Battle Reports

The U.S. oil industry--inadvertently involved in last June's Arab-Israeli war--last week issued its first battle communiques. They were remarkable: rather than having lost money during more-or-less temporary Arab oil embargoes against the U.S., the American companies made comfortable profits.

How? "Flexibility" was the word used by Mobil Oil Chairman Albert L. Nickerson, who is also chairman of the Business Council, an advisory group for the White House. When Middle East hostilities either slowed or stopped production at Mobil's holdings in Saudi Arabia, Iraq, and Iran, the company merely dipped deeper into its vast North American reserves and substituted Western Hemisphere petroleum for Middle East oil that could not reach Europe quickly because of the Suez Canal closure. As a result, Nickerson reported third-quarter earnings up 6.8%, to $93.8 million. Jersey Standard Chairman Michael L. Haider announced that the world's largest oil company had substantially increased its Western Hemisphere operations, and had a third-quarter rise in earnings of 15.8%, to $315 million. Gulf Oil's U.S. production was up in the quarter, and earnings rose 13%, to $138.4 millions. Phillips Petroleum, pumping more oil than ever from domestic wells, had record revenues for the quarter of $496,309,000 and record profits of $39,052,000.

Elsewhere, in other battles, U.S. corporations reported good and bad results. Among the communiques:

>Airlines compared the third-quarter with the same quarter of 1966, when a strike of machinists shot down their high-flying figures. Eastern Airlines' revenues for the 1966 quarter were $75 million, and the line showed a loss of $11 million. Last week Eastern reported third-quarter '67 revenues of $166 million and a profit of $4.1 million. United, also recovering from the strike, had third-quarter earnings that set an all-time high of $30,896,000. TWA's earnings of $33,519,000 were eight times as high as last year's, and revenues doubled, to $260,446,000.

>Auto companies, although the third quarter includes annual shutdowns for model changeovers and is normally the slowest quarter of the year, showed a surprising rebound. G.M., on sales of $3.77 billion, up 15%, reported a quarterly gain in income of 49%, to $149 million, because of a shorter changeover period in which the new models were tooled up. Chrysler earnings were $26.8 million v. $6,500,000 last year on a rise in sales from $1.1 billion to $1.3 billion; the increase in profits came about because of the earlier start on new-model production, economies ordered by Chairman Lynn Townsend, and the sell-off of a large inventory of cars. Both G.M. and Chrysler, late in the quarter, were helped to some degree by the U.A.W. strike against Ford.

>Steel companies were not so fortunate. Second largest Bethlehem Steel Corp. had its lowest quarterly earnings in four years--$23,158,000 on sales of $628,642,000. Bethlehem directors nevertheless voted a quarterly dividend of 37.5-c- a share, but said that there would be "no further dividend action" this year. Armco, Allegheny Ludlum and Lukens also reported declines.

>Railroads also reported lower third-quarter results. The Pennsylvania Railroad showed a sharp drop in earnings, from $27,557,000 last year to $11,135,000. Union Pacific's net income was down from $26,193,000 to $19,595,000, and Norfolk & Western, normally one of the most profitable, had a 23% earnings decline. The N. & W. managed, however, to set another sort of record. Pulled and pushed by eight diesel engines, a supertrain of 450 coal cars moved over 47 miles of N. & W. track to set a freight-train record for U.S. railroads. Any motorist caught at a grade crossing had to wait ten minutes for the supertrain to pass.

With almost all third-quarter earnings in, the summary was predictably subdued. The Wall Street Journal, in its periodic survey of profits, found that for 499 companies in such widely ranging activities as department stores and rubber making, profits were off 1.8% for the quarter; the New York Times found 475 companies up 1% for the quarter but down 3.6% for the first nine months of the year. The results were disappointing, but there was at least a silver lining. For the last quarter of the year and for next year as well, earnings are expected to rise again, thereby justifying Lyndon Johnson's argument for a tax increase.

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