McDonnell's Second Stage

When James Smith McDonnell decided in 1939 at the age of 40 to start his own planemaking company, scoffers told him he was foolish because the aircraft industry was "overcrowded." He quit as chief project engineer for the Martin Co. and, with $135,000 in loans and a satchel full of his designs, opened his own twelve-man shop at the St. Louis airport. Today McDonnell Aircraft Corp., maker of a celebrated string of fighter planes and the Mercury and Gemini space capsules, is worth $149 million. In the sharply competitive aerospace business, where losses come easily, McDonnell's profits have increased for twelve straight years, amounted to $13.9 million in 1962. Crusty, M.I.T.-trained "Mac" McDonnell, who controls the company with his 13% stock ownership, runs it all (TIME, March 9).

Now McDonnell is staking out a bigger claim in aerospace. For more than a year, he has been quietly buying stock in Douglas Aircraft Co., which is more than twice as large as McDonnell Aircraft. Neither he nor Douglas will say how much he holds, but Wall Street estimates run to 200,000 shares, or 5% of the total, worth $4,250,000 at the current market. Since Chairman Donald Douglas Sr. owns only 10,150 shares, President Donald Douglas Jr. only 1,082 shares, and nobody is known to own more than 10% of the stock, McDonnell could easily exercise much power in that company.

McDonnell declines to disclose his intentions, but could hardly have invested so much in another aerospace company simply to diversify his holdings. More logically, ultimate merger appears desirable in an industry where no single producer can muster all the scientific capabilities needed to occupy a commanding place in space. Douglas would make a good mate. It offers a large write-off against future taxes. Due largely to development costs on its DC-8 jetliner, its 1959-60 deficits totaled $52 million. Douglas is the contractor for the nation's first airborne ballistic missile, the Skybolt, and for the Saturn moon rocket booster. In addition, Douglas and McDonnell share a $1,800,000 contract, jointly awarded them by the Federal Aviation Agency, to develop a supersonic transport jet.

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