Shop Talk

Shop Talk k To The Employees achine Company, Rockford, Illinois lord, Chairman & President June 10, 1975 WHEN I TALKED with you last Oc tober 24, I told you that 1974 at In gersoll was a good year; that we had made all the shipments we had promised customers; the quality of our work was good and the com pany was making profits - and using those profits to get in the best shape possible for the future. At that time, the results for the year were not final and I promised to report to you again when they were. On the 28th of April, I reported the results of 1974 "officially" to both the Directors and the Stock holders of the company. I want to take this opportunity to tell you what those official results were and also to give you as much in formation as I can about 1975 and 1976. I will talk only about the results of Ingersoll's Rockford operations; not those of our overseas com panies. It is enough to tell you that our overseas companies are all operating profitably, that they too made their shipments on time in 1974. Our three companies located in Germany and our European consulting group now represent about 40% of the total company, and are of great help to Ingersoll as we grow and meet new cus tomers and new competition around the world.

In our Rockford operations in 1975 SHOP TALK 525 1974, our shipments were $52,300, 000. That is a record for the com pany in any year. This $52 million is the only income that Ingersoll received during 1974. Of that amount, we paid $23, 410,000 for materials (such as steel plate, and tools) and services (such as electricity and telephone). And we paid $23,298,000 for the total payroll. I know it is hard to keep those figures in your head - let me sim plify. We received $52 million. This is all the money we took in. We paid out $23 1h million to out side firms and just a little less than that to the men and women who work here. These two items total about $47 million. The dif ference between this $47 million and the $52 million we received from customers is our profit. Ac tually, it was $4.9 million. We nor mally pay 50% of this to the gov ernment as "corporation tax." Last year it was less because of losses in previous years.

All of the profit was reinvested in the business - almost $3 million in new machines alone. In the same way, all the profits from our European companies were rein vested in those plants. To repeat, the total company payroll for all the men and women who work here was $23,298,000. We paid this amount, but you did not receive it; because we are' required to withhold income and so cial security taxes before you get your pay check. Of the $23,298,000 that you earned, $5,933,000 was withheld and your checks totaled $17,365,000. I report this way because I want to talk for a minute about taxes. It seems to me, as I talk with you individually from time to time, that we tend to forget how much of our pay is withheld for taxes. All of us together earned over $23 million in 1974, but we only saw $17 million of it. The rest of it went to the government. In addition, the company pays corporation taxes, and other taxes, which we must take from the sell ing price of our machines. We pass taxes on to our customers in the selling price just as they do to their customers. Ford and General Motors, for example, pass their "corporate" taxes on to their cus tomers, and so, you can see, that we, as car buyers, pay these taxes too.

Politicians would like to have us forget that the vast majority of all the money taken in by our gov ernment comes from p,eople like all of us gathered here, who work for a living. They would like us to forget that we've paid so much in taxes, so they arrange to deduct it from our checks every two weeks and hope we will get used to the 526 THE FREEMAN September idea of getting paychecks any where' from two-thirds to three .. quarters of what· we have actually earned and what the, company paid us. They would also like to ha,ve us believe that corporation taxes are paid by corporations. Corporations don't pay taxes., only people pa..y taxes. Taxes are p,assed along in the price of goods until they come to rest when people buy things. But it sometimes is easier for a politician to recommend a bigger bite on the "big corporation" than to raise our individual taxes. So he raises taxes on the oil companies, for example - "surely, they can afford it!" The truth is; we pay that tax, too - when we buy gas.

At times, they would like us to believe that wealthy people pay most of the taxes. Politicians con tinually refer to the "loopholes" in the tax structure and indicate that all we have to' do is find a way to take more money from the rich and everything will balance out. They're putting us on! The money collected from all the wealthy peo ple in this country is not enough to run the government for a week, at the present rate of spending. There is still another funny idea around. It has names like "Federal Funds," "Revenue Shar ing," and "Matching Funds." The idea seems to be that we can have goods and services here in Rockford and have somebody else pay for them. If we want a civic cen ter, for example, but cannot raise local taxes to cover the cost, we will get these funds from "the government." Since the government prod uces .nothing, and has nothing except what it takes from the peo ple, this idea can only mean that some communities have a surplus which they will share with us here in Rockford. Nonsense! The gov ernment takes a quarter toa third of what we produce and redistri butes .it - and you can be sure some of it sticks in Washington.

The truth is that men and women like those gathered here pay all the bills. $6 million was taken in taxes from us in 1974 alone - directly from our pay checks-and this doe'S not count corporation taxes,excise taxes and property taxes which ·we pay in a more indirect way. And this takes us back to infla tion, which I talked about last time. It is bad enough to have taxes so high,but it is even worse to have politicians spend more than they collect. This year they are "going in the red" more than ever before in the history of our country, and much of this money will be wasted onproj ects we could better handle ourselves. And how are they going to pay for this overrun? They will bor1975 SHOP TALK 527 row as much as they can, and when this doesn't make it, they will "print" money and we will pay for it in higher prices down the road. Let me get back to our affairs at Ingersoll-our business con tinues to do well. This year we will produce more than last year in every department and we will make more money. We continue to make our deliveries; the products we have continue to gain accept ance around the world. We have $60 million in the backlog, which, the way we are running now, is a good full year's work; and we have good prospects beyond that.

There is talk all around us of other businesses not doing so well. That usually means our work will slow down as well - lateT on. Whether it will happen this time or not, I do not know. All I know is we are doing all we can to take advantage of every opportunity to sell our machines and so far we've be'en successful. I'm sure you will agree that it would be foolish if we didn't ex pect business to slow down based on what is happening all around us. The only thing we-cando about it is to perform to the best of our ability in all departments. We recently received a $10 mil lion order from Caterpillar for machines for a V -8 diesel engine. This order, in physical units, is nearly as big as the Russian proj ect [machine tools to build diesel engines for trucks]. The last ma chines will be shipped near the end of 1976. Since the next ten years will see a big expansion of diesel engine production around the world, how we do this job will be watched by all those in the diesel business.

Incidentally, the Kama River machines for diesel engines are being set up in Russia at a very rapid pace -after a slow start. So far our workmanship (even in cluding the job of boxing for ship ment by sea) has been given high praise. Our order book is not full to the end of 1976 but we-have machines scattered through the schedule out that far. We have $29 million of special machines already firmly booked· for '1976 delivery and this means we have a good chance of having a good 1976. What happens in 1977 is any body's guess. There is only one thing we can do to bring· in new work and that is to' improve our quality and our efficiency in every way possible. If we take cost out of everything we do and if we can steadily improve on what we send to our customers, we stand the best chance of getting whatever business is available.

528 THE FREEMAN September I hope you will pay attention to the new look on the bulletin boards. For some time now - we' have been reporting maj or new orders and I have been told by many peo ple that this is a good thing to do. Just recently we started using the bulletin boards to tell you about job opportunities as they arise in the company. If at all possible, we want to :fill new jobs at Ingersoll with people who al ready work here. We' used to handle this by word of mouth, but this is no longer sufficient, so we are trying to write up the oppor tunities as they arise. Keep in formed and if you are interested, talk to your boss or go directly to the personnel department. Don't be shy. If the job description looks tough, but you are interested, talk to somebody about it. Since we started this practice 90 days ago, twelve Ingersoll peo ple have taken new jobs as a result of it. There is opportunity to get ahead at Ingersoll.

I have spent some time talking ~bout taxes. I did so because we sometimes forget the fundamental truth that people who work for a living pay most of the taxes. Wealthy people pay high taxes but there is such a small number of them that it does not matter in the total. People on we1fare, old peo ple, young people, students - do not pay taxes - only people who work for a living. The direct in come taxes from Ingersoll alone last year amounted to $6 million and that is repeated in every com pany this size throughout the land. Indirect taxes (or less direct taxes. - such as corporation taxes) are also paid by those of us who work. And yet, all that money pouring into Washington is not nearly enough. Our government will put us further in debt in 1975 - :and then they will cover this shortfall by printing money, which will cause our pay checks to buy less in the future. Since we are the ones who pay, it has to be up to us to do some thing about it. If we don't let the politicians know what we think, nobody will.

Our business is good. 1976 should be another good year. What will happen in 1977 is anybody's guess. There is opportunity for ad vancement at Ingersoll. Each one of us can· contribute toward keeping the business com ing our way by the quality and amount of work we do every day. ~ LUDWIG VON MISES Wag Unemployme and Inflati0: O UR ECONOMIC SYSTEM - the market economy or capitalism - is a system of consumers' su premacy. The customer is sover eign; he is, says a popular slogan, "always right." Businessmen are under the necessity of turning out what the consumers ask for and they must sell their wares at prices which the consumers can af ford and are prepared to pay. A business operation is a manifest failure if the proceeds from the sales do not reimburse the busi nessman for all he has expended in producing the article. Thus the consumers in buying at a definite price determine also the height of the wages that are paid to all those engaged in the industries.