Destructive Creation - Mark R. Wilson American Business, Politics, and Society

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major World War II industry most stimulated by orders in the 1930s was the one that made aircraft. Here again, an expansion of orders in the late 1930s was critical for the disposition of forces that would be available by the time of Pearl Harbor. Planes and their engines could be produced somewhat faster than the large warships, but it still usually took at least two years to move from design to quantity production.15 This lag meant that procurement of most of the planes available to the Navy and the AAF by early 1942 had occurred before summer 1940, when the United States truly ramped up its mobilization efforts.

      The aircraft expansion was shaped by a new factor, which had not been significant in the case of warships. This was the role of foreign demand—most notably, in the form of large purchases and capital investments by France and Britain. By spring 1939, when the U.S. Congress authorized expenditures for aircraft expansion comparable with the funds that it had provided previously for warships, the British and French orders had already provided the American aircraft industry with a major stimulus.

      The aircraft industry, like shipbuilding, had suffered from the end of military orders after World War I. But it was a less mature industry, with dreams of a future in which air travel would become commonplace. By the mid-1930s, after a wave of consolidation was reversed by antitrust action, the adolescent aircraft industry remained highly competitive. Across the country, at least a dozen viable airframe manufacturers had military contracting experience. With just 36,000 workers in 1938, the aircraft industry was still quite small. Dependent on military sales and exports, it was also fragile. Among the leading aircraft manufacturers, only Douglas—maker of the DC-2 and DC-3—enjoyed much success as a supplier of civilian airliners. From 1935 to 1937, modest orders from the Air Corps and the Navy, most of which offered low profit margins, accounted for 40 percent of the industry’s sales. Another third or so of the industry’s output was absorbed by more profitable export sales, many of them to Latin American nations and China.16

      Exports became far more important from 1938 to 1941, when large orders from France and Britain transformed the American aircraft industry. The British and French purchases, along with smaller orders by a few other foreign customers, amounted to over $1 billion—nearly half of the industry’s sales during those years.17 By February 1939, before Congress increased funds for U.S. military aircraft procurement, the British and French governments had already ordered more than 1,200 planes from American companies. France alone spent over $300 million on American aircraft and engines in 1938 and 1939—about twice the amount spent by the U.S. military. By April 1940, Britain and France together had ordered nearly six thousand planes and more than fourteen thousand engines, at a cost of $573 million.18

      For individual firms, the British and French aircraft purchases of 1938–40 were electrifying. The buying spree started in summer 1938, a few weeks after a British delegation toured aircraft plants in California. In June, Britain ordered two hundred of Lockheed Aircraft’s two-engine “Hudson” bombers, which would not begin flight tests until year’s end. Eventually, the British would order 1,100 more. But for Lockheed, a small company with two thousand employees, even the first order seemed enormous. With the Hudsons priced at $85,000 each, the initial order promised $17 million in revenue over the next couple of years—far more than the $2–$3 million in annual sales that the company had been recording in the mid-1930s. During the six months after the first Hudson order, Lockheed doubled its workforce and added a second eight-hour shift. Thanks to the British order, Lockheed was able to move more quickly into production of its fast twoengine P-38 fighter, which it started to deliver to the Air Corps in 1939.19

      While Lockheed’s change in fortunes was extreme, many other American airframe makers also grew rapidly. France and Britain ordered dozens of new planes from Douglas, North American Aviation, the Glenn L. Martin Company, and the Curtiss-Wright Corporation. From 1938 to early 1940, these companies and others across the industry tripled their workforces.20

      For the airframe makers and aero engine manufacturers, foreign governments were important sources of capital. Britain, as part of its first Hudson bomber order, provided Lockheed with a cash advance of $360,000. This helped tide Lockheed over until early 1939, when the company was able to raise $3 million by issuing more stock. Meanwhile, France provided Martin with $2.4 million to expand the company’s main plant in Baltimore, in order to help Martin fill an order for Model 167 bombers. Foreign capital was even more critical for the early expansion of the two largest engine manufacturers, Pratt & Whitney (part of the United Aircraft Corporation) and the Wright Aeronautical Corporation, the engine-making division of Curtiss-Wright. By the time the European war started in September 1939, Pratt & Whitney had already received $85 million worth of engine orders from France. Then, just after the war began, France agreed to pay $7.5 million to build a whole new facility at Pratt & Whitney’s works in Connecticut. Known as the “French wing,” this doubled the company’s plant space. Soon after, the British paid for their own $8 million “British wing.” Together with a $14 million investment in new plant from the United States, the French and British outlays allowed Pratt & Whitney to increase its plant by a million square feet of factory space, all before January 1941. Something comparable was achieved at Wright Aeronautical’s main plant in Paterson, New Jersey, which used a $5 million direct investment by France to triple its floor space between 1938 and 1941. By mid-1940, France and Britain had provided $72 million worth of direct investment in U.S. aircraft industry plant, nearly 50 percent more than the private investment in plant made by the companies themselves.21

      Domestic military demand for aircraft also jumped in 1939. Before then, even experienced and talented manufacturers had been struggling to survive. A case in point was the Seattle-based Boeing Aircraft Company, designer of an innovative heavy bomber, the B-17. Enjoying enthusiastic support from Air Corps officers, Boeing received a small contract for thirteen B-17s, which it delivered in 1937. However, the penny-pinching secretary of war, Harry H. Woodring, decided to stop buying B-17, in favor of the cheaper Douglas B-18. This nearly destroyed Boeing, which had been struggling financially throughout the decade. In 1939, Boeing recorded a loss of $3.3 million; the company found itself compelled to take out a $4.7 million loan from the federal government’s Reconstruction Finance Corporation (RFC).22

      A dramatic shift in U.S. military demand for aircraft would not manifest itself until 1939. But it had its roots in the European diplomatic crisis of September 1938, when it appeared that Hitler’s demands for control over territory in Czechoslovakia would throw Europe immediately into a major war. Although that outcome was delayed by the “appeasement” of Hitler via the Munich agreement, President Roosevelt responded to the crisis by asking his advisers to plan for a bigger air force. The planning was led by Harry Hopkins, the veteran New Dealer and top Roosevelt adviser, along with Assistant Secretary of War Louis Johnson, a champion of militaryindustrial preparedness. During the fall of 1938, Hopkins, Johnson, and Roosevelt discussed the possibility of having New Deal public works agencies build as many as sixteen new government-owned aircraft plants. They started to select sites for these new plants all around the country, from Utah to Alabama. Roosevelt unveiled his plans at a meeting at the White House on 14 November. There, he stunned members of his cabinet and top military officers by saying that he wanted the United States to build a tenthousand-plane Air Corps (more than quadruple its current size), along with the industrial capacity to be able to build twenty thousand planes in one year.23 (Over the weeks that followed, as the White House faced the problem of persuading Congress to pay for such a program in peacetime, these ambitious goals were scaled back.)24

      During this early planning for a major expansion of U.S. aircraft output, private airframe company executives worked hard to ensure that the growth would be handled entirely by themselves and not by firms from other industries or the government. To airframe and aero engine makers, the threat of competition from the government seemed very serious. Might the Air Corps end up running the new government-owned plants, thereby setting up a mix of public and private operation such as the one that already existed in naval shipbuilding? This question worried the airframe manufacturers, who lobbied hard to prevent such a possibility. As one Air Corps officer put it, after a meeting with company leaders in early 1938, “all manufacturers interviewed were unfavorable to any scheme whereby the Government would own and operate aircraft facilities.”25

      The

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