(c) Converting existing facilities of planned contractors in any particular case by minor conversion of buildings and the installation of equipment to which the Government retains title.

(d) Utilizing space in Government plants either by conversion or additions to the active plant.

(e) Utilizing pilot and production lines established since World War II by means of phase II and III studies provided under industrial mobilization planning appropriations.

(f) Utilizing existing inactive facilities when suitable for the purpose for which required.

REHABILITATION OF PLANTS

The Government-owned reserve and stand-by plants must be rehabilitated, both buildings and equipment, before the plants can be placed in operation, inasmuch as only minimum maintenance has been performed since World War II because of budgetary limitations.

Senator O'MAHONEY. But we have carried items for rehabilitation to take care of these reserve buildings in other appropriations, have we not?

General REEDER. No, sir. Let me say parenthetically, that at the end of World War II we retained the plants which we selected, those thought best to keep.

For example, we have no great explosive industry. Therefore the ammonia line plants and that sort of thing we kept.

Now, the problem was how much we should put into them.

Senator O'MAHONEY. Well, my point is this, General Reeder. In Ordnance just yesterday we discussed an item-I have forgotten what the figure was-for the care of these reserve plants.

General REEDER. That is the reserve machine tools.

Senator O'MAHONEY. Yes.

General REEDER. That is right. That is different from this over-all rehabilitation.

Let me just go a step further.

Senator O'MAHONEY. My point is that this cost, so far as ordnance is concerned, is not a duplication of what you want here? General REEDER. No, sir; there is no duplication.

Senator O'MAHONEY. But it is a separate appropriation?
General REEDER. That is right.

Senator O'MAHONEY. In addition to what you are asking for here?

REASONS FOR AMOUNT REQUESTED

General REEDER. Yes, sir. This is the big item. We could have kept those plants up to a high standard of availability, ready to go tomorrow, or within 60 days, or any particular standard. Such maintenance would have been very costly, relatively, because we didn't know when we might have war and would need the plants. It might have been 20 or 30 years. That would have been much more costly, that is, to effect such maintenance, than to keep them on a minimum. standard, and then when we were ready for them, or thought we were going to be ready for them, bring them up to the highest level of maintenance.

Another reason for that is that in the course of the years, new processes are developed, and were you to maintain a World War II plant in reserve at a high degree of readiness you might have for world war III an obsolete plant in excellent shape. It is cheaper to keep the buildings standing and the machinery in fair shape, and then bring it up all at once and simultaneously incorporate the newest practices in that plant.

Permanent arsenals must be expanded, and in some cases modernized, to perform assigned missions of specialized production.

Development of new items and techniques since World War II make it desirable in many instances to alter, convert, expand, or establish new production lines in Government-owned plants.

CONSTRUCTION OF NEW PLANTS

Provision is also made for construction of a minimum number of new plants for production of items having no civilian use, where expansion of private and Government-owned facilities would not meet current or foreseeable demands. Such plants will be retained in the Army plant reserve.

Following World War II, the Army retained sufficient special-purpose plants such as explosives, powder, ammunition-loading, and chemical plants, in addition to those classed as the permanent arsenal system, to provide for approximately 40 percent of World War II capacity.

Plants of other types which might be adaptable to use in restoring productive capacity for civilian needs were made available for that purpose, namely, for the civilian economy.

As a result of this policy, manufacturing capacity represented by the permanent arsenals and stand-by plants, having an acquisition value of approximately $2,300,000,000, was maintained on a minimum basis during the peace years. Based on current costs these plants now represent a value of some $4,500,000,000. The use of less than $0.5 billion expended from fiscal year 1951 and planned expenditures from fiscal year 1952 expediting production appropriations would allow the rehabilitation of the major portion of these plants at a fraction of their present-day replacement cost and at the same time lessened the impact on the national economy which would otherwise result from added requirements for materials, manpower, et cetera, were the retained plants not available.

COST OF PLANT MAINTENANCE

Senator O'MAHONEY. What was the cost of maintenance during the period of inactivity?

General REEDER. Over the years, that has run about $23,000,000 a year for the last of 5 years. It is around $100,000,000. It was less than $23,000,000 for a while, and then we jacked it up.

Colonel DAVIS. It went down to as low as $10,000,000.

General REEDER. It is not over $100,000,000.

Senator O'MAHONEY. So that on the basis of replacement cost, the

maintenance program was decidedly economical?

General REEDER. Yes, sir. It was advantageous.

Senator O'MAHONEY. How many such plants were there?

General REEDER. I have, at your request, a list of the 74 industrial plants in the Army's reserve. I have a list of them for the record. Of those, 26 are fully active. We have 32 partially active and in the process of reactivation and rehabilitation. There are 16 which are not presently required for production, which are inactive. Those are mostly explosive components, where our ammunition requirements are not great enough in volume to require their use at this time.

There is a clothing impregnation plant, a chemical plant, a couple of chemical plants, mustard, and so forth.

Senator O'MAHONEY. Most of these are really ordnance plants, are they not?

General REEDER. That is right, sir.

PLANTS IN INDUSTRIAL RESERVE

Then we have the Army-sponsored plants in the National Industrial Plant Reserve. They, of course, are maintained by General Services Administration, but we are the responsible agency in dealingwith the GSA.

Senator O'MAHONEY. How many plants were constructed during World War II that were leased under option to recalling into Government use?

General REEDER. Do you have that?

Colonel BISHOP. I do not have that available here. I can supply it for the record.

General REEEDER. We might call and get that.

Senator O'MAHONEY. Of course, General Services Administration took many of these plants, I know, from the information obtained in other hearings, and I think it would be well to have that in the record.. General REEDER. All right, sir; we can supply that. (The information requested is as follows:)

Twenty-three plants of the thirty-seven in the Army-sponsored National Industrial Plant Reserve were disposed of by the disposal agency by sale or lease under the terms of the national security clause. The remaining 14 have been maintained for future use by General Services Administration. Of the 74 Army-owned reserve plants, 8 are at the present time leased to private industry subject to recall when required for mobilization purposes. Five plants held by General Services Administration as part of the Army-sponsored National Industrial Reserve have recently been transferred to the Army. Nine special-purpose plants, not required at this time, are still in possession of General Services Administration.

There are 37 plants in the Army-sponsored National Industrial Plant Reserve, of which 13 are fully active; 7 are partially active or in process of reactivation or rehabilitation, and 17 are not presently required.

Those are almost entirely explosive components or chemical plants. There is one textile plant, one armor-plate, and one engine-parts plant in Detroit.

Senator O'MAHONEY. What are the 17 that are not presently required and how are they different from the 16 that you mentioned a little while ago?

General REEDER. These are under the General Services Administration. They differ in that they are not under the immediate control of the Army. We can get them back. In fact, as you see, we have put 13 back.

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Senator O'MAHONEY. Is there any money in this estimate for them? General REEDER. There is no money to recover these except to rehabilitate them where we are rehabilitating them and putting them back into use. There will be money for seven of the plants in process of rehabilitation.

For example, there is the General Motors Corp. Fisher body plant at Flint, Mich. That was used by Buick in their spare-parts work. Senator O'MAHONEY. There is nothing in this item for the 74 industrial plants which are now in use-or is there?

General REEDER. Yes, sir. You will find money all through here for them.

Senator O'MAHONEY. I know that money for them is to be found all through the budget, but under "Expediting production" is there any money for the 74?

General REEDER. Yes, sir.

Senator O'MAHONEY. All right. For what particular operation? General REEDER. Well, I don't say that there is money for each of the 74, but there will be extension of work in machine tools.

Senator O'MAHONEY. Well, General, this is really what I want to find out: To what extent are there appropriations elsewhere in the budget which will be expended on these plants, and to what extent will the appropriation under "Expediting production" be sufficient for the plants?

General REEDER. All right, sir.

Let me just take one more example, the Cleveland Tank Plant, at Cleveland, Ohio.

That is where we are making the light tanks. That is one of our reserve plants. We put that plant back into shape for the light tanks with money from Expediting Production. The cranes, for example, were not strong enough to lift the parts of the tank, and they had to be replaced.

The floors, I believe, had to be reinforced.

DISPOSITION OF CRANES

Senator O'MAHONEY. What did you do with the old cranes? General DAVIS. That was originally an aircraft plant, Mr. Chairman, and they never made tanks there.

Senator O'MAHONEY. Well, I can understand that you needed bet

ter cranes.

General REEDER. The question is: Who got the old cranes? Senator O'MAHONEY. What did you do with the old cranes? General CUMMINGS. At the time I saw the plant, it had no crane equipment in it whatever. It was being used for the storage of tanks. General DAVIS. It was being used for the storing of beans for the Department of Agriculture when I first saw it.

General REEDER. The crane equipment had been removed previously.

General CUMMINGS. Had there been any cranes, they would have been placed in reserve.

General REEDER. I believe the building was not strong enough, and I understand that before putting in the cranes, they had to increase the structural strength to carry the load.

Senator O'MAHONEY. As you stated the proposition, you were talking about replacing the lighter cranes with heavier cranes, and so I wondered what had been done with the lighter cranes.

General REEDER. It was to work heavier weights that we put in the cranes.

Senator O'MAHONEY. I understand that.

General REEDER. The money to put that plant in operation comes out of Expediting Production, and was used to put it into good shape.

FUNDS FOR TOOLING

Now, the other money that will be used there from another appropriation is the tooling money, the money for the jigs, fixtures, and dies. There is, for example, the plate with holes in it which shows where to bore when you get a casting underneath it. You put that into the drill on top of the piece.

Senator O'MAHONEY. Why should not this all be in one appropriation item?

General REEDER. Custom has decreed more or less that you separate purely capital expenditures, those which have a long life, from those which have a relatively short life. Now, the jigs, fixtures, and diesthe tooling, as we call them—are associated very directly with the item you are making.

The man who is going to make a template gets the drawings of the thing he is going to work on. He lays out with calipers, dividers, and all sort of things, what he wants, and then he makes the template, so that he can set that down on each piece as it comes along.

When he drills the holes through there, his job is done.

When we cease to make the light tank, for example, those jigs, fixtures, and dies cease to have any value except as junk.

Senator O'MAHONEY. Except as junk?

General REEDER. Or to put them away against the time you may make the light tank again. These also wear out more rapidly than machine tools.

Senator CHAVEZ. I can see the reason for the change all right, but why cannot the complete job be done by one agency out of one appropriation?

General REEDER. Well, it could be, except that we have become accustomed to associate with the production cost of an item like the tanks those jigs, fixtures, and dies which are peculiar to it.

Senator CHAVEZ. I see. It is a custom of the trade?

General REEDER. Yes, sir. Ordnance is a big trade. If you get an $8 billion business, you have a big trade.

Senator O'MAHONEY. It would give the committee a better understanding of the entire cost if this could be placed in one item. I think you could, without a great deal of difficulty, before this record is prepared, go through the appropriation and give us a table showing the amount for Expediting Production and the amount in other appropriations that have to do with these plants.

General REEDER. We can, sir.

Senator O'MAHONEY. I mean, aside from the mere operation of them.

General REEDER. It won't be an instantaneous business, however. There is really quite a bit of work to take out the tooling.