Evening star., 1940-08-14
;Aviation Industry
Gambling Millions
10 Speed Defense
Placing Orders in
Anticipation Of Law
For Amortization
BY JOSEPH S. EDGERTON.

= Without waiting for Congress 10
sbreak the latest aircraft production
sbottleneck by enacting legislation
ito lift profit limitations and permit
a fve-year amortization of new
-airplane plant costs, the Nations
major aircraft plants today are
Yending out contracts for the new
machine tools which will constitute
the most costly item in their ma
'tional defense expansion programs,
it was learned today
The machine tool contracts it was
explained signify the breaking of
a jam which for seven weeks has
held up a 4OO,O0O,OOO air defense
program. They indicate a willing
ness on the part of the aviation
industry to gamble millions of dol
lars in an effort to speed up the
defense program on the chance that
Congress will underWrite the cost
,of factory expansions. for defense
purposes.
Officials of the Aeronautical
Chamber of Commerce, national
trade body of the aeronautical in
'dustry, today were notified that
about IA of the Nations largest air.
craft manufacturing plants, which
will handle contracts for practically
.all of the 1000 airplanes to be
built under the 100000 900 pro-
gram, have signed machine tool
'orders running into many millions
of dollars.
1t also was reported to the cham
Der that orders are being placed
by these plants for great quantities
of duralumin and other raw ma
.terials and for castings and semi
'machined or machined parts ham
died through subcontracts. These
orders will entail expansions in
many of the raw materials and
accessories industries, 1t was re-
ported.
Officials of the Defense Commits
sion also announced today that air.
craft plants with which Federal con-
tracts are being negotiated and even
fome plants without contracts are
going ahead with plant expansion
programs in advance of congress
sional action. AS result OF these
expansion programs, employment in
the airplane factories alone has been
increased from approximately $4,000
in January to $4,000 in June and
now is believed to be increasing at
an even faster rate Employment
figures for the aircraft engine fac
tories are increasing at approxi-
mately the same rate, according to
reports to the Aeronautical Chamber.
On the basis of these reports,
officials of the Defense Commission
pointed out that the statement OF
Secretary of War Stimson before
Joint congressional hearing last week
that the Government has been able
to sign contracts for construction OF
only 80 airplanes out of the 1000 or
more for which funds have been
available since June, does not give
a true picture of conditions in the
aircraft industry.
Final Contracts Not Signed.
Although 1t is true that, because
OF uncertainty as to who must bear
the expense of plant expansions for
purely defense purposes, the manu-
facturerS. have not yet signed final
contracts, it was pointed out, the in
dustry already is going ahead with
plant expansion plans which must
precede the quantity production OF
combat planes for the Army and
Navy.
Nevertheless. it was explained by
the Defense Commission. contracts
for airplanes have been cleared" by
the Government and some of them
have been signed by manufacturers,
subject to revision on the basis of
congressional action on pending
profits tax and amortization legis-
lation.
The clearing" of a contract, it
was explained, means that all Gov
eminent work on the contract has
been completed, including legal ex-
animation of its terms, certification
that the funds are available, and
approval obtained from all Federal
agencies concerned. 1t also means
that the newly-created construction
advisory section in the Office of the
quartermaster general has examined
the qualifications of prospective bid
ders and has recommended to the
quartermaster general three firms
which appear best qualified to un-
dertake the project.
To Sign When Legislation Passes.
With all these preliminaries out
of the way, the actual signing of
contracts is expected to be COM
pleted within a few hours after
Congress completes action on the
pending legislation.
The decision of aircraft manu-
facturers to undertake expansion
projects without waiting any longer
for Congress is based upon assur-
ences of defense authorities that
every effort would be made to pre-
vent saddling upon the industry of
costs of plant expansions for defense
purposes only.
On August William S. Knudsen,
production chief of the Defense
Commission, called upon the man
ufacturers to anticipate the passage
by Congress of a f1ve-year amortiza
ton law and to start work at once
on plant expansion. Three days
later, in a statement given out by
Chairman Cooper OF the tax sub
committee of the House Ways and
Means Committee, in the presence
of Mr. Knudsen, congressional tax
leaders asked defense contractors
to 60 ahead with their programs,
with assurances they would be per-
mitted to deduct from taxable in
come the cost of plant expansions.
West Coast Plants Squirt.
On the Pacific Coast, hub of the
Nations aircraft industry. every
major concern is reported to have
undertaken an expansion program.
Announcements of expansion made
by Douglas. Dockheed and Vultee
involve millions in investments and
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