Fontana, Again

When Henry J. Kaiser built his Fontana steel mill in 1942 (on a hog farm in California's San Bernardino County) he borrowed $111.8 million from the Reconstruction Finance Corp. Of this sum he spent $94 million to build the plant, held the balance for working capital.

Last week Henry Kaiser yelped with pain when the RFC decided to put the loan on a businesslike basis. RFC's revamped terms were: 1) a 15-year 4% first mortgage of $69.5 million ($58 million for the marked-down value of the property, plus '$11.5 million which RFC offered to lend Kaiser for additions to Fontana); 2) a 25-year, no-interest second mortgage of $34.5 million; 3) a $10.3 million note to be secured by 103,180 shares of Kaiser Co. Inc. 4% first preferred stock. In short, RFC wanted its original loan repaid in full, 'was not prepared to subsidize Kaiser's well-publicized campaign to deliver cheap steel to West Coast industries.

Henry Kaiser, who knows all about publicity, promptly threatened to appeal his case to Congress, and got California's obliging Governor Earl Warren to order an investigation of RFC's shackling of western industry. Said Kaiser: "War costs should be written off as a part of the total economic waste of war and should not be charged against industry." On this point most industrialists agreed that he appeared to be on solid ground.

But RFC stood firm on Fontana. The broad question was: should RFC expect to collect in full for a war plant built at inflated costs? RFC thought so, argued that if West Coast industrialists really wanted cheaper steel they should apply to the ICC for a lower freight rate from Fontana.

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