At the close of World War II, the Boeing (BA) Airplane Co. of Seattle, Washington, which had designed and built the Flying Fortress and its magnificent successor, the B-29, was looking around for a peacetime product to make—something, anything, that would take up the terrible slack in military orders. As a committee of two to pick the product, Vice President Wellwood E. Beall and Edward C. Wells, brilliant aeronautical engineers both, glumly contemplated the likeliest looking gadget of the lot—a design for an egg beater. It probably would have been one hell of an egg beater, but thanks to Stalin & Co. there duly turned up some additional work (one billion dollars worth, to be exact) in Boeing’s regular line. Back to the shelf went Project Egg Beater, and from Eddie Wells’s drawing board there sprang, instead, designs for the U.S. Air Force’s first jet bombers, the B-47 and the B-52.
In terms of urgency of current production and work in progress, no manufacturer in America, in a sense not even Oak Ridge or its satellites, is more important to the freedom of the free world than Boeing. The atom bomb, of course, is the supreme U.S. weapon. But since it is no longer ours alone, the bomb as a possession is subject to depreciation with each passing day. There was a time when the naked threat of the U.S. to “drop” the bomb might have been sufficient to ensure world peace. The prospect of retaliatory atomic warfare subtly shifts the emphasis to comparative ability to “deliver” the bomb with rapidity, precision, and a minimum incidence of failure. As time advances, the disparity in atomic stockpiles becomes less menacing to the Russian. He will be afraid to strike only if he respects and fears the efficiency of the vehicles that transport our weapons to the critical targets.
Without disparagement of the conventional U.S. bombers on the line today, one may assert that, pending perfection of the long-range pilotless plane (eight to a dozen years hence), the jet bombers are the U.S. arsenal’s best bets for persuading the Russians to observe the peace. This is not to suggest that the Russians take a complacent view of the B-50’s and B-36’s, which would fly atom loads into the Russian heartland tomorrow if all-out war were precipitated. But Red planes would meet them with a good chance of inflicting costly losses and of cutting the efficiency of the raid to something less than the paralysis of the Soviet economy and war machine. Over Korea, the Russian MIG-15 jet-tighter interceptors outflew anything the United Nations put into the air (it was only by superior cockpit skill that U.S. F-8G Sabrejets outscored them). Against our B-29’s in Korea, the Red Migs engaged mostly in probing, discreet sparring matches; but they showed enough to indicate that they can probably catch and punish any piston-engined bomber in the air today.
Click to enlarge.
The Boeing B-47, on the other hand, is the fastest bomber known to be flying, and flies high enough to make it a difficult bird for any fast but short-fueled jet fighter to pot. Over two years ago, on an experimental flight, the B-47 raced 2,289 miles across country at an average speed of 607.8 miles per hour. Its current maximum speed is undisclosed, but since that flight the thrust of its six jet engines has been increased from 4,000 pounds each to 5,200 pounds each, and the plane has undergone numerous other modifications. As for the B-47’s altitude, the Air Force stonily limits the description to “over 40,000 feet.”
Thus in every respect except range (less than half of the 10,000 miles credited to the B-36) the B-47, which can tote a payload of over 20,000 pounds, qualifies as the most fearsome and efficient carrier of the atom bomb. And everything the B-47 can do now, the much, much bigger B-52 presumably will do better a couple of years hence. All of the dimensions and powers of this jet giant will not be revealed until the first model noses its way out into the Seattle sunlight sometime this year. It is, to avoid the hyperbole of the magic word “intercontinental,” a genuine long-range bomber that will travel 10,000 miles round trip with a 10,000-pound bomb load. The B-47 is categorized as a “medium” bomber. All combat planes, however, have had their range stretched by the new in-flight refueling techniques, the machinery for which has also been developed and built by Boeing.
Boeing is rolling
So much for the grave responsibilities vested, via the Strategic Air Command, in the Boeing bombers, and enough of what they will do when-as-and-if. To many the burning question is, “How well is Boeing getting on with the job of building them?”
If an impetuous question deserves an impetuous answer, that answer could be, “Marvelously well.” For from what the naked eye can see, Boeing is really rolling. At the Wichita, Kansas, division, where a cadre of 1,500 workers existed when the go-ahead on the B-47 was flashed in March, 1948, employment has expanded to over 22,000. This is only 7,000 short of the plant’s peak employment in World War II, and is in fact several thousand in excess of the force that turned out a record 100 B-29’s a month in the closing phase of the conflict. (Once a plane’s designs are frozen and the pipelines are filled, fewer workers are needed on the production line.) Most of these people are working six days a week. There are two shifts of eight hours each, a third “stub” shift of six and one-half hours, and in several key spots in the plant employees are working ten-hour shifts six days a week.
Click to enlarge.
The great, government-owned Plant 2, three million square feet, which was stripped clean and closed tight at war’s end, now bristles with $29 million of new machinery and facilities. The plant is fat with stacked materials and parts, and alive with planes in various stages of becoming. As for the planes in being, the production count is strictly classified. But it is still a tense and exhilarating moment for all Boeing hands when, over the testing field across the road, the air is literally ripped asunder by the roaring, rocket-assisted take-off of a B-47. The scope of the program is indicated by the volume of subcontracting (in the state of Kansas alone, almost $100 million in subcontracts has been let by Boeing) and by the recent reactivation of large wartime plants by Douglas at Tulsa, Oklahoma, and by Lockheed at Marietta, Georgia, for the production of B-47’s. Boeing will furnish the engineering and tooling.
Meanwhile the Air Force, biting at Boeing’s heels, adds to the quickening air of mobilization at Wichita. Once production of the B-47’s began, the Air Force promptly installed Project Wibac (Wichita Boeing Airplane Co.) in the corner of the municipal airport that adjoins the Boeing plant, with Colonel Paul W. Tibbets, the pilot who dropped the A-bomb on Hiroshima, as officer in command. As each new B-47 comes off the line, and is test-flown by a Boeing pilot, the plane barely has time to cool before one of Tibbets’ staff has her up in the air for evaluation and accelerated service testing; liaison between factory and field has never been so close. And as soon as the city of Wichita can carve out a new airport for itself, the Air Force presumably will appropriate the entire municipal airport for the establishment of a B-47 combat-crew training base.
Blessed event
At Boeing’s home plant in Seattle, where behind ceiling-high canvas curtains two prototypes of the B-52 are getting their near-final touches, there is naturally no comparable pattern of progress in evidence; but there is tension and a knowing, self-conscious busyness, as in a hospital maternity wing. Though Boeing’s Seattle network employs upwards of 28,000 workers, about one-third of them are now at the government-owned Renton plant eight miles away, where Boeing has a sizable C-97 cargo-plane program going and has also been performing a considerable amount of modification work on B-50’s, and even B-29’s (many of the latter are being converted to tankers). So far as possible, Boeing is keeping its main Seattle plant cleared of odd jobs and is preparing it for the installation of giant jigs and extra-heavy machinery for B-52 fabrication and assembly. For those two planes behind the curtain, though catalogued as “experimental,” are being designed in complete detail for full production. On the basis of what the B-47 showed, the Air Force bought the B-52 sight unseen.
Thanks to this gesture of confidence in Boeing, valuable time is being saved. In the usual procedure, the first model of a plane to take to the air is developed from experimental drawings and is built all at once, so to speak, and in a single assembly. But after the prototype has been approved by the Air Force and the plane is put on a production line, it has to be broken down into a number of parts, simultaneously built in various parts of the shop, which are then brought together into numerous subassemblies and ultimately to final assembly. And it’s a maxim that the higher the rate of production desired, the greater the number of subassemblies required. Often, in going from an experimental to a volume production basis, an airplane has to be almost completely redesigned. A whole new series of problems arise involving such factors as the strength and surfaces of the joints between assemblies, the greater use of standard parts, the sufficiency of materials and tools, etc. In the case of a heavy bomber, the transition from an experimental O.K. to mass production normally takes two to four years. That’s the difference between performance and producibility.
Click to enlarge.
Built from production drawings rather than experimental drawings, the B-52 is presumed to have had most of the major assembly-line problems solved in advance. Though the two planes have been constructed in a cubicle less than 200 feet long and 500 feet wide, they are, as nearly as possible, true prototypes of the planes that will be turned out in volume by the full facilities of the shop. Also, the production layout has been determined, and most of the materials have been ordered for arrival at the appropriate time. An important factor this, because in airframe manufacture most of the materials must be processed before they reach the factory, and also thousands of equipment items and component parts must be furnished by outside suppliers. Consequently, it normally takes nearly twice as long to collect the “materials” as it does to put the plane together.
When the B-52 plant at Seattle is once operating at concert pitch, it will be an impressive spectacle, and many an orator will undoubtedly be moved to acclaim this latest demonstration of America’s incomparable productive might. But the kudos will rightfully belong to the Boeing engineers (of whom there are 4,000, but not nearly enough) who “flew” and “tested” the B-52 in ingenious laboratory prototypes, mock-ups, and simulations of all kinds of weather and pressures before ever a spar was inserted or a bolt bolted on the actual airframe. If, thanks to such efforts, the B-52 is in reasonable production before the end of 1952, it will represent a mighty handsome peacetime accomplishment, for “gestation” of the B-52 didn’t begin until 1946. The B-29 had the benefit of two years of preliminary study before the specifications were set up in 1939. It didn’t reach real production, even under the pressure of war, until late in 1943, a spread of six years. The infinitely more complicated, more revolutionary B-52 may make it in the same span.
For more on Boeing, watch this Fortune video:
Some exceptions noted
Thus, Boeing is not loafing on its critical assignment, and for those patriots who like physical and statistical proof that we are “getting on” with our rearmament program, there is much in this interim report to cheer them. But Boeing is not boasting, either. The company, one of the oldest plane manufacturers in the U.S., is wise in the ways of bombers, and takes almost for granted its remarkable competence to design and build flyable planes of this character. What Boeing does not take for granted is that the best answers it has come up with to date are the best answers that can be found. Boeing is proud of the B-47, but is far from willing to go to sleep on the performance the plane has thus far attained. Nor is Boeing happy about the terrific cost required to build, fly, and fight the plane. Nor is Boeing complacent about its ability to produce, under the guns and butter policy, B-47’s in the quantities and at the rate that may be desired.
At the early production stage a B-47 costs $3,400,000 as against $1,200,000 for a B-29 at a comparable stage during the last war, and this figure does not include government-furnished equipment that costs almost as much again as the airframe. (As for the B-52, the first two models are costing the government more than $8 million each.) Much higher fuel costs and the requirements for longer runways are additional factors in the over-all expense of the B-47. At those prices, Boeing believes, the plane ought to have terrific performance if it is to justify its ranking expenditure in the defense economy. The B-29, for example, had a high degree of performance for its time. It was, perhaps, as handled by General Curtis LeMay’s forces, the greatest single factor in the subjection of Japan. Yet it is useful to recall that in the first raid on Japan, from improvised Chinese bases, three B-29’s were lost on the take-off; that in thirteen early unsuccessful attacks from Saipan on the Musashino aircraft plant near Tokyo, fifty-eight B-29’s were downed, largely because of unanticipated winds high over the target; and that in the most profitable raid the 21st Bomber Command ever executed against Tokyo, on May 25, a total of twenty-six of the 498 B-29’s participating were lost and 100 more damaged. The point to bear in mind here is that in judging the progress of the B-47 program, the last war’s B-29 program should not be blandly used as a criterion. With B-47’s costing almost three times as much per plane, it might well prove reckless economics to build too many of them too soon.
Click to enlarge.
It should also be appreciated by the “numbers” advocates that the jet-engined B-47 represents a great leap beyond anything the U.S. has previously attempted in bombing planes and is not merely a broad, evolutionary step as was the B-29 over the B-17. In the latter transition, the great problem was the aerodynamic one of overcoming the drag imposed by the twice-as-heavy, 30 per cent faster B-29 in the face of the limited horsepower available. Boeing engineers solved that brilliantly by designing a “cleaner” plane. They have been equally successful in mastering the strictly aerodynamic problems of the B-47. But the swept-back wing wasn’t perfected until 1946, when captured German data gave the clue, and the designers have never been too sure about the limits of the still developing jet engines. What’s more, the problems of flying at altitudes well beyond 40,000 feet and of making a plane behave normally in temperatures varying from 100° above to 100° below zero cannot be satisfactorily solved in the laboratory, or in a day or a year in the air. Consequently, the B-47, though “in production,” is constantly undergoing development, and each plane off the line is in some respect different from the preceding one. Some of the changes, in fact, are quite striking: B-47’s may switch from six engines to four.
Apart from the inability, or rather inadvisability of freezing the design of the B-47 at this time, there are a number of other obstacles to swift production that were not encountered in the B-29 program. For example, the increased weight of materials and tools has caused the reduction of the ratio of women on the production line from 40 to 20 per cent. The wing skin of a B-47 (at the base) is five-eighths of an inch thick, compared to three-sixteenths for the B-29, and the 30,000 close-tolerance, flush-head bolts on the wings must be bolted by sturdy men. This plane is not Rosie the Riveter’s dish.
The big vexation, however, is caused by the complicated gadgets required. When one reflects that the B-29 carried a crew of eleven and that the B-47, flying nearly twice as high and twice as fast, has a crew of only three, the situation speaks for itself. Substituting for eight sets of human brains is an electronic setup involving 6,000 different wires, which, end to end, would extend 18.7 miles (and this is exclusive of the twenty miles of wires in the 3,000-pound, 1,500-tube bomb system). Only workers with sharp electronic skills can do this job properly, and Boeing can’t get nearly enough of them, just as it can’t get enough engineers or enough mechanics.
Guns vs. butter again
Nevertheless, it comes as something of a shock to hear the Boeing executives, hot champions all of free enterprise, denounce the guns-and-butter policy as “utterly unworkable,” and categorically call for an enforced cutback in civilian production if adequate armament is to be accomplished without ruinous inflation. Perhaps any firm with $1 billion in military orders and not much prospect of making a dime in the civilian market would feel the same way. But, of course, a full-throttled civilian economy and a $50-billion rearmament program were bound to sideswipe each other at some point on the road and Boeing is one of the first to be bruised.
Actually, Boeing has been fairly successful in commanding materials, but in many other respects it sorely misses the right-of-way it enjoyed under a war-regulated economy. In Wichita, for example, Boeing is hard put to find adequate, reasonably priced housing for its new workers, and the problem of parking space at the plant is surprisingly serious. (When gas and tires were rationed, workers shared the ride; now, almost every individual drives to work in his own car.) But the paramount problem is the recruitment of electronics specialists, skilled mechanics, and engineers.
A firm like Boeing requires 300 able engineers to bring out an experimental plane, 600 to carry it through to production, and several hundred more to sustain the continuous development necessary. Boeing has immediate requirements for 1,200 additional engineers, and these needs will grow in the months ahead. And Boeing is so short of “mechanics on the line,” the fellows who put the final, exacting touches on the plane, that Seattle has had to loan several hundred such workers to Wichita for B-47 production.
Click to enlarge.
It is probably true that Boeing is in the same boat, in respect to such shortages, with other plane makers and armament producers, and in fact civilian-goods manufacturers. The problem is nationwide and long-term and is not caused solely by mobilization requirements. All Boeing knows is that thousands of the kind of skilled people it needs are employed in the automobile, television, and home-appliance industries, and that they are reluctant to quit the good pay plus the security of their present jobs to work for Boeing.
President William M. Allen of Boeing thinks that this competition has reached the point where business as usual can no longer be tolerated without subjecting the mobilization program to unbearable cost and tragic delay, and has so expressed himself to Chief Mobilizer Wilson. Charlie Wilson assures him that, actually, civilian industries have been well gouged by the allocation of defense materials and that in a matter of months the effect will be felt in the labor market. “I hope to heaven he’s right,” says Bill Allen.
It is probably a good sign that Boeing, like an edgy boxer on the eve of a championship fight, is snapping at friend and foe alike if its purpose is crossed in the slightest degree. It has always been a peculiarly single-minded outfit with a marked creative rather than commercial flair, and this is probably one reason why the Air Force, though bickering a lot with Boeing, likes to do business with it. They both are sure they have a date with Destiny.
Birth of Boeing
Boeing Airplane Co. was started thirty-five years ago as a rich man’s hobby, and was staffed by young lovers of the air who were concerned more with developing the art of the new medium than with making money out of it. Though the rich man, Bill Boeing, stepped out of the picture long ago, the basic character of the company hasn’t changed much.
Boeing, heir to a Northwest timber fortune, cracked up a Martin hydroplane one day in 1916, and growing impatient at the delay in replacements, suggested to his friend, Commander G. Conrad Westervelt, that they build a plane themselves. The B.&W. seaplane turned out to be a pretty fair ship. Boeing set up a small business and furnished the U.S. with a few trainers and flying patrol boats during World War I. Two engineering students from the University of Washington, Phil Johnson and Claire Egtvedt, both of whom later became President of Boeing, were brought in to help out at this time.
In the twenties Boeing successfully bid on a Chicago to San Francisco air-mail contract. It whipped up a fleet of fast new planes and, with the incorporation of Boeing Air Transport, suddenly found itself in the big time. Boeing picked up a connecting airline, Pacific Air Transport, and the services of a young San Francisco bank clerk, William A. Patterson, who had been advising P.A.T. on financial matters. (He is now President of United Air Lines.)
Then, in 1929, Boeing figured in a typical 1929 merger. The other participants were Chance Vought, Hamilton Propeller, Standard Steel Propeller, Sikorsky, Stearman Aircraft of Wichita, Pratt & Whitney, and United Air Lines. The name of the new giant was United Aircraft & Transport: Frederick D. Rentschler, President; William E. Boeing, Chairman of the Board.
Click to enlarge.
Though Boeing’s Phil Johnson was a big wheel in the parent company, the old (young) Seattle engineering crowd didn’t take too enthusiastically to the new setup; there wasn’t much incentive to cook up anything new and exciting in the way of design. But suddenly, in 1934, the Hugo Black investigation exploded on the industry. Companies were forced to sever their manufacturing and airline interconnections, and United Aircraft & Transport de-merged in haste. The eastern manufacturers Pratt & Whitney, Sikorsky, and the rest-became the United Aircraft Corp. The air-transport units remained United Air Lines, and Boeing became just plain Boeing again, with Stearman of Wichita as a subsidiary. Early in the shuffle, publicity-shy Bill Boeing faded discreetly from the scene, and Phil Johnson, as one of the “conspiring” airline presidents purged by Franklin Roosevelt, eventually took a top job with Trans-Canada Airlines.
With the dissolution, Boeing was left with nothing but brains. It had no money to speak of, no firm market, no product. Engineer Claire Egtvedt, who had assumed the presidency, began haunting Army and Navy offices, trying to get the thinking of the military on combat planes. They were thinking, he found, strictly in terms of defense—of recons, fighters, and pursuits. But Egtvedt wanted to get away from the fighter plane, “a stinging instrument,” as he characterized it, “that could kill and do nothing else.” He and his boys had their minds on a plane that could perform useful work, i.e., load carrying, as well as serve as a weapon.
Beginning of the B-17
When the Army announced competitive tests for a “multi-engined” bomber in 1934, Boeing saw a chance to exploit these ideas. The company sank everything it had into the competition and came forth with a genuinely astonishing four-engine plane that was to evolve into the B-17, and also laid out a four-engine counterpart for commercial use. Douglas entered a two-engine bomber—and won. For one thing, the smaller planes could be bought in larger numbers, and numbers, then as now, were impressive to some generals and most Congressmen. For another, an Army pilot, on an early testing flight of the B-17 prototype, inadvertently took off with the flight controls locked, and the plane crashed and burned.
But, of course, in the B-17, the first combat plane that could defend itself adequately as well as deal out damage to distant targets, Boeing had a weapon that would shape new strategic concepts. The airmen in the Army continued to plug for it, and Boeing engineers effected numerous refinements. It finally won over the War Department in 1940, and once in action over Europe, it pretty firmly established Boeing Airplane Co. as the world’s premier producer of heavy bombing planes.
The B-29 clinched the title. Boeing furnished 17 per cent of the U.S. bombers operating in World War II, and this 17 per cent dropped 46 per cent of the bombs dropped by us in Europe; shot down 67 per cent of the fighters felled by U.S. bombers in Europe, and dropped 96 per cent of all the bombs dropped on Japan.
The unfair rewards
After such terrible magnificence, the story of Boeing’s immediate postwar experience is rather shattering. When peace was declared, the War Department had a plan for tailing off production in a graduated fashion, which, in the case of Boeing, worked out in an ironic way. Though the Wichita plant was closed down completely, the Seattle shop was handed a sort of work bonus of 120 additional B-29’s. The pipelines were flowing so perfectly, however, that the order came to only a month’s work.
Now, just how does the world’s premier producer of bombing planes go about “reconverting” for peace? Boeing’s laboratories were loaded with projects, most of them for the military. Preliminary designs for the XB-47 were about two years along, but amounted to nothing very solid because of insufficient data on jet engines. Boeing had drawings in the works for the B-50, a more powerful version of the B-29, and it was engaged with a proposed B-54, a still heavier, piston-engined bomber. It also had built the C-97, a double-deck troop and cargo carrier. But Boeing didn’t have anything that it could begin at once to make and sell in quantity in order to hold a labor force together and sop up overhead. It didn’t even have anything it could cheerfully lose money on, and thereby take some advantage of the carry-back provisions in the tax law. Boeing’s sales dove from $600 million to $16 million.
By an added misfortune, Boeing came up to this crisis without the services of a strong administrative head. Phil Johnson, who came back to serve as Boeing’s wartime President, had died in 1944, and Claire Egtvedt reluctantly stepped in to pinch-hit. Boeing was in a considerable quandary. It needed a president who believed in the uncompromising engineering quality that was the core of the company’s genius, but who would, at the same time, face up to the commercial necessities of the hour. The directors screened many a highly recommended candidate (one of whom was Major General Benny Meyers!), then turned to the man whom they knew best, and who best knew Boeing.
Allen’s arrival
When Bill Allen graduated from Harvard Law School in 1925, he joined the Seattle firm of Donworth, Todd, and Higgins, and was promptly assigned to the Boeing account, which was handled at that time on a $50-per-month retainer basis. Thereafter he served as Boeing’s principal counsel, and was elected to the Boeing Board in 1931. The presidency was no plum for Allen. His lucrative law practice more than matched the salary, and the day he took office (September 5, 1945) was the day on which the government canceled its production contracts, and 25,000 Boeing employees had to be laid off.
It was at this point that Boeing engineers ruefully regarded the egg beater, and a dozen other dandy little items of that ilk. But they concluded, “Why kid ourselves?” Boeing people had been trained for years in the production of a terrifically expensive article, where quality and performance meant everything and cost could, if necessary, be damned. They were temperamentally unfit for the turnabout to household gadgets, and there was grave doubt that they could make a successful run against the agile performers already in the field. So Boeing re-embarked, with full knowledge of the hazards, on the manufacture of commercial planes.
In the final furlongs of the war, when postwar planning was popular, Boeing threw a couple of million dollars into mock-ups and tooling for a relatively small, twin-engine plane that it hoped to sell to short-haul operators. But when Sales Vice President Fred Collins got down to cases with these potential customers, he found them willing to put only $10,000 on the line, and the balance in elongated installment payments. Boeing decided that if it must gamble, it would gamble for bigger stakes. Accordingly, President Allen, making his first tough decision, ordered the Stratocruiser into production. This was a plush, double-deck airliner adapted from the C-97 design.
Oh, those airliners
Fred Collins had better luck peddling this plane. He sold twenty to Pan American, and in the next year and a half placed ten each with Northwest Airlines and B.O.A.C. (the British line), eight with American Overseas Airlines, and seven with United Air Lines. It was a remarkably fine plane, and ably merchandised, and resulted in a net loss to Boeing of $1.3,500,000. One reason for this financial fiasco was the insistence of each customer on highly individual interior treatment of the planes purchased. On this score, Boeing spent a total of $8 million in design changes over and above the specifications. Also, a new flock of CAA regulations added to Boeing’s cost. Still another reason for the loss rested in Allen’s second tough decision—the decision to fight to the bitter end a strike called against Boeing by the International Association of Machinists in April, 1948.
The strike turned mainly on the issue of job seniority. The seniority rule, Boeing claimed, was causing the replacement of skilled workers during periods of fluctuating employment by less competent production-line hands, and it refused to write the clause into the new contract. The union struck, pulling out 15,000 workers. Lawyer Allen carried his case up to the federal court, and won his contention that the strike was a violation of the Taft-Hartley law. Eventually a new contract, without the seniority clause, was signed.
Boeing today is a beautiful organization to observe in operation. Its roster is full of youth and brains and imagination, and its docket one long list of vital and awesome products—the B-47, the B-52, the ingenious in-flight refueling boom, the analogue computer, the multi-purpose cargo-transport-hospital ship, the revolutionary gas turbine, and the guided missiles that can’t be talked about. It has well over $1 billion in orders that will take three years to run off, and unless the temper of the world changes miraculously, there’ll be more where that came from.
Click to enlarge.
Yet, as a business, Boeing Airplane Co. is a mighty baffling proposition. To do what it has contracted to do, Boeing will have to spend $16 million on new facilities within the year and must borrow that amount from the banks. This, together with loans required for other purposes, would put total bank borrowings well beyond the company’s working capital of $46 million. Over the cycles of the past, Boeing has never been able to put much financial beef on its bones, and its prospects for doing so today, despite the new flood of sales on the way, aren’t much better.
Bill Allen once wryly put it this way: “The only way to make money in the aircraft industry is to stay out of business between wars.” What Allen had in mind, of course, was not merely the losses ordinarily suffered from strictly commercial business, but the fact that these losses fall in such a way as to make the aircraft manufacturer a prime victim of the excess-profits tax. In the base years 1936–39 for the World War II excess-profits tax, Boeing (which had spent those years perfecting the B-17, remember) showed an absolute loss of nearly $4 million. Under the mobilization E.P.T., it won’t fare much better. In the base years 1946-49, Boeing averaged an annual profit of $1,337,000, which means that on rearmament earnings it will be socked, it expects, for an 82 per cent tax. And here’s salt in the wound: an automobile company that gets a subcontract to build the same planes or parts on Boeing designs will pay a tax of only 52 per cent, the base years having been fine in autos.
Last year Boeing made $10,827,000 (highest in its history) on sales of $307,251,000. This year, with midterm profits of $3,090,000, it will probably earn substantially less on a larger volume, owing to higher taxes, amortization charges, and a lower profit on government contracts.
What, then, is a company like Boeing to do between wars? This is a question not for Boeing only, but for the government. For Boeing’s experience has been that you can’t build commercial planes as a sideline and make any money; you’ve got to go whole hog on them, and then you’ll make money—perhaps. Similarly, you can’t fool around with military planes as a sideline if you expect to produce planes adequate for the national defense; you must work whole hog on them, too, without a break.
Perpetual program
What Boeing believes is that the proved military plane makers ought to be assured by the government of a continuing program. In Boeing’s case it estimates that a running program of a plane in production, a plane in development, and a plane on the drawing board (or design-study stage) is the bare minimum requirement. Such a program for Boeing bombers at present prices would run to something over $100 million a year, and would keep a nucleus of some 1,500 engineers and 14,000 skilled and semi-skilled workers on the job and in form. If such a practice had been followed since war’s end, it would no doubt have paid for itself on savings on the B-47 and B-52 and both planes would be farther along the road today.
If this seems inconsistent with the principles of free enterprise, Boeing hastens to point out that the plan should in no wise fetter free and even fierce competition among aircraft companies; the awards would have to be continuously won on merit. As for the 15,000 not overly fortunate stockholders of Boeing, the plan might or might not enhance, at public expense, the value of their investment. But there’s no question that for 150 million Americans it would be a very good investment indeed.
A version of this article was originally published in the September 1951 issue of Fortune.
