Machines Merge

This being the Machine Age, the Machine Maker might appear to be top dog in the industrial heap. But this does not necessarily follow. When, last week, Allis-Chalmers Manufacturing Co. proposed to absorb Advance-Rumely Corp., only the man in Wall Street seemed greatly con- cerned. Allis-Chalmers follows only General Electric and Westinghouse in the field of large electrical equipment, manufactures also a diversified line of farm machinery and machines for general industrial use. World's largest hydroelectric unit is the 70,000-horsepower engine built by Allis-Chalmers for Niagara Falls Power Co. Yet even in 1929 Allis-Chalmers showed a net of only $4,300,000, made but $3,600,000 in 1930 and for the first quarter of the present year netted approximately $500,000. Meanwhile, Advance-Rumely, although famed in the field of farm-equipment (many a broad acre has been harvested with Advance-Rumely's Do All tractor) lost $396,000 in 1929, lost another $1,200,000 in 1930, ran up four consecutive years of passed dividends on its preferred, paid no common dividends and has a surplus smaller than its probable 1931 losses.

The Allis-Chalmers & Advance-Rumely merger, while admitted by both parties, has been delayed by the difficulty of determining a proper ratio for the stock exchange by which the consolidation will be accomplished. In February, Advance- Rumely went through a somewhat intricate recapitalization, during which its name changed from Advance-Rumely Co. to Advance-Rumely Corp., and more significantly, the corporation issued common stock which it exchanged for the company's preferred stock--the same preferred on which dividends had been so long in arrears. It appeared last week that holders of Advance-Rumely stock would receive one share of Allis-Chalmers for four shares of Advance-Rumely. But Advance-Rumely has $7,598,287 of notes receivable (mostly money owed it by farmers) and inventory of $3,831,651 and it appeared doubtful whether either notes or inventory would be accepted at their face value. Allis-Chalmers, however, is in a strong enough position to operate Ad- vance-Rumely even during a continued deficit period, and should the farmer again come upon good times Allis-Chalmers would benefit from a distribution system which Advance-Rumely has built up during the past 15 years. The acquisition also rounds out the Allis-Chalmers agricultural line, adding Advance-Rumely's harvesting machinery (tractors, combines) to the tillage machinery (plows, cultivators) in which Allis-Chalmers has specialized.

Allis-Chalmers Manufacturing Co. is an outgrowth of a company established by the late Edward Phelps Allis in Milwaukee in 1847. His successors mismanaged the business, ran it into a receivership in 1912. Receiver appointed was Otto Herbert Falk, who thought his job might last a month or two. It has lasted 18 years, Mr. Falk being today Allis-Chalmers' president. He cut waste and duplication by reducing six plants to three. No secretary intercepts his telephone calls; no watchdog guards his office. A Falk business principle: to keep no one waiting. Prospering under Falk management, the company reached the blue-chip class during the Bull Market, when its stock sold for $330 a share, was then split four-for-one. Diversification of products has prevented the Depression from becoming too depressing, although the $3 dividend on the new stock, not met in 1930, has been cut to $2.

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