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Now, the reason, as I have said, is that we have plenty of bauxite all over the world, but the freight on bauxite is so high-our freight rates are the highest in history-that it does us no good in this country.

Many years ago they put a duty on alumina of $10 per ton. If we converted the Dutch East Indies bauxite into alumina, we would have only 40 percent of the cost of freight and we could have a competitive condition.

It is apparent from what I have said that the propositions before the committee do not contemplate the use of any foreign bauxite, that they contemplate using only the limited supply of bauxite in Arkansas. It is our contention that if the limited natural resource that is left of the bauxite in Arkansas is left in Arkansas, it can run an aluminum industry there for many years; and as the gentleman preceding me said, they can build up a large number of manufacturers around that and have a continuing prosperity.

The first thing we have got to decide here is whether we are going to rob Arkansas of her natural resources and of her future prosperity to run a large industry for a limited period and then have a complete flop.

ARKANSAS PRODUCED BAUXITE "FASTER THAN ALCOA EXPECTED"

The first statement made by Alcoa, so far as I know, as to the disposal of these plants, was made at the Mining and Metallurgical Engineers' convention in Chicago in October, 2 years ago. The first conclusion was this: They foresaw nothing which would increase the use of aluminum after the war beyond what it was prior to the war, Second, that there would be no use for the Government plants, and that they should be scrapped. Third, that they would have to lay off from 80,000 to 90,000 men after the war. That is the first proposition that Alcoa made.

Now, the people of Arkansas were patriotic, and they went after the job and produced bauxite down there so much faster than Alcoa expected that before they knew it they had created a stock pile of 3,000,000 tons, which is substantially available at the present time. Then, they were shut off completely about a year ago and their contracts canceled. This kitty of bauxite has prevented Alcoa from going through with its proposition to scrap the aluminum plants. They can't scrap those plants with this bauxite on hand, so this is only a plan to use up this temporary supply of bauxite, and then we will have a lot of obsolete plants on our hands.

In my prepared statement I have likened Arkansas to a widow with insurance, and it is quite apparent that a lot of sons and daughters of Arkansas are being feted and complimented and encouraged to talk for Alcoa. Alcoa is making love to that widow, and so is Reynolds. When her bauxite is gone, I think she will be obsolete.

I am leaving my statement to be filed, and I am confining my remarks to a few points. The duty on alumina of $10 a ton cannot be justified by labor, because the cost of labor in making the alumina before the war was around 80 cents per ton-$10 as against 80 cents.

The duty on alumina was put on many years ago to protect the Aluminum Co., but I do not believe this committee or the people of America believe that Alcoa needs that protection today.

My next point is this: I have talked to Europe twice this week. I am informed that there are between 300,000 and 500,000 tons of alumina ready to be shipped from France, Yugoslavia, Austria, and Hungary, and that they would be glad to furnish us alumina. Their market in Germany has been cut off, and they would be glad to trade with us and would prefer to sell us goods in trade than they would to be objects of charity or go in our debt. That alumina can be brought into this country, and it can furnish alumina to that plant in Los Angeles and can furnish it to the west coast plants, and we can then have a competitive industry.

We are talking about an industry that can produce aluminum at 7 cents, not at the fictitious ceiling price that was put on by OPA based upon no question of cost.

Now, the next thing is this. We have three large rolling mills, one at Spokane, one at Chicago, and one at Newark, Ohio. Each of these mills can produce 150,000 tons, or more, of aluminum per year. If they operate at capacity, it would cost $60,000,000 to operate. If they operate at half capacity, it will cost $42,000,000 to operate. If they operate at one-fourth capacity, it will cost $34,000,000 to operate.

In other words, if we go to a 25-percent capacity year, the cost of fabricated aluminum to the public will be more than doubled. Those plants have got to be operated at or near capacity, in order to be of any value to the Government.

I don't know how to express myself as to the kind of propositions I have heard before this committee. I have heard it said here that these are the most efficient plants in the aluminum industry, representing $700,000,000, and the people come in here and say, "If you will guarantee us against loss and if you will give us orders so we can run the plants, we will take them on lease."

I have never heard of anything so ridiculous in my life. If you will take the duty off bauxite-let me bring out a very important point here. This duty on alumina of $10 a ton is not a revenue measure for the United States Government. I have looked through the Bureau of Mines reports for 20 years, and I cannot find that there has ever been any alumina shipped into America in 20 years. There has not been one dollar of revenue gotten out of this duty on alumina. It is merely the protection that has prevented there being anything but a monopoly in this business. The duty can be removed without loss of revenue.

In order for these plants to operate at maximum capacity, there must be alumina plants and there must be alumina reduction plants, and it would take all of them. I have heard it said here that the plant at Burlington, N. J., would have to be scrapped. I can tell you that if we get alumina from France and don't have to pay duty on it, that plant can operate. We can operate it because we have got the Big Inch pipe line, and we have the oil refineries there, and we can produce power in the day by oil and get off power at night, and then can operate that plant. That plant cost over $20,000,000. Are we going to scrap that plant, simply to keep a barrier to protect monopoly, or are we going to take that monopoly away?

In conclusion, let me say that there are several things that are uncertain. I have covered other things in my report, and I hope the committee will see fit to read it. I don't want to prolong this, although I would like to go into it very much further.

(Mr. Cary's report follows the conclusion of his testimony.)

The freight rates are uncertain. They were made during the war. We never saw a freight rate of less than 4 mills per ton-mile, and that is the freight rate from Arkansas to the Pacific Northwest. In order for us to do business, we have got to have certainty. We cannot put up $30,000,000, which we are prepared to do to buy these plants, on any uncertainty. We are ready to buy these plants the minute you will take the duty off bauxite. We are willing to pay you the reasonable value of those plants. We will show our stability through our bank in Wilmington, and the stability of the people behind us. We are not going to disclose who the people are behind us, because they are users of aluminum, and they are dependent upon Alcoa to furnish them at the present time, and we don't want them discriminated against in case we do not make this deal.

There isn't any question but what we can take the whole $700,000,000 and put them into operation.

The Hybinette Laboratory has been in operation continuously, from father to son, for 700 years, and I don't believe that we have failed yet. We produced a process used in Canada and Russia that reduced the cost of making nickel from $15 per pound to 22 cents. We produced the nickel-chromium alloys that made it possible to crack gasoline. We produced those alloys that were necessary for producing synthetic rubber and many chemicals. I could go on for an hour and tell you of the outstanding things that this laboratory has done.

We have an organization that is capable of offering better technical knowledge in this business than has been used in the past. We will make improvements in this business, and Alcoa will make improvements. It is a well-known fact that old industries do not improve unless they have competition. We will show them how.

I thank you, Mr. Chairman.

Senator MURRAY. We thank you for your statement, and you may be assured it will receive careful study.

Coming at the end of the meeting, I am sure others may wish to comment on it, and they will be given the right-anyone who desires -to submit any statement or analysis on it.

Senator REVERCOMB. I want to make an inquiry. You have indicated here that you, on behalf of some persons whom you feel should not be disclosed, would like to buy some of these plants. Have you discussed this with the Government selling agency at all?

Mr. CARY. I presented a proposition to Mr. Symington 3 weeks ago today and told him that these prerequisites, the uncertainty of freight rates, the uncertainty of electric power and the duty of alumina would have to be settled before we were willing to bring our money down here and put it on the barrel head.

Senator REVERCOMB. In other words, you would not make a firm offer until those three conditions had been met?

Mr. CARY. Nobody can. You have got to know what you are doing. I do not think I would last long in my business if somebody put up $30,000,000 and didn't make good.

I was technical director of the Le Tourneau Co., the builder of the big earth-moving machines, and we always made it a point that every side of a proposition be discussed and determined before we put our

money out. That is the reason that that company started in the depression and made money all through the depression and has made over $45,000,000 profit up to the present time.

I would like to say just one word on the question of markets. I spoke about this heat-treat patent, and if the committee desires, I will explain that.

Senator MURRAY. Is that discussed in your prepared statement?
Mr. CARY. No, it is not; it is only referred to.

Here are the same alloys [indicating]. One is heat-treated and one is simple annealed. This one [indicating] has a tensile strength of 62,000 pounds per square inch. After it was pulled we were able to bend it that way without any break.

This is the strongest aluminum alloy [indicating] ever made, and it is 25 percent stronger than any alloy that Alcoa has. This is the same alloy after it was heated treated, and this one pulled at 101,000 pounds per square inch. This alloy in the annealed condition is one and onehalf times as strong as mild steel and only weighs a third as much. This [indicating] is two and one-half times as strong as mild steel.

We have one large earth-moving concern that wants 25,000 tons of our metal. I can't talk pounds-that is something that was brought into the picture during the war. We have a shipbuilding concern that wants 40,000 tons a year.

Cement is delivered to New York in containers that weigh 4,400 pounds and carry 5 tons. We have an order on our books, and have had for 8 months, for $12,000,000 worth of this alloy, because we could reduce the weight of those containers from 4,400 pounds to 700 pounds. Two of the largest railroad car builders in America say they can use 140,000 tons.

Now, let me say one more thing. We can't make sheets in Spokane and ship them east, as the gentleman from Los Angeles mentioned, and, therefore, we have got to have the mill in Chicago. But for more than 30 years all the cans for canning sardines and fish in Norway were made out of aluminum, and I noticed the other day in the paper that the catch in one place only was about 9,000 tons of sardines a day. We. have made an estimate, and it would show a demand for 300,000 tonsthat is more than they can make in aluminum out in the Northwest now-of aluminum for cans.

Let me say also to you that those cans will give you fish in better condition than you can get out of a tin can, and that is the reason Norway went to aluminum cans.

Let me say that there is no reason under the sun for throwing away, or taking any chance of throwing away, $700,000,000 worth of aluminum plants in this country that are high-class plants.

I thank you again.

(The prepared statement submitted by Mr. Cary is as follows:)

ADDITIONAL STATEMENT OF FRANCIS C. CARY, METALLURGIST, WILMINGTON, DEL., RE DISPOSAL PLANS FOR ALUMINUM PLANTS, OCTOBER 19, 1945

I appreciate the honor of being invited here to give my views on this subject. I further want to commend Congress for the thorough job it has done in developing most of the facts. It will be assumed that the committee is familiar with the able interim report produced by Senator Murray.

The object is to dispose of the Government plants and create an integrated competitive aluminum industry. It must be directed toward establishing a perma

nent industry and a permanent disposal. Such disposal must promote the greatest benefit to the greatest number of people. It must promote the largest employment possible. A wise plan can create prosperity, a short-sighted plan would be disastrous. Disposition is an immediate necessity to get these plants into operation. A long-range plan must be pursued to have continuing prosperity and employment. The prerequisites to either a lease or sale are:

1. Bauxite or alumina.

2. Power.

3. Transportation, both ocean and rail transport.

BAUXITE AND ALUMINA

Arkansas has a limited supply of bauxite, it also has the Jones Mills aluminum plant, and it has natural gas. Bauxite and natural gas are its two most important natural resources. Although the bauxite is low grade, with the equipment at Hurricane Creek, and with improvements we can make in the process and the saving in freight, it can compete with foreign ores. Natural gas is plentiful and should be cheap enough for power. Arkansas has a favorable location. If the natural resources of Arkansas are conserved and used over a period of years these plants can be operated many years and will be a permanent supply of aluminum in Arkansas. A permanent supply of aluminum will build a host of industries in Arkansas to fabricate and make consumers products and will establish a balanced economy between agriculture and industry. It will provide opportunity for the progresive young men coming out of the schools and universities. It will establish a permanent prosperity based upon its own natural

resources.

The first question to be decided is whether or not we are going to rob Arkansas of its natural resources and its future prosperity by a flash-in-the-pan operation in other plants and a quick profit for some operator or operators. Arkansas is like a widow with insurance money. If we take away her insurance and use those plants temporarily we will soon have consumed her insurance and have an obsolete widow to dispose of at which time the Government will have some obsolete plants worth only their dismantling value and Arkansas will be deprived of its heritage.

The people of Arkansas should not object to a temporary use of their natural resources to start up the other aluminum plants, but such temporary arrangement should be terminated as quickly as possible.

We have consulted with representatives of certain European countries who have provided alumina to Germany for making aluminum. They can furnish us bauxite or alumina. It takes about 2 tons of bauxidte to make 1 ton of alumina. There is no difficulty in ocean-shipping alumina. Alumina has been ocean-shipped to Norway for many years. For more than 2 years we have had several men in many countries investigating bauxite. Our transportation experts advise on the cost of delivering the bauxite. The calculations show that we cannot import bauxite from far distant lands and compete with the Guianas. Ocean freight is the highest in history. The distances are too great.

It costs about half as much per pound of aluminum to transport alumina, the oxide, as it does to transport bauxite. It also reduces the canal tolls about one half.

It has been recommended by the Murray committee that the duty of $1 per ton on bauxite be eliminated. The report is silent as to alumina. The duty on alumina has been $10 per ton. This duty cannot be justified as protecting labor because the direct labor in making alumina before the war was less than $1 per ton. It cannot be justified as protecting small industries because there were none. It effectively prevented the importation of alumina over the years. If the duty on alumina had been eliminated the Badin plant in North Carolina would have been an independent producer of aluminum. This duty has effectively protected monopoly from being challenged over the years.

The former hearings show that for every man employed in producing aluminum there were 50 men employed in fabricating, that for every man producing alumina there were 100 employed in fabricating the metal. By eliminating the alumina duty we can lower the price of aluminum and for every man lost in producing alumina we will create employment for 100 men in utilizing the metal. We think it is time to take a realistic attitude towards Europe. France, Austria, Yugoslavia, and Hungary can furnish as alumina. They need our relief but they need employment, they need to produce and they can produce alumina

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