Late Take-Off on the SST

After years of delay and months of suspense, the U.S. has all but decided to enter belatedly the race to build a supersonic jetliner. A special Cabinet committee headed by Vice President Johnson will shortly send to the White House a long-awaited report strongly recommending that the Government bear the financial brunt of developing the costly plane, which will be able to fly from coast-to-coast in less than two hours and from New York to Paris in less than three. President Kennedy is expected to ask Congress for an appropriation to get the whole thing started. Congress, already balky about the high cost of getting to the moon, must be convinced on similar grounds that national prestige is involved. The sums are so big that, in the words of Northrop Corp.'s Chairman Tom Jones, "there has to be a purpose other than free enterprise." Three months ago, Federal Aviation Administrator Najeeb Halaby visited the plants of the Anglo-French consortium-British Aircraft Corp. and Sud-Aviation--and was shocked to see how far along the British and French were in building their needle-nosed Concorde jetliner, which will fly at Mach 2.2 (or 2.2 times the speed of sound). The market for a supersonic transport (or SST, as it is widely known) will at first be only 100 to 150 planes, and both U.S. and foreign airlines are naturally inclined to order the planes from the company that can promise the earliest delivery date. The Russians are also pushing ahead with an SST. Speed Debate. U.S. aviation experts are hotly debating whether the U.S. should build a Mach 2 or a Mach 3 jetliner. The FAA favors a Mach 2 plane, because it could be built more quickly and less expensively, would be able to use existing design techniques and metals. Just about everyone else, including the airframe makers, strongly favor a Mach 3. "We ought to do better," growls North American Aviation's Chairman Lee Atwood, "than just to build another Concorde." Since a Mach 3 jetliner, to resist heat at such speeds, would have to be built of stainless steel and titanium, it would take longer to make and would also require costly engineering for new engines. But its backers argue that a Mach 3 would be a radically new plane that would give the U.S. undisputed future leadership. There is also talk of a compromise Mach 2.3 or 2.4 plane that could later be developed into a Mach 3. Though the U.S. is getting off the runway late, it already knows quite a bit about what has to be done. The only large jet in "the free world that has logged any substantial supersonic flight time is General Dynamics' B-58. Boeing has 100 engineers working fulltime; at its Renton plant near Seattle on a supersonic project. In its usual guarded fashion, Boeing has been testing models in wind tunnels for at least five years, has built a full-scale mock-up of a cabin section of a Mach 3 jetliner. North American Aviation is building three prototypes of the supersonic B70 bomber. Pooled Skills. But none of the U.S. airframe makers can on its own raise the $1 billion to $2 billion needed to develop an SST. To get a program moving this year, President Kennedy must get $100 million or so out of Congress during the current session, or face a delay that would make it practically impossible to catch up with the French and British, who promise delivery of the first Concorde in 1970. If the Government encourages U.S. airframe makers to pool their skills, the result might give the airlines a plane whose performance and economy would make it worthwhile for the airlines to wait. The U.S. would still have to get its price right. According to current industry estimates, an American SST Mach 2 would cost about $12 million to $15 million apiece, while a Mach 3 would cost $20 million. The British and French are planning to sell the Concorde for less than $10 million. One difference is that the two European governments donated $500 million outright to develop the Concorde, while the U.S. government expects to be paid back for much of what it advances. has lost money for the past two years. In a typically complex deal, the trio used an incredibly low-priced ticket to ride far on Lionel's tracks. They got the voting rights to Cohn's 55,000 Lionel shares in return for an interest-free loan to him of $281,275; Cohn is pledged to sell them the shares in 1964 and 1965, by which time he hopes that the stock--which sank from 14 1/8 to 5 1/8 in four years under his management--will be selling at a higher price. To top all this, the restless three last week were negotiating with Promoter Meshulam Riklis to take over his sprawling (assets: $66 million) but sorely troubled Rapid-American empire, which controls 1.500 Lerner, H. L. Green, National Shirt, McLellan and other stores; it also makes printing plates and plastic signs and sells citrus fruits. Chucking & Muscling. Muscat, Krock and Huffines got together in 1957 through a mutual interest in rehabilitating a sick New Jersey company called Reinsurance Investment Corp. With the help of their own private fortunes, they then began to build their industrial pyramid, swapping the cash or shares of one company to win control over others or using shares as collateral for loans to buy other companies. As they got control of each company, they quickly closed down or sold off profitless operations, expanded the money-making ones, chucked out many incumbent executives and consolidated management at the top of the pyramid. Though the three work as a team, they have no central office, seldom meet together, and plot their strategy mostly over the telephone. Muscat is the leader and operating chief who muscles onto reluctant boards and does the firing. Krock, who works out of his Worcester, Mass., office, is the chief strategist and financial planner. Huffines handles the lawyers, soothes the stockholders and sews up the corporate details that the more flamboyant Muscat and Krock would rather not bother with. Suits & Skeptics. The three Muscateers boast that they have turned Defiance Industries' 1961 loss of $384,500 into a 1962 profit of $497,000. But critics say that much of the gain was due to changes in bookkeeping, plus the surprising inclusion of profits from one subsidiary that Defiance had not even taken over until two weeks after Defiance's fiscal year had ended. A pair of Defiance stockholders is suing the management because they object to a deal in which the trio last year paid almost three times its book value to get control of one company. Wall Street is also skeptical of such tactics, and the stock of Defiance has dropped from a 1962 high of 13 7/8 to 6 5/8last week; B.S.F. is down to 6 3/4 from last year's peak of 15 1/4. But the trio carefully maintains a collectively optimistic face and predicts a profit for Lionel this year. Muscat, who also is the one empowered to do the boasting among the partners, says: "Between the three of us, we have enough experience, money and follow-through to run any company in the country."

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