Cord v. Cohu

Seven months ago William Averell Har- riman. then board chairman of potent Aviation Corp.. was persuaded to invite Motormaker Errett Lobban Cord into the directorate of Avco. Mr. Cord had been a painful nuisance to Avco and other ''pioneer'' operators with his low-fare Century Air Lines, his rambunctious efforts in Washington to get mail contracts. Avco took over Century, gave Mr. Cord 5% of the Corporation's stock. There were expressions of esteem on both sides. But the industry, aware of Mr. Cord as a shrewd, aggressive operator, accustomed to running things his own way, wondered how long it would be before an explosion occurred.

Last week came the explosion, with a loud bang. Mr. Cord, who had increased his ownership of Avco stock to 30% was now openly clamoring for control of the company. He charged the present management with the loss of $38,000,000 in three years through "extravagance, waste, speculation, shrinkage of properties, cancellation of officers' debts.'' For whatever economies the company effected since April, he claimed full credit. He accused the "reigning clique" of transacting all important business in "secret meetings" unknown to him, the biggest single stockholder: of plotting to perpetuate its own regime for another ten years.

The explosion was touched off by Avco's quiet negotiations to acquire the assets of another big holding company, North American Aviation Inc. To pay for the property, Avco was to issue nearly 2,000,000 new shares of stock. Chief among North American's assets is a transport system covering the Atlantic seaboard below New York, joining Avco's transcontinental line at Atlanta and meeting its Boston-Montreal sector at Newark. Integrated, the network would blanket the East and South. But whatever the merits of the deal, its effect would be the reduction of the Cord share in total Avco stock from 30% to 15%.

When Mr. Cord in Beverly Hills. Calif, saw the imminence of that threat last week he fairly popped with rage, sent his lawyers rushing into court at Wilmington. Del. Just as the Avco directors sat down to complete their merger plans for submission to stockholders, the Wilmington court granted a temporary injunction restraining the board from further action. Avco pried loose the injunction, but agreed not to consider the deal further until next week when Mr. Cord would be back in New York.

Now the battle was in the open. Mr. Cord turned to Avco's 28,000 stockholders, pleaded for proxies for a stockholders' meeting Dec. 21 to enlarge the directorate from 35 to 68. and supposedly to increase his own representation on the board from three to 36.

As everyone knew, what Mr. Cord meant by the "reigning clique" was the group centering about Banker Harriman and his good friend Robert Lehman. W. A. Harriman & Co. and Lehman Bros, headed the bankers who raised $38,000,000 for Aviation Corp. when it was formed in 1929. Friends of Banker Harriman understood that he aspired to be in aviation what his late famed father was in railroading. At the outset the Aviation Corp. structure was loose. Its subsidiaries numbered 80, included unrelated small lines, charter services, schools, factories. (The list is now about 20.) The company grew to be not the titan that United Aircraft & Transport is but an extremely potent and coherent transport system holding ten of the 23 domestic airmail contracts. However the growing pains were acute. When Avco was six months old the 1929 crash occurred. Immediately afterward the company altered its investment policy, put much of its ample cash into other than aviation stocks. There were three presidents in three years, President LaMotte Turck Cohu taking office last March just in time to greet Mr. Cord.

President Cohu, a youthful Princetonian (1917), was an investment broker, head of Air Investors Inc. which is a substantial Avco stockholder. He could not deny Mr. Cord's statement last week that Avco had lost money since its birth,* but he did say that the fight with Mr. Cord had been brewing for months because of Cord's efforts to "jam Stinson planes down the company's throats." Cord builds Stinsons and the Lycoming engines that pull them. Old guard Avco men said that Cord was a poor transport man, that his Century Lines lost money, that he would cut pilots' pay below the minimum of safety and efficiency. (He had labor troubles with the Century pilots.) Another complaint: Cord had studded the Avco ranks with spies, some of whom spread the word that the employes "had better play ball with the Cord crowd because Cord s going to be the boss." The spies were weeded out, fired.

Basically each side summed up its case thus. Cord: ''Of every Avco dollar 30 cents belongs to us, 63 cents to stockholders other than the present management. We are going to see the company properly run, by those who have a real interest in it." Avco: "Our directors are financiers, industrial leaders, representing widely distributed stock. Why turn the company over to a plane manufacturer who merely seeks a controlled outlet for his product?"

The outcome of the battle appeared to hinge largely on the success of the Harriman-Lehman group in rounding up proxies from the many substantial stockholders known to them. Banker Harriman himself had begun to withdraw from the aviation scene. Last month he resigned as Avco board chairman, was succeeded by his friend Banker Lehman (TIME, Oct. 31). About the same time Harold Ellstner Talbott Jr. resigned the North American Aviation chairmanship. His place was filled by George Newell Armsby, chairman of Bancamerica-Blair Corp. which sponsored North American. Guessers everywhere tried to connect the two resignations with the presence of Mr. Cord. But, as for Banker Harriman, the explanation lay in his newly acquired chairmanship of the Union Pacific Railroad--a return, after ships and airways, to his father's tracks.

> Bustling little Congressman-reject Fiorello Henry La Guardia (N. Y.) warned the Postmaster General that he would sponsor a strike of Avco pilots if Cord should get control.

Homing Whale

Dr. Claude Dornier stood in front of his airplane factory on the shore of Lake Constance, Switzerland one day last week, beaming with pride as one of his flying boats glided out of a soupy fog to a landing. This was no ordinary flying-boat, nor an ordinary flight. It was the sturdy Greenland Wai (Greenland Whale) completing a round-the-world trip begun 14 weeks ago, with stolid Wolfgang von Gronau and three aides as master and crew.

As all the world knows the Greenland Wai took off from the North Sea Island of Sylt, site of Capt. von Gronau's seaplane school, traversed without incident the northern passage via Iceland and Greenland to Montreal. Thenceforth she made her easy way across part of the U. S., pausing at Detroit, Chicago, Milwaukee. North of Winnipeg the Whale rested on Cormorant Lake while her crew-rested, fished. Thence on to British Columbia, Dutch Harbor, Alaska, and along the stepping stones of the Aleutian Islands and Kuriles to Tokyo.

The Greenland Wai encountered no serious trouble until crossing the Bay of Bengal. About 150 mi. off Rangoon a water pump broke. Down came the plane upon a tossing sea. An S O S brought a British steamer which towed her into Rangoon. As casually as before, the plane flew on to Colombo, Bombay, Bagdad. Athens, Rome, across the Alps in a storm to Friedrichshafen.

Capt. von Gronau has expressed approval of the North Atlantic route for airmail service, but disapproval of the North Pacific route on which "the weather changes every 15 minutes and there is so much fog."

Wings over Australia

Into the desert 1,000 mi. north of Adelaide the Australian Government was sending squads of engineers last week to build four landing fields at 100 mi. intervals between Alice Springs and The Granites. In The Granites, a wild, desolate territory, infested by savage blacks and savage insects, diggers had struck gold. Six expeditions were pushing toward the strike by truck, tractor, horseback, camel and by airplane. Every available ship was in demand to rush in food & water, rush out yellow dust.

*About $10,000,000 operating loss, $20,000,000 asset shrinkage in Avco statements: according to Mr. Cord, $38,000,000 asset loss.

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