have recourse to an incident that occurred some months later,
when production had begun to roll and costs had cascaded to
unprecedentedly low levels. After assembling the figures, we had
advised the Bureau formally that, effective at the beginning of the
next quarter, we would reduce invoice prices below the contract
fixed prices by a certain figure per engine calculated to avoid
any accumulation of excessive profits. The total relinquishment
of potential profits was calculated to amount to approximately
$10,000,000. Meanwhile, we had adjusted wages and salaries on a merit
basis for all except top executives. On the day this news appeared I
was making one of my customary tours through the shop when one of the
workers detached himself from a big Bullard machine and headed out to
cut me off in the aisle.
He was a big brute with beetling black eyebrows and a sullen mouth,
yet as he caught up with me the hard look melted away before a big
grin and he stuck out a grimy fist.
“Mister,” he said, gripping my hand in his big paw, “I’d go to hell
for a company that won’t profiteer. And, mister,” he added, “that
goes for a lot of other guys in this shop, too.”
Despite the fact that the Air Corps Act of 1926 had made provision
for this type of profit control, Congress had passed an amendment to
the Vinson-Trammel Act in 1934, imposing a further statutory limit
on profits under contracts for shipbuilding and aircraft production.
The wartime Excess Profits Tax purported to further regulate profits
but of course only created waste. The manufacturer had to add the tax
to the price of his product anyway. The act encouraged management
to take decisions which, though unsound economically, looked smart
taxwise. Expense accounts chargeable to cost of product soared to
heights undreamed of in competitive business. Political in character,
uneconomic in principle, the Excess Profits Tax swelled the costs of
war while giving a false impression of profit limitation.
The Price Adjustment Act, commonly called “renegotiation,” was the
really effective means of profit control. Under it, competent price
adjustment boards set up the ground rules and administered them with
justice to those concerned. Yet this legislation, despite the fact
that it was fundamentally in the interest of private industry, was
passed with such a flavor of punitive action against business that
even the wisest industrialists were tricked into fighting it as just
another attack on the profit motive. Too many of us, unfortunately,
were so busy hating Roosevelt that we forgot how to use our brains.
Under wise leadership the whole thing could have been turned around
into a constructive effort. Had the administration called in
representatives from the many industries and put the problem squarely
before them along with an appeal to their patriotism, there would
have been no problem. Voluntary, industry-wide action would have
been forthcoming to keep industry on a sound financial basis, and
the example thus set must certainly have brought wage rates within
bounds. Had a routine been set up under which the government agreed
to utilize privately owned facilities on terms that would compensate
owners for their use and restore them as nearly as possible to
their original status, details could have been handled by price
adjustment boards in a cooperative manner. Punitive laws could have
been reserved for culprits, and industry would have helped police the
economy.
My own convictions as to the efficacy of voluntary processes stem
out of experiences in two wars. In World War I, Herbert Hoover,
relying upon good leadership to prevent shortages, gave a convincing
demonstration of what the American people can do voluntarily in such
an emergency. In World War II, at the very moment when my company was
being frustrated at every turn by arbitrary controls on men, money,
machines, and materials, I acted as chairman of the Connecticut State
War Finance Committee and saw the people rally to the brilliant
leadership of two able young men in the Treasury Department, Ted
Gamble and Bob Coyne, who raised billions of dollars that would never
have been forthcoming under any compulsion.
CHAPTER TWENTY-EIGHT
Off the Beam
The German attack on Russia immediately converted a lot of former
pacifists into bloodthirsty warmongers. With that everybody began
trying to get into the act. We, who had once been crucified for
warmongering, now found ourselves charged with “too little and too
late.” The war cry now became “unconditional surrender,” a phrase
that had a hollow ring to men who had watched Woodrow Wilson end
World War I with his “Fourteen Points” by dividing the German people
and the German Kaiser.
In this country everybody became overnight an expert on war
production and a critic of the professionals. The professionals,
unfortunately, must always bear the responsibility for their
actions, while their critics can and do speak with the advantage of
irresponsibility. The newspapers now began to ballyhoo the “Reuther
plan” as the answer to everything and news commentators belabored
the ether with a cacophony of approval. From his office in the War
Production Board, Bill Knudsen called us on the telephone.
“You know this fellow Reuther?” he inquired, pronouncing the name as
if it spelled Rooter.
Yes, we knew about Reuther from the headlines. With his usual flair
for publicity, he had crashed the front pages with the bright idea of
putting all the machine tools of the automotive industry, now laying
off men to convert to war production, into construction of airplanes
under the mass-production principle. To an expert like Reuther, the
idea of buying new machinery just to build airplane engines smacked
of another grab by the bosses. Its reaction on Bill Knudsen had
prompted this call for help.
“Well,” he said, with that delightful Danish accent, “what are we
going to do about him?”
Fred Rentschler thought a moment. “Send him up here,” he replied.
“We’ll take care of him.”
And when Walter Reuther arrived at “The Aircraft” in East Hartford,
he was mustered into the board room and received by all the principal
officers of the company. After he had stated his case bluntly,
sparing no wallops at the “carriage trade,” we assured him that if he
knew where we could get the kind of tools we needed, he was just the
man we were looking for. Maybe he had better quit the union and go to
work for us. We had combed the countryside for suitable tools but had
not been able to find any. As a mechanic, Reuther would know machine
tools, and we would like to have his help.
Reuther descended into the shop with our supervisors, who walked him
for miles over the entire layout. On his return he pronounced the
verdict. The stored machines he’d had in mind were no good for our
job, after all. He’d had no idea we were doing a watchmaker’s job.
What he didn’t know was that watchmakers’ tolerances were far too
crude for the exacting demands of aircraft engines.
After Reuther had gone back to Washington, one of our old-timers
lingered a moment in the board room.
“You’ve got to hand it to that cocky little redhead,” he said slowly.
“He sure knows publicity.”
But aptitude for show business was not wholly monopolized by either
labor leaders or politicians; some industrialists got around, too.
Notable among these was Mr. Henry J. Kaiser. After the private
shipbuilders had developed their new technique of constructing
components for assembly in the finished vessel, it was Mr. Kaiser,
the dam builder, who caught the public eye as the boss shipbuilder
of them all. And his activities were not limited to shipbuilding;
he was into everything. After Igor Sikorsky had finally performed
the impossible by creating the helicopter, his fame was almost
overshadowed by headlines hailing Mr. Kaiser as the great producer of
this new contraption. Again, when the German submarine blockade had
attained the peak of its effectiveness, it was Mr. Kaiser who crashed
the headlines with that hair-raising proposal of his, calling for the
construction of 5,000 huge flying boats weighing 500,000 pounds each,
with which to leapfrog the German submersibles.
A recognized aircraft constructor with the temerity to point out
that no such craft had even been projected, let alone designed or
tested experimentally, or that the industrial capacity of the nation
had already been stretched to the elastic limit, would put himself
in the position of lacking imagination. And when, finally, the tide
of public opinion forced the President to place an order for such a
craft, the contract was awarded to Howard Hughes, and Mr. Kaiser,
having promoted the idea, stepped gracefully aside. The President
afterward testified to the power of such propaganda when he told Don
Douglas he had felt compelled to award the contract to get Henry
Kaiser off his neck.
The appointment of Sidney Hillman as co-chairman with Bill Knudsen
on the War Production Board was consistent with the philosophies
of a period that held management responsible for production over
which labor exercised authority. The idea that labor should earn
the right through production rather than the blackjack was too, too
old-fashioned. When, therefore, the big unions moved in on the West
Coast aircraft companies in an attempt to dictate industry-wide wage
rates, Sidney Hillman, after beating the drums to arouse the tribes
to the necessary frenzy, summoned leaders of the aircraft industry
to Washington for a little “collective” bargaining. The idea, it was
said, was “to put the ‘C’ in ‘D.C.’”
At the moment, this looked like but one of the fantasies of that mad
era. In retrospect it takes on definite form. We who had created a
vital industry were put on the defensive as profiteers by leaders of
a publicly supported labor monopoly, itself bent on profiteering.
Whatever profit we might be allowed was a matter of law. As suppliers
to the government, we were responsible to the people for keeping
costs down. The workers, largely unskilled, were being urged by their
leaders to slow down, while the same leaders blackjacked the public
for higher wages for less work. All this, in the task of making the
tools for the public’s defense.
The situation, largely chargeable to the Nye investigation and
similar episodes, could have been avoided under leadership of
a different character. A clear statement of the fundamentals,
accompanied by an appeal to industry, labor, and the public, could
have resolved the internal conflict into an all-out cooperative
effort, but none was forthcoming. The political atmosphere of the
time resembled that described by C. W. C. Oman in his book, _The
Seven Roman Statesmen_, first published by Edward Arnold & Co.,
London, 1902. In Rome, the politicians from Tiberius Gracchus to
Pompey, who paved the way for the Emperor Julius Caesar, bought the
votes of the proletariat with money created by enterprising men and,
while they gained fame for themselves, deprived the people of freedom.
The formal meeting took place in an ornate conference room on the
fifth floor of the new Social Security Building. We manufacturers,
after proving our identities, were shown the entrance to an escalator
which we discovered went only as far as the fourth floor. That word
“escalator” had been borrowed in war contracts as a means of partial
protection against unforeseen wage hikes.
To a large gathering round the council table, Sidney Hillman pointed
out that, since collective bargaining in Southern California had
broken down, Washington had been forced to settle wages, working
conditions, and similar matters—for the entire industry. The
decision, it appeared, had already been taken at a high level and we
might just as well relax and enjoy it.
Our position was stated by a spokesman who pointed out that if labor
would step up its output and reduce costs, the employer could meet
the demands out of savings in cost. If, however, government increased
labor rates without correspondingly modifying sales-prices, it would
bankrupt manufacturers.
Sidney Hillman listened to our point of view with amused tolerance
and then played his ace.
“Of course,” he remarked, “you are protected by the escalator clause.”
Reuben Fleet, of Consolidated, twisted in his chair and swallowed an
aspirin tablet.
“When we came up to this fifth floor this morning,” he said, “they
showed us the escalator. But,” he added, wagging a finger in Sidney
Hillman’s face, “the escalator stopped at the fourth floor.”
At this pat retort the contractors gave vent to a whoop that broke up
the meeting.
Shortly after President Roosevelt’s announcement of his
50,000-airplane program, or the “numbers racket,” newspaper headlines
flared the story that government had called industry leaders to
Washington to tell them off for their crime, “too little and too
late.” The call brought Phil Johnson from far-off Seattle, Donald
Douglas, Bob Gross, and Dutch Kindleberger from Los Angeles, and
others from farther or nearer. Phil Johnson, once driven out of air
transport, had now been called back to Boeing to build heavy bombers.
But when we manufacturers foregathered together and proceeded to the
assigned meeting places, we found the rooms so jammed with sound
cameras, klieg lights, and heavy cable, there was room for but a few
of the better-publicized culprits. The others watched through doors
and windows while big politicos mugged cameras that would flicker
their message to the hinterlands. Most of us had to see the newsreels
to find out what message it was we had traveled so far to receive.
The problem of how to expand production, train licensees, and meet
all Selective Service demands was always with us. For all United
Aircraft divisions had accepted the responsibility for servicing in
the field all equipment of our design whether manufactured by us or
anyone else. This kept hundreds of trained service men in the field,
including many in the front lines.
One day I received a visit from my old friend Joe Beach, former
mayor of Hartford, once a good citizen but then a major assigned to
the Army Personnel Procurement Branch. Joe, who knew our problems,
regretfully advised me that he had received orders to recruit, from
Pratt and Whitney, several hundred men conforming to a specification
that described our best-trained field-service men, specialists who
could be replaced only with the greatest difficulty. Joe tried to
soften the blow by saying the men would be immediately commissioned
captains or colonels or something. The Army would not take “no” for
an answer; it was come across or else.
In this tough spot, I phoned for “Tiny” Flynn, our service manager,
and with Joe listening asked him how many of his staff had been
inducted into the Army and what the Army had done with them. The
answers were “plenty” and “K.P.” or “latrine duty.” I then asked Tiny
if he had their present addresses, and when Tiny answered in the
affirmative, Joe grinned and walked out. Later he confessed to having
never sprung one of these men out of “K.P.”
After the Jap sneak attack on Pearl Harbor I called on my old friend
Admiral Reeves in Washington to get his slant on what had happened.
The admiral, now retired, had been recalled to active duty and
assigned to the Navy Department in charge of Navy lend-lease. Always
an Anglophobe, he there tried to keep our English cousins within
reasonable bounds. Considerably older now, the admiral was said to
require two traffic lights to get across the expanse of Constitution
Avenue, but the old spirit flamed.
“The one thing the administration needed to bring the people into the
war on the side of the British,” he explained, with that sweeping
gesture of his, “was Pearl Harbor. Who could have expected them to be
so dumb as to play right into our own hand? Our big surprise wasn’t
Pearl Harbor; what defeated us was that the Japs could be so dumb.”
After the attack, the admiral was ordered to Pearl Harbor as a member
of the Roberts Board to investigate the efficacy of the Japanese
assault under a strategic concept which the admiral had conceived but
his contemporaries had not understood.
Following Pearl Harbor, aircraft production shifted to full
throttle. Under Bill Knudsen’s leadership, Ford, Buick, Chevrolet,
and Nash created new facilities and shipped United products.
Wright Aeronautical first built a huge plant near Cincinnati and
then drew Studebaker and Chrysler into the complex. At United we
stepped employment up to 75,000 and thought we had attained our
peak production. Then we were called to Washington and told to
build a new plant somewhere out west, one bigger than the Hartford
establishment. This looked at first like the straw to break the
camel’s back, yet Jack Horner discovered an ideal plant site in
Kansas City, Missouri.
In undertaking this job for BUAERO, we pointed out that we had
no funds of our own with which to finance either construction or
operation. We therefore suggested that we take the job on without
profit to ourselves. The plant could be constructed by the Defense
Plant Corporation under our plans and, when it came to operations,
the Navy could put a disbursing officer at Kansas City who would
pay the vouchers and invoices certified to him by our manager and
approved by the Navy inspector. This was a procedure we had tested
in Canada where James Young, president of our Canadian Pratt and
Whitney, had been called on to build a propeller plant in Montreal.
Under that program His Majesty’s Government had deposited funds in
the local bank which were disbursed by His Majesty’s disbursing
officer in payment for services and materials approved by His
Majesty’s inspector. And if His Majesty’s inspector elected to reject
work in process, or exercise any other authority commonly assumed
by government inspectors everywhere, then it was His Majesty’s hard
luck, not the manufacturer’s. In other words, our nonprofit proposal
was not entirely altruistic; we were also concerned with avoiding
losses.
But now it developed that we must be allowed to earn some profit,
in order to be able to absorb items of cost which one inspector or
another might not allow. Thus when we made a contribution to the
local Community Chest drive, and a cost inspector ruled it out as
illegal, there must be some place for us to recover the expense. And
so we finally accepted a nominal “profit” with the provision that any
amount left over after all “illegal” fees had been paid would revert
to His Majesty—or rather to Uncle Sam.
But the important fact developed by this transaction was that it was
entirely possible for a reputable constructor in wartime to perform
a public service without “profit” in the usual sense, and do an
outstanding job at it. As a matter of fundamental equity, United
Aircraft Corporation risked none of its funds in this effort and
was not, therefore, entitled to receive profit for it, especially
when its own resources were being fully employed and were earning
a fair return. The principle here is that each enterprise engaged
temporarily in the war effort has a distinctive problem of its own
and no over-all legislation can be written to cover individual cases
in an equitable manner. The place to reach decisions on these matters
was the Price Adjustment Board.
As between United Aircraft and its licensees, the relationship was
one of mutual respect and close cooperation. We spoke the same
language and subscribed to the same principles. One could not say as
much for relations between the airplane builders and the automotive
industry. One day Dutch Kindleberger trumpeted a blast, pooh-poohing
the automobile manufacturers as significant producers of airplanes,
an outburst that threatened to revive the ancient feud between
the mass production industry and the “carriage trade.” This snort
coincided with the mailing of a letter I had written to President
Harlow Curtice of the Buick Division, complimenting him on the job
Buick had turned in by constructing a new engine plant near Chicago,
and getting it rolling. In reply to my letter Mr. Curtice later used
a pat phrase which seemed appropriate to an address I was scheduled
to deliver before the annual meeting of the Union League Club in
Chicago.
I therefore suggested to the Union League dinner committee that they
invite Mr. Curtice to sit at the speakers’ table so that I might
make acknowledgment of the Buick performance. The address was being
broadcast over a nationwide hookup and I had taken for my title “The
Fundamentals of Freedom.” I reviewed the airplane story and took as
my theme the idea that the magic of the aircraft performance lay in
the creative power of individual freedom. And when the time came to
quote the Curtice letter, I read it verbatim:
“I believe,” read the letter, “that the people of this country will
be happy to know that we manufacturers can cooperate in a crisis, as
effectively as we are accustomed to compete in normal times.”
In order to simplify the Pratt and Whitney problem, we had taken
certain decisions with respect to standardizing our line of engines.
First of all, we had definitely scrapped the abortive liquid-cooled
program and had ceased to produce certain air-cooled models. With
this behind us, we now faced a critical situation that threatened
to negate some of our efforts along this line. Back in the late
’thirties, Bill Patterson, president of United Air Lines, had asked
us to assist him by making a study of a completely new airplane,
capable of coast-to-coast flight with two stops en route, and having
such economic characteristics as would make it a great advance in air
transportation.
We had studied the problem along the lines followed in developing the
Pan American Clipper series, and had forced ourselves to conclude
that we would need an engine somewhat larger than our popular 1830.
The airplane would be a four-engined job carrying approximately forty
passengers and would, at current rates for mail pay and passenger
fares, be very attractive to all the airlines. We had recommended to
“Pat” that he turn the study over to one of the established airplane
companies with plenty of experience in producing transports. Pat had
interested Don Douglas in the project, and Don had brought the other
airlines into the picture with the idea of making the airplane a
joint project. One ship had been built but when no production orders
were forthcoming, and the armed forces had shown no interest, the
project had lain idle.
Shortly after the outbreak of the war, the Army had issued orders to
halt all production of transports, a mandate that was revoked only
after a Congressional delegation had intervened. Later, in a quick
turnabout, the Army tried to take over the airline transport system
intact. Yet even after it had absorbed nearly half of the airplanes
in service, along with a large number of key men, the commercial
airlines stepped up their plane utilization to the point where they
were carrying more passengers than ever before but with half the
equipment. On January 19, 1942, the Navy organized the Naval Air
Transport Service, or NATS, and on June 1, the Army followed with
the Air Transport Command, or ATC. Out of the confusion as to the
functions of air transport, these two military services emerged to
become indispensable to the prosecution of the war.
After this, the Douglas four-engined transport project was revived
and rushed into volume production. Almost overnight, Army and Navy
C-54’s, and the commercial version, DC-4’s, began winging all over
the world to carry important people and critical materials to meet
desperate situations. Now as this service expanded, it hurdled the
submarine blockade and became in fact the safest means of transport,
as well as the most expeditious. Of all the various world services,
that across the Himalayan Hump became the best known, but the
over-all performance of the military air-transport services and the
commercial operators was so outstanding as to lead to the conviction
by many that economic air transport had arrived.