The Master Plan

Price Boss Michael Di Salle this week unwrapped his long-awaited "master" regulation to fix the prices and profits of U.S. manufacturers. His 25,000-word order takes 75,000 manufacturers out from under the general price freeze of Jan. 26, places them, instead, under a complex system of profit margins.

The basic principle of Di Salle's new system is to set prices according to a manufacturer's pre-Korean level, add to them only the actual increases in material costs up to December 31, the labor costs up to March 15. But Di Salle is determined to make businessmen take thinner profit margins and share part of the increase in costs. He will not allow them to toss in increases in the costs of sales, advertising, research, overtime, etc.

When it becomes effective May 28, the new system will cover radios, television sets, refrigerators, washing machines, ranges, furniture, many building materials, many processed foods, hardware, tires, chemicals, paper products and some textiles. It will not cover autos, petroleum products or other lines already under special industry regulations.

Any manufacturer who loses money for 30 days under the margin regulation can apply for hardship relief. But then he will run into another tough hurdle, which Economic Stabilizer Eric Johnston set up last week. No company will get price boosts if the industry to which it belongs is making 85% of the profits of the three best years from 1946-49.

This rule will put a premium on efficiency, let low-cost operators get a better break than inefficient, marginal ones. But Di Salle warned that OPS will not allow any new increases in costs (e.g., cost-of-living wage increases) to be added automatically to prices.

Di Salle admits that his gradual squeeze on profit margins will take a long time to show up on consumer price tags. But when it does begin to be felt, he predicted substantial price slashes, especially among swashbucklers who took advantage of shortages to charge all that the traffic would bear. For many businessmen who tried to hold the price line and got caught by the Jan. 26 freeze, the profit-margin plan would mean a boost in prices.

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