Irving S. Shapiro, chairman of the giant chemical company DuPont, said today that it is "clear that the recession is now upon us and that we ought to plan for more difficult times."
Shapiro, speaking to reporters after the company's annual meeting here, said profit margins in many of the company's operations are being squeezed by sharply rising costs.
But Shapiro added that the recent sharp fall in silver prices -- from a peak of about $50 an ounce to the current level of $14 to $15 -- should help Du Pont "make up some of the ground we lost."
Du Pont, the nation's second biggest user of silver after Kodak, found it difficult in the early months of this year to pass on the rising costs of silver in the prices of its photo products.
Du Pont buys about 17 million ounces of silver a year. Kodak buys about 50 million ounces.
President Edward G. Jefferson told shareholders that earnings in the 1980 first quarter were down slightly from the first three months of 1979, even though sales rose 18 percent.
"It has not been feasible to increase selling prices sufficiently to offset the very sharp rise in costs of energy, petrochemical raw materials and precious metals." He said the net profit margin -- the difference between selling cost and price -- was 6.9 percent in this year's first quarter compared with 8.4 percent a year ago.
The company reported that its first-quarter earnings were $244 million ($1.66 a share) on sales of $3.6 billion, compared with earnings of $248 million ($1.70) on sales of $3 billion in the first quarter of 1979. The sales increase represented a 2 percent increase in volume and a 16 percent rise in average selling price.
Jefferson told shareholders that overseas demand continues to be strong and that, while demand in the United States remained at a good level during the first quarter, there was "weakness in automotive and housing markets." He said the outlook for the rest of the year is worse.
Jefferson noted that the cost of petrochemical raw materials -- used in the production of a wide variety of products from textile fibers to plastics -- was 66 percent higher during the first quarter of 1980.
"The cost squeeze was most evident in the company's domestic business, where earnings during the quarter were down 8 percent from a year ago despite increased sales," he said. Jefferson said the "prospects for the remainder of the year are cloudy. Continued double-digit inflation, coupled with the high cost and restrictive availability of credit, are leading to a throttling back of general business activity. Our customers and, in turn, their customers, may be forced to curtail their purchases due to a growing inability to obtain operating funds at acceptable costs."
The sharp rise in interest rates had come about as the Federal Reserve Board and President Carter sought to dampen the rate of inflation by making borrowing more expensive and difficult. The prime lending rate rose to a record 20 percent earlier this month, although last week major banks cut that to 19 1/2.
Despite the semingly adverse impact on Du Pont's business, Jefferson called the Carter program a "first step in the right direction."
Shapiro, one of the few leaders of American industry that is a Democrat, told reporters later that he continues to support Carter for re-election, "Consider the alternatives," he said.
Both Shapiro and Jefferson called upon the administration and Congress to take further steps to change the tax laws to encourage business to increase capital investment, such as with accelerated depreciation, and to take a "more balanced approach to government regulation.