More Trouble for K-F

This article was published on: http://www.time.com/time/magazine/article/0,9171,817409,00.html?promoidgooglep and copied for sake of archiving KF's C-119 history :

Kaiser-Frazer, which has had its troubles selling autos, faced trouble of a different sort. New Hampshire's Senator Styles Bridges charged last week that K-F's biggest defense contract, which has kept the company going for the past few months, is costing taxpayers at least $150 million too much. K-F, said Bridges is building 159 Fairchild C-119 cargo planes for the Air Force at a cost of $1,200,000 apiece, whereas the same planes made by Fairchild Engine & Airplane Corp cost only $260,000. The Senator, who will head either the Armed Services or Appropriations Committee in the new Congress, demanded an all-out full-dress investigation of this "almost incredible disparity."

K-F landed the C-119 contract soon after the Chinese Reds moved into Korea two years ago. Fairchild had developed the plane, and said it had plenty of idle capacity to turn out more. But at the time, the Air Force was looking for a second source of supply for critical equipment. It wanted Willow Run but the only way it could get it—and thus prevent the Army from snatching it for tank production—was to take K-F in the package. There was another reason for giving K-F a contract: the RFC had just sunk another $25 million in the company and was anxious for a war contract to bail out the loan.

Since then, K-F's production record has been something less than impressive. To date, it has delivered only eleven C-119s, and all of them have been assembled by K-F from parts supplied by Fairchild. Not until K-F has delivered another 30 planes will it be making C-119s entirely from its own parts. When the arms stretch-out was ordered last year 41 planes were lopped off K-F's contract and switched to Fairchild's order books In short, it looked last week as if Fairchild could have handled the entire C-119 order with ease and at much lower cost. Fairchild may well complete its contract while K-F is still making the plane Fairchild developed. But the Air Force still stubbornly insists it was right. It said that K-F is getting valuable experience for another defense job: the building of the C-123 Chase cargo plane, the C-119's successor, which was developed by Chase Aircraft before it was bought by K-F.

When the Bridges charges hit the papers last week, K-F's President Edgar Kaiser placed ads in ten cities saying that Bridges had "found it impossible to keep any of several appointments" made to discuss K-F's side of the case. Kaiser denied the "inference . . . that the Willow Run operation is inefficient," and demanded a chance to prove it in a congressional investigation.

But it was clear that the quintuple fumbles on the C-119 had kept K-F afloat. Last week Kaiser reported that K-F was in the black for the first time in four years, with a third-quarter net of $344,064. All the profit was due to defense work, chiefly the C-119 contract; K-F's auto operations lost $175,094 in the quarter. In the first nine months of 1952, said Kaiser, the company lost $8,700,000 on $98 million in auto sales, whereas on $17 million more in defense work it netted $3,000,000. If K-F lost its C-119 contract and didn't get other war work, it might have trouble keeping going.

 

Chuck Lunsford stumbled on this Time-Life article, dated 06Jul1953, on www.time.com (link)

AVIATION: The Ax for Willow Run


Armed with stacks of statistics, Henry Kaiser and son Edgar appeared before a Senate subcommittee last week to defend their performance in making airplanes at Willow Run. But in the midst of the defense, an aide passed them a note containing some startling news: Air Force Secretary Harold Talbott had just canceled Kaiser's orders for C-119 Flying Boxcars, along with $225 million in orders for 244 assault transports from Chase Aircraft, 49% Kaiser owned. On that note, the hearing abruptly ended.
Next day, the Kaisers laid off 9,000 of their 12,200 workers at Willow Run, where the C-119 Boxcars were made on license from Fairchild Engine & Aircraft, their original designer. Auto production (250 cars a day) had already been halted in the plant a few days earlier, when a strike at Borg-Warner shut off K-F's supply of automatic transmissions and forced a layoff 'of 2,200 men. At week's end, there were only 1,000 K-F workers left, finishing up the last Boxcars and making auto parts for other manufacturers.
The aircraft cancellations came after Senator Styles Bridges' hearings had brought out that K-F needed $1.3 million to build a Boxcar that Fairchild itself is building for only $260,000 each (TIME, June 15). The Air Force denied that this caused the cancellation, but nobody believed it. The Air Force, fighting to restore some of the cuts in its 1954 budget, obviously wanted to drop an operation criticized as wasteful. Henry Kaiser and Edgar had done their best, before the hearings broke up. to acquit K-F of this charge. In a 22-page prepared statement, and an 88-page memorandum passed out to the press, they detailed Kaiser-Frazer's tribulations.
Kaiser Motors, said Henry, had started from scratch on the C-119's, had to learn all about the new job and write off its enormous tooling costs against only 159 planes. The cost of producing the first C-119's was high, as is usual in mass production, but with production increasing, mistakes corrected and short cuts discovered, the cost curve would fall rapidly.
Fairchild, on the other hand, had the advantage of a Government-furnished plant, said Kaiser, with a large part of its tooling costs written off against a great many more planes, specifically 200 C-82's (forerunners of the C-119's) and some 400 Boxcars. It was also unfair to compare costs between the two planemakers. said Kaiser, because the C-119 made by Fairchild is not as difficult to build as the modified C-119 being made at Willow Run.
Kaiser Motors, which has already been paid $150 million for the 55 Boxcars it has delivered, will be permitted to finish eleven more C-119's with parts ready for assembly. On top of what it had paid for the planes, the Air Force had poured $30 million into tooling up for C-123's at Willow Run and committed $40 million more to Chase Aircraft for design and engineering (Kaiser still has subcontracts for plane parts). Whether Kaiser could keep Willow Run going was anybody's guess. There was talk that the plant might start producing parts for Willys Motors (which Kaiser bought for $62 million two months ago). But that prospect was small consolation. In the first half of this year. Kaiser made $2,507,000 working on C-119's and C-123's. But he dropped $8,540,000 making autos.

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Last updated 01.Apr.2007