Business: Green Bay Quarter

Confidence is returning to the manufacturers who, in overwhelming numbers, are comparing the black ink of today with the red ink of many years gone by. —President Roosevelt at Green Bay, Wis. last August.

Last week U. S. Steel Corp. reported for the Green Bay quarter a net loss of $9,826,767. Chairman Myron Charles Taylor announced that operations had averaged 24% of capacity as against 52½% in the June quarter when Steel made, not lost, $5,300,000.

Other steel companies fared little better. Bethlehem was in the red for $2,400,000. Allegheny Steel lost $34,000 as against a $365,000 profit in the second quarter of this year. National Steel, as usual, managed to keep in the black but a $2,500,000 profit in the June quarter dwindled to a paltry $347,000.

There was a good reason for steel’s poor showing. Buyers were using the inventories they collected last spring when the steelmasters were so loudly resigning themselves to a nation-wide strike. Meantime business receded, and hand-to-mouth buying barely kept the mills rolling.

With the conspicuous exception of steel (and, as always, the railroads), President Roosevelt was right about the relative use of red and black ink.

Item: The Federal Reserve reported that 407 U. S. corporations earned a total of $19,000,000 in the first half of 1932; in the first half of 1933, $75,000,000; in the first half of 1934, $385,000,000.

Item: National City Bank reported that in the third quarter of last year 165 big U. S. corporations earned $117,000,000; in the Green Bay quarter, $87,000,000—a decline of 25%. But in the first nine months of this year those same corporations made $301,000,000 as against $175,000,000 in the first three quarters of 1933.

What worried the average businessman was the fact that while these 165 corporations made 25% less in the Green Bay quarter, they actually sold more goods than in the same three months last year. Every batch of corporate earnings gleamed with examples of profitless prosperity.

Notable was the business of Walter P. Chrysler. Last week Chrysler Corp. reported that it had sold more automobiles in 1934’s first nine months than in any full year in history. Chrysler took in $100,000,000 more than in the same period of last year, yet made $2,500,000 less. Reason: rising costs of labor and materials.

Mr. Chrysler would be the last to deny that $9,400,000 is a handsome profit for any corporation. What alarms him and every other thoughtful manufacturer is the trend—smaller & smaller profits on a larger & larger volume. That is what most businessmen really mean when they talk fearfully about the profit system.*

*Afoot among earnest businessmen last week was a movement to popularize the use of the more balanced phrase, “profit & loss system.” A complicating factor: instead of the “profit system” members of the Administration often say the “profit motive.”