Sizing Up the Winners and Losers

The Carter energy program is so comprehensive that it will affect just about every industry and form of enterprise in the country--many in ways that cannot be assessed accurately until Congress finishes with the package. But already executives and investors are sizing up which industries and companies will be most helped or hurt. The potential losers--some oil producers, automakers and utilities among them--are openly annoyed. The prospective winners, a diverse group including some industries that have drawn little investment attention, are loath to crow about benefiting from a plan that the President presented in terms of stern sacrifice; privately, they are delighted.

A major gainer would be the insulation industry, which would get a lift from Carter's proposal to give federal tax credits to homeowners and businessmen who insulate their buildings. The industry--notably the three major fiberglass insulation producers, Owens-Corning, Johns-Manville and Certain-Teed--has been on a hot sales streak since 1973, when energy consciousness-raising really began. And the market has barely been scratched.

Joseph Kroach, executive vice president of the Washington-based National Insulation Contractors Association, expects that once Congress approves the tax-credit proposal, home insulation will double within a year and industrial and commercial insulation will increase by 20%. Most of the demand will be for insulation in attics and basements and around piping in private homes. The industry has been expanding production, and there is little reason for concern about shortages.

Other industries and products that would benefit from the Carter plan:

SOLAR heating and cooling units could enjoy a sunburst of popularity if Congress approves the program's offer of tax credits to householders and businesses that install them. Among the more prominent firms making solar equipment are Grumman, Revere Copper and Owens-Illinois. The market is huge, according to William Matlock, president of Sunpower Systems. If Congress passes the tax-credit measure, Matlock asserts, the President's 1985 goal of 2.5 million homes heated and cooled by solar energy could be accomplished before 1980.

COAL producers stand to mine rich profits out of the energy plan. The President has called for increasing production from 665 million tons a year at present to 1.1 billion tons by 1985. Even so, coalmen are far from happy. They worry that tough clean-air standards will divert utilities to nuclear power and new strip-mining regulations will inhibit output. Mine operators are concerned that the surge in demand will drive up prices and Government allocation plans and price controls could become necessary.

RAILROADS that haul coal would be in for a windfall. Hays T. Watkins, chairman of the Chessie System, the nation's largest coal hauler, expects 100 new mines to open along the line's routes in the next five years. That would add 33 million tons a year to the system's coal freight, 50% more than its present volume. All that will require more coal cars and enhance the revenues of railroad-equipment manufacturers like Pullman Inc.

POLLUTION-CONTROL devices especially for smokestacks, will be in increasing demand as more coal is burned by factories and power companies. Research-Cottrell Inc., which makes electrostatic precipitators, sulfur-dioxide removal systems and fabric filters, has seen its sales rise from $24 million in 1967 to $231 million last year. Babcock & Wilcox, a manufacturer of pollution-control equipment and a major producer of coal-fueled steam generators, is now Wall Street's No. 1 takeover target.

ALUMINUM producers would win big new markets. Demand for aluminum heat collectors would swell with increased sales of solar units. Greater emphasis on insulation would step up purchases of aluminum storm doors and windows. The tax on big cars would result in an even greater effort by Detroit to lighten its models by using more aluminum in engine blocks and other components. About 100 Ibs. of aluminum is now used in one car. But the use of aluminum in autos could double by 1982.

CONSERVATION-related devices should do well. For example, the President's plan calls for giving tax credits to businessmen who install recovery systems that capture and re-use steam and heat that would otherwise dissipate. If Congress approves the measure, firms like Thermo Electron of Waltham, Mass., are more than ready to meet the need. One of the company's slab reheat furnaces was installed in an Oregon steel mill and produced as much steel as a traditional furnace while using only half as much fuel. With the cost of electricity certain to rise, McDonald's Corp., the hamburger chain, is testing a new electrical motor that could cut power consumption by 20%. This device, besides being built into new electrical engines, could easily be fitted into millions of existing units that run exhaust fans, water pumps, electronic garage-door openers and the like.

Among the losers, the oil industry may not be hurt as much as the complaints of oilmen might indicate. Oil executives are dismayed that Carter would keep price controls on most of the crude they pump from existing wells, while raising costs to consumers through a new wellhead tax. Blaine Yarrington, executive vice president of Standard Oil of Indiana, contends that the program would slash oil-company revenues by 10% by 1985. Reason: Government-controlled crude prices at present are permitted to rise about 10% a year; under the Carter plan, price increases on all but newly discovered oil would be allowed to climb no higher than the annual rate of inflation. Still, Carter's proposal to allow oil from Alaska to sell at an uncontrolled price of $11.28 per bbl. should help such North Slope producers as Standard Oil of Ohio, Atlantic Richfield and Exxon.

Painful Dent. Automakers are now riding the crest of a sales surge. Last week General Motors reported record sales for the first quarter, a whopping $13.6 billion. In addition, Ford, Chrysler and even troubled American Motors showed hefty sales gains for the period. Yet automen worry that the President's determination to slap a heavy tax on the larger models will put a painful dent in sales. They contend that drivers will simply keep their big cars longer. Economist Otto Eckstein estimates that despite a pickup in small-car sales, the program would cause total sales of U.S.-made autos to drop by 300,000 units by 1980 and employment in the industry to decline by 2%.

Electric-utility executives are also unhappy. They will have to borrow heavily to get cash to convert from oil to coal by 1985, as the program demands. In New England alone, major power companies estimate, it will cost them $600 million to convert. Much of that money will go for antipollution devices that will be needed to meet the program's clean-air requirements, which the utilities believe are too stringent. The power companies would rather the Government put more emphasis on developing nuclear power, which requires much cheaper fuel than coal.

Most heavy users of energy, such as the paper and chemical industries, will suffer somewhat because of higher prices caused by the proposed wellhead tax on oil. Airlines will feel the pinch of rising jet-fuel prices. The increases will have to be passed along to travelers, and higher ticket prices would probably pare passenger traffic. Some industries, such as textiles and glass, that use oil and gas as both feedstocks and fuel cannot convert completely to coal for technological reasons and would just have to pay more.

As always, the stock market is reflecting these mixed prospects. Even before Carter unveiled his plan, prices of stocks in pollution-control companies, railroads and coal-mining firms were rising while shares in big oil companies, automakers and airlines were stagnant or declined. Overall, the Dow-Jones industrial average dropped 28 points in the first three trading days after Carter's speech to Congress, apparently because traders felt that the energy program simply increased the uncertainty of calculating most companies' profit outlook. Though prices rallied a bit by week's end, the uncertainty of investors and businessmen is likely to continue until the program's final shape becomes more apparent.

This file is automatically generated by a robot program, so viewer discretion is required.