AVIATION: Austerity, but No Alarm

Like any housewife who has to live with a lower grocery budget, the Pentagon last week slowed down its buying of a few bread-and-butter items and decided to make longer, lower time payments. The budget ax in this case fell on the aircraft industry. The Navy announced that it will stretch out the procurement of three jet fighters—Chance Vought’s supersonic F8U Crusader, McDonnell’s F3H Demon, Douglas’ A4D Skyhawk. United Aircraft Corp. reported that its work on a nuclear-plane engine would be “drastically reduced,” or scrapped altogether. And the Defense Department announced that it will trim progress payments on unfinished aircraft from 75% of the cost to 70%, forcing plane makers to find more financing in a tight-money market. Said Boeing’s President William M. Allen: “This belt-tightening had to come, and it is high time that the industry and the nation faced up to actualities. The public thinks there is too much defense; the only answer is austerity.”

Built-in Cushion. Most other plane makers admitted to austerity, but they were not alarmed. Washington had tipped them months ago to the coming cutbacks, and they had slowly geared for them. To cushion the drop in F8U production, Chance Vought is counting on missile contracts for its Regulus and heavy orders for a faster, improved all-weather F8U, which it now has on the drawing boards. Douglas figures that its $2.5 billion backlog and its big business in missiles and commercial jets can easily absorb the slack of the Skyhawk stretch-out. And to help offset the stretch-out in orders for its eight-jet B-52 bomber, Boeing last week got its first production contract for its ramjet Bomarc interceptor missile. The sum: $139 million.

McDonnell’s President James S. McDonnell Jr. estimates that the Demon stretch-out will not cut McDonnell Aircraft’s present record employment of 27,000; it will only keep it from climbing to the new peak that had been expected. The stretch-outs, in total, will cause far fewer layoffs than earlier anticipated. Last week the Pentagon estimated that this year’s $1 billion to $1.5 billion slash in aircraft orders will trim the industry’s payroll by 5%—a drop of 40,000 workers from the total 800,000. Since the industry has a high labor turnover, much of this cut will be accomplished simply by not replacing workers who quit. By year’s end Douglas will reduce its 76,000-man force by 8,000, and Lockheed will shrink its 60,000-man force by 5,000. North American Aviation, which laid off 7.300 workers after its Navaho missile was washed out last month, will drop another 4,700. Boeing will pare its 100,000-man force by about 10,000, but last week it resumed advertising for skilled and semiskilled workers.

Stepped Up Sales. Despite the stretch-outs, backlogs and sales are fat. United Aircraft reported last week that first-half shipments rocketed to $604 million from $458 million at the same time last year, and earnings reached $26 million, v. $21 million. McDonnell’s sales are 24% ahead of last year’s rate. Chance Vought’s sales are 72% ahead of the 1956 period, and the June 30 order backlog reached $467 million, up $200 million from a year ago. While some plane makers fear that sales and profits will nose down next year, they will still be big enough to keep the industry healthy.