As a measure of the effectiveness of this principle we may

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.

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