Changing Of Guard -- General Dynamics' Image-Conscious Chief Leaves Amid Firestorm Over A-12

ST. LOUIS - Five and a half years ago, Stanley Pace walked into General Dynamics Corp.'s headquarters in Clayton, Mo., in the midst of a firestorm.

When the former World War II bomber pilot retired as chairman and chief executive of the company this week, he left another firestorm behind.

In 1985, the military-contracting giant pulled Pace away from TRW Corp. in Cleveland and his planned retirement as vice chairman. The company wanted Pace to replace its embattled chairman, David Lewis, who was resigning in the wake of federal and congressional investigations into gifts given to government officials and alleged overcharges in its submarine program.

Pace, now 69, stepped in as an outsider devoted to rebuilding General Dynamics' reputation and getting it back on course. He took great pride in ridding it of what he called its ``bad-guy, black-hat image.''

But as his final days at the helm neared, Pace found General Dynamics under attack once again.

This time, the Defense Department and Congress are accusing General Dynamics; its partner, McDonnell Douglas Corp.; and the Navy of mismanaging a troubled attack-bomber program called the A-12. And the Justice Department is conducting a criminal investigation to see whether the companies received progress payments they should not have.

Pace has left these problems for William Anders, the former astronaut who was tapped as his successor. Anders joined General

Dynamics as vice chairman last January from Textron Inc. in Providence, R.I.

But in a recent interview, before Defense Secretary Dick Cheney gave the Navy three weeks to say why the A-12 program should not be canceled, Pace reflected on his tenure at General Dynamics, the future of the company and the future of the aerospace industry.

Pace, who was born in 1921 to a farming family in Kentucky, is a West Point graduate and World War II veteran.

On his 39th mission in a B-24, Pace was shot down and spent nine months in German prisoner-of-war camps.

Trained as an aeronautical engineer, he joined TRW in 1954, working his way up the corporate ladder to the No. 2 spot before arriving at General Dynamics.

During his reign, General Dynamics joined industry teams to build the A-12 and the Air Force's advanced tactical fighter; greatly expanded its Atlas rocket program into the commercial arena; created ethics and ombudsman programs; chose not to diversify further; and named Anders as successor.

But the abrupt end of the Cold War and the latest A-12 troubles have interrupted Pace's accomplishments.

``On some of those we are at halftime in the ball game,'' Pace said. ``I don't think I'm willing at the moment to declare success or declare failure; we still have the last half of the ball game to play and see how it comes out.''

The changing world order will mean shrinking defense budgets for General Dynamics' M-1 Abrams tank, F-16 Falcon fighter, Trident and Seawolf submarines and its missiles. The A-12 and advanced tactical fighter, on which the company is teamed with The Boeing Co. and Lockheed Corp., both face cloudy futures.

``This is the price that we in the industry have to pay for achieving success in the Cold War,'' Pace said.

General Dynamics diversified somewhat when it bought Cessna Aircraft in 1985, but Pace has shied away from any other commercial ventures. Even with the onset of declining military budgets, General Dynamics officials have maintained they will stick to building weapons.

But military contractors will surely shrink in size, and so, too, will the industry, Pace says.

``Some people are leaving this business already,'' he said. ``Some people would leave if they could and had somewhere else to go.''

The defense acquisition process is ``complex, cumbersome and bureaucratic,'' Pace said. And the new technology always presents an added question mark to military programs.

``That means you are working on things that you know and understand, but not completely,'' he said. ``Therefore, mistakes are made. Estimates are made incorrectly. Problems occur.''

Observers may criticize the military-industrial complex, but a close relationship between the Pentagon and military contractors is a must, Pace said.

``A partnership is the way to get things done in this business,'' he said. ``An adversarial relationship is not the way to get things done in this business.''