AIR CRAFT INEFFICIENCY BARED
Air Craft Inefficiency Bared Former Supreme Justice Charles E. Hughes in Official Report to Government Shows Delays, Deceptive Reports and High Profits. The Hughes report on aircraft production...
...The Cost-Pius System...
...The capital stock of the company, $1,000,000, was not paid in until Dec...
...The Bristol was so far removed from a machine that could carry an engine of that power that it had been admitted by high authority that it waa 'very foolish trying to put the two together.' "Thus, nothing is left of last fall's program for service planes save the De Haviland 4s...
...France and England have been preparing for peace during the past two years...
...There would seem to be no question but that the members of the aircraft production board in recommending contracts had confidence in the capacity of those undertaking the venture, and the previous success of this group while Mr...
...Sources of Delay...
...Deeds Not Punished...
...The Bristol fighter, as redesigned to take the Liberty motor, proved to be a failure and after series of fatal accidents was discarded...
...Its entire paid in capital is $850,000...
...This first shipment, though in itself not large, marks the final overcoming of many difficulties met in building up this new and intricate industry...
...Foch will continue to command its armies...
...They have a central organisation back of the armies to control the manufacture of equipment and munitions of war...
...In one case a man whose duties were such that any one who could handle a screw driver could do his work, was drafted, and immediate steps were taken to have him returned as a 'motor builder.' Previous to his employment by the company he had been employed as a stock clerk by a manufacturer of gowns and he had no previous mechanical experience...
...1, 1917, when in one transaction the stock was paid for and all shares were transferred to tbe Dayton Metal Products company, which thus became and still remains the owner of the Dayton Wright Airplane company...
...General Conclusions...
...Talbott Sr...
...It is understood that the machines are being tested and that the questions which have- arisen and have been brought to the attentioifciof the authorities are receiving their consideration...
...Deeds retained an interest in the Dayton Metal Products company and thereby in the Dayton Wright Airplane company...
...The provisions of the criminal statutes do not reach inefficiency...
...It was estimated by iu officers that deliveries would reach 1,500 in October, and that the entire contract would be completed by the first of December...
...Deed's approval in giving it his official sanction...
...The Lincoln Motor Company will make a pro...
...Employers will not start up again until they know what markets and wages will be...
...Hughes says: "At the time this statement was issued (Feb...
...Demobilization comes at the worst possible time of the year...
...The Packard Motor Car company has contracts for 12,000 Liberty motors and separate parts...
...John R. Commons, labor expert of the University of Wisconsin, who is giving a series of lectures on the questions of economic reconstruction by the League of Nations...
...HUGHES sharply criticised the "extravagant scale of profits" allowed to aircraft end Liberty motor manufacturers...
...The Liberty motor is pronounced 'a great success for observation and bombing planes, and for this purpose' it has found high favor with the allies...
...Responding to repeated and urgent recommendations for production of Spads in this country, an order for 3,000 Spads was placed with the Curtiss Aeroplane and Motor corporation under date of Sept...
...THE Dayton Wright company received contracts for the construction of 4,000 De Hav-iland 4 planes at a cost to the government of about $30,000,000...
...16 last that "due to nonarrival in France of suflicient raw materials French production of aeroplanes and engines is insufficient to me^t need of French and American air service during the next three months...
...Deeds was himself one of the incorporators...
...Affidavits were immediately presented for his return from camp upon industrial grounds and he was returned accordingly...
...Will it ever be thus, or will we have a reign of terror before we will appreciate the blessings of constitutional liberty?Editor's Note...
...7, 1917...
...These things the League is already doing, "But it will need at once to rebuild Northern France and Italy, Belgium, Serbia and Armenia...
...Hughes said: "It is only to be tolerated during such period as it is found to be absolutely necessary to secure immediate production...
...PERSHING cabled Feb...
...The evidence with respect to Col...
...these are supplied to the other manufacturers...
...Estimated Ford Earnings...
...and Talbott Jr...
...Its entire paid in capital is $850,000...
...Food control must continue for another year at least...
...Hundreds of these cadets were held at concentration camps and other places for several months without suitable training...
...The League's merchant marine will bring the wheat and meat that have accumulated in Australia...
...DATING from August 1, 1917, the salaries thus allowed were as follows: H. E. Talbott Sr., $35,000...
...Germany, Austria-Hungary, Bulgaria, and Turkey must pay the bilk, but the League must furnish the credit to begin at once and set millions of unemployed at work...
...The Ford company has not received advances from the government...
...Squicr and Col...
...This was later reduced, so that its profit on the De Havilands may be computed at about $3,600,000, according to Mr...
...In another case a man who was considered a deserter by his local board was finally located at the plant of the Wright-Martin company, where he was arrested and inducted into the army...
...The first airplanes obtained by the United States were manufactured abroad of American materials, but, says the" report: "The deliveries originally contemplated on the foreign orders were not made...
...The Ford company also has a contract for 400,000 cylinder forgings for the Liberty engine, on a fixed price basis of $8.25 each...
...Hughes estimates its profit would be $15,-000.000 on these contracts...
...Deeds, and that he did not learn of the inaccuracies of the statement until his return from Europe in the latter part of April...
...5, it did not leave the United States until March 22...
...One who had been a clerk of a earpet company, without mechanical experience, and who had a minor assembly job, was drafted and was returned on indefinite furlough as a necessary WITH its well known efficiency, and in view of the fact that by beginning later it did not have as much difficulty as the Packard company had experienced, it may be assumed that the actual cost of the 5,000 engines at the plant of the Ford Company will be less than $3,-200 per engine and at the rate of $450 an engine (that is 25 per cent of the difference between $3,200 and $5,000) its additional profits would amount to $2,250,000, or its aggregate profits on the 5,000 earned by January, 1919...
...HUGHES traces the backing and filling in the war department on the question of building a combat plane, and concludes: "The final result is that there has been no renewed order for the production of Spads and that the order for S. E. 5s is being proceeded with hut that the American machine of this type is still in the experimental stage...
...Deeds "continued to be on the most intimate and confidential footing with Kettering and Talbott in connection with the prosecution of the government work, the Dayton Wright Airplane company...
...The Packard Motor Car company has contracts for 12,000 Liberty motors and separate parts...
...1, 1917, the salaries thus allowed were as follows: JL D. Talbott Sr., $35,000...
...There were to have been twenty-five De Haviland 4s delivered in October, 1917, but the first cne was not shipped till six months latrr and the program of 8,000 is now only 25 per cent fulfilled...
...His intimate business associates were Charles F. Kettering and H. E Tal-bott, owners of practically all of the stock of the Dayton Wright Airplane company of which Col...
...The large percentage of the contractors' profits which will be taken by the government in taxation is strongly emphasized, and, of course, what the government takes back by taxation should be fairly taken into account...
...There may also be noted at this point," says Mr...
...Hughes' report says: "The extravagant expectations of production and the failure of realization is shown by the program laid down last year...
...Hundreds of thousands of men who have given up their jobs will be hunting them again...
...3The absence of proper appreciation of the obvious impropriety of transactions by government officers and agents with firms or corporations in which they arc interested compels the conclusion-that public policy demands that the statutory provision bearing upon this conduct should be strictly enforced...
...There is work for the unemployed if the League of Nations goes on as it has been doing the past year, and sets the world at work for France, Italy, Belgium, Serbia, and Armenia...
...Deeds was the head...
...public information a false and misleading statement with respect to the progress of aircraft production for the purpose of publication with the authority of the secretary of war...
...There is a year's work for several million men...
...30 years old, who was made president of the company), $30,000...
...Details Cannot Be Made Public...
...COMMENTING on the cost-plus system under whicli the bulk of the aircraft contracts were arranged, Mr...
...and H. E. Talbott Jr...
...America is only beginning to study the problem " entitled to fixed profit* on the 5,000 engine* of $3,125,000, and the additional percentage of the saving under the bogey cost of $5,000...
...Hughes says: "There is no reason why this fighting plane should not have been produced here in quantity many months ago...
...Demobilization of our armies at home is serious...
...and Talbott Jr...
...Huge Profits Made...
...The airplaue company received nothing on the issue of its capital stock except the fixed property represented by its plants, and the government agreed to advance it $2,500,000 for working capital...
...If these higher ups can not be brought to the bar of justice then courts of justice have become a by-word and hissing...
...HUGHES took a vigorous rap at the manner in which exemption from the draft was allowed to employes in aircraft factories, particularly in the Wright-Martin company's plants...
...There are certain limitations which it is not necessary to describe, of their military effectiveness .for this purpose, and machines of the later and improved types are to be provided...
...These programs witl ut varlition- and schedules of deliveries, appear to be grotesque in the light of the actual facts, but they bear the imprimatur of the planning department of the equipment division with the countersign (except in the case of the De H-9s) of official approval," says the report...
...Deeds may be tried by court martial under articles 95 and 96 of the articles of war for his conduct [1] in acting as confidential adviser of his former business associate, H. E. Talbott...
...Hughes against Col...
...In particular it is recommended that the activities in relation to spruce production, which, being largely centered on the Pacific coast, it was impracticable to embrace in the present inquiry, should be carefully scrutinized...
...E. A. Deeds, formerly in charge of aircraft production, in his relations with Dayton manufacturing concerns which received l«rge aircraft contracts with liberal profits...
...Hughes discusses at length the question of whether Deeds retained an interest in the Dayton company and thus concludes as to Deeds' transfer of stock: "The fact is that the transfer of the shares in the Dayton Metal Products company, which owns the stock of the Dayton Wright Airplane company, was made to Col...
...The department of justice has been hotfoot after weak-minded individuals who have foolishly criticised some functions of government and most severe penalties have been inflicted i.nd yet in most cases the parties convicted harmed no one but themselves...
...Baker Misled...
...The company did not begin its deliveries until the 14th of June...
...This winter will see a crisis of unemployment...
...fit of about $11,500,000 on contracts for 8,000 motors and spare parts...
...4The federal trade commission should be re- quested to report upon the proper cost of mahogany for airplane propellers, to the end that upon the coming in of its report the question of the propriety of further action with respect to the transactions of the mahogany manufacturers and importers' association may be determined...
...It was nearly six months later that the production of a single-seater pursuit plane (the S. E. 5) was undertaken, and thus there was a serious loss of time through a reversal of judgment which was in turn reversed...
...Vacillating Decisions...
...was at the time receiving and continued to receive $60,000 a year as president of the Dayton Metal Products company...
...Hughes, "the serious delays which occurred in securing adequate provision for the training of American cadets abroad...
...His report says in this connection: "Prior to August, 1918, the operations of the draft department of the company were open to serious criticism and exhibited many irregularities...
...Cases of this sort have now been brought to the attention of the provost marshal general...
...Trafficking in Stock...
...Deeds' charge, demands the attention of the military authorities," said Mr...
...Edward A. Deeds should be presented to the secretary of war to the end that Col...
...E. Talbott Jr., (30 years old, who was made president of the company), $30,000...
...20 Secretary Baler announced: "The first American built battle planes are today en route to the front in France...
...It is a story of inefficiency and confusion in high places...
...of the Dayton-Wright Airplane company, and in conveying information to Mr...
...was also receiving a salary of $18,000 from the Dayton Metal Products company...
...ft is evident that the matter called for immediate investigation and for suitable disciplinary measures, but no steps were taken either for correction or punishment...
...It would be impossible to restate them in a brief summary...
...But there is no proof upon which it can be charged that Col...
...There were earlier statements of a delusive character as to the progress of aircraft production, but the particular statement to which attention has been called was inaccurate m its specific statement of facts, and its misleading character was obvious to any one having knowledge of the actual conditions...
...was at the time receiving and continued to receive $60,000 a year as president of the Dayton Metal Products company...
...This is shown by their correspondence, Mr...
...He testified that when it was brought to his attention he (iid not regard it as a proper statement to have been sent out, but that he did not institute an inquiry to ascertain who was responsible for it...
...was well under way the order was cancelled on Nov...
...Hughes continued...
...Talbott Sr...
...But the fact remains that practically at the inception of the government's aviation activity m connection with the war and within the sphere of Col...
...Of the Bristol fighter, now abandoned, 3,000 were to have been built...
...The League of Nations already exists...
...Hughes estimates its profit would be $15,000,-000 on these contracts...
...The plant investment required for this production certainly cannot be regarded as any greater than that on the part of the Packard company...
...C. F. Kettering, $35,000, and II...
...It appears that after the remedying of various defects they are being successfully used as observation and bombing planes...
...Talbott in an improper manner, with respect to the transaction of business between that company and the division of the signal corps of which Col...
...HUGHES traces in great detail the causes of delay in aircraft production, including lack of knowledge and experience, defective organization of the signal corps, lack of information on the equipment required for service planes, frequent changes of plane design, chaotic conditions in some factories, and changes in the Liberty motor...
...It is a most appalling revelation in view of the needs of our army and navy and the failure to meet those needs ^ although Congress had been lavish in its appropriations...
...Demobilization of our armies in Europe is not as serious...
...5It is recommended that the representatives of the department of justice should keep in touch with the progress of the reaudit of accounts so that they may be advised of the complete enforcement of the rights of the government in final settlement of accounts and that the government has been fu'y protected against unnecessary loss through waste and the absence of suitable factory supervision...
...The contract with the Ford company for the Liberty engines provides that there shall be allowed for depreciation on the machinery and buildings especially acquired for the performance of the contract, in addition to the...
...Deeds had large business interests at Dayton...
...Mr...
...Highly improper conduct" was charged by Mr...
...was also receiving a salary of $18,-000 from the Dayton Metal Products company...
...The defective organization of the work of aircraft production and the serious lack of competent direction of that work by the responsible officers of the signal corps to which the delays and waste were chiefly due, were matters for administrative correction through unification of effort under competent control...
...There is no question but that this grossly misleading statement was published on the authority of Col...
...The secretary of war states that the responsibility for the statement clearly rested with Gen...
...They can now shift the world's industries at once and give ont millions of contracts to rebuild the devastated countries...
...Deeds had been associated with them, was well known...
...On account of lack of system the war department "had been unable to ascertain within $100,000,000 what .obligations had been incurred abroad...
...In the Hog Island affair and now in the aircraft production department we have conditions that smell to high heaven in which men of high station have endangered the lives of thousands upon thousands of our boys in service all for the lust of gold...
...employe, A former proof-reader, a former skating instructor, and a former coupon elerk, who had obtained employment at the Wright-Martin plant were drafted and similarly returned...
...ON FEB...
...facilities already owned by the contractor, the difference between the fair cost and the fair market value as determined by appraisers at the time of the completion or canceling of the contract...
...But this order had barely been placed when doubt was cast upon the enterprise and after preparation for production THE Dayton Wright Airplane company, with a capital of $1,-000,000 was first allowed a price for the production of De Havilands rtiich would have netted it $6,350,000 This was later reduced, so that its profit on the De Havilands may be computed at about $3,500,000 according to Mr...
...While this conduct of Col...
...War Babe Salaries...
...most likely by reason of the delays on the part of the United States in furnishing the required materials and the increased pressure of the needs of the allies...
...19, 1917...
...This highly improper conduct, in holding communication in this manner with his former business associates in a transaction pending between the Dayton Wright company and the government department in Col...
...For obvious reasons," say the report, "it is not deemed advisable to make public the detail of the present aircraft program...
...80) only one plane had been delivered for shipment to the American expeditionary forces, and while this had been shippe-' from the factory on Feb...
...and [2] in giving to the representatives of the committee on DATING from Aug...
...It is too heavy for the lighter pursuit planes.' "The Hispano engine for pursuit planes could have been produced in quantity but for the failure of the war department to grasp the problem...
...Hoover and the food controllers of the League will feed Europe and the conquered peoples and the armies...
...The Dayton Wright Airplane company, with a capital of $1,000,000 was first allowed a price for the production of De Havilands which would have netted it $6,350,000...
...Hundreds and thousands and millions of workers throughout the world will be rapidly laid off from work...
...At this point Mr...
...SQUIER testi/ie.s that he had nothing to do with the statement that was issued for publication on Feb...
...The company was guaranteed profits amounting to $2,500,000 and an additional profit under a sort of bonus arrangement of not less than $1,000,000...
...Regarding the Ford company's contracts, the report says: "The contract with the '^ord Motor company was for 5,000 Liberty engines...
...Draft Dodging...
...That can be stated by the military authorities whenever they think it wise to do so...
...It is behind its schedule, but between Sept...
...GEN...
...The Ford company has not received advances from the government...
...GEN...
...If the League does not do so, starvation in Europe and unemployment in America will be the toll of the first winter after the war...
...HUGHES declares that despite his position with the aircraft management Col...
...Pershing's Appeal...
...THE same confusion and inefficiency resulted in delay in building Handley-Page and Cap-roni bombers...
...While many of the results of the investigations were anticipated by the press, the revelations of the Hughes report uncovered violation of criminal statutes by officials in charge of important phases of air craft production and the lack of appreciation of the tremendous responsibilities whkh rest upon the officials...
...There is work ahead for them to do in policing the conquered nations...
...This was the more regrettable because these students embraced a large number who were exceptionally proficient and who had gone abroad early on the assumption that they would have important and superior advantages in training...
...Gen...
...2The evidence discloses conduct, which, al- though of a reprehensible character, cannot be regarded as affording a sufficient basis for charges under existing statutes, but there are certain acts shown not only highly improper in themselves but of especial significance, which should lead to disciplinary measures...
...In conclusion the Hughes report says: IThe controlling facts and the conclusions in relation to the matters reviewed have been stated under appropriate headings...
...Deeds does not come within the scope of the criminal code, it deserves the prompt attention of the military authorities...
...The Hrndley-Page schedule dropped from 1,500 to 50, with none yet comp'ete...
...6Permit me also to suggest that a special division or subdivision of th ¦ present bureau of investigation in the department of justice should be assigned to the consideration of suggested delinquencies in connection with aircraft production so that the work already done may be appropriately followed up...
...WITH its well known efficiency and in view of the fact that by beginning later it did not have as much difficulty as the Packard company had experienced, it may be assumed that the actual cost of the 5,000 engines at the plant of the Ford comj»any will be less than $3,200 per engine and at the rate of $450 an engine (that is, 25 per cent of the difference between $3,200 and $5,000) its additional profits would amount to $2,250,000, or its aggregate profits on the 5,000 engines would be $5,375,000 earned by January, 1919...
...The failure to do so was not due to lack of facilities, but simply to a change of opinion at a critical time as to what was advisable...
...Kettering received a salary of $25,000 from the Dayton Metal Products company and $50,000 from the Delco company...
...Hughes said, quoting letters which passed between them...
...They had no influence for good or bad...
...We have not as yet sent from this country to the battle front a single pursuit or combat plane, as distinguished from the heavy observation or bombing planes and, after giving due weight to all explanations, the fact remains that such pursuit planes could hwve been produced in large quantities many ON ACCOUNT of lack of system the war department "had been unable to ascertain within $100,000,000 what obligations had been incurred abroad...
...Total of $5,375,000...
...months ago had there been prompt decision and "consistent purpose...
...Hughes' report says: "The promoters of this enterprise, not content with these profits which were to accrue to them either directly or through their ownership of the Dayton Metal Products company, at once took advantage of the opportunity to increase their gains by salaries as executive officers of the Dayton Wright Airplane company...
...Besides the delay in production the report presents a gruesome record of profiteering...
...There were to have been 9,000 Capronis, the first "of which are yet to be delivered...
...Deeds and that the secretary of war relied upon the fact that it had Col...
...By reason of a lack of maneuverability the De Haviland 4s cannot serve the purpose of a pursuit plane...
...21 and that he did not know of it before it was published...
...Altogether from foreign factories 1,017 training and 1,512 combat planes have been delivered to the American forces...
...There were to have been 7,500 De Haviland 9s until this schedule was canceled...
...4 it delivered, according to the government's request, 768, and it may be expected that it will complete its contract for 5.000 by the end of January,* 1919...
...i'ault of Indecision...
...Only the League of Nations can do it...
...OF THE Spad fighter, Mr...
...The nations have also their internal problems...
...The course of production of these planes is hereafter stated...
...Deeds' intimate business associates on their unsecured notes which are overdue and unpaid save to a small extent...
...THE failures and delays of th» war department in producing American airplanes were revealed in an official report of Former Supreme Justice Hughes recently made public...
...It is not within the province of this report to make recommendations with respect to administrative policy, but it should be said that under the direction of Mr...
...C. F. Kettering, $35,000...
...It is therefore recommended that the officers found to have had transactions on behalf of the government with corporations in the pecuniary profits of which they had an interest should "be prosecuted under section 41 of the criminal code...
...Potter there has been improvement in organization, and progress has been made in gratifying measure...
...Industry is already demobilizing...
...The Packers Combine is another case where the government halts at the threch-hold and allows malefactors of great wealth to go unscathed of justice...
...The Lincoln Motor company will make a profit of about $11,250,000 on contracts for 9,000 motors and spare parts...
...The fact, however, that a cost-plus system is deemed advisable for a time does not justify an exorbitant fixed profit," Mr...
...Of this statement Mr...
...Deeds' important if not commanding influence his former business associates were placed at once through government contracts in a position where they had the assurance of very large profits upon a relatively small investment of their own money and in addition were able to secure generous salaries which they charged against the government as part of the cost of manufacture...
...But the contemplated tax does not justify an extravagant scale of profits which, even after the payment of taxes, would permit an excessive return upon the capital invested, in view of the greatly reduced risks of the contractor under the cost-plus contracts...
...The Hughes report on aircraft production gives another example of extravagance and inefficiency only paralleled by the Hog Island Scandal...
...6 and Oct...
...Three hundred thousand homes have been destroyed in France...
...For the present purpose it may be said that the abandonment of the program for the Spads left us, until recently, without any program for single-seater pursuit planes and that also until recently, so far as service planes were concerned there remained a program for immediate production which was virtually limited to De Haviland 4s and Bristol fighters...
...In other cases, men whose work was entirely clerical secured deferred classification on industrial grounds...
...The plant investment required for this production certainly cannot be regarded as any greater than that on the part of the Packard company...
...Ryan and Mr...
...It is said that their numbers were larger than the capacity of the French : ml British schools which it was expected would receive them...
...The league already has its War Industries Boards...
...Hughes pointed out that at the beginning cf the war Mr...
...Under the original contract it would tlten be THE immediate problems of reconstruction are the demobilization of industries and the demobilization of armies, according to Prof...
...Kettering received a salary of $25,000 from the Dayton Metal Products company and $50,000 from the Delco company...
...Highly Improper Conduct," MR...
...France has lost two million workers...
Vol. 10 • November 1918 • No. 11
