Evening star., 1942-04-19
Vast Expansion
Continues in
Tool Industry
Toxes to Take Most
OF Increased Profits,
Survey Shows
srrclsl Dispatch to The star.

TeCOfQS ana IuFtfleT expansion OF
that industry is indicated as long
as the war lasts, it is pointed out in
a survey issued this week by Stand
ard & Poor's Corp.
Machine tool builders are being
asked to raise their output this year
to more N1an double l94l totals
Benefits from the additional sharply
increased volume will go far toward
offsetting higher labor and material
costs, permitting q substantial in
crease in operating profits. Because
of the sharp increase in taxes. how
ever, only the exceptional company
will be able to increase final net
income.
Production Records Set.
Production of machinery increased
virtually without interruption last
year. At the close of the year the
Federal Reserve Board index OF
machinery production was some 81
per cent higher than a year before
Production in 194l, including in
dustrial and electrical machinery
farm machinery and equipment
printing and Office machinery, is
estimated at around $1,000, 900 900
This total is some $4,000, 900, ,0oC
higher than the 1929 record.
For January the index OF ma
chinery production, based on an
average of 1859 equal to 100, was
248. an advance of seven points from
December and rs points higher than
January, 194l. In February the
index stood at 256.
To mobilize industry for the pro-
duction necessary to meet the wal
requirements of this country and
its Allies. much of the facilities
still devoted to civilian and COM
mercial goods will have to be con-
verted to the manufacture of war
materials. Normal operations in
many divisions of the industry will
thus be restricted and, in some
cases, actually banned. Shoe ma
chinery, leather working and tan
ming machinery, new textile ma
chinery, paper and pulp mill ma
chinery and woodworking machin-
cry will be among those affected
Work in connection with the war
effort will, however, more than COM
pensate. Production will be limited
only by the availability of raw ma
terials, skilled labor and plant and
equipment capacity.
Capacity Operations Assured.
New machinery orders have in
creased sharply in recent months
The Department of Commerce in
dex of the value of machinery or
ders receded from the June peak
of 29S (January, 1889, equals 1907
to 258 for October, apparently re-
f1ecting curtailment of some manu-
factured lines as we'll as some diff
culties caused by priorities. Sue
cessive peaks in the index have
since been made, however, the lat
est being 447 in January.
With the United States in an
all-out war effort and general in
dustry being converted to war pro-
duction, there is little doubt that
the volume of new business coming
to the machinery industry will con-
tinue to increase. Machinery back
logs indicate capacity operations for
more than year ahead, and it is
not expected that present backlogs
will be reduced for some time to
ccme, despite steady increase in
the productive caDacitv of the in
dustrv. fdded to the favorable out-
look fer ccne~tic de'na"d is the
likelihood Ct further increase in
lend-lease shipments.
Lower Earnings Expected.
Machinery sales in 1941 are esti-
mated to have been more than go
per cent above those for 1910 and
earnings generally were at record
or near record levels. Further sub
stantial sales gains will be expert
enced this year. With the great
bulk of business connected with the
war effort, the industry should have
little trouble in obtaining the neces-
sary raw materials.
Increasing labor and material
costs, the rising percentage of low
yield war business and the fact that
most selling prices have not been
increased indicate some narrowing
of operating margins. However. the
shrinkage will be offset in part by
the benefit of increased sales. Thus
it appears that most machinery
companies will show further good
operating gains. Because of the
sharp increase in taxes, few COM
panies will earn as much as in l941
but results will compare favorably
with most other industries.
New Expansion Planned.
To meet the demands of the all
out war effort, the machine tool
industry is being called upon to eX-
pand output to about $2,0O0,000 .00O
this year. In 1941 output was valued
at about 100000, while in 194C
the value was only S450,0O0 900
Shipments in February, 1912, were
at a new high of S93, 100, 900, or al
an annual rate of 81, 100000.
While the current production rate
would indicate output of only a little
more than half of the desired total
the goal set by the War Production
Board is considered attainable. II
will be reached through the COM
bination of the fullest use of exist
ing facilities, expansion of present
plant capacity. Subcontracting, new
sources of manufacture and further
simplification of sizes and designs
Established companies in the ma
chine tool field have been steadily
expanding capacity during the past
year and further additions to plants
of many manufacturers, designed
TO increase output from 40 per cent
to so per cent. are under way.
Though machine tool builders a.
a group are highly vulnerable tc
excess profits taxes, final net vii
hold close to the highly favorable
levels attained in 194l, even on the
basis of the latest indicated current
tax proposals.
Clearing House Issues
Report at New York