Evening star., 1940-06-22
Aircraft Leaders
Disturbed by New
Profits-Cut Plan
Declare Bill Would
CurtoiI Expansion
And End Research
BY JOSEPH S. EDGERTON,

| ScdTCu anu QcVclOpMeNC TO keep
pace with foreign warplane progress,
American aviation and defense
leaders are seriously disturbed by
pending congressional proposals to
reduce aircraft manufacturing prof.
its further.
Pending legislation. If enacted,
would curtail the whole aircraft ex-
pansion program and completely
wipe out research and development
activities at the time when they are
most urgently needed for national
security, in the opinion Of defense
and aviation leaders.
The profit-limiting legislation was
inserted as q Senate committee
amendment in bill already passed
by the House to speed up naval
construction and, with some further
modification, was approved late yes
terday by the Senate. It now must
60 to conference between the Senate
and House.
AS approved by the Senate. the
amendment permits the Govern
ment to guarantee q maximum of Z
per cent profit to airplane manu-
facturers, and shipbuilders. The law
now allows up to IL per cent profit
on airplanes and up to 10 per cent
profit on ships, but guarantees no
| returns.
Objection Raised.
When the amendment first was
inserted earlier in the week by the
Senate committee immediate OBJ
lection was raised by the Army and
Navy and the National Defense Ad-
visory Commission on the ground
that it would block expansion and
progress in the two industries most
vital to national defense.
AS result of this objection, the
Senate Naval Affairs Committee held
executive hearings Wednesday and
Thursday. At the close of these
hearings it was indicated that a fur
ther amendment would be offered
on the floor of the Senate to CLARITY"
the situation.
Officials of the Aeronautical
Chamber Of Commerce declared to-
day that out of the Z per cent al
lowable profits under the proposed
amendment the ship and airplane
building industries must pay for
losses due to spoilage or waste in
manufacturing or to delays in de-
livery of raw materials or parts; a
Federal income tax amounting to
from l to Ia per cent; interest
losses on borrowed money: capital
stock taxes; State and local taxes
and franchise costs.
After these deductions, manu-
facturers cannot hope to net
profit of more than 3 or 81 per
cent at most, it was pointed out;
unavoidable losses due to wastage,
engineering changes during course
Of production and the like may wipe
out any profits.
For q number of years airplane
manufacturers have been putting
at least 10 per cent of profits into
research and development to i'm
prove the performance and quality
Of aircraft. This research and de-
velopment work is held to be of
vital Importance to national Sc
curity, especially at the present
time. II productive capacity of
the industry is to be increased to
meet the increasing defense de-
mands, plants must be expanded,
tools purchased, employees hired and
trained and executive and super
visory leadership increased. Loss
of profits may delay or prevent some
of these vital increases at the time
when they are needed most, it was
pointed out.
Vital to Safety.
What we cannot understand"
one Of the Nations outstanding lead
ers Of the aviation industry said,
''is why the manufacturers of uni
forms, tanks, automobiles for mill
tary purposes, munitions or others
of so or more necessary war prod
ucts escape these crippling limita-
tions, while Congress picks out only
the ship and aviation industries,
which are the most vital of all to
our safety, to choke them down to
q point where they become losing
propositions and no dividends are
possible.
1--WE do not see why, if there is
to be legislation coming up that
will take care of excess war profits
in all branches of industry, ship and
airplane building should be singled
out for this discriminatory and
harmful treatment. Labor unions
are protected, but the industries
which are so vital to our defense
and the stockholders who support
those industries are denied protec-
ton under such legislation as this.
mo one in the industry wants to
reap unjustif1able profits out of a
national emergency. Every one in
the industry wants to contribute
to his utmost to the building up of
airpower and the continuation of
aviation progress. We cannot make
these contributions If we are denied
the right to make the money nec-
essary to give them being"
Industrial Plans Blamed.
4lc PCAAuA1S pIOllt"AlIkllIlllk lCk-
islation is regarded as the result
of a failure to provide adequate
price control plans in the existing
national defense and industrial
mobilization plans. There are only
the most vague and general price
control provisions in the 1899 in
dustrial plan and the Army and
Navy Munitions Board, which spon-
sored the plan, apparently is not
certain whether price control Is
necessary or desirable in case of war.
It is stated in the plan merely
that control Of prices in war may
be required to prevent or minimize
disruption Of the national economic
structure resulting from the impact
Of the rapid increase of demand
upon existing facilities and re-
sources"
It is provided in the 1899 plan
that a price control authority may
be organized as required by cir
o,,,,n C%o nraCO