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WILD. I spoke to Marcus some time ago. He told me that he was very pleased that the Bosch Co. became interested in his French companies and he would like nothing better than to have the Bosch Co. interest itself.

(Dipper remarks that Bosch is trying to form a closer cooperation with the French company.)

WILD. I will tell him so. He will be pleased.

(Dipper remarks that he sent the final wording of the proposed agreement to Mr. Marcus and that Bosch is very anxious to hear what Marcus has to say to that agreement.)

WILD. Shall he talk to you on the phone or cable?

(Dipper answers that either way would be satisfactory.)

I offer that in evidence.

(The excerpt was received in evidence and marked "Exhibit No. 153.")

Mr. TOLAND. Now, Mr. Marcus, you make what is known as the "aleostrut." Do you have the patent for the device known as aleostrut, and are they made by your company in the Cleveland Pneumatic Corporation?

Mr. MARCUS. Well, on the matter of struts, struts are made in the South Bend plant. Perhaps Mr. Breech would care to discuss the strut question with you.

Mr. TOLAND. Is Mr. Mel Burns an employee of Bendix Corporation?

Mr. BREECH. He is an employee of Bendix Aviation, Ltd., a small subsidiary in California.

Mr. TOLAND. In Burbank?

Mr. BREECH. Yes; that is right.

Mr. TOLAND. And Mr. Cautley?

Mr. BREECH. He is the sales manager at South Bend, the strut department.

Mr. TOLAND. I don't suppose that either of you two witnesses is familiar with these. I will ask you if you are.

Is it a fact that on January 1, 1941, your company licensed the Axelson Manufacturing Co. of Los Angeles, Calif., to build 96 shock struts for Douglas Aircraft?

Mr. BREECH. I understand that is so. I have a very limited knowledge of it.

Mr. TOLAND. Have you ever been advised, Mr. Breech, that Lieutenant Colonel Branshaw, chief inspector of the Army Air Corps, stated that one of the shortages in aircraft production is in struts?

Mr. BREECH. One of the shortages in aircraft production has been struts from the beginning of the war effort.

Mr. TOLAND. Did the War Department take any active part in attempting to get your company to get restrictive licenses so that struts could be made by several small companies?

Mr. BREECH. I don't know what action the War Department took. I was a director then and it was reported by Mr. Ferguson as to what the strut situation was, and as an officer of General Motors at that time, Colonel Wolf, now General Wolf, approached me with the idea of having one of the General Motors divisions, Delco Products at Dayton, build struts under Bendix licenses, and arranged the licenses not only with Bendix but also with Cleveland Pneumatic Tool Co., who are competitors in the strut business.

Mr. TOLAND. Were you advised, or was it brought to any of you gentlemen's attention, the Air Corps' attitude toward the competition

forced on Bendix in connection with struts? This was explained by your Mr. Cautley in the following manner in a memorandum dated November 20, 1940:

Just talked to Major Early at the field and he made some interesting statements.

He stated he knew that Axelson and Menasco were getting strut business and that he felt that this sort of competition would not be too serious later on so long as we could keep a large unit from going into the business.

Was that ever brought to your attention?

Mr. BREECH. It was never brought to the Board's attention. (The memorandum was received in evidence, marked "Exhibit No. 154" and is printed in its entirety in the appendix of this volume.) Mr. TOLAND. I would like to offer these documents in evidence. (A letter dated February 24, 1941, was received in evidence, marked "Exhibit No. 155" and is printed in the appendix of this volume.)

(A memorandum dated April 8, 1942, was received in evidence, marked "Exhibit No. 156" and is printed in the appendix of this volume.)

Mr. BREECH. I would like to make a statement as director of the company and from my knowledge of the strut business. I have had many sessions with Colonel Wolfe at Wright Field, as I said, General Wolfe, K. B. Wolfe, on the strut business and set up Delco products division, General Motors, under a license to build struts; not only Bendix struts but Cleveland pneumatic struts. Mr. Ferguson, General Manager of the South Bend Division, made various reports to the board of directors on the strut business.

I would like to have the date of those items you put in there because I think you will find those date back at least 2 years.

Mr. TOLAND. This is November 20, 1940, and February 24, 1941. Mr. BREECH. I would say that anything that Mr. Cautley would say, that anything that Mr. Cautley wrote, never reached the board of directors and never represented any executive officers' statement of policy; purely the statement of a very ambitious sales manager. At any rate, the Bendix Corporation, within my direct knowledge not only as a director of the company but as a subcontractor, has encouraged the building of struts every place, and granted licenses every possible place to build struts, as they did with Menasco, incidentally, which is mentioned there. Maybe Mr. Cautley didn't like it. If he didn't like it he didn't get his views over to the board of directors or any executive officers.

Mr. TOLAND. Now, you gentlemen are familiar with the visit of the French and British Purchasing Commissions in 1939 when they came here to buy airplanes and spare parts. Are you familiar

The CHAIRMAN (interposing). One minute; let one of the witnesses.

answer.

Mr. MARCUS. Yes, sir.

Mr. TOLAND. Are you familiar with the effort on the part of your company to get the other companies to agree on the same price that would be so charged to these two commissions?

Mr. MARCUS. That is an old friend turned up. We have been through that questioning rather seriously at great length. Our answer is we have not agreed with anyone. We never agree with anybody. We make our own prices.

Mr. TOLAND. Now, isn't it a fact that the Pioneer Instrument Division of Bendix attempted to have Douglas, North American, Martin, and Curtiss-Wright all quote the same price as Bendix on Pioneer instruments to the French Commission?

Mr. MARCUS. No, sir; but you will find, and I will try to make it as short as I can because we have been over it at great length, some ambitious agents on the west coast did write some letters which might be construed in that form. No one who had any authority in Bendix ever knew about it, except by indirect reference. We have had a procedure before the grand jury on those questions. I have heard nothing further from it since then, but I do feel that you will find on the west coast what I call an ambitious agent and perhaps someone in the sales department referring to service parts prices of rather minor order by comparison with the major issues that were then before the French and the British Purchasing Commissions.

Mr. TOLAND. Well, I will show you a lot of photostats and ask you to look at them. If you can identify them state for the record the witness or the writer or the person that received the communication, because I will take your statement. If you want to go through them and make any statement as you go through, quickly so we can get through, I will be glad for you to do so.

(A file of 15 photostatic copies of correspondence of the Pioneer Instrument Co. was received in evidence, marked "Exhibit No. 157" and are printed in the appendix of this volume.)

(A letter dated May 24, 1939 was received in evidence, marked "Exhibit No. 158" and is printed in the appendix of this volume.) Mr. MARCUS. I will try to help save your time because I know I have seen them all before.

The CHAIRMAN. Go ahead.

Mr. MARCUS. I will try to help conserve your time because I have seen all of them before-my general statement that they were by an ambitious agent would cover it, plus this fact. When we made prices they were always in categories of the user. For example, there was government in the first category as the largest user and entitled to the lowest price. That has never varied. There would be engine makers; they would come in the next category as the next largest series of users. For example, for starters, generators, magnetos, carburestor and the like.

Then there would be airplane makers and they would come in a third category, using instruments, for example, some of which-and there is by no means any consistency in this; sometimes they were made through the procurement agencies of the Government, such sales, and sometimes through the airplane makers direct. They come in another category of a lower discount class.

Then finally there would arrive, let us say, this French and British Purchasing Commission, and they came in the lowest discount class and that is because we felt, and properly, they were just a one-time purchaser of something.

Mr. TOLAND. Isn't it a fact, Mr. Marcus, that your company charges the Government one price and another company or civilian company another price?

Mr. MARCUS. As I have explained, based, generally speaking on the quantitative relationship of the user to our company.

Mr. TOLAND. I am going to go into your formula of costs in a few minutes.

Mr. BREECH. May I ask a question, just for my own information and the record, and your information? I believe that this fellow who writes these letters is not an employee of Bendix; he is merely an agent on the coast working on a commission and from what I have heard he wrote some letters cooperating out there with some of the aircraft companies, which had we written we probably would be in a pretty embarrassing position, and as such he was called on them directly. Mr. TOLAND. Mr. Cautley is anemployee, isn't he?

Mr. BREECH. He is an employee of the Pioneer Instrument Division. Mr. TOLAND. He is a responsible employee in charge of that plant out there?

Mr. BREECH. No, no, sales manager of the strut division only at South Bend.

Mr. TOLAND. Here is what he said:

Hayes is using—

meaning the Hayes Manufacturing

a 200 percent overhead on their labor and 10 percent administrative charge on labor, material and overhead to arrive at cost. Their selling margin is obviously what the traffic will bear, except that they are being very careful not to put in too large a margin on aircraft orders. However, the Air Corps prices, unless under special circumstances, are more than their civilian prices, which is sound.

Mr. BREECH. I think that is very easy to answer in the case because I don't think the products are comparable at all, because it is my recollection, and without intimate knowledge of Hayes, that whatever they made for the commercial market were small struts for private airplanes, but when you are making struts for military planes it is an entirely different animal, as a Chevrolet and a Cadillac.

Mr. TOLAND. Isn't this indicative of the method used by your company in determining prices?

Mr. BREECH. It is not.

Mr. TOLAND. Let me finish. R. H. Isaacs, sales manager of Pioneer wrote to his staff under the date of December 31, 1933:

Please base the prices on this following formula: Parts of Pioneer manufacture, direct labor plus 300 percent overhead, plus material, equals commercial cost. Mr. BREECH. To whom is this addressed and from whom and of what date?

Mr. TOLAND. This is addressed to an awful lot of people-five people.

Mr. BREECH. Who are they, please?

Mr. TOLAND. Their names? To Mr. Isaacs and I think you probably would be able to make them out if you know them. I will show it to you.

Mr. BREECH. I am sorry; it is so dim I can't read it. Charlie [Mr. Marcus], you may know that. It is Isaacs-I can't read it.

Mr. MARCUS. The first man is Lewthwaite; he is in the sales department of Pioneer. The next one is McEnness, also in the sales department. The next one is Kercher, I think also in the sales department. One is Boynton. I don't know that name. The last one I can't read.

Mr. BREECH. Can you read the letter? I would like to know what it says.

Mr. TOLAND. I can read part of it; I have parts of it; it is difficult to read; you really need a magnifying glass.

Mr. MARCUS. I can read the part you read.

Mr. TOLAND. I didn't read it; he went on further to say:

Direct labor plus 300 percent, plus material equals commercial cost. To the commercial cost figure add 50 percent for profit, which will give a minimum net selling price. This minimum net selling price, multiplied by two, should equal the list price. Purchase price plus 50 percent profit should be considered as a minimum net selling price. This multiplied by two to arrive at list price.

Mr. BREECH. He must be talking about service parts from which discounts from 50 to more percent are given, I believe.

Mr. MARCUS. The discounts vary all over the line.
Mr. TOLAND. That is offered for what it is worth.

(The photostat was received in evidence, marked "Exhibit No. 159" and is printed in its entirety in the appendix of this volume.)

Mr. TOLAND. May I ask you, isn't it a fact that your company and Jack & Heintz, that we examined here some weeks ago, were the only companies that were engaged in the aircraft-starter business in the United States up until recently?

Mr. MARCUS. As far as I know they still are.

Mr. TOLAND. I didn't say that. I say, isn't it a fact that up until a short time ago the only two companies making aircraft starters in the United States were your company and Jack & Heintz?

Mr. MARCUS. That is what I say; I still think they are.

Mr. TOLAND. That still doesn't answer my question, Mr. Marcus. Isn't it a fact that your company and Jack & Heintz were the only two companies that made aircraft starters? Is that "yes" or "no"? Mr. MARCUS. To the best of my knowledge they are.

Mr. TOLAND. What did you charge the Government for your aircraft inertia starters?

Mr. MARCUS. I have offered these prices.

Mr. TOLAND. I would like to have all the documents you were requested to present as to the prices that you have charged for inertia starters to the Army, Navy, and any other Government department. Mr. MARCUS. I have them here by three categories, the Navy, the Army, and the naval aircraft factory.

Mr. TOLAND. I would like to offer in evidence the documents that the witness just furnished, showing the contract number, the material and the unit price. I ask that they be not printed but merely filed as an exhibit because they contain confidential information.

(The schedule of prices on inertia starters to the Army, Navy, and naval aircraft factory were received in evidence, marked "Exhibit No. 160" and are filed with the committee.)

Mr. TOLAND. Now isn't it a fact that your company and the Hayes Industries, Inc., were the only two nontire manufacturers in the airplane wheel and brake business prior to the last year or so?

Mr. BREECH. Will you please repeat that, with the only nontire? Mr. TOLAND. Nontire manufacturers.

Mr. BREECH. Why do you say nontire?

Mr. TOLAND. Because you don't make tires in the airplane wheel and brake business.

Mr. BREECH. Cleveland Pneumatic. You mean airplane wheels and brakes?

Mr. TOLAND. Airplane wheels and brakes. Isn't that true?

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