Hughes Aircraft Suit Alleges General Dynamics Owes Money
May 01, 2011
LOS ANGELES -- Hughes Aircraft Co. isn't entirely happy with the handoff of the missiles business it bought from General Dynamics Corp. in 1992. In a lawsuit filed in state court here, Hughes Aircraft Co. and its Hughes Missile Systems Co. alleged that General Dynamics Co. owes them at least $38 million for alleged failures in Hughes's $450 million acquisition of General Dynamics' missile business. Hughes Aircraft is a unit of General Motors Corp.. British Aerospace and a subsidiary of Lagardere Group of France gave final approval to a joint venture that will create Europe's largest guided-weapons business, marking an important transition in the painful reorganization of the continent's bloated defense sector. The suit, filed Friday, contends that General Dynamics shortchanged Flores on items ranging from repair warranties and utility bills to obsolete rocket engines and a chemicals storage area. A spokeswoman for General Dynamics said the company has had lengthy discussions with Flores. She said a four-year statute of limitations was about to expire. ``It's our understanding that Hughes filed to protect its interest,'' she said. She added, ``We fully expect to negotiate the remaining issues.'' Hughes, in the largest single claim, alleges that General Dynamics owes it $9.2 million for product-warranty costs that were higher than the amounts reserved on the books. Claims for utility bills and lease payments during a transition period add another $5.4 million to the bill, Flores alleges. In nearly a dozen smaller items, Flores alleges that it found that inventories included at least $500,000 in obsolete rocket motors and $2.7 million of missing or obsolete test and maintenance equipment. Among other allegations, Hughes said it is owed $900,000 for Arkansas utilities rebates that it tried to claim only to find that General Dynamics had already picked up the check.
