Where Are Those Profits?

The huge profits alleged to have been made in the aviation business are largely mythical. Here is the story of what two plants do with their money — where it is distributed, and how much is left for profits to the manufacturer and his stockholders.

The industrial benefits of the Army's expansion program are reaching down into every American community. Protests from Midwestern towns to the contrary notwithstanding, these communities, too, are reaping their share of the work and contributing their proportion of the raw materials. An order to an industrial concern in Hartford or Seattle seldom means that the work will be done in that particular city. On the contrary, it is more than likely that only a fraction will be done locally. Nor does it mean that management will derive the greatest gains. Statistics from typical organizations in the aviation industry tend to prove that labor, raw materials, and engineering costs take up the largest part of the aviation dollar.

Aviation magazine has reached these conclusions after a study of two typical organizations in the aviation industry — the large Boeing Aircraft Company in Seattle, which on August 30 received a War Department contract tor 277 of its famous heavy bombing airplanes, the Flying Fortress, costing $70,449,955.20; and the Beech Aircraft Corporation, of Wichita, Kansas, which was given an award on August 28, 1940, for 150 training airplanes and 20 transport airplanes at a cost of $4,847,217.25.

The charts in this study clearly indicate that the size of the corporation merely affects the extent of the job done in places other than the parent home of the company. The distribution is practically the same.

Let us consider several features connected with the construction of the Boeing Flying Fortress. The geographical sources of raw materials used in its construction extend from Seattle to practically every state in the Union. The list of subcontractors and their addresses illustrates the same trend, for it indicates that plants everywhere are being mobilized to meet America's military needs in the industrial field.

The chart showing the distribution by manufacture of money received for aircraft during 1939 by the Beech Aircraft Corporation is especially instructive. It shows that the plant had a gross income of $1,300,000, yet the stockholders received nothing. The power plant builders got 20 percent, labor 16½ percent, engineering 10 percent, raw material 7 percent — everyone profited but those who made the capital investment. Is there better evidence than these facts to indicate that manufacturers are not gouging the public and are not piling up excessive profits?

The national distribution of funds received in buying finished and raw material on the $619,000 spent by the Beech Aircraft Corporation in 1939, shows that 14 states in addition to Kansas contributed toward completing the Beechcraft model.

The chart showing the division of labor and wages paid during the year is also instructive in pointing out the different types of employment called for in aircraft production. This Beechcraft job called for aircraft assembling mechanics, engine mechanic, sheet metal workers, machinists, tool and die makers, painters, upholsterers, maintenance men, woodworkers, welders, and others. The mere mention of the trades also emphasizes the quality of skilled work demanded of aviation workers.

These charts so eloquently tell their own story that it appears needless to add anything further than to express the belief that a similar breakdown not only in the aircraft industry but in all those allied to the national defense expansion program, would indicate a similar trend.

National defense is indeed a national effort, both from an armament and from an industrial standpoint.

National Distribution of Funds Received in Buying Finished and Raw Materials During 1939
Expenditures For Material During This Period $619,000
Beech Aircraft Corp

Ohio Received 10% of this Total for furnishing the following:
Brass Bushings
Door Locks
Window Hardware
Fiber Pulleys
Landing Lights
Navigation Lights
Rubber Fuel & Oil Hose
Fuel Strainers
Bulbs & Lamps
Electrical Cable
Dural Fitting
Vacuum & Fuel Pumps
Wobble Pumps
View Finders

Connecticut Received 27% of this total for furnishing finished products and raw materials as follow:
Oil Radiators
Landing Gear Motors
Exhaust Stacks and Elbows
Gear Chain
Spring Steel
Piano Hinge
Dome Lights
Gas Tank Caps

Kansas Received 9.8% of this total for furnishing the following finished and raw materials:
Clout Nails
Leather Strips
Bitumastic Paint
Identification Tags
Balsa Wood
Taxes paid to state
Cataloy Bronze Castings
First Aid Straps
Cowl Pin Springs

Missouri Received 2% of this total for furnishing the following finished and raw materials:
Stainless Steel
Fire Extinguishers
Thread and Rib Cord
Control Cable
Shock and Landing Gear Springs
Upholstery Tacks
Flat Wire
Steel, Bar, Rod & Strip
Fiber Products
Brass Products
Fuel & Oil Gaskets
Aluminum Bar

Illinois received 2% of this total for furnishing the following finished and raw materials:
First Aid Kits
Felt Products
Accessory Controls
Brass Safety Wire
Clevis Pins
Bolts, Nuts & Washers
Piano Wire
Electrical Wire
Fuses and Holders
Sound Insulation

Indiana received 0.5% of this total for furnishing the following finished products:
Rubberized Hair Pads
Leather Binding
Roller Chains
Sprockets & Gears
Vibrator Horns
Hood Lacings

Wisconsin received 0.5% of this total for furnishing finished and raw materials:
Brass Eyelets
Landing Gear Motors
Electric Fuel Gauges
Tie Rods
Flying Wires
Aircraft Cable

Massachusetts received 0.5% of this total for furnishing the following finished and raw materials:
Gears & Worms
Cabinet Locks
Universal joints
Sash Cord

New Jersey received 12% of this total for furnishing the following finished products:
Tab Control Parts
Stop Nuts
Engine Accessories
First Aid Kits
Leather Upholstery

New York received 8% of this total for furnishing the following finished or raw materials:
Fuel Analyzers
Instrument Lights
Oil Radiators
Radio Equipment
Rubber Tubing
Engine Switches
Balloon Cloth
Flitex Cloth & Tape
Upholstery Materials
Grommets & Fasteners
Flexible Aluminum Tube
Flexible Shafts

Michigan received 2% of this total for furnishing the following finished and raw materials:
Gasoline Gauges
Paint & Dope
Door & Window Handles
Leather Upholstery
Rubber Plugs
Ash Receivers
Landing Lights
Electric Terminals
Fuse Clips
Steel Tubing
Window Moulding

Pennsylvania received 24% of this total for furnishing finished or raw materials :
Engines & Accessories
Storage Batteries
Aluminum Bar
Fuel Valves
Safety Glass
Steel Tubing
Moonglow Lamps
Motor Oil
Bolts & Nuts
Brass Chain
Bronze Bushings

Minnesota — Oklahoma — Texas received 0.2% for furnishing the following:
Bronze Bar & Castings

California received 0.3*% of this total for furnishing the following:
Electrical Fittings
Castings Rubber Moulding

Oregon received 2% of this total for furnishing:
Grade A Spruce

The Beechcraft Personnel Were Paid $681.000 During the Year For Their Work in 1939

Sheet Metal Workers Received $194,000
Machinist, Tool & Die Makers Received 71,000
Painters Received 26,600
Upholsterers Received 9,500
Plant Maintenance Men Received 13,600
Woodworkers Received 21,150
Welders Received 67,000
Employees Under Production Planning & Control
Employees Under Plant Administration Received 12,600
Employees Under Executive Sales & Administration
Members of the Engineering Department Received 84,000
Inspectors Received 22,000
Engine Mechanics Received 14,400
Aircraft Assembly Mechanics Received 69,000

Distribution by Manufacture of Money Received for Aircraft During Fiscal Year 1939
Beech Aircraft Corp Gross Income $1,300,000

Labor 16.5%
Power Plants 20%
Propellers 5%
Instruments 4%
Buildings Interest Depreciation 1½%
Manufacturing Overhead 14%
Taxes 3%
Gas, Water & Electricity 1%
Raw Materials 7%
Finished Products Purchased Other Than Motors,
Props & Instruments
Engineering 10%
Administration & Sales 8%
Tools, Dies & Developments 3%
To Stockholders 00.00%

Capital Investment and Fixed Overhead Required for 1939 Production of 66 Biplanes —8 Monoplanes — Capital Investment $369,000 — Fixed Overhead $290,800

Beech Aircraft Corp
Real Estate11,000
Shop Equipment (jigs, Tools & Dies141,000
Office Equipment19,000
Landing Field18,000
Car Trucks & Tractor3,000
Depreciation on Office and Shop Equipment, Tools,
Jigs & Dies
Maintenance and Depreciation on Buildings21,700
Development Cost21,300
Interest 8,000
Selling & Administration Overhead 120,000
Manufacturing Overhead 145,000
Heat, Gas, Water and Electricity 13,000
Taxes 33,000
Insurance 7,500

Cost Distribution of One Beechcraft Ship in Regular Production

Paid to labor 25
Paid for engines 18.5
Charged to factory burden 18.25
Charged to commercial overhead 14.8
Used to purchase finished parts 9.6
Spent for engine accessories 4.25
Paid to purchase raw materials 4.2
Paid for instruments 2.8
Paid for absorbing engineering and development costs
of experimental ships
Represents manufacturing profits 0.

Geographical sources of raw materials used in construction Boeing Flying Fortress follow.

Material received from the various states is as follows:
Washington: silver, copper, lead, zinc, lumber, paper.
Oregon: lumber, leather, silver, copper, lead.
California: fish oil, mercury, petroleum, borax, lumber.
Nevada: silver, copper, lead, zinc, mercury, manganese, tungsten, gypsum.
Idaho: lead, silver, zinc, copper, wool, lumber.
Montana: leather, copper, silver, wool, zinc, manganese, instrument jewels.
Wyoming: lead, gypsum, petroleum, lumber.
Utah: copper, silver, zinc, asphalt.
Arizona: silver, copper, molybdenum, vanadium, garnet jewels.
New Mexico: copper, lead, zinc, leather, fiber.
Colorado: lead, copper, wool, silver.
North Dakota: clay, leather, fiber, insulation.
South Dakota: silver, tungsten.
Nebraska: leather, fiber, casein, starch.
Kansas: flax, petroleum, zinc, casein, lampblack.
Oklahoma: zinc, lead, petroleum, leather.
Minnesota: iron, paper, linseed oil, electrical parts, paints.
Iowa: lead, zinc, starch, oil, steel parts.
Missouri: lead, silver, zinc, fiber, leather.
Arkansas: bauxite, abrasives, petroleum, cotton, antimony.
Louisiana: sulphur, acids, fiber, paper, paraffin, lumber.
Mississippi: cotton, leather, turpentine, rosin, pitch.
Alabama: steel, silver, copper, lead, tin, graphite, bauxite, cotton, turpentine, rosin.
Georgia: iron, bauxite, manganese, talc, cotton, turpentine, rosin.
Florida: cotton, peanut oil, sponges, turpentine.
South Carolina: cotton, fabric, twine.
Tennessee: cotton, silver, copper, rayon, plastics.
North Carolina: cotton, talc, mica, turpentine, tar, rosin.
Kentucky: asphalt, alcohols, porcelains.
Indiana: glass ignition equipment, motor parts.
Illinois: iron, steel, copper, instruments, insulators.
Wisconsin: paper, leather, electrical machinery.
Michigan: steel, copper, gypsum, brass, motor parts, hardware.
Ohio: rubber tires, tools, hardware, accessory parts.
West Virginia: glass, carbon black, steel, porcelain, chemicals.
Virginia: fabrics, chemicals, paper.
Delaware: steel products, paper, explosives, artificial leather, plastics.
Pennsylvania: steel, glass, silk, paper, leather, fabric, tool parts.
New Jersey: iron, zinc, textiles, chemicals, paints, plastics, accessories.
New York: aluminum, zinc, glass, paper, wire, cable, plastics.
Connecticut: instruments, engines cables, machines, guns.
Rhode Island: instruments, fabric, rubber, electrical accessories.
Massachusetts: fabric, leather, silk, rayon, paper, electrical goods, machine parts.
Vermont: slate, talc, fabrics.
New Hampshire: mica, leather, fabrics, paper, rubber products.
Maine: slate, lumber, leather, woolens, fabric, muslin.

This article was originally published in the October, 1940, issue of Aviation magazine, vol 39, no 10, pp 32-33, 104, 106.
The PDF of this article [ PDF, 4.7 MiB ] includes two maps showing sources of raw materials and locations of subcontractors for the Flying Fortress and a diagram showing the cost breakdown of a new twin-engined craft for the Army, from Beech.