The military buildup for World War II resulted in an aircraft industry that was on a whole different scale from the struggling, on-again-off-again business that companies like Lockheed struggled with in the early to mid-1930s. Demand for supplies for the war predated U.S. entry into the conflict, most notably in the case of Lockheed’s provision of Hudson bombers to Britain. But it was the war itself that transformed the industry. Output increased by an astounding 13,500 percent during the war: The U.S. aviation industry produced more than 300,000 aircraft for the military services. It was hard to imagine how a peacetime economy could sustain anything approaching those production levels, and initially it didn’t.
As Lockheed President Robert Gross put it in his reflection on the immediate postwar situation, “As long as I live, I will never forget those short, appalling weeks.” Whatever his personal feelings may have been about the conflict, from his perspective as a businessman it was not the war itself but the drop-off in business that followed that appalled him. As he put it in a 1946 letter, “After the end of the Japanese war we had what looked like a very healthy production program,” but difficulties with key programs, like the Constellation airliner, required that operations be “cut to the very bone.” By the following March, Gross was pining for the good old days of World War II: “We had one underlying element of comfort and reassurance during the war—we knew we would get paid for whatever we built. Today we are almost entirely on our own, the business is extremely speculative, and with a narrowed market, the competition is very keen.”
As the end of the war neared, Gross had hopes that his firm would have a leg up by virtue of the fact that it had built a substantial number of military transports that could be readily adapted to serve as long-range airliners, but he feared that the timing was wrong: “If the war had ended six months ago, our development position would have been so favorable compared to anybody else’s except Douglas that we would undoubtedly have been guaranteed a leading position in the market.... Now, however, the war has dragged on and every month that it lasts gives other companies an opportunity to get development work going.”
The shifts in the business took a personal toll on Gross, who wrote to his associate Henry F. Atkinson that “life is really hectic these days, what with the airplane business nearly flat on its face and me having my 50th birthday and feeling old age as a real flat tire. Seriously, we have lived a lifetime these past few years, but I am fundamentally a man of hope and faith and I believe in the end things will come out.”
Part of Gross’s “hope and faith” stemmed from his sense that he and his colleagues could successfully lobby for a policy of peacetime government subsidies for the aerospace industry, even if it did not compare to the levels of government business achieved during World War II. In August 1945, just a few months after the end of the war, Gross testified on the topic of “aircraft reconversion and America’s airpower policy” at hearings held by the Aviation Subcommittee of the Senate Committee Investigating National Defense Programs. The theme of Gross’s testimony was that just as the aircraft industry had answered the nation’s call during wartime—providing America with the “greatest air force in the world, and a production capacity of 50,000 planes per year”—the U.S. government had an obligation to sustain the industry in peacetime. And while Gross acknowledged that “peacetime aviation will not be able to immediately [emphasis added] support this war-expanded industry,” he had a number of suggestions on how to start that process. First, he wanted government to give the production equipment it had paid for during the war to industry on a free or low-cost basis. Gross argued that it would otherwise be sold for scrap with little benefit to the government. He also wanted to avoid having the government dump military transport planes onto the commercial market, a move that would deprive Lockheed and its cohorts of potential business. And he wanted the development of a peacetime aviation policy that would provide subsidies in areas such as support for civilian transport planes that could be converted to military use in time of war.
Gross was far from shy in making his case. Without “steady encouragement and financial backing” from the taxpayers, the technical marvel that was the modern aircraft industry would atrophy, he suggested. “One road leads to retrogression and mediocrity,” Gross said. “The other leads to progress and continued world leadership in the science of flight. The choice is one which the public must make, and the hour of decision is here.”
Gross’s ultimate argument, however, had little to do with science and technology for their own sake, or even the economic benefits of a thriving aircraft industry. It had to do with national security: “I find it very difficult to talk about the airplane as a weapon of war ... the prospect of an airplane maker pleading the case for air security is somewhat tragic. It is a cause I would not be selfish enough to plead as a businessman, but it is my duty to plead for it as a citizen.”
To Gross’s mind, the case was clear: “Having made these new discoveries, we have to decide whether we will advance them as a means of security for our country or abandon them only to have other countries use them against us.” Gross’s case appeared to offer no middle ground, no policy that would provide modest support to the industry without being viewed as “abandoning” it and its technological capabilities. His reflections sounded suspiciously like a recipe for a new arms race.
In spite of his fears—and his special pleading on behalf of his industry—once the initial shock wore off, Gross managed to regain his emotional footing and come out on the other side more bullish on his company’s prospects than ever. In an extraordinary address to the Southern California Council of State Chambers of Commerce, Gross plugged both the military and the civilian sides of the business. First, he suggested that the technological gains in military uses of aircraft had to be sustained through ample ongoing investments during peacetime. Then he forecast “extraordinary advances in transport of passengers and mail all over the world,” to the point where flying would become a regular part of everyday life, not a luxury for a relatively few well-heeled customers. He even predicted that private flying would increase to such a degree that it might eventually be possible to have “an air buggy [helicopter] for everyone.”
Gross’s rivals were not so upbeat. Jack Northrop suggested that there would not be adequate orders to hold together the talent and facilities that had been built up in the industry during the war. And Donald Douglas seemed more angry than hopeful. He sent a letter to Congress arguing that “after telling industry to drop everything and concentrate on war production ... Government should not, now that the war is over, say to industry ... you’re on your own.”
In the early months after the war, Wall Street seemed to agree with Gross’s rosy outlook, and the company enjoyed a surge of investment in 1946. But by 1947 Lockheed’s share price had dropped by two-thirds. Hopes had been boosted in early 1946 when the company delivered the first postwar copy of its Constellation airliner—a four-engine transport that had been in the works before U.S. entry into World War II—but it was not enough to stop the slide in its share price. Matters got worse when the Constellation suffered numerous mechanical failures, including a crash over Bozeman, Montana, that forced the Civil Aeronautics Board (CAB) to ground the plane in the summer of 1946. Despite this setback, the various versions of the “Connie”—the nickname for the Constellation—proved to be good business for the company. As early as 1941, the year America entered World War II, Lockheed had already taken orders for 80 Constellations, 40 each from TWA and Pan American. In the 1950s, the next-generation Super Constellation sold over 160 copies at roughly $1.7 million per plane.
In the end, the company held on, not by finding commercial business but by selling fighter planes and patrol aircraft to the Air Force and the Navy. The postwar increase in commercial airliner sales had been expected to amount to only $400 million in business over two to three years, versus projections of $1.2 billion per year in military aircraft sales. On an annual basis, military sales to the government would average about ten times the amount of sales of commercial planes to the airlines. As the Wall Street Journal put it in August 1945, “Continuing military contracts are expected to keep the plane makers eating regularly, but airline business may well prove to be the butter on the bread.”
~~Prophets of War -by- William D. Hartung
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