Senator O'MAHONEY. Let me say, Senator Wherry, before you arrived on the scene, and we had pursued this matter quite extensively, Mr. Cox clearly stated with respect to the Reynolds lease or the Reynolds offer that there was a provision in it for the purchase of ingot which, in his opinion, the Surplus Property Administration has no authority to carry out.

Senator WHERRY. All right.

Mr. Symington, you asked me what I would do with these plants yesterday, and I gave you an answer. I would like to suggest to the chairman of course, editorials in papers probably would not be admitted in evidence in any court, and I want you to know that I know that-but there are three paragraphs from an editorial in the New York Times which I think clarify my statement considerably, and I would like to ask if I might include that in the transcript after my remarks of yesterday and the answer that I made to Mr. Symington, Senator O'MAHONEY. Yes; without objection, it may be included. Senator WHERRY. Thank you.

(The New York Times editorial referred to by Senator Wherry is inserted at this place in the record since the record of yesterday's session was already in process of printing when his request was submitted.)

[Editorial for the New York Times of October 16, 1945]

* *

ALUMINUM SUBSIDIES

Surplus Property Administrator Symington has asked Congress to determine whether or not new producers should be subsidized when they acquire surplus aluminum plants. At the same time RFC Director Sam H. Husbands has testified that "nobody but the Aluminum Co. of America is willing or able to buy the plants. * The only offer to lease has come from Reynolds Metals, which wants a 5-year lease under which the Government would stand all losses for the first year." We are confronted here with an important problem of public policy. The question is: Shall surplus-property plants, which cannot stand on their own feet economically when sold or leased to certain private groups in an effort to avoid a monopoly, be subsidized by the Government?

The aluminum industry has been controlled by one large company. The Department of Justice has been seeking to break up this company for some time. Assistant Attorney General McGranery told the congressional committees that "competition will be established within the industry no matter what it takes." We have had a long history of trust busting. But throughout that history we have not adopted a national policy of subsidizing competitors such as is proposed here. Nor have we attempted to break up monopolies on any such basis as suggested in the phrase "no matter what it takes." In general, it has been held that bigness alone is not to be condemned. Only when that bigness is used to develop an unreasonable restraint of trade was action to be taken.

Use of coercion, the development of unfair practices, and the maintenance of high prices have been among the tests of undesirable monopoly. Despite the domination by one company, aluminum prices have declined steadily through the years. This decline even continued during the war. Moreover, under modern technology, control over the supply of a commodity by one or few sellers does not give those sellers the power of life and death over their customers. Substitute products are an important factor in checking abuse. For most uses of aluminum there are substitute products available. These include plywood, light steels, plastics, and other metals.

If it is established that undesirable effects upon our economy flow from the aluminum situation, we have the means of correcting them through the antitrust acts. Government subsidization of competitors would be an unfortunate alternative which inevitably would lead to a steadily larger drain on the Treasury and would furnish another form of Government competition with private industry.

Senator O'MAHONEY. Very well, Mr. Symington, we are very much indebted to you, and I am sorry that we had to take so much of your time.

(Discussion off the record.)

Senator O'MAHONEY. Mr. Wilson, will you proceed with your statement now? Before proceeding, however, may I suggest that you identify yourself and your associates for the record so that we will know just who they are, and so that the reporter will know?

STATEMENT OF I. W. WILSON, VICE PRESIDENT, ALUMINUM CO. OF AMERICA, ACCOMPANIED BY LEON E. HICKMAN, COUNSEL; AND ARTHUR P. HALL, ASSISTANT SECRETARY, ALUMINUM CO. OF AMERICA

Mr. WILSON. I am I. W. Wilson, vice president of the Aluminum Co. of America. On my left is Mr. Arthur P. Hall, who is assistant secretary, and our Washington representative, and on my right, Mr. Leon E. Hickman, who is counsel for the Aluminum Co. of America.

Mr. Chairman, I would like to say that the Aluminum Co. of America, Alcoa, appreciates this opportunity to come before this joint committee and express itself on the questions we believe have been raised by the report of the Surplus Property Board and the report of the Attorney General, and we hope that we can make our position clearer than we believe has been made in those reports, and that we can be of assistance and helpful to these committees in working out a program for the disposal of these properties in the aluminum industry. Senator O'MAHONEY. On behalf of the committee, Mr. Wilson I desire to express my appreciation for that statement of yours. I might also add that the whole committee, and all of Congress, recognize that we are confronted here with a problem of immeasurable magnitude. We are seeking the best advice that we can obtain. We are not here at all in an adversary capacity with respect to anybody, but we are merely trying to confront the facts as, they exist and see what our course from now on should be.

QUOTES FROM LETTER FROM ALCOA TO MR. SYMINGTON

Mr. WILSON. I believe that it will be more helpful in pointing out the specific points-at least from my point of view-if I might be permitted to read the letter we have recently written to Mr. Symington. In a letter dated October 15, 1945, we wrote to Mr. Symington as follows:

The position of Aluminum Co. of America in the aluminum industry is not correctly stated in the report to Congress dated September 21, 1945, by the late Surplus Property Board. That report presents Alcoa (1) as dominant in the control of the raw materials from which aluminum is made, (2) as such a low-cost producer of aluminum that no one can compete without governmental assistance, (3) as dominant in the world aluminum market, and (4) as a ruthless competitor. These are incorrect assumptions, but it is on the basis of them that the report reaches the conclusion that the Government-owned aluminum plants cannot be operated competitively unless the lessees or purchasers are sustained with tremendous Federal subsidies, which will carry in their train a substantial governmental control of prices and markets. We protest both those premises and that conclusion.

In order to meet a nonexistent condition, the report proposes the following six-point subsidy program which applies to every phase of aluminum manufacture and sale a cradle-to-the-grave program which, once started, can never be terminated:

Subsidy No. 1: Government guaranty against losses.

Subsidy No. 2: Purchase options based on earnings' record under the subsidized leases.

Subsidy No. 3: Government procurement of bauxite.

Subsidy No. 4: The subsidized manufauture of alumina for sale at prices equal to or lower than Alcoa's cost of manufacture.

Subsidy No. 5: Reduced power rates on Government-owned power to operators of Government plants.

Subsidy No. 6: Government stock-piling of aluminum ingot purchased from operators of the Government plants.

It appears to be the plan to put these subsidies into effect through the use of general funds of the Reconstruction Finance Corporation without seeking Congressional appropriation or approval.

Senator O'MAHONEY. May I interrupt?

Mr. WILSON. I would appreciate it because I realize, and I want the committee to realize, that this letter was necessarily written before these hearings started, and I am sure that, written today, that statement would be modified.

Senator O'MAHONEY. There probably will be some other modifications, will there not?

Mr. WILSON. I am sure there will be, and incidentally I want to also call attention that the footnotes having reference to the Surplus Property Board's report refer to pages in the mimeographed report, because that was the only report we had available, the printed report had not yet come out when this letter was written. If there is any question at any stage as to the reference point, I have tried to correct the pages in the copy from which I am reading, so that I can refer you to the specific page in the final printed report.

Senator O'MAHONEY. Inasmuch as in your answer to my query you say that if this letter were written today it would be modified, do you care to indicate, at some convenient time, what those modifications would be?

Mr. HICKMAN. It would be underscored here and there, too. Mr. WILSON. Yes; I accept Mr. Hickman's correction there. Senator O'MAHONEY. Let's have them both; we are trying to get the facts and you come before us now with a letter which immediately is recognized as being out of date and outmoded.

Mr. WILSON. I don't believe in this case, having heard Mr. Cox this morning, that this particular statement need be greatly changed.

Senator O'MAHONEY. Well, how about subsidy No. 6? The statement has been clearly made here now, on behalf of the Government, that there is no authority to purchase ingot.

Mr. WILSON. I still think, Mr. Chairman, that the report indicates that that is one of their proposals.

Senator O'MAHONEY. That, of course, is a conclusion.

Mr. BORCHARDT. Could you refer in the report to the specific passage that suggests the purchase of aluminum ingot?

Mr. WILSON. Pages 18 and 40 of the printed copy.

Mr. HICKMAN. Furthermore, we might find that while Mr. Cox disavows authority Mr. Goodloe will assert it, and this paragraph relates to the authority of the RFC.

Mr. WILSON (continuing):

It will be interesting to observe whether you follow the same formula of subsidized governmental control when, as required under section 19 of the Surplus Property Act, you report to Congress on the disposal of plants and facilities devoted to the manufacture of magnesium, synthetic rubber, chemicals, aviation gasoline, iron and steel, aircraft, and radio and electrical equipment and on the disposal of pipe lines and shipyards.

As citizens and taxpayers, we are opposed to Federal subsidies. That road leads only to the destruction of the very “peacetime economy of free, independent private enterprise" that Congress directed to you to promote. The proposed subsidies involve governmental control of key functions of the large segment of the aluminum industry now owned by the Government, and the policies thus decreed will be equally decisive for the balance of the industry.

Our protest is directed at (1) the subsidy plan, (2) its misconception of Alcoa and the industry, and (3) the apparent underlying objective of breaking up Alcoa or governmental operation, as well as ownership, of aluminum plants, if the subsidy program does not work out satisfactorily.

The report seeks to justify the program by its inaccurate assumption of above four vital matters as well as of other matters, and accuses us of illegal practices of which we have been wholly exonerated by the district court which tried the Government's antitrust action against us and by the circuit court of appeals which as a substitute for the Supreme Court-reviewed that decision. Surely a Federal agency should accept, as completely as citizens and corporations must acknowledge, the finality of decisions made and affirmed by our courts.

We are compelled to conclude that the ultimate objective of the plan is the destruction of Alcoa by subsidizing competition in the industry that it created, or its dissolution by Government-induced court decree-the "atomization" of the company, as a former Assistant Attorney General proclaimed it-or governmental entry into private business in the form of Federal operation of the Governmentowned aluminum plants.

Senator O'MAHONEY. Now as you read that, Mr. Wilson, of course you bear in mind the specific disavowal by Mr. Symington, before you took the stand, of any purpose on the part of the Surplus Property Administrator to bring about the destruction of Alcoa?

Mr. WILSON. We heard that with a great deal of interest, Mr. Chairman.

Senator O'MAHONEY. But you did hear it?

Mr. WILSON. Yes; and we appreciate it. [Continuing:]

We know that these alternatives were in mind, because the summary of the report concludes with the observation:

"The Board recognizes, however, that conditions beyond its control may make the program impossible of accomplishment. In that event, unless the courts dissolve or reorganize Alcoa under the Sherman Act, Congress will have to consider whether to leave the aluminum industry under the domination of one company or whether to authorize the Government, either by subsidized or direct operation of key plants, to provide some measure of production that is independent of Alcoa's control."

Indeed, we are led to believe that these alternatives appeal more strongly than the sale of the Government plants to private enterprise, because the report states that:

"In fact, it may not be possible for the Surplus Property Board to dispose of the plants to competitors of Alcoa unless and until the Court does require some degree of dissolution or reorganization of the property Alcoa now owns."

The fact that the Department of Justice, only 10 days prior to the report, submitted a 139-page document to Congress devoted almost wholly to an argument for the dissolution of Alcoa seems to us more than a coincidence.

This purely destructive attitude is in striking contrast to the ruling of the circuit court of appeals in the Alcoa antitrust case which postponed all consideration of dissolution until the Surplus Property Board had disposed of the Government plants, pointing out

"Dissolution is not a penalty, but a remedy; if the industry will not need it for its protection, it will be a disservice to break up an aggregation which has for so long demonstrated its efficiency."

79912-45- -11

It can be shown from facts taken from the report, or from authoritative sources, that the Government-owned aluminum plants, in the hands of competent operators, are fully competitive without putting the Government into the aluminum business either directly as a postwar operator or indirectly through a program of Federal subsidies which continue indefinitely and will effectively kill any chance of achieving an economically sound, low cost, mass-production industry. We present these facts in the hope that you and your advisers will reconsider the subsidy-ridden program now proposed.

There "you and your advisers" refers, of course, to the Surplus Property Administrator.

Senator O'MAHONEY. Now, Mr. Wilson, you have read such parts of this letter of October 15 as you felt were necessary to set its purposes forth to the committee. May I ask you now again about the modification of that letter? I do that because this second paragraph, on page 4, begins with this phrase:

This purely destructive attitude is in striking contrast to the ruling of the circuit court of appeals

and call your attention again to the statement made by Mr. Symington denying any destructive purpose. Do you care to make any acknowledgment at all of the position which Mr. Symington took here before this committee?

Mr. WILSON. Yes; I would like to, Mr. Chairman, in that, as I said, I heard Mr. Symington's testimony with a great deal of interest, and I heard him, I won't say disavow his report, because I think I understood him to say that

Senator O'MAHONEY (interposing). I said that he disavowed any intention to bring about any destruction of Alcoa.

Mr. WILSON. Whatever his intention may have been, we believe that the recommendations as contained in that report are to that end.

Senator O'MAHONEY. You said a little while ago, in response to my question, that in the light of the testimony which was brought forth here you would modify some of the contents of this letter.

Mr. WILSON. I imagine there may be some modifications.

Senator O'MAHONEY. Now may I ask you, also, since there has just come to my desk a copy of a release which has been issued to the press by Alcoa, whether this release now in the hands of the press was prepared before the testimony of Mr. Symington was received this morning?

Mr. WILSON. Oh, yes; it was prepared before this morning.

Senator O'MAHONEY. So this release was written and has been handed to the press without taking into consideration the statements which were made here today?

Mr. WILSON. That is correct.

Senator WHERRY. Well, Mr. Chairman, what is wrong about that? Senator O'MAHONEY. There is nothing wrong about it, but I just want the press to know that the contents of this statement may be just as subject to modification as the letter.

Senator WHERRY. Certainly. I see nothing wrong about that. They couldn't anticipate what Mr. Symington was going to say this morning-you can't radar his mind.

Senator O'MAHONEY. There was no such implication in my question. I can't understand why every effort to make the facts crystal