The $11 billion-a-year aircraft-manufacturing industry, fifth biggest in the U.S., is troubled and worried. Despite enormous backlogs of orders, most companies feel insecure, not only about the future but also about the present. Warned United Aircraft's Chairman H. M. ("Jack") Horner: "All of our military business is in jeopardy." What has put it in jeopardy is the change that missiles have brought to the industry. They not only promise the end of manned military bombers and fighters, but have brought such other lightning changes that huge projects, calling for hundreds of millions of dollars, can be made obsolete almost overnight. To meet the challenge, the plane-and enginemakers are well aware that their industry must undergo the fastest and most radical change in its history —or die.
Since 1957, Government budgeting for manned aircraft has slid from $8.4 billion to $6.6 billion; missile procurement soared from almost nothing a few years ago to $3.9 billion this year (see chart). Within five years, the split will be fifty-fifty.
Almost every dollar the U.S. commits to missiles is squeezed out of some plane program. All told, the U.S. will order only 1,500 planes this year compared with 1,760 last year. Next year the cuts will be bigger. Of the fabled Century series of supersonic fighters, the fiscal 1960 budget allocates not a penny for North American's F-100 Super Sabre, McDonnell's F101 Voodoo, Convair's F-102, Lockheed's 1,400-m.p.h. F-104 Starfighter or Convair's F-106. Only one tactical plane is funded in the new budget: Republic's supersonic F-105 fighter-bomber.
Woe on Wall Street. To exist in the new age of missiles, some planemakers have already drastically changed their companies. Some are still hustling to do so, and some face the grim prospect that they must either merge with a bigger company or shut up shop. The change has already begun to cut heavily into profits. The plane industry, said one broker sadly, is the "only industry in a recession." In the first six months of this year, sales of the 15 largest aircraft companies slipped 5% and profits tumbled 45%. Among the giants, General Dynamics' earnings dropped from $20 million to $11 million, Boeing's from $20 million to $3,600,000. United Aircraft, one of the bluest chips in the industry, jolted investors by chopping its quarterly dividend from 75^ to 50¢, as first-half earnings fell from $22 million to $16 million. Douglas Aircraft, long a darling of Wall Street, landed with a bone-shaking loss of $15,009,920, will probably show a deficit for the year.
At current rates, aircraft profits will drop from $614 million last year to $350 million this year. Does an industry earning $350 million have cause for worry? "You buy stocks on the earnings outlook," said one Wall Streeter, "and almost all the aircraft earnings will continue to nose down." Compared with their 1959 highs, all aircraft stocks are well down. General Dynamics has dropped from 66½ to 48½, Martin from 62½ to 38¼, Douglas from 59¼ to 46, North American from 52⅝ to' 37¼, Grumman from 30¼ to 24⅜. In the past fortnight, nine aircraft stocks scraped new 1959 lows. Among them: McDonnell, Bell, Temco, Northrop, United Aircraft.