That is our exchange price. But the core of that distributor that we work on is worth about $5. So we pay the excise tax on $6.50, and we make a $1.50 sale. Mr. GRANT. If I bring my distributor in and exchange it for a used one which has been repaired, I pay you $1.50? Mr. MARQUARDT. Yes. Mr. GRANT. And you must pay an excise tax to the Federal Government on a transaction of $6.50? Mr. MARQUARDT. On $6.50; yes, sir. Mr. GRANT. How much is that? Mr. MARQUARDT. 3212 cents. Mr. GRANT. Which applies against the $1.50, which becomes quite a severe levy. Mr. MARQUARDT. Yes; the percentage there is quite a severe penalty. Mr. GRANT. I think that is something which is crying for attention. I assure you as one member of the Ways and Means Committee it is something we are going to give attention to as fast as we possibly can. Anything further? Mr. MARQUARDT. I think that is all I have. Mr. GRANT. We thank you. Mr. MARQUARDT. I have here this War Production Board order. Chairman PLOESER. What is this? Mr. GRANT. The War Production Board order referred to in his testimony. Mr. MARQUARDT. This is War Production Board Order L-158, dated May 5, 1944, and the part to which I referred reads as follows [reading]: Restrictions on sales to consumers: (1) No sale of new parts where old part can be rebuilt or reconditioned. No new replacement part shall be sold or delivered to a consumer to replace a part which the producer or distributor can rebuild or recondition by use of available local reconditioning facilities. (2) Used part to be turned in. No producer or distributor shall sell or deliver any replacement part either new, used, or rebuilt, to a consumer unless the consumer turns in to the producer or distributor, concurrently with his purchase, a used replacement part of similar kind and size for each such replacement part delivered to the consumer. However, a used replacement part need not be turned in in the following cases: (i) Where the used part has been consumed in use, lost, or stolen. (ii) Where the used part is a cab assembly. (iii) Where the consumer is a Federal or Territorial Department, Bureau, or Agency, or a State or political subdivision thereof which is forbidden by law from making such disposal of replacement parts. (iv) Where the new or rebuilt part is ordered by telephone, telegraph, or mail, or is to be installed by the purchaser. (v) Where the new part to be purchased by the consumer will improve the efficiency of the vehicle, its capacity of usefulness, such parts being as follows: For all vehicles: oil filters; for medium and heavy trucks, truck trailers, passenger carriers, off-the-highway motor vehicles, and motorized fire and police equipment: auxiliary springs, trailer connections, brakes, fifth wheels, auxiliary fuel tanks, governors, landing gears, heavy-duty generators, auxiliary transmissions, power take-offs, heavy duty trailer axles, wheels and rims which do not increase tire sizes, market, clearance, and identification lamps, spot lamps (internally controlled only), fog lamps and back-up lamps, signaling devices, reflex reflectors, windshield defrosters, truck and bus traction sanders. (3) Use of consumer's certificates. In any of the cases provided for in subparagraphs (2) (i), (ii), (iv), and (v) above, in which the consumer is not required to turn in a used part, he must sign and deliver to the producer or distributor concurrently with each purchase, or on the written confirmation General Motors, and Ford maintain units which do nothing but rebuild parts. Mr. MARQUARDT. Yes. Mr. BALLINGER. And put them back on the market. Mr. MARQUARDT. United Motors rebuild fuel pumps on a national scale. Mr. BALLINGER. How would you explain the position you have taken, that they apparently scrap them? Mr. MARQUARDT. They do in some instances. Fuel pumps is an item they rebuild. Shock absorbers United Motors do not rebuild. They pay $1.35 for the old shock absorber. For a while they had stations hitting them with a pick so they could not be rebuilt. Now I am informed they are all sent in to a junk dealer in Chicago who is under bond to see that they are broken up and kept off the rebuilt market. Mr. BALLINGER. Could you give a list of the parts that are being scrapped that you can suggest, the important parts? Mr. MARQUARDT. Starter drives, shock absorbers, distributorsMr. BALLINGER. Carburetors? Mr. MARQUARDT. Carburetors, voltage regulators Mr. BALLINGER. Clutch assemblies? Mr. MARQUARDT. I am not familiar with them. Undoubtedly generators. I am not so familiar with them first-hand either. Mr. HARDY. They are junking generators instead of rebuilding them? Mr. MARQUARDT. I believe so, as far as the car manufacturers are concerned. Mr. BALLINGER. Could you give us an example of what the difference in cost is between a new generator and a rebuilt one? Mr. MARQUARDT. I do not deal in generators; I cannot. Mr. BALLINGER. Can you give it to us on any one of these items; that is, an example of the difference in cost to the consumer? Mr. MARQUARDT. On starter drives I think the price has gone up now. The price to the consumer here is listed at $4.25, not exchange; $3.25 exchange. $3.25 on an exchange price would go to the consumer as a rebuilt item at about $1.75. Generators, I believe, go in at about 50 percent of the value new on a rebuilt item. Mr. GRANT. Those of you who are in the business of rebuilding automobile parts are also in a difficult competitive situation because of the application of the excise tax applied by the Bureau of Internal Revenue, are you not? Mr. MARQUARDT. Yes, we are. Mr. GRANT. In other words, if you have a $20 part on which you have $5 worth of repairs, you must pay an excise tax on the $20 transaction, even though it is a trade-in?" Mr. MARQUARDT. On the full value of the unit after we have rebuilt it. Mr. GRANT. That would be true even though it comes in and out of your shop a number of times? Mr. MARQUARDT. Yes. Mr. GRANT. You pay an excess tax on its full value each time it comes into your shop and goes out? Mr. MARQUARDT. Yes; not only on the work, but the core value. For instance, on a Ford distributor, the value of our work, we sell at $1.50. That is our exchange price. But the core of that distributor that we work on is worth about $5. So we pay the excise tax on $6.50, and we make a $1.50 sale. Mr. GRANT. If I bring my distributor in and exchange it for a used one which has been repaired, I pay you $1.50? Mr. MARQUARDT. Yes. Mr. GRANT. And you must pay an excise tax to the Federal Government on a transaction of $6.50? Mr. MARQUARDT. On $6.50; yes, sir. Mr. GRANT. How much is that? Mr. MARQUARDT. 3212 cents. Mr. GRANT. Which applies against the $1.50, which becomes quite a severe levy. Mr. MARQUARDT. Yes; the percentage there is quite a severe penalty. Mr. GRANT. I think that is something which is crying for attention. I assure you as one member of the Ways and Means Committee it is something we are going to give attention to as fast as we possibly can. Anything further? Mr. MARQUARDT. I think that is all I have. Mr. GRANT. We thank you. Mr. MARQUARDT. I have here this War Production Board order. Chairman PLOESER. What is this? Mr. GRANT. The War Production Board order referred to in his testimony. Mr. MARQUARDT. This is War Production Board Order L-158, dated May 5, 1944, and the part to which I referred reads as follows [reading]: Restrictions on sales to consumers: (1) No sale of new parts where old part can be rebuilt or reconditioned. No new replacement part shall be sold or delivered to a consumer to replace a part which the producer or distributor can rebuild or recondition by use of available local reconditioning facilities. (2) Used part to be turned in. No producer or distributor shall sell or deliver any replacement part either new, used, or rebuilt, to a consumer unless the consumer turns in to the producer or distributor, concurrently with his purchase, a used replacement part of similar kind and size for each such replacement part delivered to the consumer. However, a used replacement part need not be turned in in the following cases: (i) Where the used part has been consumed in use, lost, or stolen. (ii) Where the used part is a cab assembly. (iii) Where the consumer is a Federal or Territorial Department, Bureau, or Agency, or a State or political subdivision thereof which is forbidden by law from making such disposal of replacement parts. (iv) Where the new or rebuilt part is ordered by telephone, telegraph, or mail, or is to be installed by the purchaser. (v) Where the new part to be purchased by the consumer will improve the efficiency of the vehicle, its capacity of usefulness, such parts being as follows: For all vehicles: oil filters; for medium and heavy trucks, truck trailers, passenger carriers, off-the-highway motor vehicles, and motorized fire and police equipment: auxiliary springs, trailer connections, brakes, fifth wheels, auxiliary fuel tanks, governors, landing gears, heavy-duty generators, auxiliary transmissions, power take-offs, heavy duty trailer axles, wheels and rims which do not increase tire sizes, market, clearance, and identification lamps, spot lamps (internally controlled only), fog lamps and back-up lamps, signaling devices, reflex reflectors, windshield defrosters, truck and bus traction sanders. (3) Use of consumer's certificates. In any of the cases provided for in subparagraphs (2) (i), (ii), (iv), and (v) above, in which the consumer is not required to turn in a used part, he must sign and deliver to the producer or distributor concurrently with each purchase, or on the written confirmation thereof if the order is placed by telephone or telegraph, a consumer's certificate in the following form: CONSUMER'S CERTIFICATE AUTOMOTIVE REPLACEMENT PARTS The undersigned purchaser certifies, subject to criminal penalties for misrepresentation, that: (a) The replacement parts covered by this certificate are essential for the maintenance, repair, or improvement of equipment he now owns or operates; (b) these parts will be used to replace parts which to the best of his knowledge cannot be rebuilt or reconditioned by use of available facilities; and (c) he will, within 30 days after receiving the parts, dispose of the old parts, if any, through scrap channels. The foregoing consumer's certificate must be retained by the producer or distributor making the sale to the consumer as part of his records. (Witness excused.) STATEMENT OF CHARLES MIKRUT Mr. BALLINGER. Give your full name. Mr. MIKRUT. Charles Mikrut. Mr. BALLINGER. What is your business? Mr. MIKRUT. Auto parts jobber, Chicago. Mr. BALLINGER. What is the name of your business? Mr. MIKRUT. Subway Auto Parts, 1025 North Ashland, Chicago, Ill. Mr. BALLINGER. Do you want to make a statement to the committee? Mr. MIKRUT. Yes; I have an antifreeze problem also. In May an eastern manufacturing man came into my store and he said I could have antifreeze if I bought something else to go along with it. He sold me six gross of radiator stop-leak and cement and he promised me 4.200 gallons of antifreeze. The cement was delivered immediately. The antifreeze was to come in about September 1. In the meantime I sent my salesmen out to sell the antifreeze and we got orders for it. I paid for the cement and the stop-leak, then I received a letter yesterday morning that I will not get any antifreeze until February or March of 1949. Mr. GRANT. You took the tie-in and got everything except that which you wanted most? Mr. MIKRUT. That is right, even though I had a good supply of cement and stop-leak on hand. I needed antifreeze for my customers. Mr. GRANT. You were told definitely you could not get it in any other way than to buy the whole thing? Mr. MIKRUT. That is right. Chairman PLOESER. What is the name of this concern? Mr. MIKRUT. The Flows-On Manufacturing Co. Chairman PLOESER. Where are they located? Mr. MIKRUT. I think they are in Pennsylvania; I think Pittsburgh, Pa. Chairman PLOESER. They are jobbing for whom? Mr. MIKRUT. They are manufacturers. They make antifreeze and radiator solutions. Mr. GRANT. It is a good thing they do not make anything else. They would have sold you that, too. Mr. MIKRUT. Yes; those are the tie-in deals. Mr. GRANT. Anything further? Mr. MIKRUT. One more thing. About 70 percent of my business is done with the car dealers and service-station operators. I sold a certain car dealer a stock of fan belts, hose, and spark plugs. He had the stock in his place about 35 days. The factory man came in and told him he better get rid of it and send them back where he got his merchandise. So he had paid me for the merchandise. He sent it back to me and I had to issue a credit for it. I go over there and talk to him and I said, "What is the matter?" He said, "We are forced by the factory to buy from them only." Mr. MIKRUT. No; all verbal. Mr. BALLINGER. You heard the testimony of Mr. Quinn here this morning. From that testimony Mr. Quinn seems to think in these big corporations the top officials do not always know what is going on down at the bottom. Mr. MIKRUT. Yes. Mr. BALLINGER. Have you ever tried to make a complaint to the presidents of these companies? Mr. MIKRUT. No; I happen to know the owner of one of these companies and the serviceman had instructions to buy from me all he could buy. So he went to the owner and he said, "That is all right." He said, "But if I want to get tires, I better buy from them." They were threatening to not give him anything else. Mr. GRANT. Would you give us the name of the manufacturer referred to in the second example that you have related? Mr. MIKRUT. I have had experience with two of them. One is Chrysler and the other is General Motors; Chrysler the same way with Mopar Parts. Chairman PLOESER. It seems to me that that is the most stupid kind of public relations for automobile manufacturers. Mr. MIKRUT. It is. Chairman PLOESER. It just doesn't make common sense. I do not know many small-business men who are that dumb in their business relations, yet these big fellows are supposed to be smart. Mr. MIKRUT. My business dropped from five to six hundred dollars a month with some dealers to $42 a month. I sold some brake felt. The factory man came around and said, "You better get some brake linings with General Motors name on it." So I got it back then. I had enjoyed this business for 10 years. Mr. BALLINGER. Do you know of any other automobile manufacturers doing the same thing? Mr. MIKRUT. That is all. Mr. BALLINGER. In your experience. Mr. MIKRUT. Mostly Chrysler dealers and General Motors. Chrysler demands Mopar parts and the man is afraid to buy anything else even though they have the same spark plugs in Mopar boxes. They are forced to buy from the factory. Mr. GRANT. We thank you. (Witness excused.) |