The Price of Plastic - Financing Liner Manufacturers

Why was financing liner manufacturers such a big deal? 

By the time the Chicago Quartermaster Depot assumed responsibility for the M-1 helmet liner, the United States Home Front was gearing up for all-out war production. As liner development moved into the uncharted waters of molded plastics, the Quartermaster, whenever possible, utilized small companies for items needed.

In the case of many small companies, “business as usual” had ceased as a result of a priority system put in place to ensure that the manufacture of items of greatest need to the war effort had the highest priority access to machines, materials, and manpower. Due to losses in their skilled workforce to either critical war production or military service and not having access to the raw materials necessary to make their pre-war products, many companies found themselves contemplating how they would keep their company afloat and were therefore eager for the opportunity at a government war contract.

The ability to manufacture a plastic liner complete with all its parts was not immediately possible, as the necessary industry either did not exist or, if it did, was not to the level that would be required. Every company involved in the development of the plastic liner would face the need to reorganize, retool, buy new equipment, and, in many cases, train a new female workforce to the skill level necessary to get the job done. In short, to make the idea of this new high-pressure liner assembly a reality, these companies would require substantial financial investments of money that they did not have and would not be eligible to secure through traditional bank loans.

There were two ways to solve a financing problem if a manufacturer was unable to get the working capital necessary to start production on their own. The government could step in, buy the necessary tooling up front, and provide advance payments for payroll and minor preparation costs while leasing the tooling back to the contracted company. The second option involved a company applying for a government-guaranteed loan from the Defense Plant Corporation, which would issue the money to the manufacturer, with the government essentially promising to cover the loan.

One of the few companies able or willing to obtain loans on their own by mortgaging their property, facility, and equipment as collateral, CAPAC Manufacturing Company, was only able to obtain half of what they needed on their own, necessitating them to apply for advanced payments from the government in order to obtain the remaining working capital required to start.

McCord, Seaman Paper, IMP, and St. Clair chose to “assign claims against payment,” which basically means the bank lent the monies to these companies on government-guaranteed contracts where all payments from the government went directly to the bank until the loan was repaid.

According to the preliminary time studies available for the high-pressure process, the desired quantity of liners would require a minimum of 200 active molds to meet their contracted due dates. The government purchased 150 of these molds directly, with CAPAC Mfg. and Seaman Paper Co. being the only two prime contractors to purchase their own molds. The only difference between these options was in the unit price of the liners under contract.

If the government purchased molds directly and leased their use back to a contractor, the unit price would be lower, whereas if the contractor purchased their own molds and amortized their cost back to the government, the unit price would be higher. Either way, by the end of production, the government had acquired ownership of all molds used for high-pressure liner manufacturing.

According to notes recorded by the Chicago Quartermaster Depot, we know that the first step a company had to take was to acquire the necessary liner body molds for their presses. We know that the Kellering of these molds, on average, cost $2,500.00 each, and that, initially, an operational press could form 190 liner bodies in a 24-hour shift. Let's assume, in order to simplify the math, that a contract was let for liners based on a quantity and due date that would require the contractor to produce 1,000 liners every 24-hour shift. This means the company would have to have six presses in operation, requiring a start-up investment of $15,000 in molds alone. To help bring this home, $15,000.00 in 1942 dollars equates to $285,608.00 in 2023 dollars.

Finally, here is a small snapshot to help paint this financial picture. On April 22, 1942, a Quartermaster inspection revealed that Westinghouse had 14 operational molds and another 17 in production. This total of 31 molds represented a 1942 investment of $77,500.00, or in 2023 dollars, $1,475,640.00. Upon the completion of Inland's final contract, the Quartermaster retrieved 39 liner molds, valued at $2,500 each, representing a total cost of $97,500.00 in 1942 or $1,856,450.00 in 2023.

Now you know….