Show Business Today Today Today- Lack k of Funds Hampers War Output GESNER and Jy By Bv PAUL UL j JOHN JOliN BECKLEY NEW EW YORK Feb 26 26 Wide world War production II is suf- suf eri from the lack of funds Sources familiar with the fi financing fi fi- of defense contracts disclosed disclosed dis dig closed today that the production efforts of many companies were being delayed by difficulties In ob- ob working capital These maintained there still were I serious bottlenecks restricting the thelow of defense dollars into Industry in industry In- In low flow where they are needed to buY buy raw materials and meet payrolls pay pay- rolls roIls on war contracts The TM situation was brought into the spotlight this week by the disclosure that Chrysler corporation corpora- corpora Lm tion was negotiating with its anks for a line of credit That means that these banks bank would stand ready to lend the company comp up to that amount as Chrysler corporations corporation's annual report disclosed that the company had d used all of its surplus profits and nd nd had dug into its cash reserves to the the extent of to finance fi finance fi- fi nance gance huge defense commit commit- ments Companies lilt Hit If defense work is straining the cash resources of a giant like Chrysler corporation what is it doing to thousands of smaller companies companies com corn panics Financial experts here say the work ork of hundreds of small and medium sized contractors has been delayed by lack of funds The general general gens' gens gen gen- s' s eral procedure on armament contracts contracts contracts con- con tracts calls caUs for payment 30 days j after delivery This means contractors contractors con con- tractors and subcontractors must mustI supply funds themselves to pay I for new machinery buy raw materials materials materials mate mate- rials and pay workers for the entire entire entire en en- tire period that the contract is in production Added to this is the burden of i steep steen federal taxes on corporate income which are a heavy drain drainon I r on cash balances Banks have done much to meet I I t the need for funds Many devices have been worked out for lending money noney against government con- con tracts The R It F C is also making direct loans loans' in some cases and for some big companies the Defense Plant corporation is building and equipping the war factories out of pf t I their own funds I Loans Needed r But men who know the picture first hand say there still is need for some other source of funds There are loans to be made risks to be taken which are too hazardous hazard hazard- ous for banks which must safeguard safeguard safeguard safe safe- guard depositors depositors' funds Many of these loans are so risky they would cause a high rate of I losses but the important thing is that they would speed war production tion and today cost is secondary On price contracts procurement I officers of the army navy and I air f force have authority to advance advance advance ad ad- vance 30 per cent of the dollar amount to the contractor to help him with working capital lems Whether to make this advance advance advance ad ad- vance vance however lies entirely at atthe atthe atthe the discretion of these officers In many cases observers here I believe these procurement officials have been far too cautious in making making malting mak malt ing such advances They are procurement procurement procurement pro pro- experts not financial men and are slow to take the re responsibility responsibility responsibility re- re for making advances of huge sums Work Slows Down The result these observers say is a serious slowdown in getting defense work under way Many contracts are awarded to the lowest lowest lowest low low- est bidder without any investigation tion Ion of ot his credit standing As a result those with poorer credit ratings often find themselves with witha a big contract but no one will lend the money to handle it A number of suggestions to remedy remedy remedy rem rem- edy this situation are being discussed discussed discussed dis dis- dis- dis cussed here but the general feeling feeling feeling feel feel- ing is that any change must come from W Washington One recommendation is that discretion for making advances on contracts be shifted to experienced experienced experienced financial men who already are available in regional offices on the war production board But the biggest need many feel Is for some form of government guarantee which would enable banks to extend credit even to poor financial risks in order to speed up defense work The feel feel- tog log is that these loans would in inVolve involve involve in- in volve losses which private capital cannot bear but which would be worthwhile in defense expendi expendi- ture hire |