I never could have
Speaker 1: believed that this would happen. So you get tired when
Speaker 1: people like me ask you what it's like to be
Speaker 1: a woman and being CEO of an aerospace defense company
Speaker 1: or you get asked that a lot. Um, I think some,
Speaker 1: I think UM, I and you and I've talked about
Speaker 1: this before. I approached this job primarily as a person,
Speaker 1: largely one form by being a woman, um, but not exclusively.
Speaker 1: So I think about myself as a person, and in
Speaker 1: this position, not so much a woman. Your stock is
Speaker 1: up a eight percent since you became a CEO. Do
Speaker 1: you think under President Biden defense spending may level off
Speaker 1: and therefore may be harder for aerospace defense companies to
Speaker 1: do as well? So I think defense spending historically has
Speaker 1: been driven by the threat or the perception of threat um,
Speaker 1: and it is not a particularly safe world at the moment.
Speaker 1: That's number one. Number two. President Biden has been a
Speaker 1: lifelong supporter of national security. So this budget that he
Speaker 1: submitted to Capitol Hill was a nominal increase um. Importantly,
Speaker 1: all of our programs were fully supported because of their
Speaker 1: criticality to the war flight. Most of the large aerospace
Speaker 1: defense companies have moved to Washington. Do you see the
Speaker 1: Pentagon leaders from time to time? Do you go see
Speaker 1: the secretaries of Army or air Force, or Defense or
Speaker 1: Navy or what do you do in terms of interacting
Speaker 1: with them. So I think it's important that we know
Speaker 1: our customer UM, both on the uniform military side, and
Speaker 1: we tend to try to know them as well. UM.
Speaker 1: And then with each change of administration, we try to
Speaker 1: get to know the primary decision makers so we can
Speaker 1: get inside their decision space help them think about again
Speaker 1: what we can provide. So I spent some time with
Speaker 1: all of them. In our major customers, so that would
Speaker 1: be primarily the Army and the Navy. The American people
Speaker 1: obviously have a high regard for our military, but they
Speaker 1: don't tend to think of the defense contractors as highly
Speaker 1: as they do with the military. So do you think
Speaker 1: there's any reason for that? So I don't know that
Speaker 1: they're particularly not the love but this is the way
Speaker 1: I think about it. UM. If the US cannot avoid
Speaker 1: war through diplomacy or deterrence, UM, it goes to war,
Speaker 1: and it goes to war. With the US defense industrial base,
Speaker 1: we cannot go to war as a nation without US.
Speaker 1: We make all the products and services that provide our
Speaker 1: service people with the weapons, systems and protective devices they
Speaker 1: need to survive and win. Because of consolidation in recent years,
Speaker 1: we now have essentially five major defense companies, and you
Speaker 1: think that's enough. Should we have more competition, or you
Speaker 1: think that's okay. So competition is driven in the defense
Speaker 1: industry by two things. One the number of new weapons
Speaker 1: systems coming out, and they're relatively constrained, to say it,
Speaker 1: compared to um the eighties when you had a lot
Speaker 1: more defense companies, and to the complexity of each of
Speaker 1: the weapon systems. So the capitalization requirements for defense companies,
Speaker 1: the large defense primes, and we are one of them,
Speaker 1: are significant. So given those capitalization requirements and given that
Speaker 1: the intimacy that we need to have with our customer,
Speaker 1: I think we're pretty well balanced at the moment. And
Speaker 1: by the way, when you think about competition, we have
Speaker 1: a monopsity buyer with enormous purchasing power. So while we
Speaker 1: may be in duopolies or some people in monopolies, we
Speaker 1: are up against a very powerful customer. So there's a
Speaker 1: lot of shaping that happens um in our contractual discussions
Speaker 1: with our customer. Sometimes people say that the defense budget
Speaker 1: is very high because the cost overruns of new weapons
Speaker 1: systems or so forth. Is that a fair criticism that
Speaker 1: sometimes they are cost overruns that are very very high.
Speaker 1: So if you think about the complexity of modern weapons systems,
Speaker 1: it is not unusual for some of them to have
Speaker 1: early on in the production of the development some cost overruns.
Speaker 1: But it's incoming upon us as a defense industry is
Speaker 1: that once we understand the technology and then how to
Speaker 1: build it and how to build it effectively, continued to
Speaker 1: take costs out as we go down our learning curves
Speaker 1: and that's an important part of the value equation we
Speaker 1: have with our customer's taking driving costs out of systems.
Speaker 1: So today one of the biggest challenges for General Dynamics
Speaker 1: and one of the biggest opportunities. So I think in
Speaker 1: in any business, UM, the challenges are solving complex problems
Speaker 1: that come to you. You know, the problems that come
Speaker 1: to me and my senior leadership team for for resolving
Speaker 1: tend to be highly complex and middlesome. UM. So your
Speaker 1: ability to solve those complex problems are an important element.
Speaker 1: I think of the value that we add UM to
Speaker 1: the company, and then I think opportunities. You always want
Speaker 1: to make sure that you've got a creative enough mind
Speaker 1: and open enough mind to be able to see around
Speaker 1: square corners. What am I missing? You know? The why
Speaker 1: questions are really powerful. Why are we not doing this?
Speaker 1: Or why are we doing this? I ask those questions
Speaker 1: a lot, and in the answers you can sometimes tease
Speaker 1: out some real opportunities, some hidden things. But thinking creatively
Speaker 1: about opportunities and problems, it's really important. And what about
Speaker 1: the industry generally think they have big challenges now as
Speaker 1: the defense budget probably comes down a bit, So I
Speaker 1: think that, um, we are all responsible and and we
Speaker 1: have an obligation UH to find the latest and best
Speaker 1: technologies that we can for our customers and deliver them
Speaker 1: in the most cost effective manner we can. And I
Speaker 1: think that that's a challenge in an opportunity for all
Speaker 1: of the big defense companies. Let's go through the major divisions.
Speaker 1: You have a General Dynamics, So UM one is the
Speaker 1: Marine Systems. Now you before you became CEO, you were
Speaker 1: the head of Marine Systems? Is not correct? I think
Speaker 1: I've got it right. There were sixty eight submarines now
Speaker 1: in the entire U. S. Navy fleet. Do we really
Speaker 1: need a lot more submarines or we just kind of
Speaker 1: replacing the ones we have? Or do we need more
Speaker 1: than sixty eight, which I think the number we have.
Speaker 1: So I personally believe that the more submarines the better.
Speaker 1: And while people maybe jaundice that in um skeptical of
Speaker 1: my view given where I sit, I think from a
Speaker 1: national security perspective, US underwater supremacy is critical to our
Speaker 1: national security and the more submarines that we can put
Speaker 1: in the water, the better off we are to protect
Speaker 1: our shores as well as to protect our assets overseas.
Speaker 1: So it takes a long time to build a submarine,
Speaker 1: is it like three years, four years, five years? So
Speaker 1: they attack boats when we're on about our twenties something
Speaker 1: attack boat which is the Virginia class submarine takes about
Speaker 1: um seventeen months to build. Um we are building the
Speaker 1: ballistic missile submarine replacement in the Columbia class, which is
Speaker 1: replacing the Ohio class. It's part of the nuclear deterrent.
Speaker 1: That will take us eighty four months. So these are long,
Speaker 1: complicated build cycles. And what does it cost to build
Speaker 1: a submarine? I assume it's uh not uh, you know, cheap.
Speaker 1: So the Virginia classes about two billion dollars a submarine.
Speaker 1: But there are highly survivable weapons systems and by the way,
Speaker 1: as we've come down our learning curves, Um, we have
Speaker 1: driven costs out of out of those submarinings. So again
Speaker 1: that's part of the value proposition with our customer. Let's
Speaker 1: talk about another division, the land division, which is I
Speaker 1: assume that division that makes this tank. All right, So
Speaker 1: why are tanks so important today? Because with cyber and
Speaker 1: and kind of missiles being launched off of submarines and
Speaker 1: so forth, do we really need tanks to kind of
Speaker 1: help the military that much? So? Since the dawn of
Speaker 1: human time, wars are ultimately one if they can't be avoided,
Speaker 1: their one with boots on the ground or taking territory.
Speaker 1: I don't see that paradigm changing anytime soon. If we
Speaker 1: get into a really hot war, you need your tanks,
Speaker 1: you need your army to take land. You have an
Speaker 1: aerospace division and they are the principal product is Gulf
Speaker 1: Street jets. Is that right? Yes? Um, as a reason
Speaker 1: why you're not in the military jet business unlike some
Speaker 1: of your competitors, Well, UM, General Dynamics before the big
Speaker 1: sell off, you would call General Dynamics and the height
Speaker 1: of the Reagan build up as the largest defense industry
Speaker 1: that comes at the CEO at the time, UM believed,
Speaker 1: and I think appropriately so to some extent, UM that
Speaker 1: it was important to UM sort of liquidate at the
Speaker 1: end of the Cold War, and so he systematically went
Speaker 1: through and sold off units and defense, including UM what
Speaker 1: was at the time, UM General Dynamics, UM fighter jet business.
Speaker 1: So we're out of that business, all right. So you're
Speaker 1: in gulf Stream now. Glof Stream is mostly a business
Speaker 1: jet business, I thinks, okay, And so with COVID, I
Speaker 1: assume business people weren't flying around as much, were they
Speaker 1: buying as many jets. So golf Stream is a pretty
Speaker 1: cyclical business where economy facing and as is as goes
Speaker 1: the world economies, that tends to draw I have our demand,
Speaker 1: and this was the third economic perturbation that I have
Speaker 1: seen since I've been a General Dynamics. So what we
Speaker 1: have learned is to be a good cyclical and that's
Speaker 1: drive out costs faster than your revenue declines. So last
Speaker 1: year we were the only successful aerospace O e M
Speaker 1: to make a profit, a significant profit at a billion dollars,
Speaker 1: and we did that by reacting very very quickly to
Speaker 1: the change in the marketplace. So demand was down as
Speaker 1: a result of the economic perturbations caused by COVID, but
Speaker 1: demand is nicely begun to recover and we are in
Speaker 1: a very strong position in that recovery. So let's talk
Speaker 1: about your last division, which is your information division, which
Speaker 1: I assume is mostly cyber related things and things you
Speaker 1: can't probably talk too much about. But is that where
Speaker 1: the greatest growth is going to be for aerospace defense
Speaker 1: companies in cyber and other kinds of information technology. So
Speaker 1: cyber is embedded in almost every single one of our programs,
Speaker 1: including the main battle tank, the upgrades that we make
Speaker 1: and the continual improvements that we make to upgrade the technology,
Speaker 1: and for example, that platform all include cyber protection of
Speaker 1: multiple UM multiple layers. So cyber is a growth area
Speaker 1: and has been for quite some time in the defense
Speaker 1: industrial base. We are very active and have been for
Speaker 1: twenty years in the cyberspace and will continue to see growth,
Speaker 1: But I don't see it as the exclusive growth in
Speaker 1: our in our business. What's driving real growth on the
Speaker 1: defense side of submarines. So one area we didn't talk
Speaker 1: about that is an area that some people think is
Speaker 1: important in aerospace defense is space. So UM some companies,
Speaker 1: some of your competitors are building things for the space world.
Speaker 1: Are you thinking about getting into space? So we have
Speaker 1: some components, some lines of business that serve UM largely
Speaker 1: as a merchant supplier some of the space companies, and
Speaker 1: that's a good place for us. We've made our large
Speaker 1: capital bets elsewhere. Let's talk about your own background for
Speaker 1: a moment and how you came to be the CEO.
Speaker 1: So where did you grow up? I grew up pretty
Speaker 1: much all over what day was in the Air Force,
Speaker 1: and we spent a lot of time in Europe during
Speaker 1: the Cold War, and I got a real sense of
Speaker 1: being an American. UM. Germany was still relatively poor UM
Speaker 1: in the sixties coming out of World War two, UM,
Speaker 1: and not the major industrial power that it is today.
Speaker 1: And we had a real sense of what the United
Speaker 1: States had done to save Europe. Your father wasn't Serbian
Speaker 1: immigrants the United States? Is that right? So my father's
Speaker 1: family suffered from totalitarian regimes, both on the fascist side
Speaker 1: and the communist side, and they were fortunate enough to
Speaker 1: escape with their lives and during World War two, and
Speaker 1: it was their dream to come to the United States.
Speaker 1: Because when you have suffered from both types of totalitarian ism.
Speaker 1: You you treasure democracy, in particular market based democracy. And Uh.
Speaker 1: He is an avid patriot, as is my mother. UM,
Speaker 1: and they they imbued me with that same sense of patriotism.
Speaker 1: So you grew up in various places in Europe and
Speaker 1: United States, and then you went to college at Smith.
Speaker 1: So did you study aerospace defense at Smith? Or what
Speaker 1: did you study? I was a government major and the
Speaker 1: philosophy minor um and uh, and I got a superb
Speaker 1: labor arts background and education. So I learned to write
Speaker 1: and I learned to think in college. Those are two
Speaker 1: critical values. So most people that graduate from Smith probably
Speaker 1: don't wind up in the CIA, be my guess. Most Yes.
Speaker 1: So when you were interviewing for jobs at the end
Speaker 1: of your college career, UM, did you tell people I
Speaker 1: want to be in the CIA or how did you
Speaker 1: happen to get into the CIA? Well, I had a
Speaker 1: sense of service to my nation, um, and it seemed
Speaker 1: a good place for me. Um so much in life,
Speaker 1: as you and I've talked about before, his finding place
Speaker 1: and Uh, it was the agency was opening its stores
Speaker 1: to women, um. And so it was a good opportunity
Speaker 1: for me and I really enjoyed the service that I
Speaker 1: was able to provide. How long were you in the CIA?
Speaker 1: About four or five years? And were you a c I,
Speaker 1: a agent or your spy or undercover? You can't say
Speaker 1: even today. So we were what we're called case officers.
Speaker 1: So you might, in the common parlance, think about those
Speaker 1: spies when you were doing that. Could you tell anybody
Speaker 1: what you were doing or what did you tell people
Speaker 1: you were doing as a career, Well, we had various
Speaker 1: um uh stories that we told approved stories, and I
Speaker 1: think we'll leave it at that. Okay, but your parents
Speaker 1: that they even know my parents. So after you did
Speaker 1: that for a while, you decided to go to where
Speaker 1: to school? Yes? So the Cold War was winding down
Speaker 1: and um yes, and decided to go to business school?
Speaker 1: All right? She went to Wharton. And then after you
Speaker 1: have a Wharton n b A. I assume it's easy
Speaker 1: to get a job. Was it easy for you get
Speaker 1: a job? It was extremely difficult. I had a rather
Speaker 1: a kind of classic background, and I was seven months pregnant,
Speaker 1: so it was very hard to get a job. You
Speaker 1: have a c I A background, your seven months pregnant,
Speaker 1: and you find that employers aren't interested in hiring women.
Speaker 1: Like that. I had a number of interviews. I remember
Speaker 1: one in particular. I wanted to work for a steel
Speaker 1: company because I like making things. Um, the tangible value
Speaker 1: of seeing, you know, the fruits of your labor. And
Speaker 1: I walked in and now here they are at a
Speaker 1: hiring fair or and I walk in and they say,
Speaker 1: we're not hiring and so what I understand, You're not
Speaker 1: hiring me? Um, as I wattle out of there. So
Speaker 1: you finally got a job at the Office of Management
Speaker 1: and Budget, which runs the budget of the United States government.
Speaker 1: So what did you do there? So? I started out
Speaker 1: as a budget examiner and was fortunate enough to work
Speaker 1: my way up and ended up running the National Security Division,
Speaker 1: which was responsible for all defense and intelligence spending. UM.
Speaker 1: Submissions to the to the Congress. Okay, so after a
Speaker 1: while you decided I had enough of this. The government
Speaker 1: salary is good, but not that good. You decide you
Speaker 1: want to go in the business. Um. And you you
Speaker 1: got a position in two thousand one with General Dynamics. Yes,
Speaker 1: I had to stop over for four years at the
Speaker 1: Pentagon and then to General Dynamics. And I went there
Speaker 1: because I remember thinking very distinctly in these seminal times
Speaker 1: in your life when you have perhaps a bit of epiphanies.
Speaker 1: I sat at my desk one afternoon, thinking I can't
Speaker 1: afford to put my children through college. And I happened
Speaker 1: to know a number of CEOs, including the CEO of
Speaker 1: General Dynamics, and I called him and I said, I'm
Speaker 1: going to be leading year soon if you ever would
Speaker 1: be interested, and called a couple of the other CEOs,
Speaker 1: and and I was fortunate enough to go with General Dynamics. Okay,
Speaker 1: So she went to General Dynamics in two thousand one,
Speaker 1: And what was your initial job there? So I was
Speaker 1: in strategic planning, but think about that, more special projects
Speaker 1: for the CEO. And I ultimately kept a series of
Speaker 1: jobs um as I moved up the chain at General Dynamics.
Speaker 1: But I was also the chief of staff to the
Speaker 1: then CEO, and I learned a lot about how a
Speaker 1: very very effective, powerful CEO manages a company. I learned
Speaker 1: a lot watching a superb CEO operate. And you said, hey,
Speaker 1: I can do this job as well as this guy.
Speaker 1: At some point, No, that would be the height of Hebrews.
Speaker 1: And I've never suffered from that. I think I was
Speaker 1: the beneficiary of a lot of learning. So I was
Speaker 1: blessed with that. Today, as you look at the opportunities
Speaker 1: that women have to be chief executives, you think they're
Speaker 1: much better than when you were coming along. And what
Speaker 1: do you advise young women who want to be a
Speaker 1: CEO about the best way to prepare to be a CEO?
Speaker 1: So I think there are more opportunities for women that
Speaker 1: there certainly were in the late seventies when I entered
Speaker 1: the workplace, and that is throughout the food chain. I tell,
Speaker 1: whether it's young women or young men, if you want
Speaker 1: to do well in this world, be a part of
Speaker 1: a team, serve your team well, and do the job
Speaker 1: in front of you as best as you possibly can.
Speaker 1: And in functional organizations, the rest takes care of itself,
Speaker 1: and a dysfunctional organizational bets are off get out of it.
Speaker 1: What would be the skill set that a CEO really
Speaker 1: needs to be success on today's environment? So I think
Speaker 1: a good leader needs fundamentally good character, good characters required.
Speaker 1: I think a a smattering and a and a wholesome
Speaker 1: um capability set in whether it's intellect or finance, or
Speaker 1: ability to think strategically or solve complex problems. All those
Speaker 1: things are really important, and frankly, perseverance. I mean, sometimes
Speaker 1: you just have to never, never stop, never to quit,
Speaker 1: never give up. So you have three daughters and so, um,
Speaker 1: you've obviously got a private sector jobs you can help
Speaker 1: support them and get them through college. And you have
Speaker 1: now getting four grandchildren grandchildren. Okay, so what do you
Speaker 1: do for rest and relaxation to spend time with your
Speaker 1: children grandchildren? Well, that's joyful, but I wouldn't call it
Speaker 1: RESTful relaxing. Um. Three toddlers and one newborn is haurly relaxing. Um.
Speaker 1: But my husband and I walk a lot, hike a lot,
Speaker 1: and uh, and we talk a lot. He's finishing his
Speaker 1: doctorate at Princeton Theological Seminary and ethics, and so I
Speaker 1: find those kinds of conversations really stimulating and interesting. They're
Speaker 1: a respite for me. But there are also a lot
Speaker 1: of mental gymnastics to kind of keep up. Other people said,
Speaker 1: it seems in Congress to have a spouse who is
Speaker 1: getting a degree from Princeton Theological Seminarians. Very spiritual presumably,
Speaker 1: and you're in the aerospace defense business. Is anybody mentioned
Speaker 1: that seems unusual or not well. I think it probably
Speaker 1: is a bit unusual, but I think when you're in
Speaker 1: leadership positions, it's important to look at all of your
Speaker 1: decisions through immortal prism, irrespective of the industry that you're in,
Speaker 1: and to make sure that you're doing the right thing
Speaker 1: um and to constantly question I am I doing the
Speaker 1: right thing? Is this the right thing? And if you
Speaker 1: don't ask yourself those questions routinely, then I think you
Speaker 1: can you run the risk of failing to see potential error.
Speaker 1: So what's the greatest pleasure of being the CEO of
Speaker 1: Jenathan Amis and what's the biggest downside? Well, I think
Speaker 1: these jobs are sub great privilege. I don't think I
Speaker 1: see a particular downside. The pleasures the people and the team.
Speaker 1: We have a highly functional, um, very transparent, very cohesive
Speaker 1: team and frankly, you know, he was an interesting outcome
Speaker 1: from COVID. UM crises bring out the worst and the
Speaker 1: best in people, and while we entered the COVID crisis
Speaker 1: as a very coherent, powerful team, we emerged even stronger
Speaker 1: forged and that brings me a lot of satisfaction. Thanks
Speaker 1: for listening to hear more of my interviews. You can
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