benefits of a reconverting economy and its accompanying growing demand.

Alcoa has evidenced her willingness to purchase alumina from an operator of Hurricane Creek if the prices were competitive. Alcoa has also indicated her willingness to maintain the operations in most of these plants temporarily until new operators can be arranged for. This is the spirit by which much will be accomplished. Alcoa should continue on this track and not decry the Government's honest efforts to establish competition in the aluminum business. Alcoa should accept the long view and recognize its value to our entire economy.

SHOULD BE FOUR TO SIX BASIC PRODUCERS

Further, I think it should be firmly recognized by the Congress that there should be a minimum of four basic producers, six if possible, since there you have a broad base upon which to build. This should be made a part of the directive formula on the part of Congress to Mr. Symington. I tentatively base these figures on the number of plants in existence, their geographical location, and their sphere of influence. A duopoly, because of the protection afforded it, by not being a monopoly, may in effect be worse than the monopoly. This should be guarded against.

STRONGLY OPPOSES SUBSIDIES, BUT ADVOCATES GOVERNMENT AID

The question of subsidies has arisen many times at this hearing. My understanding of a subsidy is "payments of moneys to create a desired effect or to obtain something on the part of government which, generally, only benefits a few." In my own testimony before the Senate committee hearings I very strongly urged against subsidies. I cannot see, though, where any sensible program of aid to a producer in order to establish him in this field of no competition can be called a subsidy.

Even if there were money spent in this direction, creation of competition in the aluminum industry might eventually result in a price reduction of as much as 2 cents a pound; without this competition we might conceivably see an increase of 1 or 2 cents a pound. If our judgment proves correct and the American public saves on a 1,000,000,000-pound production 2 cents a pound, an absolute minimum of $20,000,000 a year would be saved, not taking into consideration additional savings due to smaller profits on lesser cost basic materials on the part of producers, retailers, and so forth. Competition in a rapid expansion program as established at the beginning of this war would have saved this Government $300,000,000 in their plant-building program.

What, if we do not have competition by the next emergency, will it cost for our next hurdle? Wherein does subsidy lie if in the net result more is gotten out than put in? If we had never given mail contracts to our commercial air lines years ago, which was in the nature of a so-called subsidy, where today would we get the great commercial fleets from which we, the American people, are gaining so much?

I am taking this viewpoint as an American, as a taxpayer, not as an aluminum manufacturer seeking personal advantage. What that aid, incentive, subsidy, or whatever you call it, consists of is the important

thing, not the word itself. What consists of obtaining greatest value for the Government? In most cases in the plants under discussion if you attempted to sell them on the open market as such to all comers except Alcoa, the offers you would find would not be very flattering. The next step then is to hold them at an exorbitant maintenance cost which in effect is till then, subsidizing the war effort, since the war no longer exists. Let us proceed then to what might be construed as a reasonable aid on the part of the Government.

I do not believe that an operator of any of these reduction plants should be guaranteed against any loss, nor should the Government share in the profits. Don't keep Government in business as such. I feel that the plants should be carefully considered and a fine analysis of cost should be established. Establishing then, the cost of its operations-based on proposed costs-the economic feasibility is immediately established for a given volume. That information should be divulged to the RFC at the time the proposal would be made on the part of the prospect. The information should be of a secret nature. There we have a starting point. The only question that then remains is how to obtain the volume of production.

GUARANTEED OUTLET NECESSARY FOR A PART OF PLANT CAPACITY

For the beginning of its operations the plant would require a guaranteed outlet for at least a part of its capacity. In my own estimation a "50 percent of production" Government order for the ArmyNavy Munitions Board stock pile would serve the purpose. The remaining 50 percent must be manufactured at the operator's risk and disposed of on the open market. Stock piling is no subsidy. It is a matter of value received.

Operating capital should be supplied on the part of the entrepreneur. If his credit enables a loan at a bank, that of course does not preclude him from applying for a loan at the RFC which could be made on a basis of sound banking principles.

STOCK-PILING ESTIMATES

Senator O'MAHONEY. How far do you think stock piling could go? Mr. TROY. Well, I have seen estimates as high as a billion and a half to two billion pounds.

Senator O'MAHONEY. How long would it take to stock pile that amount?

Mr. TROY. I was thinking in terms of 300,000,000 or 500,000,000 pounds a year, maybe over a period of 4 or 5 years.

Senator O'MAHONEY. In 5 years that amount would have been obtained?

Mr. TROY. Yes, sir.

Senator O'MAHONEY. And purchased by the Government. Then, what would be the question that would confront the Government?

Mr. TROY. I think, sir, by that time the market would have been established that would enable individual competition of Alcoa to obtain its own markets, and if it could not by that time, then something is drastically wrong with our entire system.

Senator O'MAHONEY. Within that period you think that new and broader markets could be developed?

Mr. TROY. That I think has been brought out very adequately in all this testimony. In my own opinion, sir, I think it has been substantiated by practically everybody in the business, including Alcoa.

The loan of operating capital as such should not be considered as part of a contract to buy or lease any plant unless the individual can command the loan on his own power. Terms of course should be as liberal as possible.

PLANTS SHOULD BE LOCATED WHERE PEOPLE ARE PERMANENTLY

ESTABLISHED

I once heard Senator Wherry, of Nebraska, remark that the work should be brought to the people, not the people to the work-meaning of course that plants should be established where there are people not causing continual dislocations.

I have just returned from a cut-short visit of inspection and engineering study of the Los Angeles reduction and extrusion plants. The people of Los Angeles are very anxious to have their local productive capacities put to use. Their eyes are focused in this direction. The thing that struck me as being most singular was that in a part of the country, where 50 percent of the country's planes were built, there was not a sheet mill. Yet during the war, a 288,000,000-pound sheet mill was constructed at Spokane.

In my analysis of the situation, I found that the Southwest was ripe for an integrated industry in the aluminum field, and that a goal like that was not unobtainable in the near future if the start were afforded through the obtaining of these plants at this time. The establishment of a local bauxite plant would be an immediate plan followed by the setting up of a sheet mill meeting the local requisites. This goal, while it would not permit any immediate withdrawal of profits for years to come, would accomplish the sincere desire on our part to benefit not only ourselves but the people. Our interests would be protected on a sound down-to-earth basis and our profits would then accrue.

In considering the Los Angeles project it would be well for the committee to dwell on the Boulder Dam power arrangement of costs to the city of Los Angeles as compared with that of Coulee-Bonneville. It is my understanding that almost 50 percent of the costs of CouleeBonneville Dams have been charged off against items like flood control, and so forth, allowing a low power rate whereas at Boulder only 18 percent has been so charged, causing a higher rate. Added to this, of course, is a 300-mile span of power being carried to its outlet. Why should such a power differential exist? Immediate steps should be taken toward its correction even though no immediate action is taken on the over-all power problem.

WOULD LIKE A 5-YEAR LEASE WITH THE GOVERNMENT WITH OPTION TO BUY

What we would like to see on a basis of purchase would be a 5-year lease with the Government with an option to buy. The value of the plant is to be mutally agreed on by the RFC and the prospective purchaser. The leasing arrangement would virtually be a part of the purchase action. The lease payments would be based on a "so much per pound sold arrangement" which would apply toward the purchase

For instance, if there were 100,000,000 pounds of aluminum produced annually in the plant, then a half cent would yield a return to the Government of about $500,000 per annum. Since, purportedly, these would be the best terms that the Government could get (outside of Alcoa) for these plants, they would, in effect, create a sale to the highest bidder. There is no subsidy involved. Of course the economic value should be the determining value of such plants.

ECONOMIC VALUE MUST BE DETERMINED

Incidentally, in physically inspecting the extrusion plant at Los Angeles it was discovered that a million-dollar air-conditioning unit had been installed. This unit, during all the time of the plant's operation, was never used. It probably never will be used; its value is nil. The reduction plant supposedly has carbon-rod-making facilities that are 50 percent greater than its own needs. Los Angeles was to have supplied Riverbank with their carbons. Both these plants have black-out lighting, and the cost of inserting windows is also a consideration.

These are only some of the factors that must be taken into consideration when determining economic value. I bring these to your attention so that the $178,000,000 figure represents only what these plants cost the Government and is nowhere near their true worth. In further consideration of these plants it should be pointed out that all records and figures pertaining to the plants' past operations should remain with the plants. In both of these plants they had been removed by the operating companies.

The purchase of the main constituent of the basic aluminum, namely, alumina, according to the Surplus Property Board, would run around $28 to $30 per ton out of Hurricane Creek. The arrangement for the purchase of this material would constitute only an immediate aid with us only until such time as a bauxite plant could be established at Tidewater in Los Angeles to handle imported ores from the Orient.

We would also like to suggest that it would be a recoverable cost to take part of Baton Rouge and move it out to the west coast at this time in order to put to use a plant which otherwise may not have any use. We want to state that it would not be our intention of entering competing fields where small business has its greatest opportunity, but rather promote new small companies into them.

RECOMMENDATIONS FOR CONGRESSIONAL FORMULA

Upon the completion of our inspection and analysis of the plants on the west coast and upon the formation of a definitive policy on the part of the Congress so that the Surplus Property Board, through its agent, the RFC, knows exactly what is acceptable and what isn't, we will make our formal, specific offer for these plants.

The RFC and in-sight prospective purchasers should sit down and the prospective customers should make known what they would like to see in that formula. Those recommendations should be studied as possibly being a part of Congress' formula. We sincerely trust that the formula as will then be laid down by the Congress will be progressive and will meet the demands of the situation. In any event, it should be an over-all plant and all comers should be treated similarly.

The plan and the way it is working out could be looked at in retrospect by the Congress and adjustments made if needs be.

In conclusion, let me say that we have found that in the past we have manufactured many items which Alcoa and Reynolds said couldn't be made; that by this token, through competition, Alcoa and Reynolds may learn much. A joining of hands is necessary.

(Information supplied by Mr. B. Cozzens, city of Los Angeles, department of water and power.)

Allocation of costs, Boulder project versus Bonneville-Coulee project (excluding transmission system facilities)

NOTE.-Figures for Boulder were obtained from Interior Department appropriation bill, 1944, and apparently cover all costs incurred, however, no specific mention is made of interest during construction period. Figures for Bonneville were obtained from a report made by the Bonneville chief engineer to the Federal Power Commission and specifically include interest during construction period.