Word: profits
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Dates: during 1950-1959
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Another big trouble is the feast-or-famine nature of aviation. While the current long-range procurement policy is a vast improvement over previous policy, airmen still remember what happened after World War II. North American, for example, went from a profit of $14 million in 1945 to a $12 million operating loss in 1947. Then it had to crank up to high speed again to produce F-86 Sabre jets for Korea...
...rent would merely add to the cost of planes, in effect transfer Government funds from one pocket to the other. However, it still gives rise to an argument that planemakers make too much money in relation to their net worth. Thus, McDonnell's 1954 pre-tax profit of $14 million looks big beside its $24 million net worth. But the industry argues that the cold statistics take no account of the enormous investment in designers, engineers and production men, give little credit for years when profits are small...
...straight fixed price or cost plus fixed fee, depending on what the Pentagon prefers at the moment. Says Douglas' Senior Vice President Frederic W. Conant: "When we're building at a loss, the Pentagon wants to buy at a fixed price. When we're making a profit, the Pentagon wants to buy on a renegotiation basis...
...manufacturer can be sure of his profit until it is approved by the Government's Renegotiation Board. Airmen complain that the board, which still has 3,500 cases on its docket, works too slowly. Under a fixed price plus incentive bonus contract, Boeing estimates that it saved the Air Force $23.2 million on B-47 bomber production in 1952 by producing lower than estimated prices. In doing so, it won itself an additional $5,800,000 profit. But last fall, three years later, the board decided that Boeing's 1952 profits of $54.5 million before taxes, on sales...
Many planemakers think that the board's methods for determining a fair profit are vague, sometimes unfair. While most businessmen gauge profits in relation to sales, the board puts heavy weight on a company's net worth, along with such other factors as character of the business, extent of assumed risk and subcontracts, and inventive contribution. Even the Hebert committee recognizes that the renegotiation law is too vague...