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RECONSTRUCTION FINANCE CORPORATION

STATEMENTS OF LT. COL. WILLIAM BARCLAY HARDING, SUR

PLUS PROPERTY BOARD, DIRECTOR OF AVIATION DIVISION; WILLIAM L. CLARK, AVIATION DIVISION, SURPLUS PROPERTY BOARD; AND HANS KLAGSBRUNN, DIRECTOR, SURPLUS PROPERTY, RECONSTRUCTION FINANCE CORPORATION

BACKGROUND OF DIRECTOR OF AVIATION DIVISION

Colonel Howse. Colonel Harding, I might say, Mr. Chairman, is on detached service from the Army and has been for nearly a year, with the Surplus Property Board.

Mr. SNYDER. What service was he in?
Colonel HowsE. He was in the Air Corps.

Mr. CANNON. You may at this point in the record indicate what his service has been.

Colonel HARDING. I have served with the Air Transport Command. Mr. SNYDER. That is what I understood.

Mr. CANNON. You may at this point in the record give a résumé of his service and background.

(The statement requested follows:)

Colonel Harding was born in New York City in 1906. He was educated at Browning School, New York City; Groton School, Groton, Mass.; and Yale University.

In private life he is a partner of Smith, Barney & Co., one of the larger investment banking firms in New York City. In this connection, Colonel Harding has specialized in financing aviation enterprises, and has acquired a wide understanding of the economic problems which concern both the aircraft manufacturing and air-transportation industries. He was actively associated with a number of aviation enterprises, both large and small, serving as a director of Eastern Air Lines, Inc., and Roosevelt Field, Inc.

Although unable to qualify for military pilot rating because of inadequate eyesight, Colonel Harding has maintained an active private pilot's certificate for the past 16 years. He has piloted his own airplanes extensively throughout the United States, Canada, and Latin America.

In the autumn of 1940 Colonel Harding came to Washington to join the staff of the Coordinator of Inter-American Affairs. He was appointed Director of the Division of Transportation and Aviation. Under his supervision extensive surveys of Latin-American air transportation, shipping, railroads, and highways were completed.

In the spring of 1941 Colonel Harding was appointed Vice President of Defense Supplies Corporation, a Reconstruction Finance Corporation subsidiary. In this capacity he was joint director of the Government's program to eliminate Axis influence in Latin-American air lines. The program was under the supervision of Mr. W. L. Clayton.

Colonel Harding resigned a Naval Reserve commission in 1942 in order to accept a commission in the Army. He served a year in the Military Intelligence Service, after which he obtained a transfer to the Air Transport Command, where he served for a year in the Plans Division of the Headquarters Staff.

In the spring of 1944 General Arnold named Colonel Harding senior Army member of a joint Army-Navy mission to Latin America to effect closer coordination of the activities of the two services in that area.

In May 1944 Colonel Harding's services were requested by Mr. W. L. Clayton, then Surplus War Property Administrator. He was named Director of the Aviation Division, Surplus War Property Administration, and has continued to serve in this capacity under the Surplus Property Board which assumed responsibility for the disposal of surplus property in October 1944.

PROGRAM FOR DISPOSAL OF SURPLUS AERONAUTICAL PROPERTY

Colonel HARDING. Mr. Chairman and members of the committee, I appreciate the opportunity of appearing before the committee to outline the program for disposing of surplus aeronautical property. The complexity and scope of this problem can readily be seen from a few simple statistics.

Out of every dollar the Congress has appropriated for purchase of war materials, 24 cents have gone for aircraft. So far this has amounted to more than $43,000,000,000.

Out of all war property declared surplus as of May 1, 63 percent, in terms of cost, is aircraft. As a relatively small portion of aeronautical surpluses are salable, only 18 percent of total surplus disposals, in terms of original cost, consisted of aeronautical property, and this class of property accounted for only 8 percent of proceeds from surplus sales. Aeronautical surpluses now represents roughly 70 percent of surplus inventory.

Although the salable aeronautical surpluses are small in relation to the total volume of this class of property, nevertheless they loom very large in relation to the postwar civilian market, if past experience is any criterion. For example, less than 17,000 civilian-owned aircraft were in operation in the United States on January 1, 1944. That number has been increased by the addition of more than 10,000 surplus planes.

Another example is the case of transport aircraft. Until November 1944 the commercial air lines of the United States were limited by Presidential order to the operation of 300 planes. Up to the present time, more than 200 surplus transports have been sold or leased to domestic and foreign air carriers, of which 94 have been added to the 300 planes to which I have referred.

Since the war began more than 20,000 transports have been built, and it can be expected that a large proportion of them will become surplus property. The majority of these transports were built to military specifications and are probably not economically convertible to commercial use once new commercial models come into production. Even so, the manner of their disposition can hardly fail to have an important impact on the development of commercial air transportation in this country and throughout the world. Equally significant to American aviation will be the policies applied to the disposition of the multitude of surplus components which include engines, propellers, instruments, and so forth. Vast quantities of these items, maay brand new, will be left in warehouses, factories, and the pipe lines of supply when the war comes to an end.

The policies and procedures governing the disposal of surplus aircraft are based largely on recommendations of the Poage committee. This was an interdepartmental committee headed by the Chairman of the Civil Aeronautics Board, formed approximately a year ago to recommend policies to be followed in the disposal of this class of surplus property.

Mr. Clark will distribute a digest of the Poage committee recommendations and two other exhibits to which I shall make reference in a few moments.

Unless this committee so directs, I will not take time to discuss, in detail, the findings of the Poage committee. However, I do wish to draw the committee's attention to the classification of aeronautical surpluses into five basic categories, namely, tactical aircraft, transports, personal aircraft, aircraft equipment and components, and unabsorbed surplus. In other words, an airplane is a weapon of war, or a transport, or a personal vehicle, or a bunch of assorted spare parts, or a pile of scrap, and different procedures have to be followed in respect to each class.

Kindly refer to the second exhibit which has been distributed. It contains some additional illustrations of the types of aircraft which come within the three classes: (a) Tactical, (b) transport, (c) personal.

You will note that the tactical category includes advanced trainers, fighters, light bombers, medium bombers, and heavy bombers.

The transport category includes several different types of transports, some small, others large.

And the personal aircraft category includes light planes; liaison planes, used for communication, reconnaisance, and observation purposes; primary trainers, and the "utility cargo” planes which are mostly single-engined cabin planes.

Next, will you please refer to the chart which shows the manner in which surplus aircraft disposattis organized. It shows the relative positions of the Board, the owning agencies, the disposal agencies, and the Aviation Division of the Board, of which I am Director.

You will note that two disposal agencies have been designated to handle surplus aeronautical property, namely, the Reconstruction Finance Corporation and the Foreign Economic Administration. The Reconstruction Finance Corporation is responsible for aircraft disposal in the United States, its Territories, and possessions. The disposal responsibility in the Territories and possessions was transferred from Treasury Procurement to the Reconstruction Finance Corporation as recently as May 1. This transfer accounts for the obvious erasure of a box in the center of the chart.

The disposal responsibility in foreign territory will soon be transferred from the Foreign Economic Administration to the Army-Navy Liquidation Commission, which will then have the entire responsibility for disposal of all surpluses in foreign territory.

The Board functions by issuing regulations and orders, under the Surplus Property Act, which govern the operation of both owning and disposal agencies. These regulations and orders are represented by the jagged lightning-like lines at the top of the chart.

The Poage committee recommended that because of the mobility of aircraft and because of the impact of surplus aircraft sales on the development of United States commercial and military air powerboth national and international-a high degree of control, direction, and coordination of the aircraft disposal program should be vested in the Aviation Division of the Board.

Intragovernmental coordination is effected largely through the medium of the Inter-Departmental Working Committee on Surplus Aircraft Disposal which contains representation from the State, War, Navy, and Commerce Departments, the Civil Aeronautics Board,

the War Production Board, and the two disposal agencies. The Inter-Departmental Working Committee is represented in the box which appears on the chart at the right hand side of the Aviation Division.

Surplus property is not declared to the Board but, as you can see. is declared directly to the disposal agencies.

The boxes on the lower right- and left-hand sides of the chart, and the arrows pointing upward, show the procedures for purchasing various classes of aeronautical property. I shall not take the committee's time to go into this phase of the program. The purpose of this session is to explain the requirements of the Reconstruction Finance Corporation for funds to carry on its part of the disposal program. I shall, therefore, give you a brief explanation of what the Reconstruction Finance Corporation is required to do, after which the R. F. C. representatives here today will be happy to explain the details of the expenses which they expect to incur.

I shall now refer to a series of charts showing surplus aircraft disposal procedure.

Because we have been engaged in war it necessarily follows that most of our surplus planes are built to meet specialized military requirements. They include combat planes—fighters and bombers. There will also be a large number of transports. There will be many trainer planes and a few light planes used for observation and communication. There will be large quantities of components and parts.

Planes become surplus when they are worn out or obsolete to military requirements.

Many planes and parts can be sold for flight use.

(a) A few combat planes have special uses in industry, such as sky writing, forest patrol, and aerial survey.

(6) Almost all transport types will have some commercial application. However, this does not mean that all will be salable when newer types are put on the market.

(c) Some of the primary trainers and light planes are suitable for civilian training and private flying.

(d) There is a demand for components and parts for salable aircraft.

B. On the other hand, most surplus planes and the component parts cannot be disposed of for flight use. The aeronautical surpluses which are generally unsalable are:

(a) Models which cannot be licensed for civil flight purposes by the Civil Aeronautics Administration. This includes almost all combat planes

(6) Transport planes unsuitable for commercial operation.

(c) The majority of trainers which are too expensive to operate for commercial or personal use.

(d) Components and parts peculiar to combat aircraft.

At this point, in order to illustrate the channels through which surplus aircraft becomes surplus and are disposed of, I shall ask Mr. Clark to distribute two pictorial charts. Will you please refer to the chart marked “Disposal of usable planes."

When an airplane is no longer needed by the Army or Navy it is referred to the Munitions Assignment Board for possible redistribution among the United Nations. This is largely a formality si present, inasmuch as our allies cannot use worn out or obsolete equipment. Once released by M. A. B. the aircraft are declared excess to "the combined military requirement", after which the Army and Navy declare them surplus to the Reconstruction Finance Corporation and the flyable aircraft are delivered to R. F. C. fields.

The salable models, mostly transports, primary trainers and the “light liaison” type aircraft, are maintained in operational condition on the Reconstruction Finance Corporation's fields, of which there are 57. I have a map of them to which the R. F. C. representatives will make reference later on in this presentation, showing how they are distributed. The red dots are the sales fields chosen because of their proximity to the market for aircraft. Tbey do not belong to the Government and planes are placed there under agency arrangements with the operators of the fields. The blue dots show the fields which are used largely for storage, although sales are made from these fields also. These fields are themselves surplus in many instances. They were built originally for military training purposes and were purposely placed away from centers of population, and therefore are not generally good sales points, but they are satisfactory storage fields.

Transports are sold on a fixed-price basis. Those types which are in short supply are referred to the Director, Aviation Division, of the Surplus Property Board, for allocation among applicants.

Primary-training aircraft are in long supply and we doubt that we can sell them all at any price. The best ones are graded according to condition and sold at prices ranging from $875 to $2,400. Those in very poor condition are not offered for sale.

Light planes and the smaller aircraft designed for personal transportation are in extremely short supply. They are sold on a competitive-bid basis. The ultimate purchaser in each case is protected by a ceiling price established by the Office of Price Administration.

Now may I call your attention to the second chart “Disposition of unusable aircraft."

The unsalable planes—those which were built for combat; those unlicensable for civilian use; those beyond economic repair-are set aside without maintenance. When manpower becomes available they will be scrapped. However, they are first stripped of usable components, some of which are added to components and parts inventory, if salable for aeronautical purposes.

Some can be distributed for nonaeronautical uses; for example, it is possible that engines can be used to develop power on remote farms, or for the reconstruction of Europe.

The residual is prepared for sale as scrap. A great deal of attention is being given to devising the most efficient scrapping methods.

On the other hand, items suitable for educational use will be disassembled and packed for disposition to schools and colleges for nonflight educational purposes. It is understood that some 30,000 schools and colleges throughout the United States will want some of this material.

DISPOSAL OF COMPONENTS AND PARTS

By far the most difficult problem facing the disposal agencies is the handling of components and parts. That is because of the vast number of items that exist. There are more than 500,000 classifications of items in Army catalogs alone, and the Navy has many others. The individual items are scattered all over the country and all over the world.

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