tion during this interim time. In other words, our plants are shut down, our men are out of work. The whole thing is disintegrating down there in Arkansas. Now, I think there has been some failure somewhere. I am not saying that it is on the part of the Surplus Property Disposal Board; it may be on the part of Alcoa; I don't know. But there should have been some way to have handled this to have kept the plant in operation and kept the men at work. Now, that is what I want to determine. As I understand it, by reason of the plant not having been in production to exceed 40 percent of capacity for a period of 6 months, under the provisions of the lease you had the right to cancel; is that correct? Mr. Cox. That is correct. Mr. Husbands, may I ask if that was the relationship figure between the production in the leased plants and in their own plants, that 40 percent figure? Mr. HUSBANDS. That is right. Senator O'MAHONEY. Isn't it a fact that RFC was willing to have temporary operation? Mr. HUSBANDS. That is correct, yes, sir. Senator O'MAHONEY. In other words, Alcoa was not interested in continuing operation upon an experimental or temporary basis? Mr. HUSBANDS. The offer made to Alcoa was that the lease wouldbe extended for a year with the right to cancel on 60 days' notice. But I think our correspondence also told Alcoa that we would be glad to discuss that with them. But they came back with a letter and told us that they wanted to cancel, and I think they also stated that a 60-day notice was too short for them. Senator MCCLELLAN. Let me ask you this question. You testified that that was said after you gave notice of cancellation; but you didn't discuss it with them prior to that time, did you? In other words, you gave notice of cancellation and after giving that notice then said that you were willing to discuss it? Mr. HUSBANDS. That was in the same letter. Senator MCCLELLAN. Yes; but that had not been discussed in an attempt to arrive at a solution, before you gave them notice of cancellation, had it? (Discussion off the record.) The Senator O'MAHONEY. I want to make this announcement. reporter requests me to say that not all of the appearance slips have been handed to him. If there are any persons here who have entered an appearance, who expect to participate and who have not handed their names to the reporter, please do so now. The committee will now stand in recess until 10 o'clock tomorrow morning. (Whereupon, at 12:50 p. m., the committee recessed until Tuesday morning, October 16, 1945, at 10 a. m.) (By direction of Senator Murray, chairman, Special Committee to Study Problems of American Small Business, the following correspondence is inserted at this place in the record :) Hon. JAMES E. MURRAY, Senate Office Building, Washington, D. C. WESTERN STATE COUNCIL, October 12, 1945. DEAR SENATOR MURRAY: The directors of this council, at its regular meeting at Salt Lake City, Utah, October 8, adopted a resolution on air transportation and a report from the light metals committee, copies of which are enclosed. Your support of these items that are of special interest to the members of this council will be appreciated. We will welcome your comment and recommendations. Very truly yours, WESTERN STATES COUNCIL, Secretary-Treasurer. RESOLUTION Resolved, That the board of directors of the Western States Council approve the following five-point program for the improvement and development of air transportation in the 11 Western States: 1. Approval and support of the air route through the Mountain States via Great Falls to Edmonton and Alaska; 2. Approval and support of air transportation in Alaska which would give the Territory access to and from air gateways at Seattle, Great Falls, and Minneapolis-St. Paul; 3. Support and approval of the oriental route through the Seattle-Tacoma gateway to Alaska and across the North Pacific to the Orient; 4. Approval and support of the trans-Pacific central route with terminals at San Francisco and Los Angeles; 5. Approval and support of local air service between California points and Hawaii and between Pacific Northwest points and Hawaii; and be it further Resolved, That copies of this resolution be forwarded to the Civil Aeronautics Board at Washington, D. C., and to members of the congressional delegations representing the 11 Western States. Adopted this 8th day of October 1945 at Salt Lake City, Utah. Attest: WESTERN STATES COUNCIL, President. F. W. MATHIAS, Secretary. REPORT TO THE BOARD OF DIRECTORS OF THE WESTERN STATES COUNCIL At a meeting of the light-metals committee of the Western States Council held in Salt Lake City on October 8, it was the unanimous opinion of this committee that the delay in disposing of light-metals plants is detrimental to the interests of business and labor in the western area of the United States. We hereby respectfully request immediate action in the consummation of disposal of the various light-metal plants in the West to private business. It is our further considered opinion that unless sale or lease of these plants is made in the very near future that the available labor supply for operation will be dispersed and create further delays in the much needed operation of these plants and jeopordize the eventual value of the Government investment. We now understand the Surplus Property Board and the Reconstruction Finance Corporation have before them a proposal for lease or sale of certain key plants by a qualified lightmetals operator. We emphatically urge conclusion of negotiations with this or other equally qualified operator within 30 days. The committee accepts the report of the Surplus Property Administration and endorses its recommendations, including those relating to studies to be pursued relative to power costs, freight rates, and tariffs. In acknowledging the necessity for competition in the light-metals industry the committee wishes to express its full appreciation for the efforts put forward by the Aluminum Co. of America during the recent war and to express the earnest hope that this company will continue in the operation and enlargement of its business. It is recommended by this committee that negotiations with any light-metals company that may be under consideration for leasing or purchasing be fully and promptly investigated as to financial and management ability to carry forward the operation of these plants on a continuing basis. We fully concur in the Surplus Property Administration recommendation that bidders be given preference in accordance with competence and prospective ability to survive. We recommend to the directors of the Western States Council that a copy of this report be placed in the hands of all interested metals companies, interested Government officials, and Members of the Congress from the 11 Western States and to constituent members of the council. Adopted by board of Utah, October 8, 1945. directors, Western States Council, at Salt Lake City, LIGHT METALS COMMITTEE, WESTERN STATES COUNCIL, OCTOBER 23, 1945. Mr. F. W. MATHIAS, Secretary-Treasurer, Western State Council, Olympia, Wash. DEAR MR. MATHIAS: In the absence of Senator Murray, your letter from the Western States Council, transmitting the resolution of the board of directors, respecting the light-metals industry and another resolution on air-transportation development in the Western States, has come to me for attention. The light-metals resolution is oportune, for we have just completed hearings, before the Surplus Property Subcommittee of the Senate Committee on Military Affairs, our Small Business Committee, and the Industrial Reorganization Subcommittee of the Special Committee on Postwar Economic Policy and Planning, on disposal policies. Your resolution will be inserted in the record and will be printed in the final report of these hearings. I am sure Senator Murray will take proper cognizance of your air-transportation resolution. With all good wishes, I remain, Very cordially yours, DEWEY ANDERSON, (On request of Senator Revercomb, the following letter addressed to Mr. Stuart Symington, Surplus Property Administrator, by L. M. Brile, president, Fairmont Aluminum Co., Fairmont, W. Va., is inserted at this place in the record:) Mr. W. STUART SYMINGTON, Surplus Property Administrator, FAIRMONT ALUMINUM Co., Fairmont, W. Va., October 22, 1945. Washington, D. C. DEAR SIR: We have read very carefully the report of the Surplus Property Board to the Congress, dated September 21, 1945, on aluminum plants and facilities. We are deeply concerned with that part of the report which proposes, in effect, a subsidy program which applies to practically every phase of the aluminum manufacture and distribution. It is the purpose of this letter to protest against the putting into effect of any such subsidy program which we believe would be dangerous to the economy of the United States, and especially dangerous to the entire aluminum industry, including all independents now operating in the aluminum industry, except those who are the beneficiaries of these sub sidies. It would open the way to demands for subsidies in other industries and once started, would have the most serious effect upon the free enterprise system in America and upon its free economy. You call attention on page 26 of your report to section 2 of the Surplus Property Act, which provides among other objectives, "to give maximum aid in the reestablishment of a peacetime economy of free independent private enterprise, the development of the maximum of independent operators in trade, industry, and agriculture." Granting of any such subsidies, as proposed in your report, would destroy peacetime economy of free independent private enterprise rather than encourage it, and would retard the development of the maximum of independent operators in trade and industry, instead of promoting it. We wish to go on record with you as being unequivocally opposed to the granting of Government subsidies in industry on any theory. The principles of democracy are based upon equal opportunities and equal justice to all. For the Government, by any process, to pick out a single individual operator in industry and to grant him a subsidy over his competitors, and to provide that if there is any loss the Government will absorb or share in it, strikes at the very fundamentals of the principle of equal opportunity of justice and of democracy. We hold no brief for the Aluminum Co. of America, or for any other concern in the aluminum industry. Neither are we motivated by selfish interest in the position that we take. It is true that we believe that the establishment of subsidies, such as proposed by you, would eventually destroy our company along with other independent aluminum companies, and even the Aluminum Co. of America. But it is not for that reason that we feel impelled to protest and object to the program proposed by you. To destroy us in a relatively small and insignificant thing compared to destroying the principle of democracy, the principle of equal treatment to all, and of equal opportunity in America. Naturally we will fight to protect our own business which was built up against severe competition and without Government subsidy or help of any kind, as all business should be. But we will fight even more to retain in America the free enterprise system and the right of industry in America to be free of unfair competition on the part of the Government, or of the Government providing subsidies to create unfair competition. We do not go into the question at all as to whether there ought to be more competition in the production of aluminum pig and other aluminum fabrications. If this competition can be developed legitimately with private capital, that is one thing; but for it to be developed under paternalistic subsidies and protection of the United States Government, is quite another thing. We maintain that the aluminum industry would be far better off without more competition than it would be with more competition developed by any such pernicious plan as you propose in your report. We now make specific reference to some of the points urged in your report as a program of the Surplus Property Board in support of Government subsidies: We refer first, to the Government guaranty against losses to which reference has been made earlier in this letter. The proposal is, as we understand it, to give an operator of a Government-subsidized plant 15 percent of the net profits, but will require the Reconstruction Finance Corporation (in other words the Government and the taxpayers of the United States) to stand all losses. We agree with the testimony that has been made before the Joint Senate Committee Investigating the Matter of Disposal of Surplus Property Aluminum Plants, that such a proposal "is an invitation to reckless, extravagant, and calculated mismangement." Under such a program an operator could spend money recklessly for sales expense, advertising, capturing of markets, and other practices which his competitors could not possibly meet, knowing well that if he suffered any losses, the Reconstruction Finance Corporation bore them. The taxpayers paid for his recklessness. And this is true, even though the Reconstruction Finance Corporation did reserve the right "to review and approve the prices at which the metal is sold, top salaries, and extraordinary expenses." This would virtually place the Reconstruction Finance Corporation, an agent of the Government, in a position to dictate the price at which aluminum was sold and could result in the Reconstruction Finance Corporation putting all competitors of the "favored son" or beneficiaries of he subsidy, out of business. We furthermore call your attention to the fact that such a subsidy would enable the favored operator to raid other operators in the industry, of their keymen without regard to the cost of it, because the Reconstruction Finance Corporation would pay. Some competition has already been built up during the war period, by raiding the organization of other operators, and the granting of a subsidy such as is proposed, would make this practice feasible and possible to a continuing extent. You propose, further, to give the lessee of Government plants an option to purchase based upon the earnings record of the plant during the subsidized lease. [Italics, are, of course, ours.] This would permit a lessee of these plants to deliberately incur losses so that he hight eventually buy the plants as cheaply as possible. As to the subsidy proposed in the Government procurement of bauxite, we will not go into special arguments against it except to stand on the premise that the principle of subsidy is all wrong in a democracy and the subsidy applied to the procurement of bauxite is as indefensible as the subsidies applies to the purchase of plants, or guaranty against losses. The same thing applies to the proposal to subsidize the manufacture of alumina at prices equal to, or lower than the Aluminum Co. of America's cost. It is our studied opinion that, contrary to what you say in the report, the advent of new producers in the industry through Government plant disposal under the subsidy plan proposed by you, would decrease national security instead of increasing it, and would decrease employment in the aluminum industry rather than increase it, and would create a confusion in the industry. It would play havoc with independent operators, as well as the principal producers. It would be handing over on a silver platter the aluminum industry, that has been built up through long effort and through years of energy and devotion to it, to some newcomer protected from the rains of adversity by a Government umbrella. Respectfully submitted. FAIRMONT ALUMINUM Co., L. M. BRILE, President. |