District of Columbia, (2) of groceries and food products from New York, N. Y., Philadelphia, Pa., and Jersey City, N. J., to Chicago and points in Pennsylvania and Ohio on and north of U. S. Highways 30 and 30S, and from New York City to points in Michigan, (3) of soap and soap materials from New York City and Elmhurst, N. Y., to points in Pennsylvania and Ohio on and north of U. S. Highways 30 and 30S, (4) of dairy products from Clare, Hesperia, Barrytown, Coldwater, and Reeman, Mich., to Buffalo and New York, N. Y., (5) of canned milk from Defiance, Ohio, to Grand Rapids and Muskegon, (6) of lubricating oil from Bedford, Ohio, to Kalamazoo, Battle Creek, and Grand Rapids, (7) of cash registers from Kalamazoo, Lansing, Grand Rapids, Saginaw, Jackson, and Flint, Mich., to Dayton, Ohio, (8) of glass bottles from Gas City and Marion, Ind., to Grand Rapids, (9) of drugs between Grand Rapids, on the one hand, and, on the other, Baltimore, Md., and points in Ohio, and from Grand Rapids to Richmond, Ind., (10) of household goods between Grand Rapids, on the one hand, and, on the other, points in Wisconsin, Illinois, Indiana, and Ohio, (11) of motor-vehicle and car seats from Grand Rapids to points in Illinois, Indiana, Maryland, Massachusetts, Minnesota, New Jersey, New York, Ohio, Pennsylvania, West Virginia, Wisconsin, and St. Louis, Mo., and the District of Columbia, (12) of new furniture and stone-furniture tops between Adrian, Mich., and McDermott, Ohio, and from Adrian and McDermott to points in Connecticut, Delaware, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, Ohio, Pennsylvania Rhode Island, Tennessee, Vermont, Virginia, West Virginia, Wisconsin, and the District of Columbia, (13) of veneer from Chestertown, N. Y., to Grand Rapids, and (14) of springs from Royersford, Pa., to Grand Rapids, and rejected shipments in the reverse direction of the commodities described under (11), (12), (13), and (14). Lessor has pending under section 207 an application in No. MC106143 (Sub-No. 9) for authority to extend certain of its operations. Until such time as that application is granted, however, lessor has no operating rights thereunder which we may authorize to be leased herein. Compare J. H. Sprecher, Inc.-Lease-Yeagle, 50 M. C. C. 319. Under an agreement of July 24, 1947, as amended at the hearing, lessee would lease lessor's operating rights described above for a period of 5 years, commencing with the date on which temporary authority would be granted herein, at a rental of 2 percent of the gross revenues derived from the proposed operations, but not less than $100 per month. The fixed charges thus incurred would not be contrary to the public interest. Lessor had intrastate rights in Michigan covering

776209-49-vol. 50-29

the transportation of household goods and office furniture, which have been sold to another carrier. Lessee is given an option to purchase the considered rights for $5,000 at the expiration of the lease. Nothing herein should be construed as authorizing purchase of the rights.

Lessee's balance sheet as of June 30, 1947, shows assets aggregating $234,917, consisting of: Current assets $128,382, chiefly cash $24,906 and accounts receivable $99,292; carrier operating property, less depreciation, $17,714; intangible property $2; investment securities and advances $76,897; and prepayments $11,922. Its liabilities were: Current liabilities $97,470, mainly accounts payable $79,979; long-term obligations, other $73,000; reserves $12,219; capital stock $7,500; and surplus, unearned $34,340 and earned $10,388. Its income statements for 1945, 1946, and the first 6 months of 1947 show, respectively, a deficit of $2,803 and net incomes of $25,703 and $12,192, before provision for income taxes for the last two periods, and net incomes of $24,713 and $9,967, after such provision for the same periods.

Lessor's balance sheet as of July 12, 1947, shows assets aggregating $50,972, consisting of: Current assets $5,374, chiefly cash (credit balance) $2,052, special deposits $2,247, and accounts receivable $4,984; carrier operating property, less depreciation, $28,135; intangible property $11,465; and prepayments $5,998. Its liabilities were: Current liabilities $22,421, mainly notes payable $9,291 and accounts payable $11,798; advances payable $3,250; equipment obligations $11,506; deferred credits $282; reserves-injuries, loss and damage $500; capital stock $19,300; and earned surplus (debit balance) $6,287. Its income statements for the periods July 15 to December 29, 1945, December 30, 1945, to December 28, 1946, and December 29, 1946, to July 12, 1947, show deficits of $509, $5,057, and $6,850, respectively. Lessor attributes its unprofitable operations to lack of return movements, reduction in freight, inefficient personnel, and the rising cost of labor and materials. It does not intend to resume operations.

As previously stated, lessee is authorized to transport general commodities, over regular routes, between points in the southern portion of the Lower Peninsula of Michigan and between such points, including Grand Rapids, and Chicago. Lessor has authority to transport specified commodities, over irregular routes, principally in one-way movements, in a number of States, including new furniture and motorvehicle and car seats from Grand Rapids to points in Illinois. Hence, under the unified operations, the main duplication in service would be in the movement of the latter commodities from Grand Rapids to Chicago. Lessee has been assured traffic for the considered areas by shippers it now serves, and additional tonnage is expected to result

from the employment of 1 or 2 solicitors at Grand Rapids (in addition to the 3 or 4 stationed there in connection with its own operations) and agents, on a commission basis, at outlying points. While lessor's rights authorize the transportation of commodities chiefly in one-way movements, lessee has reasonable prospects of a material reduction in "deadheading;" for example, it could handle new furniture from Grand Rapids to New York City, Jersey City, and Philadelphia, and groceries and food products from these points to Chicago, and cash registers from Kalamazoo, Lansing, Grand Rapids, Saginaw, Jackson, and Flint to Dayton, and canned milk from Defiance to Grand Rapids and Muskegon. To conduct the proposed operations, lessee would initially require the addition of 15 employees, 8 tractors, 8 trailers, and terminal facilities at Grand Rapids, aside from its main terminal there, to handle uncrated furniture. The rental would approximate $125 a month. Lessee is confident of increasing its revenues by about $15,000 a month. Lessor's personnel have secured employment elsewhere. Other motor common carriers, including protestants, compete in the considered areas. In conducting the unified operations, lessee will be expected to preserve the separate nature of its regularroute rights and lessor's irregular-route rights and to move traffic only through points which may be served in common under the respective rights. B. & E. Transp. Co., Inc.-Purchase-Merchants Transp., Inc., 36 M. C. C. 561.

In opposing the application, protestants contend that they operate in the considered areas; that they are providing adequate service; that the "tacking" of lessor's irregular routes to lessee's regular routes would introduce a new element of competition; and that the loss of a material portion of their traffic to lessee would seriously affect their ability to continue operations. As previously indicated, no evidence was offered in behalf of Associated.

Creston's home office is in Grand Rapids, where it is constructing a spacious terminal. The traffic which it fears would be diverted by lessee consists of uncrated furniture. Ninety-five percent of all its tonnage is less than truckload, and approximately 60 percent of its revenues is derived from freight moving from Grand Rapids. It is at present operating not in excess of 75 percent of the capacity of its vehicles. Expenditures for the terminal and 15 units of equipment (partly as replacements) will aggregate about $150,000. It anticipates a loss of approximately one-sixth of its total revenues, should lessee succeed in increasing revenues by $15,000 a month under the proposed operations. Creston's income statements, included in its annual and quarterly reports filed with us for the period June 1 to

December 31, 1942, the years 1943, 1944, 1945, 1946, and the first 9 months of 1947, show a deficit of $14,798 and net incomes, after provision for income taxes, of $24,725, $22,364, $20,398, $41,800, and $5,154, respectively.

A number of motor carriers compete in the areas under discussion. Creston believes there is more competition than "the traffic warrants." Because of the new terminal and superior facilities, it is hopeful of attracting more of lessor's freight than would other carriers if the instant application should be denied. Inasmuch as several other motor carriers compete with lessor, particularly in the absence of evidence in their behalf, it is not possible to find on this record that, under the unified operations, lessee would be likely to divert sufficient tonnage from Creston to impair its ability to provide adequate transportation service. The factors which may account for Creston's ability to attract more of lessor's traffic than would its competitors, should shield it to some extent from the feared diversion. There is no doubt that protestants and other competitors will suffer some loss of revenues following consummation herein, but this is generally true in cases under section 5 where the acquiring carrier's financial resources, equipment, facilities, and service are superior to those of the carrier acquired. We have consistently approved transactions under similar circumstances. Compare Super Service M. Frt. Co., Inc.-Pur.-Selman and Junkins, 45 M. C. C. 432.

In connection with protestants' objection to the "tacking" of applicants' operating rights, it appears sufficiently to repeat the following from the report just cited, which is equally applicable to the instant transaction:

In numerous cases the unification of irregular-route with regular-route operating rights for the purpose of performing through transportation under the combined rights, via gateways common to both sets of rights, has been found to be consistent with the public interest where it appeared that maintenance of the separate nature of the rights was feasible.

As previously indicated, the sole function of Motor Supply, Inc., is to hold lessee's capital stock and to lease equipment to it for use in its operations. Its entire interest, therefore, is in transportation. Under section 5 (3) we have the discretionary power to provide in our order that, upon consummation of the instant transaction, Motor Supply, Inc., shall be considered as a motor carrier subject to the provisions of sections 204 (a) (1) and (2) and 220 (relating to reports and accounts of carriers) and 214 (relating to issues of securities and assumption of liability of carriers) of part II of the act, and it has been our policy to subject similar companies to the provisions of those sections. Compare Peoples Transfer, Inc.-Purchase-Hodges, 45 M. C. C. 827, and

report on reconsideration therein, 50 M. C. C. 336. Under the above circumstances, the examiners recommended that Motor Supply, Inc., should be subjected to the provisions of the above sections which appeared to meet with the approval of the parties at the hearing. However, in their exceptions, the parties object to the above recommendation, contending that substantial changes in accounting procedures would be required with no compensating benefits being derived by the public. As an alternative, the parties propose to effect a transfer of the capital stock of lessee from Motor Supply, Inc., to Timmer, thereby eliminating the equipment company from the chain of control. This proposal, which would not require our approval under section 5, is acceptable and would afford a sufficient basis for not subjecting the equipment company to provisions of the act. Our findings accordingly will require that, prior to exercise of the authority herein granted, the parties shall take appropriate steps to transfer the stock of lessee which is now held by Motor Supply, Inc., to Timmer. Following the above transfer, Motor Supply, Inc., will own no stock in lessee, and it follows that the instant application to the extent that it requests authority for that company to join with Timmer in acquiring control of the operating rights through the lease by lessee, should be denied. Our findings will further provide accordingly.

We find that lease by Michigan Express, Inc., of the operating rights of Premier Motor Transportation Company and acquisition of control of the operating rights by Fred G. Timmer, through the lease, upon the terms and conditions above set forth, which terms and conditions are found to be just and reasonable, constitute a transaction within the scope of section 5 (2) (a), and will be consistent with the public interest; provided, however, that, prior to the exercise of the authority herein granted, Fred G. Timmer shall acquire from Motor Supply, Inc., the outstanding capital stock of Michigan Express, Inc., and shall file herein a statement, verified under oath, advising of such acquisition; and provided, further, that, if the authority herein granted is exercised, the parties shall promptly notify this Commission, in writing, if the lease is to be terminated before the end of the lease period herein authorized.

We further find that the application to the extent it seeks authority for Motor Supply, Inc., to join with Fred G. Timmer in acquiring control of the operating rights of Premier Motor Transportation Company through lease by Michigan Express, Inc., should be denied. An appropriate order will be entered.