Caoutchouc Capers

Periodically since the War, rubber-minded Britons have been concerned about their position as the world's big caoutchouc-keepers.* Their first attempt to control production failed miserably in 1928, partly because the Dutch were not in on it, partly because the price of rubber was stretched to a fantastic $1.21 per Ib.

With production restrictions off, with the demand for rubber declining, prices dropped with a thump far below the cost of production. In 1932 rubber sold as low as 2 3/8-c- per Ib. It has bounced continually upward with only one rebound since the International Rubber Regulation Committee, representing producers of 98% of the world's rubber supply, came into existence in June 1934. In the past year and a half the price has doubled, springing over the 25-c--per-lb. mark last week for the first time since March 1929, despite the fact that the International Rubber Regulation Committee had just upped production quotas for the fifth time since June.

Presiding at the I. R. R. C. meeting in London last week, as he did fortnight ago at the International Tin Committee meeting which lifted tin production quotas to 110% of 1929 levels without abating a mad metal market (TIME, March 22), was precise Sir John Campbell, economic and financial adviser to the British Colonial Office. Whatever Sir John's first considerations were as he walked into the highceilinged committee room in Brettenham House next to Waterloo Bridge, the problem at hand was essentially one of trying to keep skyrocketing rubber prices from knobbling the British armament race without jeopardizing anticipated profits in rubber, which will help Great Britain's balance of international payments. Result I was that the committee cautiously sanctioned an increase in production for the third quarter of 1937 from 85% to 90% of basic quotas favorable to British producers set in June 1934. Also established for the fourth quarter was a 90% quota. Even then it was doubtful whether producers can fill quotas estimated at 1,050,000 tons for 1937 because of lack of shipping facilities and labor shortages in the caoutchouc kingdoms.

Although U. S. rubbermen use one-half the world's rubber, they have nothing to say about production, which is largely in the hands of the British, the Dutch and the French. Sitting in at Brettenham House

In Brettenham House, he speaks only when spoken to. last week, entitled to speak only when spoken to, was President Albert L. Viles of the Rubber Manufacturers Association, which is the nearest thing to a trade "institute" individualistic U. S. rubbermen will tolerate. Had he been asked, Mr. Viles would have told the committee that U. S. rubber consumption was currently running 16% ahead of last year while rubber stocks on hand have dipped below the 200,000-ton mark for the first time since 1930. At the end of last year each of the Big Four U. S. rubber companies (Goodyear, Firestone, U. S., Goodrich) had what seemed to be adequate inventories of rubber at favorable prices. But the future is not altogether reassuring, although possibilities of a shortage are balanced by the possibility that native planters in the Dutch East Indies will suddenly come forward with large rubber supplies.

The rubber company standing to profit most by bigger quotas is U. S. Rubber Co., which gets one quarter of its annual needs from its own plantations. Since its acres are in Sumatra (Dutch) and Malaya (British), U. S. Rubber has to submit with good grace to all of the I. R. R. C.'s schemes. No. 1 manufacturer in the industry--Goodyear--gets only 10% of its supply from Goodyear-owned plantations. Firestone's Liberian acres furnish only 5% of the company's requirements and Goodrich owns no plantations at all.

To U. S. Rubber's stockholders early this month President Francis Breese Davis Jr. reported that their 76,563 acres of cultivated Sumatran and Malayan rubber trees last year yielded 42,185,000 Ib. of caoutchouc, earned $1,943,790 profit, twice the 1935 figure. More interesting to preferred stockholders, who have had no dividends for nine years* was the parent company's report. Net income for 1936 was $10,172,000, compared with 36,532,000 the year before. But the stockholders can hope for no dividends until U. S. Rubber Co.'s accumulated deficit is wiped out. Even after last year's profit the deficit stood at $17,332,000, but that represented a reduction from a high of $28,000,000.

The story behind that reduction is the story of Francis Davis' stewardship of U. S. for the past eight years. In 1927 the du Fonts bought control of U. S. Rubber, plucked Francis Davis from the presidency of a du Pont subsidiary (Viscoloid), told him to salvage what had been the No.1 U. S. rubber company as late as 1925. Whittling the company's debt of $81,000,000 to $53,233,000, Rubberman Davis consolidated operations, modernized tire-making methods, pushed other rubber products, went in for Lastex, a patented, elastic spun yarn which is knitted or woven into such things as sweaters, girdles, slipcovers.

Worthy as was U. S. Rubber Co.'s progress in 1936, Goodyear's was even better. Profits last year were $10,831,000, compared with $5,452,000 in 1935. Old Harvey Samuel Firestone's sound Firestone Tire & Rubber Co. earned $9,142,000 for its fiscal year ending last October, its best year since 1927. No. 4 Rubber company is B. F. Goodrich Co., which last year earned $7,319,000, compared with $3.429,000 the previous year.

Rubber's Big Four annually make 91% of all the tires for U. S. automobiles. William Francis O'Neil's General Tire & Rubber Co. makes another 5%, with Lee, Dayton, Fisk, Seiberling, Mansfield and Pharis splitting the remainder. Total number of tires sold in 1936 was 58,000,000, compared with a high of 72,000,000 in 1928. Tires now last at least 20,000 mi. instead of the 8,000 mi. they were good for 15 years ago, but more cars and more mileage per car per year have complemented technological improvements. Current competition is relatively peaceful after years of cut-throat warring among the Big Four. Last week, even before the International Rubber Regulation Committee met in London, U. S. tiremen unanimously and harmoniously raised prices 6%, the fourth boost in nine months.

*Raw India rubber is called caoutchouc (pronounced coochook), an English word of Tupian (Brazilian) Indian origin. *Common stockholders received their last dividends in 1921.

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