Page images
PDF
EPUB

legal obligation which is enforceable in the courts by small-business users, or on their behalf?

Mr. TRAINER. Yes, sir.

Mr. BLANDFORD. Assuming the approval of all of the proposed sales, have you made any tentative or firm agreements with the Shell Chemical Co. to purchase a portion of its GR-S production? If so, state the terms and the amount of GR-S involved.

Mr. TRAINER. In January, January 25, 1955, we received a letter from the Federal Facilities Corporation in Washington, advising, in part, which reads:

All GR-S consumers who now placed orders with the Federal Facilities Corporation on 90-day advance basis should continue this practice through delivery month of May and July 1955, in addition to placing duplicate orders with private purchasers for the same delivery months.

We placed an order with the Shell Co. for 3 months, for total of 3,600 tons GR-S.

Mr. BLANDFORD. 3,600 tons per month or

Mr. TRAINER. Total, 1,200 tons a month.

Mr. BLANDFORD. That is for the period-for what period?

Mr. TRAINER. Three-month period, 90 days.

Mr. BLANDFORD. That is for May, June, and July delivery?
Mr. TRAINER. May, June, and July.

Mr. BLANDFORD. Those were the only commitments, terms or contracts you have made with Shell?

Mr. TRAINER. Yes, sir. Frankly, it was our feeling that in doing this during the period of transition between Government and private operation, that a big plant like the Los Angeles plant had to know what it was going to produce starting the day that they took over the plant.

The CHAIRMAN. All right.

Mr. TRAINER. We thought it would be helpful to the overall program to place that order with them.

Mr. BLANDFORD. The same question with regard to Phillips.
Mr. TRAINER. No, sir.

Mr. BLANDFORD. You have no

Mr. TRAINER. We have placed no orders with Phillips.

Mr. BLANDFORD. You have no orders placed or no terms arranged with Phillips. Do you have any firm plans for the expansion of capacity of the copolymer facilities which you propose to purchase? You already answered that question.

Mr. TRAINER. Yes. Over and beyond present capacity, we would anticipate that the capacity of the Lake Charles plant will be increased about 13,000 tons.

Mr. BLANDFORD. Increased Lake Charles by 13,000 tons.

The CHAIRMAN. That would make about 70,000 tons capacity at Lake Charles, then.

Mr. TRAINER. That would raise Lake Charles to 113,000 tons. From present capacity, 99,600.

Mr. BLANDFORD. At what price do you propose to sell inventory GR-S !

Mr. TRAINER. At the price we purchase it from the Government, that is no profit.

Mr. BLANDFORD. Government cost. What price do you plan to sell GR-S manufactured in your own facilities?

Mr. TRAINER. We are at present on record that we will sell general purpose synthetic rubber for 23 cents f. o. b.

Mr. BLANDFORD. You have entered into contracts for the sale of GR-S at 23 cents?

Mr. TRAINER. At this time we have entered orders for the sale of at least 20 percent of our capacity.

Mr. BLANDFORD. At 23 cents a pound?

Mr. TRAINER. At 23 cents.

Mr. BLANDFORD. What effect would a decrease in the supply of natural rubber, or an increase in the price of natural rubber, have on your planned selling price of GR-S?"

Mr. TRAINER. We do not believe that the selling price of GR-S under private operation would be affected by a decrease in the supply of natural rubber or an increase in the price of natural rubber. During the 10 years of Government operation, changes in the price, selling price of GR-S have been made as a result of changes in the cost of producing butadiene and styrene and the cost of labor.

We believe that this will continue to be the basis for any GR-S price changes under private operation.

It is to the interest of the rubber product manufacturers to have stability in the prices of the materials that they use. It will be to our interest to maintain a stable and uniform selling price of GR-S, in an effort to control fluctuations in the price of natural rubber.

The CHAIRMAN. Thank you very much, Mr. Trainer. We appreciate your frank and candid answers from the great corporation you represent.

Now, the next witness is from Goodyear Synthetic Rubber Corp., a subsidiary of Goodyear Tire & Rubber Co. Two plants.

Now, who is here from that corporation?

Mr. BLANDFORD. Mr. Spencer.

The CHAIRMAN. Mr. Spencer, what position do you hold in this corporation?

Mr. SPENCER. Mr. Chairman, my name is Leland E. Spencer. I am the assistant to the president of the Goodyear Tire & Rubber Co. of Akron, Ohio, with which firm I have been associated for nearly 29

years.

We were honored by your invitation and consider it a real privilege to appear before this committee in connection with these hearings relative to the disposal of the Government-owned rubber-producing facilities.

On June 4, 1953, Mr. P. W. Litchfield, chairman of the board of the Goodyear Tire & Rubber Co., appeared before the House Armed Services Subcommittee and on June 25, 1953, he also appeared before the Senate Banking and Currency Subcommittee and, in both instances, Mr. Litchfield wholeheartedly endorsed the objectives of proposed legislation with respect to the disposal of the Government-owned synthetic rubber facilities to private industry.

The Rubber Producing Facilities Disposal Act of 1953 was entirely consistent with his views expressed on those two occasions, with one important exception.

That single exception involved an urgent plea before the committees previously mentioned that the proposed legislation provide for the accumulation of and maintenance of an inventory of 200,000 long tons of general purpose synthetic rubber as (1) national security, (2) a means

of stabilizing production levels, (3) as a basis for economic arrangements for retaining facilities in standby and (4) to facilitate a smooth and orderly transition at the time of disposal.

While it is too late now to cry over spilled milk, we are impelled to inform you that we would feel considerably more relieved today if the act had included provision for this safeguard and if such a quantity of synthetic rubber had been accumulated as an operating reserveinventory.

Now in my prepared notes, however, fortunately, no catastrophe has happened and that advice was well advised, but since it wasn't followed, no harm has come from it.

In this connection, it is our considered view that private industry will, as soon as possible, accumulate and maintain an inventory which will in total provide more national security than exists today under Government operation. To that extent, the Nation will then be more secure than it has been theretofore.

Nevertheless, the Disposal Act of 1953 was enacted and, as required by the act, three intelligent and capable businessmen were appointed by the President to serve as a Disposal Commission. This Commission was charged by the Congress with obtaining the highest price possible. for the facilities, while at the same time creating a competitive pattern that would prevent monopoly and encourage competition as well as protecting, insofar as possible, the security of the Nation.

The Commission has, in our opinion, developed a disposal program embodying all of these objectives.

The program as developed represents a solution to an unprecedentedly complex problem, not only with respect to the aforementioned objectives, but also with regard to international relations with other free nations.

The American public and all free nations throughout the world will long be indebted to this Congress which through acceptance of the proposed disposal program has an opportunity of resolving basic and potentially serious national and international problems, insofar as adequate supplies of new rubber are concerned.

Goodyear Synthetic Rubber Corp., a wholly owned subsidiary of the Goodyear Tire & Rubber Co., presently operates 2 copolymer plants, 1 at Akron, Ohio, and 1 at Houston, Tex.

The Goodyear Synthetic Rubber Corp. has entered into an agreement to purchase both of these facilities in accordance with the regulations governing such transactions, including the national security clause, and provisions for making available a fixed portion of the output to nonpurchasers of facilities and at competitive prices.

You may be assured that expansions will be undertaken as expansions appear to be necessary and, insofar as possible, well in advance of actual need. Equipment has already been ordered against our private account in anticipation of early expansion.

Now, with specific regard to the identical bills (S. 691 and H. R. 2882) which provide special provision for reopening disposal of the Baytown, Tex., copolymer facility, we comment as follows:

Unqualifiedly, we endorse the proposed legislation, in principle. We think the program is incomplete unless Baytown is kept active. We urge legislation involving the minimum elapsed time between the transfer of this facility and the date when all other facilities are transferred.

We urge that it be kept in operation without interruption pending sale to private industry-for a limited period, of course.

I want to thank you for giving me this opportunity to present our views on this very important legislation. We are at your service if we can be of further assistance to you.

The CHAIRMAN. Thank you very much, Mr. Spencer.

Now, Mr. Spencer, we have a few questions that we are going to propound to you and the other witnesses, just like we have done with the previous ones.

Mr. Blandford, please read question No. 1 to Mr. Spencer.
Mr. BLANDFORD. Yes, sir.

Assuming the most favorable conditions, what do you estimate to be the maximum capacity, or assigned annual capacity of GR-S rubber, expressed in long tons which you could produce annually in the copolymer plant which you propose to buy?

Mr. SPENCER. 114,800 long tons in both plants.

Mr. BLANDFORD. That is net?

Mr. SPENCER. Yes.

Mr. BLANDFORD. 2. How many long tons of GR-S did this facility produce in 1954?

Mr. SPENCER. 67,096.

Mr. BLANDFORD. What has been its average production over the last 4 fiscal years? That is, for these two facilities?

Mr. SPENCER. 103,500.

Mr. BLANDFORD. 103,500?

Mr. SPENCER. Right. (Figure corrected to 93,500 after adjournment.)

Mr. BLANDFORD. Is it correct to assume that you could operate at maximum capacity for any extended period of time without doing irrevocable damage to the facility?

Mr. SPENCER. Our experience has shown that operations at maximum capacity can be sustained for an extended period.

Mr. BLANDFORD. What do you consider to be an extended period? Mr. SPENCER. Just what your question asked. It might be 1 year, it might be 2 years.

Mr. BLANDFORD. Would you say 2 years' maximum?

Mr. SPENCER. I would say 2 years.

Mr. BLANDFORD. Assuming you get the facilities, how many long tons of GR-S rubber do you plan to produce annually?

Mr. SPENCER. We plan to produce up to capacity, if the demand justifies capacity operations. In other words, all we can use or sell. Mr. BLANDFORD. Section 21 (h) of the act defines the terms "smallbusiness enterprise" as an enterprise independently owned and operated which is not dominant in its field of operation, due regard being given to the number of its employees and dollar volume of business. Do you agree that this would exclude a subsidiary company of a purchaser of a copolymer facility from participating in the share of GR-S to be made available to small business?

Mr. SPENCER. Yes.

Mr. BLANDFORD. What percentage of your planned production, expressed in long tons, do you intend to make available to small business on a continuing basis?

Mr. SPENCER. Not less than 11,500 long tons.

Mr. BLANDFORD. Not less than 11,500.

The CHAIRMAN. What percent would that be?

Mr. SPENCER. That is not less than 10 percent, sir, as covered in the contract.

Mr. BLANDFORD. 11,500.

In the sales contract covering this facility you assume an obligation to make available a percentage of your production to small business users. Do you consider this obligation to be a legal obligation which is enforceable in the courts by small-business users or on their behalf? Mr. SPENCER. Yes, we consider this obligation binding equally with all other terms of the contract, including the national security clause. Mr. BLANDFORD. Assuming the approval of all of the proposed sales, have you made any tentative or firm agreements with the Shell Chemical Co. to purchase a portion of its GR-S production? If so, state the terms and the amount of GR-S involved.

Mr. SPENCER. Goodyear is now in the process of negotiating an agreement to purchase a portion of its Los Angeles plant's requirement for the month of May 1955. Terms, 23 cents per pound, net GR-S, f. o. b. producing plant. Quantity, approximately 1,000 long tons. Duration of firm order, a portion of the next succeeding month's requirements only.

Mr. BLANDFORD. In other words, you want a firm contract for 1,000 long tons for May, with the same right to purchase the same amount in June?

Mr. SPENCER. Yes, sir, but no commitment beyond 1 month.
Mr. BLANDFORD. How about Phillips? The same question.

Mr. SPENCER. None.

Mr. BLANDFORD. No agreement with Phillips. Do you have any firm plans for the expansion of the capacity of the copolymer facility or facilities which you propose to purchase?

Mr. SPENCER. Yes. As I testified, we have already ordered equipment against our own account and plan on further expansion-and plans on further expansion which even are now partially engineered and will be undertaken just as soon as the requirement justifies such expansion.

Mr. BLANDFORD. To what extent would that increase your capacity? Mr. SPENCER. As a first step, perhaps 10,000 tons.

Mr. BLANDFORD. That is combined in the two plants?

Mr. SPENCER. Yes, sir.

Mr. BLANDFORD. Át what price do you propose to sell inventory GR-S?

Mr. SPENCER. At the same price as that which we purchase it from the Government.

Mr. BLANDFORD. Cost from Government.

Mr. SPENCER. Yes, sir.

Mr. BLANDFORD. And GR-S hereafter manufactured in your own facilities?

Mr. SPENCER. No prices have been quoted to date but it is our intention to establish the same prices per pound as the Government is presently charging.

Mr. BLANDFORD. 23 cents a pound.

Mr. SPENCER. (Nods.)

Mr. BLANDFORD. F.o.b.

Mr. SPENCER. We haven't decided the freight yet, but it will be a break-even freight proposition.

« PreviousContinue »