MANUFACTURING: Profitless Defense

Handsome, brusque James S. Knowlson, chairman and president of Stewart-Warner Corp. is a sensitive man. For weeks he listened to politicians and labor leaders yelp that big business was holding back defense by refusing to cooperate with the Government, asking huge profits. Last week he got sore, lashed out a snappy (17-paragraph, onepage) letter of explanation to his employes. Said he: “There has been a lot of bunk about industry. . . . If your friends ask you what your company has done so far, you can tell them this: Your company has bid (on a competitive basis) on ten millions of dollars of Government work. . . . We have been awarded approximately two million dol lars worth of Government contracts. . . . Prices at which they were taken are such that up to July 31, we lost $60,000 on what we shipped. This loss represents what we have paid out of our own pockets to learn how to do our job. That is not profiteering.” No sit-down capitalist, Knowlson also said his company had bought or ordered $450,000 of machinery without waiting for Government aid.

To many industrialists, Stewart-Warner’s experience with competitive bidding has no moral. The company had simply underestimated its production costs on a new product (ammunition parts). Many aircraft, steel and shipbuilding contracts are now let on a basis which prevents losses unless a company is stuck with undepreciated plants at the end of the war. Knowlson himself “wasn’t trying to give the impression that we expected to continue to lose.” But there will be others like Stewart-Warner, who will pay to learn their jobs.