STATE OF BUSINESS: Bottlenecks

STATE OF BUSINESS Bottlenecks

During September’s, and War’s, first three weeks most U. S. businessmen tried frantically to beat Europe and the next fellow to their suppliers’ order books. Last week many an industry had sold its entire production for months to come. If volume of orders and anxiety of customers for delivery were the only things that mattered, production should already have passed the 1937 peak, possibly the 1929 peak, but it had not. Production cannot be turned on and off like a light switch.

At a production rate of 40 to 60% of nominal capacity, output can easily be sped up or slowed down. But to speed up much beyond 60% of capacity, time and money must be spent sweeping spider webs out of high-cost idle factories, oil and repairs have to be lavished on obsolete machinery. At such times as the present, orders can be delivered no faster than the economic assembly line is able to move through U. S. industry’s many tight spots and bottlenecks.

The biggest danger of tight bottlenecks is that the bottle may explode. The necessity of using obsolete equipment raises costs, prices begin to pyramid, and panicked customers overbuy. The result is often an inventory depression. Example: 1937. For this among other reasons many a businessman last week had his fingers crossed about a war boom. One of U. S. industry’s most influential spokesmen, President Howard Coonley of National Association of Manufacturers (also Chairman of the Advisory Committee of American Standards Association, which is trying to eliminate bottlenecks by promoting standardization) took time out to broadcast : “. . . We have no illusions. . . . Economic chaos and years of crushing depression are [war’s] inevitable aftermath. . . . ultimately, no one can escape the ruin of war.”

This week U. S. assembly lines were clogging in several bottlenecks. > Textiles, paper, paint, steel, drugs and other industries dependent on imports faced a possible contraction, no immediate expansion of supplies. Raw wool, silk, pulp, shellac, vegetable oils, tin, chrome, tungsten, manganese, quinine, menthol, camphor, narcotics, are among materials which reach the U. S. by trade routes jeopardized by war.

> The coal industry was under pressure to supply domestic customers anxious to pile up stocks at pre-war prices; needy belligerents and neutrals who formerly bought from England or Germany. Last week the Norfolk & Western Railway which taps the mines of West Virginia and Kentucky carried 20,845 cars of coal, just 48 cars less than its all time record in the boom week of March 27, 1937. Any further increases in production are limited by: 1) the fact that many mines have not now the man power or machine power to shift to a six-day week; 2) such coal carriers as Norfolk & Western, Virginian, Chesapeake & Ohio (relatively prosperous and well-equipped roads) were so short of cars that they penalized any mine which failed to load within 24 hours every empty delivered on their switches—a state of affairs exactly the same as existed in 1937.

> In the brass industry, rolling mills near Waterbury, Conn., Rome, N. Y., in Baltimore and in Detroit, for the first time since World War I worked three shifts a day. Yet production was limited because only a few U. S. brass rolling mills are of the continuous (mechanized assembly line) type, and even such mills were held down to the pace of old-fashioned brass foundries integrated with them. Meanwhile, war orders piled up at the same time as ordinary post-Labor Day orders from the auto companies, who want prompt delivery and plenty of it. This brass bottleneck caused copper sales to lag, particularly because brass manufacturers bought far ahead last May (TIME, May 15); and England, willing enough to buy processed brass, is not wasting her precious foreign exchange buying U. S. raw copper for her own mills, when she can obtain it from South Africa.

> In the steel industry with a supposed capacity of 72,000,000 tons of ingots a year, it was estimated that four months will be needed to raise capacity to 85%, a full year to refit obsolete mills and reach 100%. Efficient high-speed producers, like Chicago’s Inland, Cleveland’s Otis, Detroit’s Great Lakes (division of National) were reported to be sold out at 100% of production until well into 1940. Syracuse’s Crucible Steel, No. 1 specialist in alloy steels for gun and shell forgings, automobile and aircraft parts, was booked solid through January 1, In the industry’s tin plate division, which normally loafs after Labor Day, U. S. Steel’s modern tin mill, Pittsburgh’s huge Irvin works was so jammed that 63 old-fashioned handmills in Pennsylvania and Ohio have been called out of limbo to work at 100%.

> Other steel bottlenecks: Continuous mills roll semi-finished steel into sheet and strip much faster than open hearth furnaces now operating feed them with ingots. Nor can the blast furnaces now in operation keep up with the open hearths. Steel making at Youngstown, Ohio dropped two points (to 80%) this week because of a shortage of iron. At Buffalo last week Bethlehem Steel blew in its old No. 2 blast furnace. One blast furnace, last relined in 1919, was put in service. Rush orders for refractory brick to reline steel and iron furnaces made Pittsburgh’s Harbison-Walker Refractories Co. jump output from 35% to 75 to 80% of capacity and go to work widening its own bottlenecks. Each advance in operations uncovered new weak spots—in soaking pits for semi-finished ingots; in blooming mills preparing ingots for the rolls; in rolls, coilers, shears, handling machinery.

> Cleveland’s Warner & Swasey Co. recently polled 251 corporate users of machine tools to see what percent of tools on hand were obsolete. Findings: of 120,864 machine tools in place, only 9.6% were bought between 1936-38, the years of most revolutionary machine tool engineering advance; 67.3% were bought before 1928, are covered with technological cobwebs. Although machine tools make mass production possible, machine tool building is itself a long-drawn-out, artisan-like process, taking up to two years in specialized cases. To make this bottleneck worse, machine-tool builders are mostly small family concerns, with their own problems of obsolescence, and not too much capital available for expansion. But regular customers, foreign and domestic arms makers and U. S. arsenals all want tools.

> With aircraft and other war industries unable to obtain the tools they need, leading companies in other fields are rushing to supply parts with their own surplus tool capacities. One is Borg Warner Corp., a leading supplier of auto parts. Its new airplane parts division working at capacity is already supplying 90% of the hydraulic and fuel pumps used in U. S. airplanes. Another is the prosperous American Machine and Foundry Co., which makes about 95% of all U. S. cigar and cigarette machinery, has just developed a machine operated by compressed air for automatically loading machine-gun ammunition onto belts. A third is New York City’s huge, old and recently reorganized R. Hoe and Co., far and away No. 1 U. S. manufacturer of printing press machinery, whose new president, exPress Salesman Harry M. Tillinghast. has cannily nursed along a new industrial division. U. S. publishing has for several years scrapped presses and bought few new ones. To use Hoe’s large idle foundry and metal working capacity, Tillinghast’s predecessor, Fred McCarty, had the bright idea of devoting this idle capacity to filling U. S. Government “educational orders” for armaments, got the Government to install machinery (Government-owned) for making fine recoil mechanisms for guns. Recently Hoe’s own machinery has turned out motor parts for such war-babies as Wright Aeronautical, Sperry Gyroscope. Salesman Tillinghast anticipates making no new investment to meet such emergency orders, plans to keep the lion’s share of such publishing business as can be had, and meanwhile profit from the logjam of U. S. machine-tool builders.

> Utilities, whose power sales have boomed for 18 months, in many cases had their capacities taxed before the war boom started. Before Nazis marched into Poland, Electric Bond & Share’s Florida Power & Light Co. had already finished plans to install a new 25,000-kilowatt steam turbine generator ($3,000,000); Commonwealth and Southern’s Alabama Power Co. let a $4,000,000 contract to install a 40,000-kilowatt generator. Last week New England Power Association’s Narragansett Electric Co. duplicated Alabama’s order at Providence, R. I. Safe Harbor Water Power Corp. on the Susquehanna River, which feeds the Pennsylvania Railroad’s electrified main line, is spending $1,500.000 to install new power capacity to handle the railroad’s expected increase in traffic. Other areas where capacity must probably be enlarged soon: Central New York, Pennsylvania, and the Western copper mining area, all places where the 1937 production boom ran into power bottlenecks. Anticipating a rush for new utility construction. General Electric’s Locke Insulator Corp. (high voltage, radio tower and distribution insulators) is putting up three new buildings.