reconversion as effort is made to establish for the future an aluminum industry that is competitive? If that be done, the use of aluminum will multiply and the number of workers employed permanently will be increased. COMPETITIVE ALUMINUM VITAL TO NATIONAL DEFENSE The aluminum workers don't want to be idle and depend only on the meager sum from unemployment compensation. They want to work. Would it be a horrible thing for the Government to keep these plants running so as to prevent unemployment and for the first time in America establish free enterprise in the aluminum industry instead of leaving it under the control of Alcoa? Pleading for the workers of the industry, I urge you not to lose sight of our interests as you consider disposing of these plants. A competitive aluminum industry is vital to national defense. Attorney General Tom Clark said in his recent report to you: "The establishment of competition requires an end to Alcoa's domination. Nothing else will be enough." He says further "Monopoly conditions were the main reasons for the absence of a safety margin in aluminum," as war needs developed. He says further, "Right from the outset, therefore, the aluminum situation was more serious than it would have been had there been competition." So creating competition in the aluminum industry would not only be best for protection of the Government in time of war but we think it would be best for the workers in aluminum. Senator MURRAY. Thank you for your statement, Mr. Davis. STATEMENT OF FRANCIS C. CARY, OF HYBINETTE & CARY, WILMINGTON, DEL. Mr. CARY. My name is Francis C. Cary. I am a member of the firm of Hybinette & Cary, metallurgists, of Wilmington, Del. To qualify myself as an expert on aluminum, I will say that we have operated the only independent laboratory on aluminum in the United States for the past 25 years. One of the processes which was patented out of that laboratory increases the strength of alloys 25 percent. Alcoa has charged 5 cents per pound in its price of sheets during the war for the use of this invention. The amount charged exceeds $50,000,000, and this is in excess of the amount paid by Alcoa to the Government for the rent of all plants. Senator MURRAY. This patent was a patent your concern developed? Mr. CARY. Yes; that is right. Senator MURRAY. And Alcoa has used that patent on a royalty basis to your concern? Mr. CARY. I haven't mentioned that. They have not paid royalties. although they told the Defense Plant Corporation a year ago in April that they had sent us the first quarter of a million dollars for that quarter. We haven't received it yet. Senator MURRAY. It is in the mail now-is it? Mr. CARY. I presume so, and the subsequent checks have not been received. transcript, vol. 4, p. 558) that power is going to waste at Bonneville Dam, and indicated that Bonneville might be able to make nonfirm or secondary power available to the aluminum industry at rates lower than any it has thus far charged. At the start of the afternoon session on October 18 (reporter's transcript, vol. 4, p. 584) you referred to this discussion and again indicated that you would like a statement from us concerning the application to TVA of the points touched upon by Mr. Goldschmidt. I think the following, along with the enclosed copy of my letter to Senator Stewart, will furnish the information you were seeking on the two occasions mentioned: 1. TVA is not empowered by its act to supply power at below-cost figures for industrial or other private use, either as a subsidy for wartime production or as an aid or incentive to peacetime competition. On the contrary, our act declares that our power projects shall be "self-supporting and self-liquidating" and requires TVA to market its power at rates which will cover the full cost of generation and transmission and assist in liquidating the cost of the TVA multiple-purpose water-control projects. Further, the TVA Act directs that power be distributed primarily for the benefit of the people of the section as a whole, particularly the domestic and rural consumer, and that "sale to and use by industry shall be a secondary purpose, to be utilized principally to secure a sufficiently high load factor and revenue returns which will permit domestic and rural use at the lowest possible rates and in such manner as to encourage increased domestic and rural use." 2. There is no power going to waste at TVA dams and TVA has no capacity which will perforce remain idle if not utilized by the aluminum industry. TVA is now prepared to deliver to Alcoa or Reynolds or other aluminum producers in this area, at nondiscriminatory rates, such quantities of power as they may require. However, if that power is not sold to consumers in that class it will be sold to someone else. In this connection I think I should state frankly that as we see it our long-range power problem is going to be one of supply rather than markets. 3. TVA's present industrial rates, for both firm and secondary power, are the product of the policies and requirements of the TVA Act as generally outlined above, and may not be arbitrarily lowered. These rates are already as low as any rates available to industry east of the Rocky Mountains. While they are higher than Bonneville rates, it must be remembered that TVA's power costs, and therefore its power rates, are determined by the characteristics of the system of multiple-purpose water-control projects which Congress has directed be built for the development of the Tennessee River and its tributaries. As suggested by Mr. Goldschmidt, the Columbia River is a special type of water resource the characteristics of which are more favorable than those of the Tennessee from the standpoint of power production. The fact is that because of the differences in the two rivers power simply cannot be produced as cheaply on the Tennessee as on the Columbia. The power available in the Tennessee Valley, therefore, is not only higher priced but also higher cost power than that distributed from Bonneville. 4. During the discussion above referred to, and following which you requested information concerning TVA, Mr. Goldschmidt remarked (reporter's transcript, vol. 4, p. 567) that "in Bonneville and the TVA power is sold on these enormous aluminum contracts on a 20-year basis." This may be construed as suggesting that TVA has sold power to aluminum producers for a minimum term of 20 years, with a requirement that the contract demand be paid for over the full 20-year period whether used or not. This is incorrect, of course, since TVA has not sold any power to aluminum producers on a minimum 20-year basis. As a matter of fact most of the firm power sold by TVA to aluminum producers during the war (205,000 kilowatts out of a total of 257,000 kilowatts was supplied under contracts cancelable by the customer upon 1 year's notice without penalty by reason of such cancellation, and the producers have already canceled such contracts in the exercise of the right so provided. In referring above to "secondary power" I have not used the term, as seems to have been done occasionally at the joint hearing, as synonymous with hydro power or capacity which will be wasted continuously or for extended periods unless purchased by the aluminum industry. As above stated, TVA has no power 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. sheet by the Hybinette process, and this was done only for a short time and on an experimental basis in one of Alcoa's sheet mills. It was never used anywhere else by Alcoa. Alcoa undertook to obtain a wartime license under this patent for the stated purpose of putting Alcoa in a position to sublicense others without charging them any royalty. It was impossible to reach an agreement with Hybinette & Cary because of the excessive royalty demanded by Mr. Cary. Alcoa has offered to pay one-half a cent a pound royalty on the approximately 100,000 pounds of production processed under the teachings of the Hybinette patent. This offer has not been accepted. Consequently, it approaches the fantastic to assert, as did Mr. Cary before your subcommittee, that Alcoa had told the Defense Plant Corporation in April, 1944, that they had sent Hybinette & Cary $250,000 for that quarter. Mr. Cary's statements about us, made in the guise of qualifying himself as an aluminum expert, are so extraneous to any matter before your committee that we do not feel warranted in laboring the matter beyond this general denial. Very truly yours, о ALUMINUM Co. OF AMERICA, |