Bogged-Down Boxcars

When New Hampshire's sharp-tongued Senator Styles Bridges charged last November that the Air Force was paying Kaiser-Frazer $1.2 million apiece for the same C-119 Flying Boxcar that Fairchild Engine and Airplane Corp. made for $260,000, K-F's President Edgar Kaiser cried foul. He took newspaper ads in ten cities to answer the charges of K-F's inefficiency (TIME, Nov. 24) and invited a congressional investigation. Last week he got it.

A Busy Day. Up before the Senate's Preparedness subcommittee came Truman's ex-Under Secretary of Air John McCone, a Los Angeles Republican, ex-steel-man and onetime shipbuilding associate of Henry Kaiser. McCone recited the crowded events of a busy day in December 1950. In the morning, Kaiser-Frazer got a $25 million RFC loan; at noon, Henry and Edgar Kaiser met McCone at lunch to ask him about defense work; in the afternoon, Fairchild Engine and Airplane Corp. was notified by telephone that Henry and Edgar would come out to Hagerstown, Md. next morning to pick up copies of Fairchild's specifications for making the C-119.

When Fairchild executives protested, McCone assured them that K-F would simply be a secondary source for planes—something the Air Force was trying to set up for all prime contractors. But a few months later, K-F became a prime contractor on its own. It bought working control of Chase Aircraft, whose C-123 is Fairchild's principal competitor. The decision to give K-F a contract to make Flying Boxcars, said McCone, was made four days before K-F had even submitted its written proposal for one (Senator Bridges wryly called this "faster than fast").

Shop Practices. The contract was let by Lieut. General Orval Cook, then chief of Procurement and Industrial Planning, who admitted that he had done so without ever inquiring into what K-F's costs for making the plane would be. And he had no records of the Wright Field meeting at which he, McCone and others made the final decision to go ahead. They were using a wire recorder, said General Cook, but "the recording equipment failed . . ." K-F's costs a plane were originally estimated at $467,000. Soon they soared to $902,000, then to $1.3 million (slightly higher than Bridges' estimate). By May 1952, when the original contract was to have been completed, K-F had delivered only one plane. Up to the present, added General Cook, it has delivered only 44 of the 134 planes originally called for. But the Air Force has made no move to cancel the contract in favor of Fairchild, which has already turned out 412 planes.

Air Force Auditor Sidney Solomon, who checked the books at K-F's plant at Willow Run, explained how money flew. For one thing, said he, K-F tried to charge off to the contract $715,631 of vacation pay for workers who had earned it from auto motive work. Other items disallowed: 1) $4.2 million of automotive costs, which would have eventually totaled $56 million if not eliminated; and 2) a charge to the Government for 65% of the cost of Kaiser's ads replying to Senator Bridges.