Detroit evening times. (Detroit, Mich) 1921-1958, 1942-04-20
DETR0f7s6 n INES
On the
Business
Front
By WARD SCHULTZ
Detroit Times FtnasciaI Editor

Hardly a day passes but what
some one wants to know why the
stock of a firm like General
Motors, which possesses huge
backlog of war orders, is selling
so cheap.
Best explanation I have seen is
the following analysis prepared
by the Wall Street Journal. 1t
shows some. although not all. of
the problems the corporation
faces.
or all the worlds big corpora
tons, General Motors Corporation
has been the biggest money
maker. Its earnings in 1941 (when
it sold about As per cent of all
the cars and trucks marketed in
the United States) were almost
$3.50, 600, 900 before deducting in
come and excess profits taxes.
Its income and excess profits
tax bill in 1871, most of it going
to Uncle Sam, was about $780,
000, 900. giving it first place as a
taxpayer, too.
GINS contribution TO the war
does not stop there. Its immense
plant facilities have been con-
verified into a gigantic arsenal. In
the first quarter of this year it
produced $261, 000, 900 of victory
products, is now producing over
500, 600, 900 a month and is ex-
.pected to pass the $1,000, 000, 900
mark for the year.
It's war orders represent 10 per
cent of the country's requirements
of war materials fabricated from
metal. according to recent ad-
vertisement which also revealed
that Motors contracts included
one-third of all machine gun
orders, more than one-third of
navy trucks, more than half of
the navy's diesel engines, two-fifths
of the aviation engines and more
than one-fourth of the tanks as
well as planes and other material.
It had at the end of the first quar-
ter II plants engaged in war work
and many others being prepared
for ii.
Appraisal of General Motors
immediate earnings prospects is
difficult. There is little to which
to anchor calculations. The COM
pany is no longer. or only to a
very limited extent, an automobile
producer, but munitions manu-
facturer. Profits on this type OF
business are lower than on COM
mercial and there is not sufficient
experience to measure what they
will be or to what extent, if any
they will be compensated for by
increased volume.
The possibility that Congress:
will place limit on profits on wal
contracts must also be taken into
consideration. The fact that the
in February, reduced
the quarterly payment on the
common to so cents share,
against a previous ST payment and
a total of S3.75 in 1871, indicates,
IA. the most favorable interpreta-
ton, the management belief that
1912 earnings will not cover the
former dividend.
General Motors immediate out
look is clouded with many ifs,
ands and butts" Yet certain facts
stand out with some clarity.
Last year, on net sales of
S24. 600, 900, 900. the corporation
showed earnings before taxes of
$3.50, 0O0. 900. approximately 20 per
cent. This was reduced by in
come and excess profits tax levies
to S201 900, 900, or S4.44 a share
on the 43,500.000 common shares.
Assuming an average operating
profit of 7 per cent on war bust
ness-it may be lower-General
Motors would have to do $1,000
100000 on such business to equal
its 1871 operating results. On the
81 .000, 900, 900 anticipated output a
7 per cent yield would mean only
S14O, 900. 900.
To this must be added profits on
nonwar business. the volume of
which this year will be relatively
small, and profits on which will
doubtless be affected by higher
costs Incidental to reduced volume
as well as my inventory adjust
ments. An estimate of S35. 900, 600
fo= the year from this source land
from dividends from investments
and subsidiaries and consolidated)
seems reasonable at the moment
Altogether. il does not appear
likely that total operating results
will exceed S200,0O0,000.
General Motors indicated excess
profits tax credit, figured from
available statistics. is around
S210, 100000 so that Il will likely
be subject only to normal and sur
tax taxes this year. Assuming a
taxable net of $3.50. 900, a 45
per cent surtax would leave profits
of more than S100,000,000 (divi.
dends received by GIN would be
taxable only in part) for stock. OF
something over So a common
share. A higher tax rate or lower
profit margin would alter these
figures materially.
Looking a little further ahead
however. it is expected that wal
production will have attained 9
$500, 100000 monthly rate by the
end of the year. If the war con.
finIins ouch nrndnctiorn In 1919 Il