Vultee Swallows Fleet

The biggest merger in U.S. aviation history last week got off to a fast start. Not a minnow, but a pickerel of an industry began to swallow a whale. Vultee Aircraft, Inc. announced that it would buy the 440,000 shares of Consolidated Aircraft Corp. common stock now held or controlled by Consolidated's president, Major Reuben Fleet (TIME, Nov. 17). The price: $10,945,000, equal to $24.88 a share and less than 50-c- below the stock's alltime high. After formal contract signing in Consolidated's huge San Diego plant, Vultee's President Richard W. Millar, Rube Fleet and an army of lawyers toasted the deal with Coca-Colas in paper cups. Thus Vultee took control of Consolidated through a 34% stock interest, and Rube Fleet will be U.S. big-bomber-builder No. 1 no more.

Vultee has a $178,000,000 backlog and 9,000 employes; it rang up a $593,000 loss in the six months ended last May. Consolidated's 30,000 employes are busy on a $725,000,000 backlog; it earned $3,611,000 in 1941's first eight months. But the deal makes sense aplenty to Fleet, Vultee, and the Army & Navy.

To Major Fleet, 54, the deal is his best chance to swap his huge holdings for hard cash, thus pave the way to diversified investments and an easier life. Trying to sell his shares, Fleet started dickering with

Wall Street brokers a year ago, never got what he thought a decent offer. Vultee's bid was made more tempting to him by two side dishes: 1) he will stay in Con-solidated-Vultee as an adviser at $60,000 annually for five years;* 2) by selling now he dodges the much higher capital gains taxes likely for 1942.

Equally satisfied are Army & Navy--not merely because Vultee is in but above all because Rube Fleet is out. Although Fleet's production record surprised them and his whopper planes are the champs of their class, he has long been persona non grata in Washington. Too often his sharp tongue has raked the Administration and accused it of bungling the defense program. Too often, too, have Government buyers left Rube Fleet's San Diego office feeling his prices were more than a little high.

Vultee is a smart little production outfit that has developed some new assembly-line techniques (see cut) hut it has made only single-engine planes (Stinson trainers, Vanguard pursuits, Vengeance dive-bombers, etc.). For it, the Consolidated deal is a side door to the big-plane field, which it otherwise would have had to spend millions in plant and experimentation to approach.

Vultee and Consolidated engineers spent weeks roaming through each other's plants, finally decided that--working as one--combined production could be increased, efficiency greatly improved.

But last week none of these was so pleased as stocky, razor-brained Victor Emmanuel, 42, president of Aviation Corp. which owns 71% of Vultee common stock. The many subsidiaries of Emmanuel's AVCO already make aircraft engines and propellers; it has big investment in New York Shipbuilding, American Airlines, Pan American Airways; soon AVCO will control Consolidated as well. So that little

Vultee could swing the deal, Emmanuel promised that 1) AVCO would buy an additional 150,000 shares of Vultee for $1,500,000, 2) his own Emmanuel & Co. (investment bankers) would help sell $6,000,000 in new Vultee preferred stock. The other $3,445,000 will come from Vultee's till.

Emmanuel cannot let the AVCO-Vultee-Consolidated setup remain so complicated forever. He plans a full merger of the two planemakers, but it may take months. The result would be a huge concern flexible enough to make anything from flivver planes to transoceanic skyliners, strong and ramified enough not to fear terrific post-war competition. Emmanuel bids fair to become the biggest single figure in U.S. aviation.

* Cracked Fleet: "If I can't earn this measly salary. I'll turn in my suit and take a shower."

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