Statement of profit and loss for the period July 1, 1943, to June 30, 1944—Continued

Comparative balance sheet as at June 30, 1944, and June 30, 1943

1 Items of this nature were included in "Accounts receivable of vessels operating agents", on "Accounts receivable (schedule A-3)" at June 30, 1943.

See sheet 3 for reconciliation with total reported at June 30, 1943.

Comparative balance sheet as at June 30, 1944, and June 30, 1943-Continued

CONTEMPLATED REVENUES, 1945 AND 1946

Mr. CANNON. Admiral Land, in your original estimate for 1945, you contemplated revenues, that are given on page 12, I believe, of the justifications, of $1,213,000,000. It now appears, however, that the total for the year will approximate $1,077,000,000. The estimate for 1946 was based on expected revenue of $1,429,000,000.

In the first place, how do you account for the lesser amount, less than you had anticipated for 1945?

Admiral LAND. We get nothing from military cargo. The lessening is due to the lessening in lend-lease, for which we are reimbursed by F. E. A. The commercial cargo, or civilian cargo, has not increased very much. We, of course, get revenue from that. We do not anticipate much increase. Six to eight percent of the total fleet will be commercial. But the real answer is a reduction in the amount of lend-lease and an increase in the amount of military, from which we get no revenue.

Mr. CANNON. You have carried the amount of tonnage which you anticipated, but it is merely a matter of bookkeeping with the War Department?

Admiral LAND. That is right; it is nonpaying.

Mr. CANNON. On what did you base your estimation that 1946 will produce this rather substantial increase? Will you not still have the same situation as to lend-lease and military cargoes?

Admiral LAND. Well, it is anticipated that we may have a little more income from commercial after VE-day. Of course, we do not know how lend-lease is going to function, because the law has just

recently been extended and modified, and the Government agencies concerned are still in the throes of discussion as to the quantity of lend-lease to be shipped during the second, third, and fourth quarters of this calendar year. I discussed that only yesterday with Mr. Crowley. It is rapidly focusing up to a point where decisions will be made, but it is not definitely settled as of today. Of course, when we drafted this, it was quite unsettled.

BASIS OF ESTIMATES

Mr. CANNON. In making out these estimates, speaking generally, of course, you had to take into consideration what you estimated would be the course of the war. I take it for granted that you relied on the well-established military principle of estimating that the war would continue at the same tempo indefinitely. Or did you in making these estimates take into consideration the fact that there might be substantial developments in Europe before the end of the year?

Admiral LAND. We did both. On the advice of the military, we took into consideration the possibility-let us hope probabilityof VE-day happening before the end of this present fiscal year, namely June 30; but we were definitely advised also, all the way up to the top, that for a short period after VE-day there would be a loosening of the shipping situation but that within 3 months thereafter there would be an extreme tightening of the shipping situation, with the actual condition becoming worse than at any time during the war. That is based on the redeployment of troops, rotation of troops, bringing home wounded, repatriating prisoners of war, liberated areas, protocols, and U. N. R. R. A.

Mr. CANNON. The transfer of troops from the European theater to the Asiatic theater?

Admiral LAND. Both to the Asiatic theater and to the United States. There are some troops that apparently under War Department procedure would be transferred to the United States, given certain leave-possibly there may be certain discharges on an age basis-and then would be reshipped to the Pacific area.

Mr. CANNON. That reduction from a two-war status to a one-war status will have very little effect on the burden right away?

Admiral LAND. I am giving you the combined judgment of the Combined Chiefs of Staff when I told you that is true. It will have little or no effect, except that the situation, from a shipping point of view, will be tighter 60 to 90 days after VE-day than it has ever been during the war.

Mr. CANNON. That will continue during the remainder of the fiscal year?

Admiral LAND. Depending on activities in the Orient; yes. So far as our knowledge goes, the answer would be "Yes."

The CHAIRMAN. At least, you have to make arrangements with that in view?

Admiral LAND. That is right; we have to plan in that manner.

MANPOWER SITUATION

Mr. CANNON. You have discussed here your manpower situation very thoroughly. I believe you say you require 93,649. Was that the figure you gave us?

Admiral LAND. I think so.

Mr. CANNON. That is about a correct estimate?

Admiral LAND. Yes, sir; that is correct: It is given on table 1, page 185.

Mr. CANNON. You tell us also that you do not resort to drafting; that all your enlistments are voluntary. What difficulty will you have in securing that number of men? Or will you have any difficulty? Admiral LAND. Well, I think we will have to be on the job every minute to hold them. I think we will hold them or recruit them. One problem is to hold the ones you have, and the other is to obtain necessary increments due to sickness, deaths, attrition, and the increased number of ships that are coming into the fleet from month to month. So we have to hold as well as to recruit and train.

Our greatest difficulty throughout the whole war came in November and December 1944, especially around Christmas time. A remarkably fine job was done by Captain Macauley, Commodore Knight, and Mr. Stone in preventing any ships from not sailing on time, even during the Christmas holidays. We went so far as to bring people in from the Lakes several trainloads of them-in order to have every ship meet its convoy. That stringency continued for a couple of months, and then there was a slight holiday in which we were all right. I think I might say that the "work or fight" bill may have had something to do with getting a few more increments. Now that the "work or fight" bill seems to have died aborning, our situation. again tightens up. There is a lot of psychology about this. Many patriotic men who do not want to pack a gun would just as soon go to

sea.

Mr. CANNON. I take it for granted you feel that they would be rendering just as effective service in one branch as the other?

Admiral LAND. Yes; it is just a question of going into the Army or Navy or Marine Corps or, in this case, the merchant marine.

Mr. CANNON. One is as essential as the other?

Admiral LAND. I do not think there is any question about it; I think they are on all fours.

RENEGOTIATION OF CONTRACTS

Mr. CANNON. What experience have you had, Admiral Land, with respect to the renegotiation of your contracts?

Admiral LAND. We have been making much better progress than we did last year. The thing is systematized; and while we have difficulty in holding our administrative people, who, like many other men, are more or less volunteers in the Government, think the war is over, and want to go back home, we have a board which acts as a rating committee, whose accomplishments are on the increase, and we have a statement for the record showing the status of W. S. A. renegotiations.

So far as the quality and quantity are concerned, I think the work has materially improved over the past year. We still are not up to date, but we are slowly getting there. As you probably know, W. S. A. renegotiation applies far more to service contracts than it does to matériel contracts, as obtains in the Maritime Commission.

STATUS OF RECOVERIES

The CHAIRMAN. Does this tabulation which you insert in the record here also show recoveries?

Admiral LAND. Yes, sir.

Mr. CANNON. What has been the status of your recoveries?

Admiral LAND. According to the Price Adjustment Board, of the cases assigned, 587 have been closed and have resulted in recoveries through March 31, 1945, as follows:

Recoveries by renegotiation, $15,146,697.14.

Recoveries by recapture, collections for other departments, projects, et cetera, $2,326,419.43.

Forward price reductions, $2,526,974.45.

Total, $20,000,091.02.

Total, January 1 to March 31, 1945, $3,635,000.

Mr. CANNON. How does that relate to the total amount involved? What is the percentage?

Admiral LAND. I could not answer that offhand.

Mr. CANNON. I suggest that you supply that.
Admiral LAND. I will.

(The information requested will be found in the following telegraphic report of April 28, 1945, from the Chairman of the War Shipping Administration Price Adjustment Board submitted for the record:)

Recruit

Price Adjustment Board office opened in New York April 15, 1943. ing and organizing consumed several months. First recovery concluded end of June 1943. In approximately 20 months thereafter recoveries effected in 257 cases aggregated $16,230,197; 221 additional cases were analyzed, meetings held but showed no excessive profits; 473 further additional cases cleared through affidavits of nonapplicability because sales volume was below statutory ceiling, Total sales of the 257 cases in which recaptures were effected aggregated $384,896,332 of which $256,373,380, or 66.6 percent, were found to be renegotiable by agreement with contractors. Of this sum contractors reported profits before Federal income and excessive-profits tax amounted to $34,078,558, or 13.3 percent, of renegotiable sales. Of these profits the Board in bilateral agreements with the contractors deemed $16,230,197 excessive and these sums were recovered for the Government. As a result there was left with the contractors as nonexcessive profits on renegotiable sales $17,848,361, or 7.4 percent, on renegotiable sales. No impasse thus far. In addition we have recovered $4,853,394 through and price reduction in which we were directly engaged. Parenthetically this sum is in nowise to be confused with contractual recaptures which I am sure for exceed $25,000,000.

Mr. CANNON. Do you consider it a satisfactory ratio?

Admiral LAND. I think considering that we are dealing with service contracts, there is not much basis of comparison with other agencies of the Government, which deal primarily with what I call the matériel contracts. I think it is satisfactory. I think the job has been done fairly and equitably.

So far as our over-all picture is concerned, Mr. Radner, our general counsel, brings up the point that the big repair yards are renegotiated by the Army and Navy. Our tremendous bills for which renegotiation takes place are really for repairs and run into several hundred million dollars per annum. Those are outside our cognizance and fall under the jurisdiction of the Navy primarily.

Mr. CANNON. You can say that they have had every attention? Admiral LAND. Yes. I also think I am correct in saying we have had no unilateral determinations so far.