Under the Knife

To 9,743 companies whose war contracts face renegotiation, the War Department Price Adjustment Board last week showed the razor edge of its scalpel. During the year ended May 1, PAB revealed that contracts totaling $18,500,000,000, held by 1,658 companies, have gone under the knife. Two-thirds were found to have excess profits. From them the U.S. recovered $1,866,000,000 in excess profits, almost two-thirds of it from price reductions on future deliveries.

This did not mean that they had been inordinately greedy. Commented PAB Chairman Maurice Karker: high productiveness of labor, fine supervision, improved flow of raw materials, inexperience with costs and materials make many a company an unwitting profiteer. Only 10% objected to PAB's excisions. In some cases companies had bid high to protect them selves from unknown costs on unfamiliar products. In many cases the growing volume of orders and the experience gained in manufacture enabled companies to make huge unforeseen savings. In a few cases the contract price was figured on the costs of manufacturing a given weapon in Federal arsenals, and the companies had found ways of making big savings by simplifying designs and improving manufacturing technique.

PAB's Karker warned that 1943 contract prices would be shaved lower still, but few companies had to worry about that. To many a company even a million-dollar cut in gross profits will make only a $100,000 difference in net because of the heavy taxes it must pay.

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