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From Labor Action, Vol. 4 No. 15, 22 July 1940, pp. 1 & 2.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
On July 9 the directors of Packard Motor Car Co., in spite of their avowed anxiety to be “of public service”, struck against the government’s armament program by refusing to sign a contract for the manufacture of 9,000 Rolls Royce airplane engines.
On July 10 the Administration conceded all their demands. And there were no loud whispers about Packard directors being fifth columnists as has been the case when 7,000 shipyard workers recently struck for a better living.
When it refused to sign the contract, the company issued a vague public statement that there were “many matters that require further study.” But it was quite clearly understood where the understanding was necessary. Packard wanted assurances from the Administration that the company’s “take” will not be interfered with. Specifically they wanted higher profits under government contracts and larger reimbursement for capital outlays in expanding their plants for war orders.
President Roosevelt, who only recently declared that the American people will not tolerate the making of huge fortunes out of war, held a conference with representatives of the Treasury, the Federal Loan Administration, the National Advisory Defense Commission and Congressional leaders, and flashed on the green light to indicate to the bosses that the road is clear. Now it will be full speed ahead to unprecedented profits out of the 14-billion-dollar military program.
The White House conferees promised to lift all profit curbs on war contracts. Up to now a so-called cost-plus-8% profit limit had been placed on contracts for ships and aircraft. In a previous article, Labor Action showed how cost of production has been made to cover a multitude of profits, so that the 8% limit became a farce. Now, however, even this pretense at controlling profits will not be made.
The Treasury Department has been checking on contracts given out by the War and Navy Departments. This check will now be removed, so that the war profiteers will not be inconvenienced by too much supervision.
On the question of capital invested in expanding plants the administration agreed to legislation allowing corporations to write-off such capital as depreciation over a period of five years. Depreciation has heretofore been allowed for wear and tear, for plant and equipment rendered unusable, etc., and even so there was plenty of room for chiseling. But now every cent invested on plant enlargement will be deducted from profits, and after five years a company may have perfectly good plants and machinery which will cost it nothing at all.
The New York Times, reporting this matter, concluded that “the sole check on possible profiteering will be the excess profits tax”. With the enormous allowances for depreciation, among other things, Packard and the rest of them will see to it that the peaks of their profits are levelled off before the tax collector gets to them.
Wall Street’s mouth waters in anticipation of the thick cream it will soon be licking up. Its comment was: “News that the Administration has abandoned limitation of profits on war orders in favor of adequate depreciation schedules which will protect companies against loss on capital invested in quasi-temporary armament plants was welcome in financial circles.” The above is a gem of understatement.
Another important concession to Packard – and this will undoubtedly hold all along the line – is that the Reconstruction Finance Corporation will lend the company around $30,000,000 to expand its plant. It should be recalled that the RFC was organized to help out concerns hit by the depression and on the verge of bankruptcy. It was not meant to finance wealthy corporations facing a coming war boom. Nevertheless the favorable terms and the nominal interest rates of the RFC will be enjoyed by the war profiteers.
Being thus satisfied on all scores Packard will now go ahead and tool its plants for the production of 9,000 airplane engines. Of these 6,000 are to go to England and 3,000 to the U.S. government. It is estimated that the total amount involved is $130,500,000.
Packard now has absolute certainty that there is plenty in it for Packard. At this point its patriotism begins.
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Last updated: 21 September 2014