Mr. Knudsen's Eggs

Defense Commissioner Signius Wilhelm Poul Knudsen held a press conference in Washington last week. He blushed. He dazed 30-odd reporters by calling them "Sir" and "Madam." At ease, his huge body hunched comfortably in his chair, he handled himself as adroitly as Franklin Roosevelt at his best. He also gave the best report to date on the state and prospects of production for U. S. Defense. Knudsen's prime points:

P: ". . . With the continuing cooperation of industry and the interested Government agencies, we can . . . equip completely a modern army of 2,000,000 men."

P: The Defense commission between June 6 and July 25 closed $315,288,152 of Army contracts, $1,412,907,677 of Navy contracts (unspent: $8,519,904,171).

P: "What may seem to some as unnecessary delay is almost always, in reality, a period of basic preparation necessary to sound achievement. . . . Few people realize that before actual production can start, months of effort must be expended upon design alone. . . . For instance . . . approximately 2,400 individual drawings are required in the complete design of the light tanks.* . . . The problem of machine tools, which is fundamental to the entire defense program, is another point where . . . it may seem that little or nothing is being done. . . . The kind of work involved does not, of course, attract headlines. Very definite progress is being made. . . . Through the unlimited cooperation of the [machine tool] industry . . . I am able to report that the huge planers and millers need to work armor plate particularly, for the expanded naval program will be available on time. . . ."

P: "We could rush out after contracts for war goods, and upset our general business world. We could do that very easily, but it would only mean a lag in total production. It is better to follow a plan. . . ."

P: Question: Why not simply put more factories to work on Defense production? Knudsen: "You make me think of a little story. It was at the National Cash Register Co. when some improvement . . . was not coming fast enough to suit the president. 'Why don't you have twice as many scientists at work on the problem?' he demanded. 'You can't get anywhere by having two hens sitting on the same egg,' said the production manager."

P: This month the U. S. aircraft industry is scheduled to produce 716 military planes (396 for the U. S., 236 for Great Britain, 84 for Latin America), plus 179 commercial transports, an unannounced number of light, private planes. "There is every indication that the industry will [reach] ... an annual production of 25,000 complete [military] aircraft by July 1, 1942."

P: Great Britain's Lord Beaverbrook and U. S. Secretary of the Treasury Morgenthau were, Mr. Knudsen indicated, talking through their hats last week when they proclaimed that Great Britain can begin getting 3,000 U. S. planes per month by early 1941. By financing 38 additional factories in the U. S., the British may be able to get 3,000 per month by mid-1942. (Last week the British reported that they had ordered 11,000 U. S. planes, got delivery of 2,800 since late 1938.)

P: "Under no circumstances will we let British orders interfere with our contracts. ... In production, I am thinking of the United States first."

P: Before airplanes can be made, parts must be made; before parts can be made, tools must be made. "After we get them production comes quickly."

P: Question: "Instead of waiting for the airplane builders to expand their facilities, why ries?" don't you Knudsen: use "We the would gain automobile facto nothing but floor space. [Automobiles have] wholly different engines, of different size, of different tooling. The buildings alone would be of use."

P: Could he get more done if he had more authority? Knudsen: "I don't want any more."

P: "Has red tape interfered? . . ." Knudsen: "I do not recognize any. People might have thought we had red tape in General Motors, because we did things in a definite way. Here, too, there are certain definite ways to proceed. I propose to proceed by those ways just as long as I can get results by them."

P: The Du Ponts have contracted to build and operate a $25,000,000, Government-owned powder plant near Charlestown, Ind. Capacity: 200,000 Ib. per day. "This plant will be completed and in operation within ten months. In 1917 the contract for construction of the first powder plant was not signed until seven months after we had entered the war."

P: ". . . No serious problem exists in . . . the production of small arms and ammunition."

P: "Food products: ... no bottlenecks exist."

P: "Trucks: . . . no bottlenecks. . . ." Big Bottle, Bigger Club. Honest Bill Knudsen's chief object last week was to arm the U. S. people with realistic information against overoptimism and undue disappointment, when they look into the sky and see no clouds of new warplanes.

This week William Knudsen had U. S. aircraft manufacturers in Washington to find a way out of a very big bottle with a very tight neck. Defense orders mean that many manufacturers must put up new plants, put in new tools which may be of no use when Defense demands end. Manufacturers therefore want to net enough from the Defense orders to pay for the new facilities, definitely do not want to risk paying ruinous taxes on worthless property (as many had to do after World War I). Said the U. S. Chamber of Commerce last week: ". . . Probabilities of ultimate loss are so great that if it were a matter of preference they [businessmen] would rather not undertake such business.

They are necessarily concerned that they do not subject themselves to very heavy losses of capital and . . . years of dispute with the Government as to profits and taxes. . . ."

Like-minded Mr. Knudsen recently got President Roosevelt to agree in principle to a bill to permit manufacturers to amortize the cost of Defense plants within five years which would give them reasonable protection. Then the President had qualms. Warned that many a Congressman would oppose outright concessions to Business, he had the amortization bill tacked to a complex limitation on excess profits. Net result: certainty that Congress will haggle over this hybrid measure for weeks, while key manufacturers, unsure of their future, remain unwilling to accept Defense orders.

Few Congressmen and industrialists were aware that Mr. Roosevelt if he liked could commandeer any plant for Defense production. Buried in a minor Naval bill which the President signed last June was a clause empowering him (through his Secretary of the Navy) to seize and operate "any existing manufacturing plant or facility necessary for the national defense . . . whenever he is unable to arrive at an agreement with the owner . . . for its use or operation. . . ."

But use of this power would hardly increase Defense production. Its real value is as a club to hold over a few recalcitrants. As one member of the Defense Commission told Correspondent Carl Allen of the New York Herald Tribune: "After all, you can get a lot more out of an organization by having it work with you willingly, than you can by trying to force it to do something for you."

What can be done by voluntary cooperation, well oiled with cash, was demonstrated last week. RFC announced a loan of $92,000,000 to Wright Aeronautical Corp., which will build a new aircraft engine plant near Cincinnati, upping U. S. engine capacity by 12,000 per year. In return Wright Aeronautical Corp. guaranteed to deliver to the Army 20,115 aircraft engines in 1941-42, and gave the Army an option on 20,115 more. Wright Aeronautical Corp. presumably expects to repay a good part of the loan from profits on the orders. Mr. Knudsen's task this week is to convince other manufacturers that they can safely take the same risks.

* For news of tanks in production, see p. 18.

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