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Aviation History
1918
1918 - 0868.PDF
proceeding for nearly a year and are stated to involve in all an expenditure of over £3,000,000. Not even a building licence has been granted since August, 1916, and the only authorisation which could be quoted by the firm is a letter from the Controller of Supplies of the 29th January, 1918, marked " private and confidential " and bearing no reference number, which told them to proceed with their power house, carbide and acetic acid factory to the full extent to make their plant self-supporting for acetic acid, both for the cellulose acetate and for solvent, and asked them for their estimate of output in order that the Ministry's estimated requirements might be communicated to them. In giving instructions for this letter to issue the Member of Council concerned assumed, as he informed the Committee, that as all the buildings were proceeding and the plant delivered, all the necessary approvals had been obtained. The Controller of Aeronaut jcalSupplies claimed in his evidence before the Sub- Committee that he was in no way concerned with the financial aspect of these extensions. It was not clear whether he had seen the proposal* ; if he had, he had but glanced at them superficially. In any case he had only received the full schedule a month ago, and he was not concerned with the amount to be expended upon it. The Sub-Committee find this attitude inconsistent with his rejection of alternative offers without reference to the Contracts or Finance Departments, and with the absence of any-reference to the financial authorities of far the greater part of the extensions, until long after the expenditure on buildings and plant had been incurred. Apart from this, the Sub-Committee are satis- fied from his evidence and from the absence of any series of detailed and dated estimates of proposed output, construction, and expenditure that his depart- ment either failed to exercise or were not in a position to exercise, any super- vision before hand over the lay out and construction involved at the different dates. Indeed, the letter quoted in the previous paragraph instructing-the firm to proceed with their whole programme of extensions is admittedly written in ignorance of the proposed capacity. Thus, without any supervision on the part of the Supply or any other department over the correspondence between the extensions involved and the capacity required, enormous capital expenditure has been indirectly incurred by the Ministry ; since until June, 1918, they were under an obligation to refund this expenditure so far as it was covered by the excess profits earned in five years, and now they have to bear a very large pro- portion in the cost of the product in the form of depreciation. Nor can any consideration of urgency be advanced in this case, for the proposals were ail put forward in outline by the company to the Treasury as early as October, 1917, -when they applied for sanction to an increase of capital. In March, 1916, as has been stated above the British Cellulose Com- pany was registered. The War Office were informed that the capita! stated to them to be necessary, namely, £120.000, would be subscribed immediately. A private Company was registered on 18th March, 1916, with a nominal capital of £4.000, ill 160,000 6d. shares, of which one-half were held by Dr. Dreyfus, about one-eighth by Vickers, Limited, and one-fourth by the Prudential Trust of Canada, who subsequently, is November, lent £120,000, without Treasury sanction, in a series of debentures secured by mortgage. These debentures were taken up by the shareholders of the Company. Treasury sanction was obtained for the issue of further debentures in January, 1917, up to a limit of £75,000, £60,000 of which appear to have been taken up. In October, 1917, the firm sought permission from the Treasury to form a new Company, with a share capital of 2,000,000 £1 shares and a debenture issue at 7 per cent, to the same amount. Except for 355,000 shares, which were to be paid for in full by Messrs. Vickers, Nobels and the Chilworth Gun Powder Company, the whole of the ordinary share capital was to be distributed among the existing shareholder? in return for their interest. The debentures were to be issued publicly. Permission was refused by the Treasury in November. On the firm protesting that they would be obliged in consequence to abandon their extensions, which were vital for the prosecution of the War, the Treasury stated that they were prepared to reconsider the matter on learning that the full programme of extensions (then estimated to cost about £2,000,000) had been formally authorised by the Ministry. To this the firm replied that they had been granted the highest priority. Three months later, in March, 1918, a private Company was registered under the name of The British Cellulose and Chemical Manufacturing (Patent) Company, Limited, with a share capital of £3,500,000 ia£i shares. Of these it appears that some 455,000 are paid for in cash. Of the remainder the bulk are exchanged with the present shareholders who receive 14J £1 shares in the new Company for each 6d. share held in the old. Recent Negotiations. Since early in the current year negotiations have been continuous for placing with this Company large new contracts covering the whole of the Ministry's requirements for cellulose acetate and methyl acetate with the manufacture of the ingredients, while clairnswere made for the revision of prices under the existing contracts. These negotiations were brought to a sudden head in June, 1918, by the Company declaring theirinability to" carry on "through want of funds unless these questions were decided. An agreement was reached at the end-of the month under which the original concession regarding the refund of excess profits for five years was revoked with all rights and obligations, and any claims to increases of price under the existing contracts were withdrawn. On the other hand the Ministry undertook to make loans at interest to the Company to cover a proportion of their approved war capital expenditure, and placed contracts with them ofjthe value of some £3,000,000 on the basis of cost plus a fixed sum for profit and a bonus for economical production. A housing scheme for the operatives at the new works has been put forward and is under consideration. There are also in contemplation new manufactures, including transparent sheets and completed dope. Present Situation. The position at the present moment, is, therefore, that the Ministry of Munitions has made itself entirely dependent upon one company for its supply of cellulose acetate and certain other products which are essential for the prose- cution of the war. Since March, 1918, the import of cellulose acetate has been forbidden even to companies who have standing orders. All other offers to manufacture that substance in this country have been refused. CipUal Expenditure.—On the strength of this monopoly or in anticipation of it, immense works have been laid down by the company. The present commitments of the company were stated by them in evidence to be over £3,000,000. Their full estimate of expenditure on new factory and extensions submitted in May, 1918, is about £3,500,000. Together with their original expenditure, they had spent by June 22nd, 1918, £1,363,000. Since the original building was begun in the summer of 1916, no building licence has been issued and those for which application was made in the autumn of T917 covered only a small fraction of the extensions then contemplated, amounting to some £750,000. A power plant has been sanctioned, but otherwise no financial sanction has been given for any of the expenditure, and details have only recently been submitted to the SupplyjBranch. It appears that, as was stated in evidence by the Controller of Priority, the extensions are carried out without any programme, and constant experiments, alterations and conversions take place. According to a report made by the Billeting Board, who were asked to investigate the need for 1,000 houses, as proposed by the company, the firm stated that the factory was laid out with a view to the ultimate employment of some 30,000 persons.This state- ment was ridiculed by the representatives of the company in evidence before the Sub-Committee, who stated that when the factory was completed not more than 3,000 or 4,000 persons would be employed, either for war or peace purposes. It is quite clear that there is greSTuncertainty regarding even the near future of the company, and the Sub-Committee are not confident that the departments which so far have handled the matter have exercised any supervision over the layout and the expenditure. AUGUST I, 45- Some of the items of expenditure deserve further consideration. The first unit, apparently capable of producing six tons per week of cellulose acetate (with acetic anhydride), and completed by July, 1917, was said by the firm in evidence to have cost about £350,000. The additional plant for this product, say 20 to 40 tons per week in all, is costing over £1,000,000. Two firms, Messrs. The United Alkali Company and Courtaulds, Ltd., whose offers had been rejected by the Ministry, were questioned by the Sub-Committee regarding the estimated cost of their schemes. The former gave a rough figure of about £60,000 for the complete installation of a plant - capable of manufacturing acetic anhydride and turning out at least four to five tons per week of cellulose acetate. The latter gave as their own estimate £150,000 for a plant producing 40 tons per week exclusive of the cost of buildings and laud, and as the estimate of a reliable authority £53,000 for a plant for 10 tons per week. The last two estimates include also the manufacturcof acetic acid from imported carbide. Multipli- cation of the plant for an increase in output would cost proportionately less. The Committee consider that these estimates which were made some time ago should be considerably increased to meet present conditions, but even so <he disproportion between them and the expenditure of the British Cellulose Company is very striking. The schedule of commitments submitted in October, 1917, by the com- pany to the Treasury in support of their application for increase of capital con- tains an item of £400,000 for plant for making dope, sheet, and films. A schedule of extensions submitted to the Supply Branch on May 22nd includes buildings and plant for dope to the amount of £43,000, and for sheets of nearly £200,000. Work for the former is in progress with the encouragement of the Supply Branch but without reference to any other authority. The Sub-Committee ascertained that the Supply Branch invited in July, 1917, another, dope-mixing firm to make extensions of their works, in February, 1918, instructed them to complete their plans as for a national factory under their management, but finally on March 13th, 1918, rejected the whole scheme on the ground that the existing facilities would meet their requirements. Although there may be advantages in making dope where the raw materials are manufactured, the immediate change of policy by the Supply Branch without any consultation with the Finance Branch or the Munitions Works Board was not satisfactorily explained to the Sub- Committee. It is not clear whether the proposal for the manufacture of celluloid sheetsis being carried out.but the Sub-Committee have learnt that there is already capacity for this purpose which has been, and is still, lying idle, owing to the impossibility of obtaining cellulose acetate. Delays in Output.—The consistent delay in the completion of the works and the commencement of output has already been sufficiently dealt with. Had the offers of other manufacturers been accepted it is probable that the Government would have obtained what they required, not only at less expense but also more quickly. The United Alkali Company were put off in August, 1916, and again, in association with tjie British Euiaillite Company, in July, 1917, by the requirement that their proposed factory must be completed within three months. Output from the first unit of the British Cellulose factory, as has been said, did not mature for a year from the first date, and the doubling of the plant, which was in question in the summer of 1917, has not yet matured, in spite of the fact that since that date the firm has received assistance by way of priority to an unusual degree. Delay in production has not proved disastrous, partly because temporary substitutes have been utilised, but chiefly because tbe requirements were over estimated. If at the present moment the quantity received is sufficient, as is stated by the Controller of Aeronautical Supplies, it is evident that the quantity anticipated would have been tar ton great. It is no doubt true that delays in manufacture are due in the case of this factory, as in every other, to lack of material and labour, and it is not incon- ceivable that other Departments of the Ministry may not have given the British Cellulose Company at one time as much assistance as they desired. But by this time such delays must be expected. Had detailed proposals for the, extensions been insisted upon, more accurate forecasts might have been formed by the Ministry'; and it is largely through acceptance of promises which were not based on detailed proposals and optimistic statements of the progress made that all competition was eliminated. Efficiency of Manufacture.—-The Sub-Committee have no means of estimat- ing the economy or otherwise of manufacture since in the first place, there are no figures of efficiency ; and secondly, even if there were, there is no other factory in Great Britain with which to compare them. Hitherto no more supervision has been exercised over the efficiency and the economy of manufacture than over the capital expenditure incurred, and, in view of the claims made for the secrecy of the process, investigation into these matters would appear to be very difficult. Quality of the Product.—With regard to the quality of the cellulose acetate produced there is a marked divergence in the evidence. The Technical Branch, the Inspection Department and the officials of the Royal Aircraft Factory, where, besides laboratory experiments, the manufacture of dope is carried on, con- sistently describe the material as unsatisfactory. Although they agree that there has been an improvement in the quality during recent mouths, they hold that it is still much below the proper standard, and indeed, markedly inferior to the product of the French Company, les Usines du Rhdne. Constant re- jections would have occurred had there not been so great a shortage. They do not contend that its defects impair the efficiency, for present purposes, of the dope made from it ; but they hold that its variability makes it necessary to subject each sample to a number of tests before it can be mixed with the other ingredients in order to make dope, and thus causes expense and impedes the manufacture of a standard dope. Further, its low degree of solubility causes considerable waste of valuable solvents and increases the labour,' time and cost of dope manufacture. On the other band, the Supply Branch state that since the factory has come into production they are quite satisfied with tbe quality of their product, and they assert that no complaints have reached them. The Sub-Committee are quite unable to understand this statement. Apart from other evidence, for several months the case has been argued in full before the Specifications Committee, and the modified specification Tvhich has now been expressly devised to allow some 80 per cent, of the British Cellulose Company's product to be accepted was only agreed to by the Committee, on the representation of the Supply Department, and after reference to the Director-General, as a temporary war measure. When it was so agreed, the Committee decided that it should be known as the specification for cellulose acetate Grade 2, but this was withdrawn on the representations of the British Cellulose Company, to whom, as the only manu- facturers, the specification was submitted, and whose representative was present at the later meetings. It is maintained by the firm that their product is superior to all others, but the Sub-Committee are much impressed by the fact that its defects have been consistently noted, as appears from documents submitted to them, by the Government analysts since October, 1914', If it had been, as Messrs. Dreyfus assert, an easy matter for them to make cellulose acetate without the characteristics of which complaint is made, it is surprising that they did no do so at Basle in the early days of the war. when they were competing in an open market with the French Company. The only other material yet produced by the factory is methyl acetate, the manufacture of which from imported materials is understood to present no difficulties whatever, when sufficient plant is avail- able. Conclusions. Until the end of June, 1918, when the original agreement with regard to the refund of capital expenditure was cancelled, the position was eminently unsatisfactory. There was no apparent limit to the expenditure which was being incurred for the purposes of executing Government orders and after-war 866
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