Senator MUSKIE. The attachment to your statement concerning the city of Reading, Pa., will be placed in the record at this point. (The document referred to follows:)

[From newspaper reports of Mar. 11, 1966];

WHY READING, PA., HAS AN "ABANDONED CAR" PROBLEM

Reading, Pa., is an industrial city of about 100,000 population. The problem of removing and disposing of cars abandoned on its streets prompted a meeting of city officials, state legislators, and the operator of a car-towing service, and the only scrap processor handling auto scrap in the area.

The following summary shows how legal red-tape and understandable city and state regulations can almost halt clean-up efforts.

The basic problem is that an increasing number of autos are being abandoned on city streets. Until this time, the towing service and others had been hauling them away free of charge to their storage lot.

Now the lot is full and the tower cannot accept any more cars. full for these reasons:

The lot is 1. Before disposing of the car, the tower must have title to it. A thorough search for the owner must be made by the state police. In this area, only one state policeman is assigned to this job-and he must cover three well populated counties.

2. Because there is always a possibility that the person who abandons a car might turn up to reclaim it, the tower must store the cars so that all are accessible. This takes space and the tower has no more space to use.

3. Because the lot is crowded, the health authorities are concerned about health problems caused by the accumulation of old cars.

4. Without a title, the scrap processor will not accept the car. The police estimate it takes 75 days to make the search and eventually get the state to issue a title for the abandoned car. In those 75 days, more cars are abandoned, requiring their removal and storage.

The scrap processor stated he would scrap all vehicles sent to him. But— 1. He will not take cars without a title and will not make himself liable for legal action by doing so.

2. Because of state and local restrictions on burning in the open, he is severely limited in the number of cars he can burn to clean them of the contaminating rubber, plastics, copper, fabric, and other materials which render autos unacceptable as scrap for steel mills.

3. The processor has obtained a new site for his plant, one large enough to allow him to install a machine which can consume 300 cars a day and produce acceptable scrap. But, unless the city aids him in getting the proper zoning, he will be unable to move.

The summary emphasizes the fact that the roots of the junked car problem and the unsightly conditions they create are deep. Legal, technological, and economic factors all have an effect on the problem.

The "simple" solutions offered-fence all scrap yards, dump old cars in the sea, and so on-obviously do not touch the source of the current condition. Worse, they either hamper the one industry existing to solve the problem in a practical manner or they waste a valuable raw material needed by the iron and steel industries.

Senator MUSKIE. Thank you very much, Mr. Story.

Mr. STORY. Thank you, Mr. Chairman.

(Subsequently, Mr. Story submitted the following communication :)

Senator EDMUND S. MUSKIE,

INSTITUTE OF SCRAP IRON & STEEL, INC.,
Washington, D.C., June 22, 1966.

Chairman, Subcommittee on Air and Water Pollution, Senate Committee on Public Works, New Senate Office Building, Washington, D.C.

DEAR SENATOR MUSKIE: Re-reading my testimony before the Subcommittee last week, I feel there should be clarification of our stand on the question of subsidy.

It's obvious, as you so ably pointed out, that whether or not we favor direct subsidy, we are suggesting that some assistance of an indirect nature be considered.

In suggesting that the steel mills and foundries be provided an incentive to use more scrap, it was our feeling that this would fit more effectively into the current market structure, would make it possible to handle payments within the existing tax procedures, and would then leave it up to the consumers as to whether or not individual companies wished to consume more of this material.

Our alternate suggestion for the railroads and other carriers (especially the former) was to apply part of the available 1 per cent of the excise tax on automobiles to the transportation systems.

When the 1 per cent was retained last year as a result of Senator Douglas' urging, it was our understanding that at least a portion of this would be applied to the problem of assisting old automobile hulks to market. The major portion, as we understand it, was to go toward financing the Highway Beautification Act of 1965, and also to covering the cost of some of the research programs.

We don't believe that funds should be paid directly to our industry for handling old automobiles or for building plants. Our people are of the opinion they can work effectively if markets can be somewhat stimulated or if some of the transportation costs of moving this type of material fairly long distances can be whittled.

Obviously, I have members who would rush for a subsidy either for processing or for new equipment. But the more thoughtful of our members feel this would be a grave mistake. The vast majority recognize, however, that something should be done to get more cars to processors. They feel an indirect approach, for the reasons I have cited above, is the most logical and effective means of doing this.

Mr. Blue's letter, submitted by Senator Cooper, tends to bear this out.

Sincerely yours,

WILLIAM S. STORY, Executive Vice President.

Senator MUSKIE. Our next scheduled witness is Mr. Ralph Michaels, President of the Association of Railroad Car Dismantlers, who will not be here but will submit a statement for the record.

(Subsequently, the following telegram was received from Mr. Michaels :)

Hon. EDMUND MUSKIE,

CHICAGO, ILL., June 14, 1966.

Chairman, Subcommittee on Air Pollution Control, Committee on Public Works, Senate Office Building, Washington, D.C.:

Thanks for your invitation to give testimony on the Douglas bill S. 3400 but regret pressing business prevents my presence in Washington tomorrow. Meanwhile I should like to register strong opposition to S. 3400 which establishes very serious bad precedent for our industry. For instance our association with a problem similar to automobiles is working with the Research and Education Foundation of Institute of Scrap Iron & Steel and also the Office of Solid Wastes of the Department of Health, Education, and Welfare. If further research grants are felt necessary they should be directed through the already established channels. Senator Douglas' bill as written does not accomplish this objective. RALPH MICHAELS,

President, Association of American Railroad Car Dismantlers. Senator MUSKIE. We also have a statement for the record by Mr. Hugo Neu of the Hugo Neu Corp., of New York City, which we will include in the record at this point.

(The statement is as follows:)

STATEMENT OF HUGO NEU, PRESIDENT OF HUGO NEU CORPORATION OF NEW YORK

CITY

My name is Hugo Neu. I am President of Hugo Neu Corporation of New York City. This statement is being submitted by me to the Senate Subcommittee on Air and Water Pollution in order to bring to its attention a major technological advance having a vital bearing on Senate bill 3400, which is now before the Subcommittee.

The technological advance to which I refer is the Prolerizing process for fragmentizing and shredding old automobiles, which has been developed by Proler Steel Corporation of Houston, Texas.

The Prolerizing process first became operational in 1958 and its use has expanded rapidly in recent years. At present there are four Prolerized scrap plants in operation in Houston, Kansas City, Los Angeles and Chicago. These four plants alone have the aggregate capacity for consuming about 1,000,000 gross tons of raw scrap per year on a single shift basis. A fifth plant is presently under construction near Boston, and additional plants are presently being planned for St. Louis, Jersey City and Philadelphia. Hugo Neu Corporation is associated with Proler Steel Corporation in regard to a number of these plants. These Prolerizing plants have successfully utilized a revolutionary new method of processing old automobiles, which makes it possible, on an economic and commercially feasible basis, to take the impurities out of the scrap without any resort to burning the auto bodies. As a result these new plants have eliminated entirely the obnoxious air pollution by smoke and fumes which are ordinarily generated by open air burning of auto bodies in the nation's wrecking yards and scrap yards.

In the Proler Process, old automobiles and other forms of light iron scrap, as well as refrigerators and washing machines, are fed, through a conveyor, into a hammer mill that fragmentizes the scrap into millions of small pieces. In a series of operations these pieces are cleaned and individually compacted into fist-sized pieces which are then shipped to steel mills in this country and abroad. As part of the process, the various non-ferrous metals are salvaged from the dirt, and the dirt itself can then be used as fill or otherwise disposed of. This means that hundreds of thousands of tons of rubber, of plastic, or tar coating, and other impurities contained in the car bodies, will be safely removed in the form of dirt, instead of being vaporized into the air by burning.

In short, the use of the Proler Process means the end of the pollution of our cities and our air which have been formerly associated with wrecking yards and scrap yards. It makes this possible on a commercial basis, through private enterprise, and without any need for government subsidies.

These new Prolerizing plants should also eliminate, in time, the unsightly stockpiles of rusting automobile bodies which have disfigured our landscape. In those areas where the Prolerizing plants are now operating, they have already succeeded to a large extent in reducing accumulated stockpiles. The improvement in scrap quality which results from these Prolerizing plants makes it possible for them, on an economic basis, to reach out as far as 300 or even 600 miles for supplies of old car bodies. If the Interstate Commerce Commission can be prevailed on to reduce freight rates for mashed automobile bodies, the long distance impact of these plants in reducing stockpiles can be made even greater.

To sum up:

1. There is no longer any economic reason for open-air burning of old automobiles, or for accumulating unsightly stockpiles of auto bodies.

2. There is no reason for government subsidies of the scrap industry. Private enterprise has provided a commercially feasible alternative.

3. An improvement in freight rates would be of assistance for areas remote from these new Prolerizing plants.

Thank you.

Senator MUSKIE. Our next witness is Mr. Benjamin Schwartz, executive consultant of the National Federation of Independent Scrap Yard Dealers, Inc.

Is Mr. Schwartz here?

Mr. SCHWARTZ. Yes, sir.

STATEMENT OF BENJAMIN SCHWARTZ, EXECUTIVE CONSULTANT, NATIONAL FEDERATION OF INDEPENDENT SCRAP YARD DEALERS, INC.

Mr. SCHWARTZ. With your permission, Mr. Chairman, I will not read my statement but will let it stand for the record with 1 or 2 minutes of observations.

Senator MUSKIE. We would appreciate that, Mr. Schwartz.

Mr. SCHWARTZ. The National Federation of Independent Scrap Yard Dealers, in whose behalf I am making an appearance, has a clean-cut position to make. We are against S. 3400 in principle and in practice. In principle, because we believe the powers granted to the President in the bill are unnecessary and unwarranted, in view of the fact that it is our conviction that, given the proper marketing incentives, the capacity, the equipment, and the organization of the scrap steel industry is prepared to accept all available old automobiles and process them, without the creation of new facilities, without any special privileges and without any subsidies, direct or indirect. In practice, we oppose S. 3400 because it contains a package-you will forgive the expression of dynamite which has in it the potential of liquidating an industry that is one of the last outposts of individual initiative in this country.

It creates the opportunity of tampering with the law of supply and demand and the movement of the strategic raw material. It creats the potential of a new bureaucracy having something to say about a free enterprise industry that has kept its integrity thus far.

And it has in it the implication of stockpiling which we are not asking for, under any circumstances.

power

There has been in the last few years-and this is what we are concerned about, not technology, not research or any of the other facetsthere has been in the last few years a concentration of economic in the scrap industry that has threatened the survival of the small and independent scrap dealer who is a very essential part of the collection and processing service of the industry.

The Senate Small Business Committee made a study and issued a report on the subject of monopoly and technological problems of the scrap industry in 1959, after extensive hearings, and termed the situation "a real threat to the economy." They made very definite recommendations which are contained in my statement.

Now our concern is that no act of Government-whether under the powers granted under S. 3400, whether through grants, tax incentives, excise taxes or subsidies in any form-that no act of Government should make the Government a party to the intensification of monopoly in our industry, and should not help to speed up the disintegration of the vital collection and processing service.

Any constructive suggestions that have been made, in our opinion, should be within the scope of an interdepartmental committee at a Cabinet level, where "the public interest" is involved, in terms of the conservation of natural resources, national defense, and furthering the interests of the small businessman in our national economy.

That top-level committee-including Interior, Commerce, Justice, Council of Economic Advisers, and the Budget Bureau-would have the power to bring about the necessary balancing of the situation, without any additional legislation.

It is within the educational and pressure scope at this high level, to bring about a policy of "balanced metallics," balancing the annual harvest of steel scrap-including the old automobile-with imported iron ore, and not permitting the scrap iron industry to be put in a position by the steel industry, on a "standby" basis.

Under these circumstances I will let the printed statement stand for elaboration. I appreciate the privilege of making our position clear

and distinct that in principle and in practice, we do not think it is necessary to create these additional powers by legislation.

Senator MUSKIE. Thank you very much, Mr. Schwartz. The committee will study your prepared statement.

I think you have supplemented it very clearly.

Mr. SCHWARTZ. Thank you.

(The full statement referred to follows:)

STATEMENT BY BENJAMIN SCHWARTZ, EXECUTIVE CONSULTANT OF NATIONAL FEDERATION OF INDEPENDENT SCRAP YARD DEALERS, INC.

We respectfully submit that S. 3400, in its application to the crap steel industry, is unwarranted and unnecessary, because, given the proper marketing conditions, the capacity, equipment and experience exist within the modern structure of the scrap industry, to handle all the old autos made available to it, without the creation of new or special facilities, privileges or subsidies.

We are, however, gravely concerned that the Bill contains a package of dynamite, in its relation to the scrap steel business, that has the potential of liquidating an industry that is among the last outposts of individual initiative in this country; that this "package" is unwittingly betraying a tradition upon which a free enterprise industry was built; and that this is tampering with the economics and the movement of materials within a free market.

The Bill provides that the President be given power, among others, to take into consideration the effect of any program on "the market for iron and steel scrap"; to "prescribe such rules and regulations as may be necessary"; to make payments (out of the auto excise tax fund), to individuals, corporations, or other business entities; to initiate "a program for the purchase, storage and resale" of the usable scrap, including "resale at a loss," all of which also contains the implication of stockpiling, and manipulation of markets by a new bureaucracy.

Because scrap does not come from a few veins of the earth, but its sources are as wide as the boundaries of the United States, the two important characteristics of the economics of the secondary raw materials industry, are the collection and processing organization at the base of the industry, and the function of the law of supply and demand, operating in a free market. The industry is composed essentially of independent and small business units within a highly "captive" industry, whose survival is threatened by the increasing concentration of economic power in the scrap business. Monopolistic trends in the industry, and the reciprocal and exclusive deal's affecting the commodities, are raising the serious question whether there will be a place for the small or independent dealer in the future of the industry.

The increasing concentration of economic power in scrap is illustrated by a report, after extensive hearings, issued by the Senate Small Business Committee on Oct. 16, 1959, under the title of "Monopoly and Technological Problems in the Scrap Steel Industry". Concluding that "a real threat to the economy is presented", the Senate Committee made the following Recommendations: "The growing power of Luria Bros. in the scrap steel industry through its exclusive dealings with many steel mills; its monopolization of many regional, domestic, and foreign markets; and its dominance and use of the Institute of Scrap Iron and Steel, have convinced your committee, that a real threat to the economy is presented. Your committee, therefore makes the following recommendations:

"1. The Attorney General and the Assistant Attorney General in charge of the Antitrust Division should conduct an investigation of (a) Luria Bros. for possible prosecution under section 2 of the Sherman Act and perhaps eventual divorcement of brokerage and dealer functions and other measures, to restore competition in the scrap industry; and (b) The Institute of Scrap Iron and Steel for its possible violations of the antitrust laws, as well as its use by Luria Bros. for Luria's own aggrandizement."

The monopoly issue has become aggravated by recent developments, since that report. In the name of "beautification", chains of "giant shredder complexes," are being established by two companies, in strategic locations, with tie-ins and other "captive" devices. What has been overlooked is the potential threat that this presents to the independent operator, in outmoding his recent investments in modern presses and shears, and in reducing him to the status of "glorified peddler" or feeder to a few companies.