Shipyard Candor

"I cannot help but be a profiteer," declared James E. Barnes of the Todd Shipyards Corp., testifying to the flabbergasted Senate Naval Affairs Committee. Mr. Barnes has been a Washington lobbyist for 27 years, and he must have been tired of all the nonsense Congress has heard and uttered about war profits. But Lobbyist Barnes, who truly said, "I am a very prolific witness," left the Senators more confused than ever.

Todd is primarily a ship repairer, with seven busy yards on three U.S. coasts. Since 1940 the Navy and the Maritime Commission have been its chief customers. On one recent Government job, Mr. Barnes declared candidly, Todd's profit margin was 62%, on others 20 or 22%. He told how, embarrassed at such profits (but at the Navy's suggestion), Todd had managed to restore $4,000,000, worming its way through Treasury regulations to do so. The blame for Todd's "profiteering," according to Mr. Barnes, belonged where Congress was least likely to look for it: 1) on Hitler, because the Navy and Maritime Commission were naturally too rushed to look into overpayments, and 2) on Congress itself, for not writing the kind of tax bill that would recapture Todd's profits. Said affable, joshing, spill-the-beans Jim Barnes, "There should not be any profits to amount to anything at all."

Actually, Todd's profits did not seem extravagant for a firm doing $200,000,000 worth of repair work a year. Todd earned $2,981,000 in the year ended last March after paying $3,500,000 in Federal taxes. This year Mr. Barnes indicated Todd would net about $7,000,000, pay $8,000,000 in taxes. But Todd's invested capital is only $40,000,000. On that, a $7,000,000 return is a very respectable 17%.

Moreover, from Barnes's candor at its most candid, it appeared that haste and Hitler were not the only villains of the piece. The ghost of NRA, he revealed, still stalks the ship repair yards. Because Todd competitor United Drydock (since bought by Bethlehem Steel) was in danger of going broke, the NRA code fixed all repair yard rates on the basis of daily wages paid, plus 35 or 40% overhead, plus machine rentals, plus 10% "profits." The arrival of war and a flood of Government work found this antique formula still in effect. As the yards filled, overhead of course dropped rapidly, which helps explain Todd's profits. Mr. Barnes assuaged the Senators somewhat by stating that nowadays Todd revises its contracts downwards when it appears profits will exceed 10%. Furthermore, he said, some jobs net only 2 or 3%, this before taxes.

Mr. Barnes also reminded the Senators that Todd had been carrying its yards and developing its now priceless know-how for 25 years without any help from the Navy.

Said Senator Walsh: "We are not interested in that"--evidently thinking that it was not necessary to know how to build ships in order to build them.

For Todd is now a shipbuilder as well as repairer. The British gave Todd an order for 60 cargo ships in 1940. Tying up with smart Bath Iron Works in Maine and the fabulous Henry Kaiser on the West Coast. Todd and associates now haye 16 yards building or repairing cargo boats and naval vessels as fast as they can. The first British ship was completed at Richmond. Calif, last month, only 13 months after the contract for the yard was signed.

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