been made in land, in plants, machine tools, and equipment, over, say, the past 10 years. Mr. ALLEN. Yes. Mr. Skeen has a statement here. better if we filed that statement? Wouldn't it be Mr. GAVIN. Well, maybe if you can give it. Do you have the total there? Mr. SKEEN. Yes, sir; I do. The total I have is not over any given period. It is the total cumulative amount that we had as of the year end. Mr. GAVIN. Starting when, Mr. Skeen? Mr. SKEEN. I should say, sir, going back possibly to World War II. Mr. GAVIN. Yes. Mr. SKEEN. These figures that I am about to give you are at original cost, without depreciation-$239 million. Mr. GAVIN. $239 million? Mr. SKEEN. Yes, sir. Mr. GAVIN. Now, what-that is land, plants-everything? Mr. SKEEN. Yes, sir. Mr. GAVIN. $239 million. That is a sizable sum of money. Mr. SKEEN. Yes, sir. Mr. ALLEN. Mr. Gavin. Mr. GAVIN. Yes. Mr. ALLEN. I don't want to let you entirely off the hook on this matter of profits. I think I would like to take 2 minutes to just tell you Mr. GAVIN. We will get back to that. Mr. ALLEN. All right. Mr. GAVIN. Let's stay with this for minute. Now if you are getting ambitious to give us a little review, why we will be glad to hear you$239 million. Mr. SKEEN. Yes, sir. Mr. GAVIN. Let me ask you: I suggested that at times you might use it for commercial purposes other than Government contracting. How much have you actually paid back to the Government since these figures were compiled? Mr. SKEEN. If it is possible, Mr. Gavin, we will give you this figure in a moment. But I think first of all you should know the basis upon which we compute such a charge. That basis is outlined in our facilities contract. We have the right to use Government facilities only on Government contracts. The moment we use it on a non-Government principal contract that is not covered by the facilities contract, we pay a usage charge to the Government. Mr. GAVIN. That is what I want to know. Mr. SKEEN. Yes, sir. Mr. GAVIN. How much usage charge have you paid to the Government since this $239 million has been established as the overall figure? Mr. SKEEN. Well, I can give you a figure, Mr. Gavin, for 1956, 1957, and 1958-just 3 years. There have been additional payments back in the Stratocruiser days, which I do not have. But the figure for the past 3 years is $211⁄2 million. Mr. GAVIN. Two and a half million for 3 years. It would be interesting-why don't you get back and get the figuresMr. SKEEN. May I correct that, sir? Mr. GAVIN. Yes. Mr. SKEEN. That is not a cumulative figure. The summation of these 3 years I just mentioned-1956, 1957, and 1958-are $448,000 in 1956, $1,179,000 in 1957, and $2,500,000 in 1958, for a total roughly here of $4 million, approximately $4 million. Mr. GAVIN. About $4 million. That is what Uncle Sam got back for usage of Mr. SKEEN. Government facilities on non-Government principal contracts. Mr. PRICE. Did that include the usage of the machines as well as the buildings, facilities, and so forth? Mr. SKEEN. Yes, sir. Mr. ALLEN. Now, it should be made clear that this usage charge that Mr. Skeen has just testified to only involved a small portion of the facilities that is represented by the larger figure that he gave you, representing the Government investment. Mr. GAVIN. When does this $239 million start from? When did you say? Approximately what time? Mr. SKEEN. We certainly have some facilities that were acquired during World War II, I would say in the early 1940's, Mr. Gavin. Mr. GAVIN. The 1940's? Mr. SKEEN. Yes, sir. Now, I would also point out with respect to return to the Government on the facilities, that throughout this time there has been no depreciation charges, obviously, going into the price of our articles for those facilities Government articles. And, further, the profit rates which have been negotiated have taken into account the fact that there was this amount of Government facilities being utilized for the end benefit of the Government by the Boeing Co. Mr. GAVIN. Did we ever ask the negotiators that particular question? I don't recall what we found out, on that score. Mr. ALLEN. You will recall, Mr. Chairman, that when we made our presentation here 3 years ago, Mr. Skeen had a chart in which he outlined the investment in Government facilities and demonstrated that if those had been privately owned, actually by virtue of having gone into a part of our cost and having made profit thereon, that— well, the Government in effect saved money by having the Government facilities. That is what it amounted to. That was your point. Mr. SKEEN. That is the substance of it. Mr. GAVIN. That is your conclusion. Mr. ALLEN. No; that is what the facts show. Mr. GAVIN. What is Boeing's capitalization? What was it back in 1940? Mr. ALLEN. I can't pick that figure out. Cer Mr. GAVIN. Your auditors are here. You are talking zeros. tainly somebody in your finance setup here ought to be able to give the capitalization of Boeing. What is it today? Mr. ALLEN. Do you want to know, in effect, the net worth-in other words, how much we have in the business? Mr. GAVIN. No. I want to know what your capitalization is. What is it? $100 million, or $200 million, or what? Mr. ALLEN. The net worth is a little over $200 million. Mr. GAVIN. I am not asking about net worth. I am asking what the capitalization is. Mr. ALLEN. Invested capital? Mr. GAVIN. Yes; you know what I mean. What did the stock holders put into the company? Not your net worth today. I just want to see what was put in and what Uncle Sam has put in. That is what I am trying to find out. Mr. ALLEN. We will get you that figure. I would call attention to the fact that the real figure that I think is pertinent is the invested capital plus the retained earnings. Instead of paying it out to stockholders, we have retained a very large percentage. Mr. GAVIN. You made some earnings, too, on what the Federal Government put into the plant. What I am trying to find out is what your investment was. Mr. ALLEN. Yes. As of December 31, 1958, our capital stock as represented on our balance sheet is $113,348,983. And retained earnings would you like to have that, sir? Mr. HESS. Let's have that. Mr. HÉBERT. Let's have that. Mr. ALLEN. $88,246,048, or a total investment in the project, as we view it of $215,595,031. Mr. GAVIN. Well, the Government has a lot of money in there. Mr. ALLEN. No; the Government doesn't have any money in there. Mr. GAVIN. It is logical. I don't argue the question. They put up $239 million. Mr. ALLEN. Oh, yes, but it is not in that figure. Mr. GAVIN. Not in that figure; no. Mr. ALLEN. That is right. Mr. GAVIN. But I say the Government has contributed greatly to the development of the industry, you might say, and there is possibly no other solution to the problem. The Government doesn't want to be in the aircraft industry. And we either have to work with you or the Government goes into business itself, which we don't want. We are just trying to find out what the Government has put in, in cooperating with you in the development of these various major contracts, which are sizable. Mr. ALLEN. Yes. I simply don't want any loose statements made that any of that money there represents Government investment. Mr. GAVIN. What do you mean "loose statements"? Mr. ALLEN. Well, that the Government put in any of that. That money was all properly earned. Mr. GAVIN. That $201 million; I don't question that. Mr. ALLEN. Yes. Mr. GAVIN. I was just trying to ascertain what the Government put in, in land, buildings, and equipment, and you said $239 million. Mr. ALLEN. That is right; we gave you that figure. Mr. GAVIN. And your company has put in $113 million actual cash on the barrelhead, and your earnings are $88-million. So you got $201 million of your money in there. Mr. ALLEN. That is right. Mr. GAVIN. Along with the Government's $239 million. Mr. PRICE. Mr. Gavin, may I ask a question there? Mr. GAVIN. Yes. Mr. PRICE. Does that figure that you have just read represent facilities that were originally built by the Government that you later purchased from the Government? Mr. ALLEN. To some extent, yes. We bought-after the war_we bought some facilities from the Government, that were built. But I can't give you that figure, Mr. Price. Mr. PRICE. Well, could you supply it for the record? Mr. ALLEN. Yes, sir. Mr. PRICE. What you bought and what the estimated original cost was and the figure you purchased it at? Mr. ALLEN. Yes, sir. (The information referred to is as follows:) Mr. JOHN J. COURTNEY, BOEING AIRPLANE CO., Seattle, Wash., May 8, 1959. Special Counsel, Subcommittee for Special Investigations, House of Representatives, Washington, D.C. DEAR MR. COURTNEY: During the testimony of Mr. William M. Allen, president of Boeing Airplane Co., before the Subcommittee for Special Investigations of the House Armed Services Committee on Wednesday, April 29, 1959, Mr. Price raised a question relative to the purchase by Boeing of Government facilities. A review of our records reveals that purchases of Government-owned facilities were made in 1943 and 1947. The 1943 purchase price amounted to $7,102,818 and covered real property and machinery and equipment which had an original cost to the Government of $7,564,223. The second transactions, in 1947, involved a purchase price of $1,114,489 and related to machinery and equipment with an original cost of $3,237,553. The purchase price in the second transaction represented the depreciated value of the property at the time of purchase. If further information is required, please advise. Yours very truly, H. W. HAYNES, Assistant Controller. Mr. HARDY. If the gentleman from Pennsylvania would yield for a clarifying question on this question of original investment? Mr. GAVIN. OK. Mr. HARDY. It might be pertinent to inquire as to whether the $113,348,000 which shows in your capital stock account-whether that represents initial investment or whether that also represents some stock dividends or other earnings that have been capitalized. Mr. ALLEN. It represents both. Mr. HARDY. So the $113 million, then, is not an accurate reflection of the original dollar investment? Mr. ALLEN. Oh, no. The stockholders-I don't know. The company started out with a very small Mr. HARDY. I am not necessarily talking about what was paid in originally. I was just trying to clear up what I thought Mr. Gavin was trying to develop. Mr. GAVIN. The capital structure. Mr. HARDY. That is right. Mr. GAVIN. And how it was arrived at. Mr. HARDY. Whether it represents paid-in capital or whether it represents the earnings. Mr. ALLEN. Both. Mr. HÉBERT. May I get off that subject Mr. GAVIN. Just a minute. I would like to ask Mr. Allen whether or not the Government is contemplating the purchase of any additional land or buildings or furnishing them for any particular contracts that you now have or anticipate? Mr. ALLEN. I don't know of any land or building that the Government is contemplating providing. Actually, the facilities that the Government provides at the present time primarily consist of special-purpose facilities which are only usable in connection with a specific project and wouldn't be usable for general purposes. Mr. GAVIN. What about machine tools? Mr. ALLEN. Well, general purpose machine tools, to my knowledge, the Government is not providing. Mr. GAVIN. There is nothing anticipated in the way of new buildings, machine tools, or equipping of the buildings? We only ask that question because most everything under defense comes before the House Armed Services Committee for authorization. And there are a number of these plants where branches of defense go ahead and put up very sizable structures without anybody having knowledge. Is that correct or not? Mr. HÉBERT. That is what we are trying to develop, Mr. Gavin. Mr. GAVIN. Just one more. Let me ask: After a prime contractor has been determined and occasionally there are some items that are held up for approval, do you find any dilatory tactics in any branches of defense, that don't cooperate with you to get the problem solved so you can get on with the work? Mr. ALLEN. Are you talking now in connection with our contracts for the manufacture of weapons, or are you talking about facilities? Mr. GAVIN. Weapons. Mr. ALLEN. Weapons. Mr. GAVIN. Yes. Mr. ALLEN. Well, I would say that generally we get very fine cooperation. It must be recognized that our Government is a very complex structure and there are many agencies involved. Mr. GAVIN. We are quite familiar with that. Mr. ALLEN. I would think so. Mr. GAVIN. Yes. Mr. ALLEN. And we run into delays at times that Mr. GAVIN. What do you do about it, then? Suppose you are trying to expeditiously fill the contract and some branch of Government, one of the services, fails to cooperate with you as they should, what do you do then? You just sit there and wait until such time as they get ready to give you an answer, or do you say, "Now you have had this for 30 or 60 days, what are you going to do about it? We would like to get on with the job. Or aren't you in the habit of talking to them that way? Mr. ALLEN. Oh, yes, we are. We project the problem, sir. That means we put some competent people on it to follow up, to go and see the agency involved and find out what we can do about expediting it. If we didn't do that, we would be dead in the water. Mr. HÉBERT. Just one final question before we go in executive session, Mr. Allen. I want to bring this into clear focus. That is the problem of what is your authority as related to your responsibility. |