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Mr. Sikes. Mr. Secretary, I admire your frankness and sincerity. Assuming that it is going to be several years before we have a twoocean Navy and assuming that South American bases, either by boring from within or by other means may be established, can you suggest from your experience any method or bill other than this H. Ř. 1776 which will provide a quicker and more economical means of ensuring our hemisphere defense and minimizing the danger to this Nation from abroad?

Mr. Knox. Do you eliminate in your estimate the help which the survival of the British Fleet would be?

Mr. SIKES. I am just asking, Mr. Secretary, if you in your broad experience have encountered any substitute or anything which would be of more value to us than this bill which we have under consideration?

Mr. Knox. It is a rather radical idea and I am afraid my Republican friends behind that rail will gasp, but I think the best thing for us to do is to treat South America as we treated the great West when it was developed, and that meant a virtually free exchange of goods between the East and the West. If we were to establish a freedom of trade between North and South America and remove every last barrier to that trade, we would tie them to us with economic bands of steel that no one could break.

The CHAIRMAN. Mr. Davis ?
Mr. Davis. No questions.

The CHAIRMAN. Mr. Secretary, I promised we would let you out at 5:30 and on behalf of the committee we want to thank you very, very much.

The committee will recess until tomorrow morning at 10 a. m., when we will hear Mr. Knudsen.

(Whereupon the committee recessed until January 18, 1940, at 10 a. m.)




Washington, D. C. The committee met at 10 a. m., Hon. Sol. Bloom (chairman) presiding

The CHAIRMAN. The committee will kindly come to order. Appearing before the committee this morning is the Honorable William S. Knudsen, Director General of the Office of Production Management.

Mr. Knudsen states that he has no prepared statement to make and under those circumstances we will start off with questions.



Mrs. ROGERS. Mr. Knudson, we are delighted that you are here. Mr. KNUDSEN. Thank you.

Mrs. ROGERS. Mr. Knudsen, you are a great businessman. The first question I am going to ask you is this: What effect do you feel tħis so-called lease-lending plan, will have upon the business of our country? I saw in the press some time ago where a member of Parliament was jubilant about this bill and stated in the Parliament that after the war was over it would be fine because the British people could be employed making munitions to return to the United States in exchange for the munitions that we would send them under this bill.

Would that not be very bad for the business of this country and keep a great many people out of employment, a great many of our munitions workers?

Mr. KNUDSEN. I do not know. It depends entirely on how the domestic business responds to the adjustments that we have after the war here.

Naturally the so-called munitions that will be returned to us will not be manufactured at the speed that we are manufacturing for England, consequently the return will be possibly spread over a long period.

Our problem here would be to get our facilities employed on domestic production after the crisis is over.

Mrs. ROGERS. Would it not seem to be a great pity to not employ our own people, who are employed in making munitions, over here, after the war is over? 288128—41-13


Mr. KNUDSEN. On those who would not be needed? We cannot estimate what that need would be. But, the effect of the program on domestic business depends entirely on the time factor when you get the plant. You see what I mean, if it took 5 years or 6 years the effect would not be the same as trying to meet it in 1 year. You understand what I mean. We must make it in 2 years now; we must make in 2 years what is needed. I have not heard any statement to the effect that we would get it back in 2 years.

Mrs. ROGERS. Are you satisfied with the progress of the defense program!

Mr. KNUDSEN. You mean over here?
Mrs. ROGERS. Yes.

Mr. KNUDSEN. Well, I think we are doing as well as could be expected.

The CHAIRMAN. Will you kindly keep your voice up, Mr. Knudsen.

Mr. KNUDSEN. I think we are doing fairly well. But of course a real show will not start until tools are finished. We are starting; from now on the earlier tools will be going into production and some of the heavier tools will come later on. I expect a gradual increase from now on.

Mrs. ROGERS. Have you any figures you could give the committee as to the extent of the progress on the program? You have said before very emphatically that there was a lag in production.

Mr. KNUDSEN. Mrs. Rogers, there was a lag on our estimate in the airplane production, and that was what I was talking about at that time. We are talking about airplanes, and there was a lag there.

Mrs. ROGERS. Do you not feel, Mr. Knudsen, it would be wiser for getting immediate production to take our idle plants and welltrained men in the localities where they now are established and put those skilled employees to work rather than building new plants in new localities where there would be the necessity of having new men and women. It takes a long time for people to become skilled workers.

Mr. KNUDSEN. There are certain things you have to build plants for, Mrs. Rogers. Take an airplane assembling plant, it is a very large plant and we do not have any such plants, so there we had to build.

Machine shops, of course, we can utilize as many of the facilities as possible.

I brought along, perhaps for your benefit, a statement on that, giving the information which you have been anxious to receive.

Mrs. ROGERS. I have been very anxious to secure information regarding the progress of the defense program and employment for skilled workers, and you have been very helpful, but I wish you could do more.

Mr. KNUDSEN. I brought along a specific instance to show you. I have taken an airplane motor plant, which is in your section of the country, and I had them give me a statement of how much of the cost was handled outside and how much was handled in the plant, and it shows that from the total materials purchased, rough and finished, 61 percent of the cost is bought outside, leaving 39 percent for labor and overhead in the mother plant. That is an illustration which you asked about sometime ago.

Mrs. ROGERS. I am very anxious to have our idle plants and idle employees put to work.

Mr. KNUDSEN. If you are able to proceed on that basis your wishes are going to be fulfilled, I hope.

Mrs. ROGERS. Mr. Knudsen, if this bill becomes the law, how long a period of time would be required from its enactment to provide any definite articles of defense, in sufficient amounts to be helpful to Great Britain ?

Mr. KNUDSEN. I have not as yet gotten the final schedules on that. We have only gotten a sort of general quantity list, but we would not be able to get any great amount until the later part of 1941, unless we take production out of existing facilities, like the small arms, ammunitions, where we have going concerns. We could take a portion of that while we are adding to the present plants.

Mrs. ROGERS. You feel that we ought to continue on our own program.

Mr. KNUDSEN. Absolutely. Mrs. ROGERS. Making our own defense materials. Mr. KNUDSEN. Absolutely. Mrs. ROGERS. I am very glad to hear you say that. As a manufacturer of extreme ability, and as a businessman, do you not believe the people of the United States should finance the supplying of war materials to Great Britain without some definitely earmarked collateral or specific security!

Mr. KNUDSEN. Mrs. Rogers, I am not in the finance business. My job is to make things, and I have to depend on other people to decide what is right; as far as I am concerned I think the materials should be made. And eventually the money comes from the people, as I see it.

Mrs. ROGERS. Yes; but my question was, so far as Great Britain is concerned, do you not feel that we should have something as collateral perhaps something such as tin and rubber and aluminum, the supplies that we need.

The CHAIRMAN. The gentleman has stated that does not.come within the purview of his department. He does not know anything about it; his job is to make things. So far as being on the dollar exchange or securing collateral, the witness knows nothing about that.

Mrs. ROGERS. But Mr. Chairman, I think the witness is a most expert one.

The CHAIRMAN. You can ask him his own personal opinion, but he has stated he knows nothing about that.

Mrs. ROGERS. I think, Mr. Chairman, Mr. Knudsen is too modest and I believe we are entitled to get his opinion.

The CHAIRMAN. All right.

Mrs. ROGERS. And I know the country would like to hear his opinion; and that is especially true, Mr. Chairman, since the matter

The CHAIRMAN (interposing). Proceed in the regular order, Mrs.
Rogers; the Chair has ruled that the witness may answer the question
if he wishes to.
Mrs. ROGERS. What is your answer, Mr. Knudsen?
Mr. KNUDSEN. I would say I do not know that they have any.
Mrs. ROGERS. England certainly has tin.
Mr. KNUDSEN. Whether she has
Mrs. ROGERS (interposing). England, of course, does have tin.
Mr. KNUDSEN. I beg your pardon.
Mrs. ROGERS. England does have tin.
Mr. KNUDSEN. Does have it?

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