Du Pont's Plan

Before the U.S. District Court in Chicago last week, Du Pont answered the Government's proposed plan to eliminate Du Font's control of General Motors. Du-Pont flatly said that it would fight the Government's proposal requiring it to distribute two-thirds of its 63 million G.M. shares to its stockholders over a period of ten years, sell the remaining one-third on the open market (TIME, Nov. 4). Said Du Pont: "A harsh, unreasonable and wholly unnecessary penalty."

Instead, the company offered to hand over all voting rights on Du Pont-held G.M. stock to its 185,000 stockholders on a pro rata basis. The family-controlled Christiana Securities Co. and Delaware Realty & Investment Co., which together own 29% of Du Pont, would do the same for their 4,000 stockholders. Du Pont would also promise not to buy any more G.M. shares, and would have no directors on G.M.'s board without specific court approval. "What would remain," said Du Pont, "would be an investment."

One big reason for Du Font's turndown of the Government plan was an Internal Revenue Service ruling that would cost Du Pont stockholders millions. IRS ruled that the G.M. stock, if distributed, would be taxable at ordinary income rates when received. If the stock was sold, any profit would be taxed again either as straight income or capital gains. For individual Du Pont stockholders, said President Crawford Greenewalt, income taxes alone would come to an estimated $580 million, plus another $100 million for corporations owning the stock. Moreover, so many shares would be dumped on the market that the market could not absorb them without depressing stock values in the two companies by as much as $5 billion.

In Washington the Government gave no formal explanation for Internal Revenue's taking such a harsh attitude on the tax ruling. Antitrust lawyers had originally thought that the Government might regard the distribution in the same tax-free manner as it treated dispersal of stock by companies broken up by the Utilities Holding Company Act. The difference apparently is due to the Government's view that the utilities were operating legally prior to the law's passage, whereas Du Pont was found guilty of violating the 44-year-old Clayton Antitrust Act. The man who will decide what Du Pont must do is Chicago's Federal Judge Walter J. LaBuy, whose original ruling in favor of Du Pont three years ago was reversed by the U.S. Supreme Court. Last week he announced that it would probably be September before he could even start hearings on Du Font's proposal.

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