INDUSTRIAL DISPERSAL

Better Defense and Better Business

IN last week's simulated H-bomb attack, Washington officials dispersed to 31 different hideouts. But for U.S. industry--the heart of the nation's war-making power--dispersal was not so easy. Had there been a real H-bomb attack, 15 accurately dropped bombs could have demolished two-fifths of America's industrial capacity.

The Pentagon is deeply worried over the small progress towards dispersing U.S. industry. Air Secretary Harold Talbott has already warned that the Air Force plans to discourage further expansion of plane and missile factories in Southern California, where 25% of the region's payroll is devoted to military aircraft production.

So far, little has been done on purely military grounds to speed up industrial dispersal--partly because of the enormous cost. Not until two years after the Korean war began did Washington take its first--and only--significant step. It ruled that in the future all new plants seeking rapid tax amortization certificates would have to be located at least ten miles outside "Probable Ground Zero," i.e., defense industry and population centers. By that time, however, the Government had already granted fast tax write-offs for $20 billion in defense construction. Moreover, even the belated rule has largely been ignored. Only 546 projects, costing $3.9 billion, have met dispersal requirements. Meanwhile, the requirements themselves are outdated, have not been changed to meet the greater threat of the H-bomb.

However, the situation is not as black as it looks. For purely economic reasons, U.S. industry has been doing a great deal of dispersing on its own. In the past year alone, the chance to save on shipping costs to the booming West Coast market caused more than 35 national firms in the East and Midwest, e.g., Elgin, Borg-Warner, to set up branches in the Southern California area. The need for sufficient labor at reasonable wages has forced many other corporations out of heavily industrialized regions into rural areas. Cleveland's Clevite Corp. (bearings and bushings), which has decentralized into eleven plants in the past ten years, insisted that "with smaller plants . . . we achieve greater efficiency." Overall, since 1940 the proportion of U.S. industry concentrated in cities of 100,000 or more has declined from about one-half to one-third.

Industry has also gone to work in other ways. Twenty-four industry task forces have been formed, and the rubber, chemical and iron and steel industries have each produced thick, detailed manuals on what to do if bombs drop. Typical topics: how to set up management succession lists in case the top echelon is wiped out; the collecting and storing of vital records in a safe place; arranging for alternate officers to sign emergency payrolls.

Some companies went to work on their own. Koppers picked a "reorganization point" outside Pittsburgh, stocked nearby bank vaults with microfilms of vital company records, and instructed key personnel to head for this emergency shelter at the first sign of attack. Standard Oil (NewJersey) set up an alternate office 60 to 75 miles outside New York City to feed, sleep and serve as GHQ for 100 top executives. Curtiss-Wright bought 84 square miles in north central Pennsylvania to assemble jet engines and 5,000 acres in New Jersey's Ramapo Hills for a bombproof headquarters. The petroleum industry has set up five regional committees to run the natural gas and oil industry in each area, and A.T.& T. arranged alternate toll-call routes and emergency generators. One company has even stocked its secret rendezvous with disaster pay checks printed on distinctive notepaper and made out in standard amounts.

But dispersal is not practical for all, can be both bad economics and bad defense. Some industries, e.g., automobiles and shipbuilding, require large concentrations of machinery, labor and materials, and any attempt to break them down into small, easily dispersed units would be almost as damaging to war production as bombing itself. Nor is dispersal simply a matter of picking up a factory and transporting it to the middle of nowhere. While the factory might be safer in its new home, it might also produce next to nothing--for want of housing, skilled labor, and transportation facilities to get raw materials.

Nevertheless, from now on industry should incorporate military purpose in its economic thinking and keep dispersal firmly in mind as it plans further expansion. Dispersal and decentralization are as much considerations of forward-looking management as healthy labor relations or sound accounting practice. For many companies, dispersal will mean not only greater safety in war but greater efficiency in peace.

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