Evening star., 1941-05-04
Machine Sales
Expected 10 Hit
New Peaks
Most Firms Profits
To Be at Least as
Lurqe as in 1910
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, May 3.-Under the
spur of defense work. 1941 sales of
most machinery and tool makers
should reach new peaks, in many
cases far above any previous levels,
according to a survey by the STAN
dard & Poors Corp. Although unit
profit margins may well narrow
somewhat, despite the economies
produced by large volume, the great
majority of companies in these
groups will probably earn at least as
much in 1941 as in 1910, even after
allowing for prospective higher in
come and excess profits taxes.
National defense work, directly or
indirectly, is putting an increasing
strain on the producing capacity of
virtually all machinery and tool
makers, despite major expansion in
personnel and plant facilities by
many. Those concerns not heavily
engaged on normal production are
handling an increasing amount OF
sub-contracted defense work.
With every effort currently being
made to step up output further, no
slackening of near-capacity opera
tions for almost all companies in
the group is currently in sight In
dicating the increasing demand
pressure from domestic sources and
for export to Britain, practically all
principal types of machinery are
now under strict export control.
Exports have continued to run
slightly better than year ago, with
Britain the main buyer. 1t is not
unlikely, however, that shipments
abroad will gradually recede, partly
because of shipping difficulties but
mainly because of rising domestic
needs
All companies in the group are
faced with rising material and labor
costs. Labor will not only be work.
ing overtime, but also will receive
higher base pay rates.
The huge volumes in prospect,
nevertheless, insure ample profit
margins for most concerns. On
much of their business, machinery
and tool makers are protected in
some measure from rising costs by
escalator clauses in contract prices
The use of these protective features
may be reduced on future business,
based on recent statements from the
newly created Office of Price Ad-
miniStration and Civilian Supply,
and operating margins may tend to
narrow somewhat, despite the econo-
mics produced by large volume.
Even with higher taxes in pros
pect, 1t is not unlikely that most
machinery and tool makers can
earn at least as much in 1941 as in
1910; in many cases, there should
be a worthwhile improvement in
net.
Prospects for some of the leading
subdivisions in the trade are re-
viewed in the following paragraphs.
Output at New Peaks.
Machine tool makers are main
tanning an unceasing pressure to
expand production for defense needs.
1t Is estimated that output in the
first quarter amounted to around
Sl55 600, 900, or at an annual rate of
S620O00, 900, compared with 1910
production of about $3.50 900, 900.
Increased subcontracting of work,
together with the lengthening of
working hours and some enlarge
ment of facilities at machine tool
plants, is believed to have raised
April output to an annual rate of
around $700000,000 Further major
expansion is indicated. and the
trade expects to raise its full year
1941 output to the vicinity of
$3.50 900, 900.
Because of their key place in de-
fense preparations, machine tools
have been subject to strict priorities
for some time. 1t is estimated that
over 95 per cent of current produc-
ton is going to meet the defense
requirements of the United States
and Britain.
Exports, almost entirely to Brit
ain, have been declining recently,
partly because of shipping difficult
ties and partly because Britain's re-
quirements since passage of the
lease-lend bill are shifting gradu-
ally from raw materials and proc
essing tools to finished products.
Exports recently have accounted for
no more than 80 per cent of the
total machine tool production, COM
pared with 40 per cent in 1910, and
the proportion may well decline
further in coming months.
Rush to Continue.
This country's defense needs are
so huge, however, that producing
capacity will be strained for an in
definite period almost regardless OF
the export trend. Recent reviews
of defense requirements in coming
periods suggest that, rather than
declining after this year, machine
tool demand in 1912 will probably
be at least as large as the unprece-
dented total for 1941.
Under normal cOndltlOnS, Sharply
rising volume means progressively
wider profit margins for machine
tool makers. The extreme pressure
of current production, however, Is
definitely modifying the normal ex-
pectancy. Rising base pay rates
together with large overtime pay
ments, have increased tool makers
labor costs around 10 per cent In
the last year. Costs of parts, ma
terials and supplies also have risen
Finally, the increasing amount OF
subcontracting now accounting for
about 10 per cent, is cutting into
profit margins decidedly. On aver
age, subcontracted work costs about
so per cent more than If it had beer
done in the tool makers plant;
sometimes it costs three to four
times as much Even though ma
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