Evening star., 1949-09-11


D REPORTS-Members of the tn
/ as they reported to President 7
rson, N. j., q lawyer; President TT
roll r. Daugherty of Northwestern
share thereof, it is necessary also
to consider the low level Of profits
or lack of profits in other years OF
the business cycle. The prosperity
of a volatile industry like steel and
its ability to pay should be judged
over a longer range.
go Break-even point: In con-
sidering the break-even point,
which is. the next factor in ap-
praising the companies ability to
pay, the Board finds that it is
unable to accept the unions esti-
mate of the break-even point for
the industry of 80 per cent under
present wage and cost levels. At
the same time the Board doubts
that the estimates made by some
of the companies running as high
as IS or 10 per cent reflect the
actual break-even points for the
larger tonnage producers. The
Boards conclusion is that the
present break-even point. for most
of the large tonnage producers, Is
somewhere above the unions fig
ure of 80 per cent and below the
companies estimates of IS to 10
per cent. These conclusions are
reached for the following reasons:
.(a) Reliable supporting data
are lacking for all the estimates
made, and the union made certain
assumptions which are unaccept-
able.
(b) Most of the companies fail
ed to inform the Board Of their
break-even points; none Of them
provided the data needed to make
reliable estimate: and the Board
believes each of the major COM.
jpanies could have Indicated It's
Town break-ese point and the.
basis thereof. -, 80 -
Testimony Not COntroyerted. ~,
(c) The unions testimony that
the ,break-even point before the
war was at IS per cent Of capacity
was not controverted.
cd The favorable course OF
profits in 1949 as compared with
1913 indicates that the break-even
point has become lower since 1948,
because in the second quarter of
1949 when operations were at the
average rate of 81 per cent, profits
before taxes were about $3.50 ,000.-
900 as compared with the same
quarter in 1948 when operations
were at 80 per cent and the profit
figure $170,000,000. rise of $780,
900 900, or about IS per cent, at
approximately the same rate Of
operations. A comparison of the
first half in 1948 with the second
quarter of 1949 leads to similar
conclusions.
% With respect to the factor
of probable movement of raw ma
terials, prices and other costs,
the board has taken into consid-
Grafton the large decline since
1948 in the prices Of certain ma
terials, notably scrap; but it has
also noted the recent recovery in
some of these prices. 1t has also
noted rises since 1948 in the prices
of certain other important ma
terials, such as iron ore and coal.
Experience shows that scrap
prices quickly respond to increased
demand, and that if rates of oper-
alton rise substantially, the price
of scrap moves upward rapidly.
(5) When years of similar op-
Grafton rates are compared, there
is no substantiation Of the unions
claim that labor has been receiv-
ing a continually smaller share,
or that ownership equity has been
receiving an increasingly larger
share of the industry's sales dol
lar. If the share of ownership
be defined in terms of dividends,
it's rate of return becomes very
low. for the total dollar amounts
of dividends, when paid, have con-
sistently been only minor frac-
tions Of profits after taxes.
Expansion Takes Profits.
CO. The induStry's recent policy
of undermining and expanding
physical plant and facilities has
absorbed most of it's recent sub
stantial profits: Given the coun-
try's peacetime and possible war
time needs for larger steel-making
capacity, the program seems en-
tirely desirable. But there. Is a
question as to whether a larger
part of the financing of such
long term assets should not have
been through long term debt in
stead of recent profits, thus leav-
ing more of the current profits
for dividends to stockholders and
for social insurance and for setting
up reserves for pensions.
CD The plant modernization
and expansion program should
result in efficiencies which. other
things being equal, will better en-
able the companies to meet the
cost of the insurance and pension
plans recommended, and also to
look toward a lower level of prices
for their products.
60 There are no inequities OF
steelworkers at present which re-
quire redress through a general
! wage-rate increase: and the rec