Senator DOWNEY. I might make this observation-I have tried to represent several score of small industries located in California, and I don't know of a single one so far that has been able to be effectively utilized in the defense industries. Our surveys in California show, Mr. Emery, and I think it is only typical of what is true in the rest of the United States, that we are making effective use of only about one-half of our capacity is being utilized. That is true in California, and I believe it would obtain throughout the Nation.

Mr. EMERY. You mean utilized for national-defense purposes? Senator DOWNEY. No; no; only one-half of the machine capacity of the United States is being utilized.

Senator JOHNSON of Colorado. You mean in the defense program? Senator DOWNEY. No; I am referring to all machine capacity in the United States. To what extent it would be utilized in the defense program, I don't know, but I am satisfied it could be utilized to a far greater extent than it is being utilized at the present time.

I think that this bill before us now is a lazy way on the part of our governmental representatives to get away from a very large task that requires high energy and imagination, and that is the full utilization of our reservoir of labor and technicians and industrial units.

I think what the Government representatives want is a way to ease their burden by dealing with the bigger groups, which, of course, have tremendous capacity, and thereby relieve the burden on the Army and Navy and Maritime Commission of assembling that capacity, and in order to facilitate their obligation they intend to help the big groups take over the machine tools and the other machinery of the smaller groups and then, of course, let their personnel and mechanics fall into the employ of the bigger groups.

As a matter of fact, I think that representatives of the Government will come here and frankly tell you that; and if that sort of thing is necessary to sabotage the small businessman of the United States, the small industries by the creating of this sort of a military dictatorship, dictatorial power, well, let us frankly face it.

They may not be willing to come here and talk openly, but if we go up to their offices they will tell us the very same thing I am stating to the committee now.

The CHAIRMAN. We will have an opportunity to discuss these things when the representatives of the various departments appear before the committee.

I want to thank Mr. Emery very much for his kindness in coming here today. We are deeply appreciative of the information which he has been so good as to provide the members of the committee. Mr. EMERY. Thank you, Mr. Chairman and gentlemen.

The CHAIRMAN. We will adjourn now until 10 o'clock tomorrow morning.

(Whereupon, at 1:10 p. m., the committee adjourned until 10 a. m., Thursday, June 19, 1941.)

REQUISITION OF PROPERTY BY THE UNITED STATES

THURSDAY, JUNE 19, 1941

UNITED STATES SENATE,
COMMITTEE ON MILITARY AFFAIRS,

Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., in room 104-B, Senate Office Building, Senator Robert R. Reynolds (chairman) presiding.

Present: Senators Reynolds, Johnson of Colorado, Hill, Downey, Kilgore, Holman, and Thomas of Idaho.

The CHAIRMAN. The committee will please come to order. I will ask the Official Reporter to take the name, designation, and official capacity of the gentleman who will now testify from the Office of Production Management, and if you will be good enough to provide him with your name, title, and any other information that is preliminarily necessary in identifying you, please.

STATEMENT OF J. P. COTTON, OFFICE OF THE GENERAL COUNSEL, OFFICE OF PRODUCTION MANAGEMENT

Mr. COTTON. Mr. Chairman, my name is J. P. Cotton. I am from the general counsel's office of O. P. M. May I just say that Colonel Watt called us yesterday afternoon and said that as a result of Judge Patteson's testimony of yesterday on the requisition bill that you gentlemen were interested in hearing from an O. P. M. witness on the O. P. M. policy in regard to its policy of subcontracting.

Mr. Mehornay tells me that he is familiar with the requisition bill only in the most general way, but he is head of the Defense Contract Service Unit in O. P. M. whose particular concern is subcontracting. The CHAIRMAN. Thank you very much.

Mr. Mehornay, we will be glad to hear you, if you will give your name to the reporter.

STATEMENT OF ROBERT R. MEHORNAY, CHIEF OF THE DEFENSE CONTRACTS SERVICE SECTION OF THE OFFICE OF PRODUCTION MANAGEMENT

Mr. MEHORNAY. My name is Robert R. Mehornay. My work here is that of Chief of the Defense Contracts Service Section of the O. P. M., which has as a part of its work the subcontracting operations of O. P. M.

The CHAIRMAN. I might add to what Mr. Cotton said, we are not only interested in being provided information relative to subcontracts and what subcontractors might be affected by this bill, if passed; but

it is my understanding that the members of the committee would also like to be informed as to what materials, if any, where they are located, and the character thereof, that might be subject to seizure under this bill if passed, in order that we may have a general understanding of the foundation of the whole matter here that we are interesting ourselves in at the present time, and if you will be good enough to give us such information as you can.

Mr. COTTON. I might add, Senator Reynolds, if you are interested in other aspects, such as you have mentioned, we will be glad to have other people come up that might be more familiar with the bill, if you

want.

As I say, we understood you wanted to hear the O. P. M.'s contracting policy, and Mr. Mehornay will furnish you that.

The CHAIRMAN. We are very much obliged to you, and the probabilities are that the committee will desire to hear more in regard to such materials, their location and availability, and the use to which those materials are put that are not available at the present time on the general market, and so forth.

Senator DowNEY. Yes.

The CHAIRMAN. Is that not true?

Senator DOWNEY. Yes, Mr. Chairman.

The CHAIRMAN. Now, I think it will be well if the junior Senator from California [Senator Downey] will direct the general inquiry to Mr. Mehornay, in order that he may direct his statement to answers required by you as a result of your questions on yesterday pertaining to this matter.

In other words, a brief statement by the Senator from California, in order that he may be thoroughly advised as to just what it is we wish to get, I think would be well.

Senator DOWNEY. Perhaps I can make my position clearer on this matter by stating to you that the terms of this present bill disturb me in certain respects.

It gives the Government the power to take from any businessman or corporation in a summary proceeding any of its machinery or leases, any of its patents, any of its equipment, any of its material, and turn it over to any other business organization for the purpose of using it for national defense.

Now, I am very much alarmed lest, in California, at least, that that power might be used in such a way as to destroy many of our small businesses.

I do know, at least, we do have out there hundreds of small industries and manufacturing concerns that are anxious to do work for the national defense that have not yet found the opportunity or means of doing that.

On the other hand, it is my belief that many of the larger corpora tions out there, particularly the shipbuilding companies, are loaded down with orders for shipbuilding that they do not have the personnel or the machinery or the equipment to fill and that instead of subletting the contracts for the work, the larger organizations that cannot do them, they will go out and just summarily, through the Government, take over the equipment and machines and personnel and organization of these smaller groups, and it was in relation to such a possibility that I desire to elicit further information.

Mr. MEHORNAY. I will be very happy to give you all I have, Senator.

Senator DOWNEY. Then, in the first place, let me ask you this, and I would like for the present to restrict my questions to California, that I know something about, and we can apply it upon the national scale, if that is satisfactory to the Chairman.

The CHAIRMAN. Certainly.

Senator DOWNEY. Take in southern California, for instance: Do you conceive yourself that the Government does have, does require, the power in the interest of national defense to summarily take over the machinery and equipment of any business organization there existing now in order to turn those over to other organizations engaged in producing, for national defense?

Mr. MEHORNAY. At the present time, from the information we have, I would say that the work that would need to be done on the property requisitioned, if I may use that word, could be done in the hands of the present owners by subcontracting or a division of the orders; in the light of the possible load for the long-range planning, I would have to guess with you, and I am afraid that that would have to be a developing program.

I cannot forecast that part of it, but for any load that we have now, I think we can adequately handle it if the known machinery and tools that are available in that area-restricting it to the southern California area, Senator, if that is the way you want it done.

Senator DOWNEY. Well, I was thinking of California as a whole. I presume the same situation exists in the San Francisco Bay region. Mr. MEHORNAY. It definitely does; yes.

Senator DowNEY. Then, let us extend the area of the application of your remarks; does the same situation prevail generally in the United States as indicated by you concerning California?

Mr. MEHORNAY. It would not extend in some items. The airplane and shipbuilding probably presents a little different problem, but whether or not it would be necessary to requisition tools, in the light of the tool production program that we all know of to be put down on an individual order, an individual project, I would say in the main as of now the work can be done; but a blanket statement that all could be would leave me on some lines I could not substantiate, because individual problems touching individual items might not stand up.

Senator DOWNEY. Well now, Mr. Patterson indicated to us yesterday that one of the evils that the Government desired to overcome by this bill was the withholding from the United States of machine tools and other machinery by the second-hand machine dealers for speculative purposes and speculative sales.

Can you tell us, do you know anything about the extent to which there is unused machinery necessary for defense purposes in the hands of second-hand machine dealers?

Mr. MEHORNAY. I cannot testify as to that from direct contact, but I have the general information from the tool section that they do know where thousands of tools are now located. There has been a price ceiling set on those tools, and I think it is rather a question of the condition and type of adaptability of the tools, rather than the question of hoarding of the tools. I do not believe we could charge that there was a hoarding.