More Trouble for K-F

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.

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