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SHAREHOLDERS APPROVE INCENTIVE PLAN MODIFICATIONS; GENERAL DYNAMICS INCREASES YEAR-END CASH BALANCE ESTIMATE TO ABOUT $800 MILLION

SHAREHOLDERS APPROVE INCENTIVE PLAN MODIFICATIONS; GENERAL DYNAMICS
 INCREASES YEAR-END CASH BALANCE ESTIMATE TO ABOUT $800 MILLION
 FALLS CHURCH, Va., Jan. 15 /PRNewswire/ -- Shareholders overwhelmingly supported a board of directors' proposal to modify incentive compensation plans for General Dynamics Corporation (NYSE: GD) executives and employees at a special meeting of shareholders in St. Louis today. Holders of 85.2 percent of the 37.9 million shares represented at the meeting voted for the board proposal.
 At the meeting, Chairman and Chief Executive Officer William A. Anders said, "During the final months of 1990, as I was working with your board to design an action plan for the company, your General Dynamics shares were trading for as little as $19 -- 39 percent of the company's book value at the time." This sharp discount of General Dynamics stock was the result of deteriorating cash flow and operating margins, as well as a strategy anticipating growth despite increasing signs of declining defense markets, he explained.
 "Without sharp and immediate action, this was a company that would continue to deteriorate," Anders said. To effect needed change, the board and management moved to strengthen and realign the senior management team, and proposed to shareholders a strong incentive program designed to increase the focus of senior management on shareholder value, and to increase employee stock ownership and share price awareness at all levels, Anders said. Shareholders approved the original incentive program in May 1991 by a 78 percent favorable vote.
 "Thanks in large part to our incentives and the new management team's leadership, your company's financial strength has improved more rapidly than anticipated," Anders told shareholders, noting that the company currently anticipates reporting a year-end 1991 cash balance of about $800 million. Anders indicated that current financial strength and liquidity is in sharp contrast to year-end 1990, when the company had a cash balance of $109 million, and expected additional borrowing during 1991 to offset a projected cash short-fall.
 In addition, Anders noted that the company had obtained $8 billion more new backlog during the year than had initially been anticipated by management, despite declining defense markets and management's insistence on reasonable returns for all new business. "These 'wins' clearly demonstrate the strength of our core defense franchises," he said. "Indeed, these profitable additions to backlog were instrumental in the decisions to more tightly focus on our core defense competencies. In addition, they imply more secure future employment for our work force."
 "Our cultural turn-around has come a long way -- margins are up; business risk is down; and our backlog has increased substantially," Anders said. "Furthermore, the company has succeeded in generating cash well above even our own expectations. As a result of these factors, your stock price is now above book value."
 Anders also noted that, with the company more tightly focusing its strategy on core defense businesses, rather than diversification into businesses with which management is unfamiliar, "we anticipate that the strong cash balances we have been generating will be substantially in excess of our liquidity and core defense investment needs."
 "While these improved conditions underscore the success of the original incentive compensation plans, at the same time they are the very factors which make certain modifications to those plans desirable as we face the challenges and opportunities ahead," Anders said, noting that when General Dynamics stock had traded below 40 percent of book value, such concepts as incorporating strong "downside risk" into the plans were somewhat academic. With the stock price above book value, he explained, "downside risk" becomes more meaningful. "The proposed conversion of gain-sharing to options will significantly increase 'downside risk' and will even more closely align shareholder and management interests," he said.
 "Because of this, we expect to return excess cash to shareholders in some manner. This in turn has led us to recommend adjustments to the incentive plans which will work to couple management and shareholder interests as tightly as possible regarding the mode or timing of possible special distributions or share repurchases," Anders said. "In addition, we are recommending a number of other adjustments which provide your board appropriate measures to ensure that both shareholders and employees are treated fairly in the event of special distributions or share repurchases."
 -0- 1/15/92
 /CONTACT: Alvin A. Spivak of General Dynamics, 703-876-3190/
 (GD) CO: General Dynamics Corporation ST: Virginia IN: ARO SU:


DC -- DC020 -- 0085 01/15/92 14:57 EST
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Date:Jan 15, 1992
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