PROBLEMS OF INDEPENDENT SMALL BUSINESS LUSTRON DEALERS WEDNESDAY, MARCH 1, 1950 UNITED STATES SENATE, SUBCOMMITTEE ON SMALL BUSINESS OF THE COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The subcommittee met, pursuant to call, at 2: 40 p. m., in room 301, Senate Office Building, Senator Burnet R. Maybank (chairman) presiding. Present: Senators Maybank, Taylor, Fulbright, Sparkman, and Frear. Also present: Senators Douglas and Flanders. The CHAIRMAN. Gentlemen, the meeting will come to order. Mr. Lobdell, would you be kind enough to come over here and have a seat? Sit right down, sir. Mr. LOBDELL. Thank you, sir. The CHAIRMAN. I would like to just make one short statement; and that is that you gentlemen-and if I am incorrect, you correct me-wired me, as chairman, and the other members of the Banking and Currency Committee, in the interest of small-business dealers, that you believe if they could continue to manufacture these houses, and if you knew that there was to be a continuation, that you would be able to dispose of them. Mr. LOBDELL. That is right. The CHAIRMAN. And that your association of small-business people is interested in distributing these houses, being agents for these houses; making a livelihood for yourselves; and making better homes available for the people in the community to live in. Mr. LOBDELL. That is right. The CHAIRMAN. You have no thoughts of asking us, as a committee, to interfere in what the Federal court may do or may not have done, insofar as the proceedings that were brought yesterday in Ohio. Mr. LOBDELL. That is right. The CHAIRMAN. You are interested in have the RFC urge upon the Federal court, and upon the receiver, upon the appointment of a receiver, that the receiver give every consideration to the maintenance of Lustron as a going concern toward producing these houses. Mr. LOBDELL. That is right. The CHAIRMAN. Because you believe that if that can be done, you gentlemen, as small-business dealers throughout the United States, can effect sales. Mr. LOBDELL. That is right. 1 The CHAIRMAN. This committee would not wish to be asked to tell the RFC who the receiver should be, or tell the Federal court; because that is beyond our jurisdiction. We didn't get the RFC into the loan; and it is not within our province to get them out of the loan, and to get the money back. That is the business of the court. I am certainly pleased to have you gentlemen here to make a record that we can send to the RFC, and they, in turn, can send to the receiver, when he is appointed-whoever he may be showing your thoughts and your ideas that you can do something with these houses that have been, I might say, kicked about for the past few months, not knowing wheher Lustron was going to continue, or whether it was going to close. Is that right, sir? Mr. LOBDELL. That is correct. The CHAIRMAN. We are very happy to have you here. That was the understanding of the committee, when you asked the Small Business Subcommittee for a hearing. If I have to leave before the hearing is over, it is because I had a previous meeting in the Appropriations Committee with the Postmaster General before I knew of this yesterday. But I want to assure you that my heart and sympathy are with the small-business people in this country; and if there is anything this committee can do in the way of recommendations to the RFC who, in turn, may take it up with the receiver, so that small business concerns, such as yours and the other gentlemen that are here, can be properly protected, we will be happy to do so. I wanted to make the record clear, because the committee, itself, didn't want to assume the responsibility of hearing who should or should not be receiver; because if we hear about one, we would have to hear about all; and, after all, it is not our business to tell the court, or tell the RFC what to do or what not to do. It is our business, as a Subcommittee on Small Business, to urge that every consideration be given you gentlemen as small-business men; and that the court and the RFC take into consideration what you have to say. That was the preliminary statement I wanted to make. Senator Fulbright has been chiefly instrumental in this. He is the chairman of the RFC subcommittee; and I will ask if he has any questions before you start to testify. Senator FULBRIGHT. No, Mr. Chairman. If Mr. Lobdell has a statement to make, I would be interested in hearing that. The CHAIRMAN. Senator Flanders? Senator FLANDERS. No. The CHAIRMAN. Senator Sparkman? Senator SPARKMAN. No; I have no questions. The CHAIRMAN. Will you proceed, sir? STATEMENT OF W. W. LOBDELL, LOBDELL REALTY CO.; PRESIDENT, LOBDELL CONSTRUCTION CO., ROCKFORD, ILL. Mr. LOBDELL. I am one of the little dealers from Rockford, Ill. Senator FLANDERS. I wonder if you would make the usual formal statement of your name and your organization for the record? The CHAIRMAN. Give your full name, your address, and organization, and so forth, for the record. Mr. LOBDELL. My name is W. W. Lobdell. I represent Lobdell Realty Co.; I am president of Lobdell Construction Co., of Rockford, Ill., a community of about 84,000. We have a Lustron franchise in a territory covering about 30 to 40 miles around Rockford. We got our franchise last February, a year ago, after considerable waiting and giving them a lot of proof as to our ability. We got our first house in March. It took us 1,153 hours to build that first house; and for the first few months we were almost convinced it couldn't be built in 350 hours, which Lustron claimed it could. We had all kinds of problems and obstacles put in our way. We had to fight the local building codes. We spent quite a lot of money to do that. We finally overcame their objections, because we proved we had a better house, a more fireproof house than anybody else. We couldn't get proper commitments from FHA and VA; and it took us a good many months to overcome all these problems. We found out that all the other dealers were having the same problems. Now my story is almost word for word what any one of these dealers all over the country would tell you. The CHAIRMAN. How many dealers do you represent? Mr. LOBDELL. There are 221 dealers in the country whom we represent; and we have telegrams, either here or on the way, from all of them, giving you all these same statements that I am going to give you. The CHAIRMAN. I might say at this point, following your remarks, we will insert those telegrams in the record. Mr. LOBDELL. Yes, that would be fine. What I am trying to show you is, the first few months we built very few houses. I hadn't built my fifth house in the first 5 months of last year, in the first 6 months of last year. By last Friday, I had built in our community 52 Lustron homes. Now, what I couldn't understand was why the other dealers around the country hadn't done as well, because we had had one stumbling block after another. We are no supersalesmen. There were just my brother and I to start with. We have now built up our organization. We have half a dozen salesmen, and they are bringing in orders at the rate of 5 and 10 a week right now. I have called Lustron within the last week, and gotten 12 houses out of them. We have 25 FHA commitments in FHA right now. I have one project that just came through today, allocating, I think it is, 151 units, that is going to be built up at Madison, Wis. We are all right on the verge of really going to town. We are waiting for the weather to break. A lot of the dealers around the country haven't stressed the sales angle until they were sure they could build these houses in 350 hours or less; because that is what our sales price is based on. Now, most of those who have built at least 10 houses know they can be built in the required number of hours. But some of these dealers have only been in operation for 4 or 5 months; and then they came into the winter weather, when you have your frost problem, and your reduction of sales; so they haven't shown any real progress to the public. You can take the number of houses that Lustron has built today. They have only built and sold about 2,300 houses. 63072 50 Now, we are not taking management's fight; we are not taking any brief for RFC or management, or anybody else. They said if they can build 8,000 houses a year or sell that many it will be a profitable business; and they will be able to pay back the money they have borrowed from the Government. Now this story has never been heard before. We found out just a week ago, last Monday night, that none of the dealers, themselves had been before any group of RFC or your committee or anyone else. The CHAIRMAN. You gentlemen never asked to appear before us before today. You never asked to appear until yesterday. Mr. LOBDELL. We never told our story, the factual story, what it was. The supposed facts were given by someone else, other than the dealers. Senator FULBRIGHT. Didn't RFC ever ask your views about it? Mr. LOBDELL. No. Senator FULBRIGHT. No one ever consulted you? Mr. LOBDELL. No one ever did. A week ago last Monday night, I called Harley Hise of the RFC to tell him just what we are trying to tell you now. He said they had all the facts, and they weren't interested in any additional information; that I would have to get the information that I asked him for from Strandlund. Strandlund didn't know any more than I did, it seemed. We have had a meeting with the RFC since. Mr. LOBDELL. We have had a meeting with Harley Hise since. He showed us the figures that he had; and, of course, when we bring in these figures now, it looks like we are crying "wolf"; but they were never our figures before. Now we have the actual facts; and now that we are ready to go ahead and build the number of houses necessary to put Lustron back on its feet, regardless of management-we don't care who the management is; any one of us can go in there now, I think with what the dealers have got set up, and run that plant and make a profit and pay the Government back. The CHAIRMAN. How were you able to cut down the time, as I understood you to say, from 1,153 hours to 350 hours? By experience? I am totally uninformed on that aspect of the matter. Mr. LOBDELL. When we got our first house, there were some parts that were still being made by hand; and they didn't fit. Our erection crew-they were carpenters; and they had never come across anything like this before. The CHAIRMAN. They had to remake them? Mr. LOBDELL. Not remake them. They just had to find out where they fit and how to make them fit. Now the parts which we get in these houses-and they all come on one trailer-fit pretty well. We don't have the problems we had then. They go in place in a hurry. We don't have the shortages we had to begin with. We have built this house in 308 hours; and our average right now is 320 hours; and our price of the house is based upon 350 hours. Now, some people have said that the potential of the houses that can be sold for Lustron is only about 4.000. That was based on a market report presented to you; and I believe the market report was taken 6 months ago, and was based on the first Lustron home model. Since then, we are now selling three homes instead of one. They have five other homes that are ready, all engineered and almost ready to be |