The main purpose as I understand my presence, is to explain to this committee how the United States Steel Co. is organized and how it is operated. Its pricing policy is a very important function of this company, and it is not something to be just thrown around hit or miss. We do not run our business on that basis, and I would like to have Mr. Austin, if this is the proper time

The CHAIRMAN. Mr. Fairless, there is no intention to ask hit-andmiss questions. These questions were very well thought out. I have gone over these questions. I think they are very logical.

They are in sequence and I would like to follow the sequence, and then we would be very happy to get from you additional explanations. You can make it as long as you wish in fullest explanation of what your practices may be, so I think this is the best way to get at it. We would like to work it out the way we have planned it. If you can answer, well and good. If you cannot, simply say that you

cannot.

Mr. FAIRLESS. Well, Mr. Chairman, I do not want to prolong this, neither do I want to start anything controversial, but to ask me a question, "If you change the price of a 6-inch width of steel will that affect some other product?" opens up a great, big commercial question, and it is not something that you can just say yes or no to and then answer that question intelligently.

The CHAIRMAN. I say if you cannot answer it yes or no, simply

say so.

Mr. FAIRLESS. I want to answer it. I want to answer every question. I do not want any unanswered questions.

Mr. LEVI. I would suggest, in view of the feeling that seems to exist, that perhaps these questions were unintelligent or unfair, that Mr. Austin should make his statement. The only reason that I am a little worried about that is that I would feel that I ought to still ask the same question anyway, and it might be that there would be some repetition.

Mr. FAIRLESS. Well, it is all right to proceed.

Mr. LEVI. I would be very glad to hear Mr. Austin.

The CHAIRMAN. I think you can handle yourself very well, Mr. Fairless. You have done very well thus far. If there is any difficulty, why we will hear Mr. Austin later on. I think we will have no trouble. Let us get on.

Mr. FAIRLESS. All right.

Mr. LEVI. Well, the next question that I have, which is no doubt unintelligent, Mr. Fairless, is that if the corporation raised the price of semifinished items and did not raise the price of the finished item, that might cause difficulties for finishers, might it not?

Mr. FAIRLESS. Well, if what you have just stated—it could.
Mr. LEVI. Hypothetically?

Mr. FAIRLESS. It is hypothetical, and also you must realize that it could be at that point that the purchasers of semifinished steel had sufficient spread in the selling price of their finished product that they could absorb a reasonable increase in the price of semifinished steel. Mr. LEVI. So that would depend

Mr. FAIRLESS. That is right.

Mr. LEVI. And an example of such a product might be wire rods. That would be the kind of product where you would have to see whether the purchaser would have sufficient spread or not.

Mr. FAIRLESS. Well, I will not repeat, but you see these questions are all involved in not only the commercial policies of the steel corporation but the commercial problems that are involved in the steel business.

Now if the United States Steel Corp. had complete control over the steel industry and was the monopoly that some people say we are, then I could just play this price commercial picture as you play a piano. I would say the price of semifinished steel goes up so and so or down so and so, and the resultant finished product price goes up so and so or it goes down so and so, and off we go. But the thing we overlook, and are completely overlooking, is that there are a great many other people in the steel business, and we have competition. Even if it is my desire to raise the price of a finished product so that it would correspond with an increase in the price of semifinished steel involved, it might not stand up because competitors of ours and those who purchase our semifinished steel say, "Oh, no, we are not going to sell for that price. We will sell for some other price." In other words, we do not have control of semifinished or finished steel. Another thing I want to point out here, we are getting into an awful lot of discussion about semifinished steel. If the United States Steel Corp. provided its share of the semifinished steel for the nonintegrated industry, it would obviously supply about 322 percent of it; is that not right?

Mr. LEVI. I think so.

Mr. FAIRLESS. That is our participation in the industry. Certainly everybody that makes ingots makes semifinished steel. Therefore, to do our share for this great, big nonintegrated consuming industry, we would furnish 3212 percent.

It so happens that we furnish a much larger percentage-a much larger percentage. Everybody that is in the steel business automatically makes semifinished steel. They automatically make it. Whether they sell it or use it, they still make it.

Mr. LEVI. Then may I go back, Mr. Fairless, and repeat the question this way. If the corporation raised the price of the semifinished item. such as wire rods, and did not raise the price of the finished item, this might cause difficulty for the finisher?

Mr. FAIRLESS. It might.

Mr. LEVI. But I think you have testified before the TNEC that your policy is to keep the finisher in business and sell to him at a proper price.

Mr. FAIRLESS. To the extent we can.

The CHAIRMAN. Is that still your practice?

Mr. FAIRLESS. To the extent that we can control it.

The CHAIRMAN. That is you keep in business the end fabricators as much as possible?

Mr. FAIRLESS. My statement this morning, Mr. Chairman, completely covered that. We want so-called small customers. We have no desire to put anybody out of business, nor do we have the power to do it. The CHAIRMAN. I do not know whether you read some testimony. We have had some fabricators appearing before us.

Mr. FAIRLESS. You had some, and you also had many letters from others, copies of which I happened to receive. Their letters do not coincide with the fabricators that testified here.1

1 A selection of letters expressing satisfaction with the U. S. Steel Corp. and received by the subcommittee in connection with its investigation of the Steel Industry appears in the appendix printed in Steel Exhibits, pp. 846-858.

The CHAIRMAN. I am not referring to letters, Mr. Fairless. I am referring to the actual testimony of some fabricators, particularly on the west coast and in the Midwest, and their statements do not jibe with what you are saying.

Mr. FAIRLESS. Well, I would like to tell you the story of the Pacific companies' fabricators. My voice is failing a little. I am going to ask Mr. Austin to tell you that story. He is more familiar with the details.

The CHAIRMAN. We want to finish with you because you are very anxious to go away, Mr. Fairless.

Mr. FAIRLESS. I am not anxious to go away today.

The CHAIRMAN. I mean this is going to be a long interrogation, and I think we had better finish with you first.

Mr. FAIRLESS. All right. I just want to state here that the competition is very, very keen out on the Pacific coast. There are many more fabricators on the Pacific coast today than there were prior to the war. There is not enough business to go around, and the usual condition has prevailed. It is difficult-it is difficult for all fabricators on the Pacific coast at the present time, including our own.

Prices are way off because there is not enough business to go around. Now we cannot foot our own bill and everybody else's bill at the same time, but, on the other hand, we are attempting to the best of our ability to be fair in all cases with each and every one of these fabri

cators.

Mr. LEVI. Now, Mr. Fairless, again in deciding whether a recommendation which comes to you for a price increase should be put into effect or not

Mr. FAIRLESS. Can we use the words "price change" instead of "price increase"? Prices go down as well as up, you know.

Mr. LEVI. I mean nothing by saying price increase. I will say price drop, price change.

Mr. FAIRLESS. Price changes I think would cover both.

Mr. LEVI. Anyway, when a price change comes to you, one of the things that you might have to take into account is the effect on other subsidiaries; is that right? That is, you might have to balance one subsidiary as against another?

Mr. FAIRLESS. No. I do not know what you mean by that. In other words, using an example only, if the price of bars was either reduced or increased, the same thing would happen in all subsidiaries. It would be a general change in the price.

Mr. LEVI. Perhaps I can give you a more particular example of what I thought you would have to take into account, and that is this. For example if the price of cold-rolled strip sold by American Steel & Wire is lowered in order to get a big purchase in the market for American Steel & Wire, that might hurt the business of CarnegieIllinois in selling semifinished steel to purchasers who convert the semifinished steel into cold-rolled strip; is that right?

Mr. FAIRLESS. Well, it might. That is pretty farfetched.

Mr. LEVI. Was that not a matter which was not so farfetched but that it was discussed in the recommendations and discussion of problems of your company in 1938 ?

Mr. FAIRLESS. Yes; there were many recommendations made. There were many suggested changes in our affairs, some of which were

adopted and put into effect and some of which were never adopted. After all, that was simply an engineer's report, and represented their opinion.

Mr. LEVI. In which your company's officials participated however; is that not correct?

Mr. FAIRLESS. Yes.

Mr. LEVI. Well, this was one of the problems which was discussed; is that not right?

Mr. FAIRLESS. That is right; sure.

Mr. LEVI. So that would be the problem as between subsidiaries. Now might you have the problem-well, I guess this would also be between subsidiaries, but in a little different way, that is, you might have a problem-between Virginia Bridge and American Bridge as to which one could bid on the job, might you not?

Mr. FAIRLESS. Oh, no. Territories and types of structures determine the answer to that question.

Mr. LEVI. So that it would be determined as to which one would bid, and they would not both bid; is that right?

Mr. FAIRLESS. That is right.

Mr. LEVI. Well, you might have to review that from time to time, might you not, as to whether the territory should be changed? Mr. FAIRLESS. We do, definitely.

Mr. LEVI. And therefore what you would be reviewing would be the geographical territory or market to be served by a particular subsidiary.

Mr. FAIRLESS. That is right.

Mr. LEVI. Is this the kind of problem you might have to decide? You might have to determine whether the TCI should supply Texas, for example, or whether the supply for Texas should come from Carnegie?

Mr. FAIRLESS. That is right. That was one of the problems that was pointed out in this study that you referred to.

Mr. LEVI. And another general policy decision which you would have to decide, for example, which I think you have already mentioned today, is whether TCI should make wide-flanged beams; is that right? Mr. FAIRLESS. Yes.

Mr. LEVI. Or whether TCI should make hot-rolled coil, that is in particular or in general, or whether that should be given to Geneva. Mr. FAIRLESS. Well, it is not quite right the way you put it. I am sure your intent is right, but Tennessee Co. must make hot-rolled coils. They must make them. They need them in their own manufacture. Now, whether they would supply those coils for Columbia out on the west coast or whether those coils would be supplied from Geneva, that is a question for the management of Geneva, Tennessee, and myself and my staff to decide.

Mr. LEVI. And the management of TCI would be consulted?
Mr. FAIRLESS. That is where management comes in.

Mr. LEVI. And you might decide, might you not, for policy reasons to go ahead with the acquistion of Geneva even though it might be more economical perhaps to supply the hot-rolled coils for tin plate on the west coast from TCI rather than from Geneva?

Mr. FAIRLESS. No; if the answer was that it was more economical to supply those coils from Tennessee versus Geneva, they would come from Tennessee.

Mr. LEVI. But you might have a situation, might you not, in which the TCI advice is that it would be better for you not to purchase Geneva but to supply the material from TCI rather than to have you go ahead and purchase Geneva and then supply the materials from Geneva.

Mr. FAIRLESS. Well, they might. Obviously, our subsidiaries do not always come up with the suggestion that is eventually adopted.

Mr. LEVI. And you might have a question, might you not, as to whether tin plate for the eastern seaboard should come from TCI in the South or whether that tin plate should come from Carnegie plants at Pittsburgh.

Mr. FAIRLESS. It could be a problem, but many times the business conditions settle a great many of those problems.

Mr. LEVI. And TCI might have a recommendation on this which would be contrary to the over-all plan of the corporation.

Mr. FAIRLESS. I do not know. What do you mean by that?

Mr. LEVI. They might feel that tin plate should come from them, whereas, looking at the over-all situation, it ought not to come from them.

Mr. FAIRLESS. Well, they could, but it so happens that the Tennessee Co. never has recommended that they ship tin plate to the eastern seaboard, not since I have been president of the steel corporation. Mr. LEVI. But that recommendation has been made.

Mr. FAIRLESS. Not by the Tennessee Co.

Mr. LEVI. It has been made by experts, has it not, experts employed by the corporation?

Mr. FAIRLESS. That is right, and their recommendation was not accepted.

Mr. LEVI. Now all of these things that we have been considering, that is, the allocation between subsidiaries, the general competitive situation, and so on, these are the kinds of things that you would have to decide in determining whether to adopt a price change; is that right?

Mr. FAIRLESS. Well, price is one of the things that I deal with. It is not the only thing. The little item of spending since the end of the war more than $1,000,000,000, I had something to do with that also.

Mr. LEVI. Now will you make a similar kind of decision with respect to transportation costs that you make with respect to a price change?

Mr. FAIRLESS. Transportation?

Mr. LEVI. Yes.

Mr. FAIRLESS. No; not a thing to do with transportation.

Mr. LEVI. Now this is what I do not understand. When the Duluth, Missabe & Iron Range decides it wants to raise its price, does that matter go to you?

Mr. FAIRLESS. No. If they did decide that, they would go to the Interstate Commerce Commission.

Mr. LEVI. I do not understand that answer. I wonder if you can elucidate a little further. You say if they did raise the price it would go to the Interstate Commerce Commission?

Mr. FAIRLESS. What are you talking about, railroad rates?
Mr. LEVI. Yes.