The following article appeared in the 1969 print edition of the San Diego Free Press. It has been transcribed from the microfilm at the San Diego Public Library.
By John Lawrence
As Frank Pace says in the Foreward to Dynamic America: A History of the General Dynamics Corporation by John Niven:
“In 1960, ours is the most powerful of nations, intimately involved in all the earth’s daily business, the major bulwark against communism and so most threatened.
From these times to the present, during our growth, from an insular agrarian society to the world’s political and industrial leader, the position of the United States in world politics has determined, almost exclusively, the flow of product research and development from General Dynamics.“
It follows from this that G.D. is intimately involved with the military. In fact, each of its major divisions is designed to serve each of the major branches of the military. The Stromberg-Carlson Division, which later became the Electronics Division, serves the Signal Corps. Convair and GD Ft Worth serve the Air Force. Electric boat and Quincy serve the Navy.
In 1923, Major Reuben H. Fleet combined Dayton-Wright and the Gallaudet Corp. to form Consolidated Aircraft Corporation. In 1935 he moved the company from Buffalo, NY to San Diego. The San Diego Chamber of Commerce worked its butt off for several years through its aviation department to get the plant here. Consolidated employed more than 1,000 men and had an annual payroll of $1,800,000. According to the San Diego Union of June 25, 1933, Consolidated was “financed principally by a number of the strongest financial institutions in New York.”
San Diego Defeats Long Beach
On May 2, 1933, Major Fleet sent a telegram to the San Diego Chamber of Commerce which said in part: “For years the San Diego Chamber of Commerce has been after us, and yet with so much to offer in marvelous climate and flying facilities, you have never exaggerated anything. I earnestly hope we can come to San Diego because frankly your layout is the best we have so far seen. Los Angeles and particularly Long Beach are trying hard to equal or better San Diego, but, if they cannot do so, both cities are anxious that we move to your community.”
The advantages of San Diego included the fact that it required less than a pint of gasoline to deliver airplanes to the army and navy air forces at North Island.
In 1930, Fleet had tried to purchase Lindbergh Field for $1,000,000. The Union reported that Long Beach offered the company “everything except the city hall to defeat San Diego.”
However, San Diego went a step further and closed the deal. On June 24, 1933 the harbor office received a check for $1,000 representing the first year’s rent and a signed lease on 20 acres of land at Lindbergh Field. The lease was good for 50 years. This would mean the total rent for 20 acres of prime land for 50 years would be $50,000. But according to Mr. Macauley, manager of the Chamber of Commerce, “The harbor commission not only put forth its best efforts in this matter, but by prompt action in budgeting $50,000 to provide necessary trackage extensions, seaplane ramp from Lindbergh Field to the bay and an extension of water and sewerage facilities made it possible to secure this great industrial prize.”
How’s that for a deal: total rent from Consolidated — $50,000 spread over 50 years; total outlay by the city — $50,000 to be done immediately. As part of the deal Consair was to expend between $400,000 and $800,000 in the construction of buildings. About the closing of the deal the Union crooned, “of fundamental importance . . . is the fact that San Diego has at last been recognized as the logical center for the nation’s aeronautical manufacturing industries — governmental and commercial.”
In January, 1939, General ‘Hap’ Arnold asked Consair to design a new bomber that would “fly the skin off” any rivals. In nine months Consair produced the B-24 Liberator. More than 18,000 planes were produced. Consolidated built a mile-long Fort Worth, Texas plant in 1941 for production of the Liberators. At about this time Consolidated began to flounder. According to Dynamic America, “the government, operating in an ‘unlimited state of national emergency,’ considered this a national problem.” Washington began to look around for someone to buy Consolidated from Fleet: someone with “the production experience and intestinal fortitude to man perhaps the most crucial single strong point on the whole production battle-line.”
In 1941 Aviation Corporation, one of the Big Three aviation companies of the 30’s, through its Vultee subsidiary, purchased Fleet’s controlling interest in Consolidated. They hired Tom Girdler, president of Republic Steel, to take over from Fleet. In 1943 Vultee and Consolidated were merged to become Consolidated Vultee Aircraft Corporation — Convair.
Convair Loses After War
Between Pearl Harbor and VJ Day, Convair delivered more than 350 million pounds of airframes, or nearly 13 per cent of the nation’s total output — some 33,000 planes, including an equivalent of 5,000 planes in spare parts. This was accomplished primarily by unskilled workers through an elaborate division of labor. In 1942, nearly 40 per cent of Convair’s workers were women. Abrupt cancellation of $1,178,000,000 worth of military contracts after the war cut production at Convair’s 8 wartime divisions until only 5 were left.
Girdler was succeeded by Irving Babcock in 1945. According to Dynamic America,”Convair’s management, trying to diversify into such commercial products as gas and electric ranges, freezers, and buses, succeeded only in proving that defense work was hardly an adequate preparation for integrated production of unrelated consumer lines.”
Losses on postwar conversion, inflation and the 240 program led to a Convair deficit in 1947 of $16 million. This prompted Aviation Corporation’s sale of Convair to Floyd Odlum of the Atlas Corporation. Odlum got the company back on its feet by hiring General Joseph McNarny immediately after his retirement from the USAF. (See related story on Industrial-Military complex.)
John Jay Hopkins had created General Dynamics by merging Electric Boat and Canadair Ltd. in 1952. In 1953 he acquired Convair from Odlum and in 1954 Convair became a division of General Dynamics. Hopkins brought in Frank Pace, Jr. as an executive vice-president. Pace had close ties to the Eisenhower administration through his old friend Earl Johnson who stayed in government service while Ike was in office and later joined G.D. as executive vice-president. Pace was elected President of G.D. in 1957.
Pace Pushes Defense
Quoting Dynamic America again: “As Director of the Bureau of the Budget and as Secretary of the Army, Pace had played an important role in the development of the national defense as it became progressively a larger part of the national economy; he himself helped formulate many of the tremendously expensive programs in nuclear research, electronics, ballistic missiles. Pace had indeed been instrumental in creating the new, scientifically oriented defense policies which would have such an impact upon industry-government relations. As a responsible official he was obliged to pass for huge defense outlays.” Pace was obviously an important asset to the company.
In 1955 a gift of 320 acres of land from the City of San Diego helped Hopkins to establish the General Atomic Division. In collusion with the City Council Hopkins was instrumental in persuading the Regents of the University of California to establish a “scientific and technical” branch at La Jolla.
From 1953 to 1956, the Air Force proceeded with legal maneuvers in order to confiscate Plant 2 from its private owner, C.W. Carlstrom. The man who directed the operation for the Air Force was none other than Roger Lewis, assistant Secretary of the Air Force in charge of material, and later to become president of G.D.
Also throughout the 50’s, litigation proceeded through which Convair eventually won back about a million dollars which it had paid to the city in taxes under protest Although Convair instigated the proceedings, the refund actually was realized not by Convair but by the Air Force. Thus the city of San Diego was deprived of a large amount of tax revenue by Convair which sided with the Air Force rather than the people of San Diego.
In the late fifties, Convair spawned the Astronautics division which produced the Atlas and later the Centaur missiles. J.R. Dempsey was chosen to head Astronautics.
Long Range Planning
In an interview with the San Diego Union in August 1958, Frank Pace told of the exciting future of the aircraft and missile industries in San Diego. “I will say this, that our relationship to the San Diego community is so happy and so satisfactory that I am sure as we grow, that this county will be a participant in our growth …. I think you’re going to find tremendous natural growth in the current set of divisions we have here — the San Diego Div., the Astronautics Div., and the General Atomic Div…. Here you are touching, in my estimation, some of the big things of the future.”
Today none of these divisions exist. Pace went on to say, “You see we’ve laid great emphasis … on long range planning. We have laid a pattern for the future … we’re concerned about where we’ll be 5 years from now … in long range planning and research, I don’t think anybody in this business can touch us.” Just three years later, Convair had achieved the distinction of losing more money than any corporation in US history, and San Diego was facing its worst economic depression.
The failure of the Convair 880 and 990 Jetliner program was caused by mismanagement, miscalculations of the commercial market and negotiations with billionaire industrialist Howard Hughes. Hughes, representing TWA, had made the 880 design his own personal vendetta to the extent that Convair lost sales to other airlines. Convair lost $425 million on the 880 and 990 programs. This exceeded Lockheed’s $121 million deficit on the Electra Turbo-prop and Ford’s $200 million disaster on the Edsel. The responsibility for the disaster was pinned on the chiefs and sub-chiefs at the Convair plant, the G.D. board of directors, Hopkins and Pace. Meanwhile, in July 1961 President Kennedy named Pace as a member of the Foreign Intelligence Advisory Board whose function was to keep an eye on the intelligence gathering activities of the government, primarily the CIA.
On February 23, 1962, the San Diego City Council adopted an emergency resolution urging the federal government to award defense contracts to General Dynamics Convair to avert an economic setback in San Diego. It said in part, “This Council urges the President of the U.S, senators from Calif., the governor, and the mayor of San Diego to intervene in this situation to their fullest extent to channel defense contracts (airframe and missiles) to the qualified industries in this community.” Governor Brown [the current Governor’s father] designated a task force to study the situation. He said, “(The study of layoffs) will help us call attention to the federal government of how the best interests of the U.S. investment in the California aerospace industry can be promoted In Washington.”
Mayor Dail said he was in favor of Rep. Bob Wilson’s suggestion to finance an office In Washington as a full time lobby to seek defense contracts for San Diego. This would cost $35,000 a year. In February, 1962, Convair asked for a rent reduction on 127,000 square feet of land from five cents to one cent per foot. In April, Joseph S. lmrie, assistant secretary of the Air Force visited San Diego to review the defense contract situation.
Charles Taylor, executive vice president of the S.D. Building Contractors Assn. said, “We have to get the building industry going again. People read in newspapers about the layoffs at Convair and they are afraid to go ahead. Our economy is not predicated entirely on Convair.”
Or is it? The governor’s task force concluded, “The key to an early reversal of the downward employment trend in San Diego is in obtaining federal recognition of the economic value of high utilization of the area’s airframe and aerospace production potential” and that the layoffs at Convair caused “strong peripheral results especially in the building industry.” An editorial in the Union said that all San Diego needed was an even chance in the marketplace and that “Man’s destination is the heavens. And we of the West are the people who can put him there.”
Lewis Crowned, TFX Landed
There was a shake-up in the top management of G.D. and the corporation was run under the ‘corporate equivalent of martial law.’ In January 1962, the Union reported, “Dynamics officials refused comment on reports of impending changes, but it is known that many directors and Col. Henry Crown, the largest stockholder and executive committee chairman, felt that new blood at the top would accelerate the company’s recovery.”
Especially when this new blood was that of Roger Lewis, former assistant Secretary of the Air Force in charge of materiel, who had overseen the acquisition of Convair’s Plant 2, and especially when the $7 billion TFX contract was about to be let. Frank Pace was out and Lewis was to join the firm in April 1962 as President.
However, two months ahead of plans, Lewis took over on February 22, 1962, The TFX contract was to be the saviour of G.D. Work at Astronautics was trailing off. The Fort Worth Division, which had produced the B- 58, was being phased out. Ft. Worth as well as San Diego was economically depressed. It so happened that the Deputy Secretary of Defense, Roswell Gilpatrick, had done a lot of legal work for G.D. and for Col. Henry Crown and, as the TFX subcommittee hearings brought out, he was about to do a lot more. How did Roger Lewis figure in this? Through his former work with Convair in the Plant 2 land grab and in his former work with the Air Force in materiel, Roger could be expected to have some pretty close contacts, especially with Gilpatric.
After all, they had both been assistant Air Force secretaries and had worked in the same office. In fact, Crown, Gilpatrick and Lewis were obviously more than passing acquaintances. Although their proposal was inferior to Boeing’s, G.D, won the TFX contract. In February 1964, Astronautics was merged back into Convair. In September 1965, Dempsey resigned over a “difference of opinion.” He was replaced by the current Convair president, Jack L. Bowers. In October 1965, the Convair Charger, their latest bid for aircraft contracts, crashed and burned at Lindbergh Field. The program was discontinued. Recently, General Atomics was sold to Gulf. The fact that the rent-free lease on 320 acres of Torrey Pines land ends in 1971 might have had something to do with it.
Presently, Convair is subsisting on subcontracts and piecemeal work. Many engineers have been farmed out to Ft. Worth, Quincy or Pomona Divisions on loan. Many have been transferred to other divisions. Currently, G.D.’s “in-man” on the Washington scene is David Packard, Deputy Secretary of Defense and a member of the G.D. board of directors up until his induction into government work. Looking back on the history of Convair in San Diego, we can only conclude that it is not the economic boon and asset that local politicians would have us believe. Since most of Convair’s facilities are government owned, hence tax-exempt, it does not provide the tax revenue that “private enterprise” would.
The dependence on the defense industry has caused severe economic depressions in San Diego. It has resulted in many people losing their jobs. It has resulted in others becoming wage-slave vagabonds who are transferred by G.D. to whatever Division currently holds contracts. Their presence has contributed to the elimination of free enterprise by forcing the private owner of Plant 2 out of business. All because of G.D.’s devotion to their customer: THE CUSTOMER, whom they share with the other big defense contractors. However, when THE CUSTOMER tries to buy anything except implements of destruction, a hue and cry arises that THE CUSTOMER has turned into a competitor and as such is interfering with the free enterprise economy. But as long as THE CUSTOMER buys more and more war materiel and stays out of housing, food or anything that would materially benefit human beings, accusations of creeping socialism do not arise.
Industrial Military Complex
In 1959, hearings were opened by a Special Investigations Subcommittee of the House Armed Services Committee to investigate the alleged favoritism and conflicts of interest of the large number of retired military officers who had accepted jobs with large defense corporations.
The subcommittee was headed by Rep. F. Edward Hebert, who said in his opening statement: “The American people are alarmed and aroused at what they see and when they hear today about the conduct of our weapons procurement and about the alleged conduct of some military men who depart the ranks of defense for lush places on the payrolls of defense contractors.”
John Courtney, chief sub-committee investigator, said that the Convair plants employed one retired full General, one Lt. General, five Brigadier Generals, 13 Colonels, 13 Majors, a Vice Admiral, 19 Rear Admirals, 15 Navy Captains, 28 Commanders and 65 Lt. Commanders for a total of 186, the largest number of any defense contractor.
Hebert singled out General Joseph McNerney, USAF retired, a former Convair president. McNerney testified that on the day of his retirement he received a “cryptic” telephone tip from Stuart Symington, former Secretary of the Air Force, advising him to call a number in Indio, Calif. Floyd Odlum, chairman of the board of Convalr, had a ranch at Indio. The phone call led to a five-year, $75,000-a-year, contract. Both McNerney and Symington had been fighters for the B-36 manufactured by Convair.
Frank Pace warned Congress to “move cautiously on proposed legislation to prohibit former military officers from accepting jobs in defense industries until two years after they retire from service.” He said that because of their military experience many ex-officers can “smell what’s wrong with a plane, for example, the minute they step into it.”
John V. Naleh, president of Convair, testified along with Thomas G. Lanphier Jr. executive vice president and assistant to the president at Convair. The San Diego Union reported on August 6, 1959, “Lanphier told the investigators that, when he speaks up for more Atlas missiles, any benefit to Convair is purely incidental.” He said he is thinking of the country’s interests.
President Eisenhower voiced his concern over the sway of what he called the “munitions lobby.” In further testimony Vice Admiral Hyman Rickover agreed to supply the subcommittee with a list of retired military officers who tried to influence him on Government contracts. Hebert said that the Aero-Space Industries Assn. was a lobby that was paid for by the peoples’ tax money. He contended the organization threw parties for military and political officials, charged the expenses off against government contracts and deducted them for income tax purposes.
Coincidentally, the day before the subcommittee hearings opened, invitations were sent out by 3 officials of the 3 largest defense contractors for a “small off-the-record” party. They were Frank Pace of General Dynamics, William Bergen of Martin, and Dan Kimball of Aerojet-General. The guest of honor was to be Lt. General Bernard A. Schriever, recently appointed head of the Air Research and Development Command. The officials refused to make available the guest list to the subcommittee on the grounds it was a private matter. The Air Force exerted its influence to have the party cancelled which it eventually was.
On a number of occasions in the years 1956-58, Convair asked the city for cancellation of inventory assessments and refunds of back taxes. Convair claimed the assessed property belonged to the Federal Government and hence was non-taxable.
On July 18, 1958 Convair requested the Board of Equalization to cancel $10,836,000 of assessments on work in progress and land, buildings, machinery and other fixtures leased from governmental agencies. In October 1958, the state Supreme Court ruled that property and tools owned by the federal government could not be taxed. County Assessor John McQuilken said he could not estimate the amount of taxes paid under protest on such assessments.
On November 1, the Union reported that about $5 million in taxes would have to be reclaimed from the cities of San Diego and Chula Vista, the school districts of same, the San Dieguito Unified School District, and the Solana Beach Elementary School District.
On March 29, 1959, the Union reported that Convair was seeking a $2.8 million refund, but about 99% of this would go directly to the Federal Government. The taxes were originally charged against government contracts and would have to be credited back to the charge. The Department of Defense had instructed Convair to seek the refund and had acted as advisor. Glenn T. Povee, Convair Treasurer, said, “We are acting primarily as the middleman.”
It might be expected that Convair fought for the tax refunds because they were a profit-seeking organization. But that was not the case. Either way it came out, Convair would not have been affected since they charged the local taxes against government contracts.
Convair knew on which side its bread was buttered. The company acted as middle man for the Air Force and against the interests of the taxpayers and school children of San Diego. If Convair were truly a private enterprise, the people of San Diego would be reaping a nice dividend in tax revenues. Since the Air Force owns most of Convair’s facilities, they are tax-exempt. Although the Department of Defense is willing to line the pockets of the people who own G.D., it is not willing to let the gravy overflow into local tax coffers.
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