lost $1,479,000 on the prices then in effect, not on these new prices. I would like to point out to you, incidentally, that some of these price reductions go to our customers who are not the Government, such as Pratt & Whitney, Curtiss-Wright, and so forth, but some of the reductions in carburetors run from fifty to ninety dollars a carburetor. That sounds like a lot of money, but when one takes into account what one of these fuel-injection carburetors is any of the old flyers, and some of the members here I know are old flyers, know what it is; it is an anti-icing carburetor. The body is as big as the old model T Ford engine body, and that carburetor puts fuel into the supercharger under pressure. I think the Germans would like to have it. At least, I have been told that. They don't have it.

You read letters here which were rather pleasantly surprising to me, that the Australians and the British do have them, and that they have them in violation of a license agreement which we had with the Zenith Co. That was some pleasant information I heard here today. Mr. TOLAND. Would you also tell the committee how much money the Government has loaned your company, if you know?

Mr. BREECH. I have those figures with me. May I continue and I will come back to that.

I served personally as a director, at the request of Mr. Ferguson, to get carburetor subcontractors, and I finally located some. After all, most of the potential manufacturers with whom I was familiar were in my own corporation at that time, that is, the one I worked for, and I couldn't find companies that were willing to undertake to build that job. It was too much of a technical job to build.

I finally persuaded the Frigidaire division, which builds compressors, to use their machinery, because we did, as far as possible, want to use existing machinery and not load the machine-tool industry down with new requirements. We got them to build these carburetor bodies for us. They are going to build 4,500 a month for these aircraft carburetors. Maybe I had better leave out quantities since those things are not to be talked about, so I will just leave that one in, except that I can tell you this let me figure it out in precentages that the production of aircraft carburetors called on by South Bend-and there are two other companies building that type of carburetor, the fuel injection type-has increased 4,000 percent since 1938, and we are meeting all schedules.

I only put that in, Mr. Chairman and Mr. Counselor, as a preface to the fact as to why some of these things are not done earlier. I will admit that it is quite timely that we bring in these reductions, and I will admit that your committee is entitled to some credit for that, but I will tell you, and I think you probably know from what you have just said, or the chairman did a while ago, that some of us have expressed a policy, as I expressed it here, that it is industry's job to see to it, as far as I am concerned, that it is not subject to criticism.

Mr. TOLAND. Now, Mr. Breech, I still haven't finished.
The CHAIRMAN. Let me get this.

Mr. BREECH. Mr. Chairman, may I do one other thing. In the interests of fairness, and you have been very kind to me here, I didn't know I was going to make a speech-if this is a speech-or I would have prepared a good one, sir; but I was quite upset, having become the new chief executive officer of this corporation, to read in connection with the famous Jack & Heintz case that you had put into the

record some of the percentage profits that the Bendix Corporation had made.

Mr. TOLAND. I haven't put them in; I am going to put them in now, as soon as you finish.

Mr. BREECH. So I called up the vice president in charge of finance and I said, "I want to see those figures. I want each one of those contracts and I want a report," and I would like to offer to you, sir, that in those you had, most of them ran from 30-percent profit to 122-percent profit.

Now there were a few errors in it, but we don't want to quarrel with that because they were high. So we took for the same period the contracts which you have in your records showing the losses that we had incurred on contracts over 30 percent, just to have an example. You reported 38 contracts on which the company made from 30 percent to 122 percent. Had you taken 25 loss contracts, sir, and brought them in, the same percentage, losing over 30 percent, you would have found that we had $3,445,000 worth of contracts over that 8-year period, I believe it was, on which the corporation made a net profit of $72,000, or 2.1 percent. Taking the figures reported to you, on all contracts reported in the questionnaire by the Bendix Corporation and its subsidiaries, I believe the profit was less than 5 percent. That includes the losses. Unfortunately you took only the profits. Mr. TOLAND. I don't want to interrupt, but may I examine the witness? I have him here to examine him, not for speeches.

The CHAIRMAN. Let him finish.

Mr. BREECH. I offer that, taken from questionnaire No. 6, of the contracts which include losses as well as profits, because in the record I saw there is only the excessive profit.

The CHAIRMAN. Getting back now to your letter to the Department or the letter to the Commission with reference to the reduction in prices of $73,000,000

Mr. BREECH (interposing). On outstanding contracts plus new contracts negotiated.

The CHAIRMAN. Have you that letter that you have written to the Department?

Mr. BREECH. I have turned them over to counsel.

The CHAIRMAN. They are in the record?

Mr. BREECH. I believe so.

The CHAIRMAN. When did you write the letter?

Mr. BREECH. The letters were written, I believe, from April 20

The CHAIRMAN. Now, may I ask you this: When did you get your subpenas to appear before this committee?

Mr. BREECH. Yes, I received my subpena, I believe-well, I have it here. I think it was April 6.

The CHAIRMAN. At just about the time-wait a minute, now, because I want credit to go where credit belongs; that is the thing I am driving at. After you got your subpena on April 6, then you wrote the communications to the War Department, the Navy Department, with reference to the reduction in price of some $76,000,000? Mr. BREECH. With the exception, I believe, sir, of $16,900,000.

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The CHAIRMAN. With the exception of $16,900,000?

Mr. BREECH. Yes, sir.

The CHAIRMAN. Because I don't want the War Department or the Navy Department to try to grab all of the credit.

Mr. BREECH. And most of that is Army, too.

Mr. COLE. As a matter of fact, isn't it a fact that your movement was generated by the activities of this committee calling it to your attention, at least, that you were making these profits?

Mr. BREECH. My movement was generated by the general publicity on the subject and the fact that I started last November 7 notifying companies in which I was interested that I wasn't going to be a party to higher prices and that as costs were reduced through added volume they must pass that advantage on to the Government.

Mr. COLE. You were quite cognizant of the activities of this committee?

Mr. BREECH. Always, certainly.

The CHAIRMAN. And it was that publicity that brought about this change of heart?

Mr. BREECH. No, sir; not on my part.

Mr. BATES. What is the sum total percentage of the subcontracts you have let out in your concern to the total amount of business you have on hand?

Mr. BREECH. Thirty-five percent of our total business in some factories, to 75 percent in the highest.

Mr. BATES. Is there any interlocking directorate between those or; ganizations and your organization?

Mr. BREECH. Virtually none, sir. There is only one, and now there is no interlocking directorate in that case. What we did, and I am speaking as Bendix, was to grab off one or two accessory plants of General Motors, and much to the advantage of Bendix, to subcontract or turn those plants completely over to the production of some of the eastern division's products, but by and large they have no interlocking directorates or anything else. It has been a constant beating of the woods to find out where to get good subcontractors and to place business with them.

Mr. BATES. You don't know about how your profits in those other organizations are running, do you?

Mr. BREECH. I believe we have a sample of one of them here today, if you would like to have one of them. Most of those subcontractors are put on a basis that they have to meet the material and labor costs that we had on that product when we were building it, because generally we take a full product out of our factories, make room for a new product for the Army or Navy, and find others to manufacture the old product on which we have knowledge. So we turn over our drawings and tools to them. They must meet our last labor and material cost, with the exception that we give them final allowance for starting expense, for educational expense, and then we give them an allowance for their overhead, which is established in their plant. So their cost is generally higher than our cost was, but that doesn't raise the price. It is sold on our price.

The CHAIRMAN. You said about what percent is subcontracted?

Mr. BREECH. Thirty-five percent in some plants, to 75 percent in other plants.

The CHAIRMAN. The records of this committee will show that we have been insisting and hammering away for years to carry out the subcontracting policy, and that is another credit to this committee. Now, Mr. Toland.

Mr. TOLAND. Mr. Chairman, may I proceed?

This witness, in his long speech, Mr. Chairman, made a statement that we only picked out the excessive profits. That is wrong. Mr. BREECH. I am referring there, counselor

Mr. TOLAND (interposing). We showed in the report your losses as well as your profits.

Mr. BREECH. Pardon me, sir. I referred to the case of Jack & Heintz. It was put into the record with the Jack & Heintz case, and here it is. That is the only one I saw.

Mr. TOLAND. We did on the 25 questionnaires.

Mr. BREECH. That is the only one I saw.

Mr. TOLAND. Now, in connection with the royalties that this company has received from Germany, Italy, Japan, and France, I would like to read into the record the statement furnished by Mr. Marcus, exhibit 145: from 1934 to 1942, the company received a total of $3,200,672.17; in the year 1942 it received $14,427 from France. The royalties paid out by this company to Germany, Italy, Japan, and France for the same years totalled $46,948.44. It paid out to France $29,500 in the year 1942. In 1941 it received from Germany $130,569.42; from Japan, $24,725; and from France, $54,256.23; making a total for the year 1941 of $209,550.65. They paid out in the same year $140.98 to Germany and $6,435.60 to France.

In connection with all of the contracts that it has with the Navy Department, I have a statement based on the questionnaires and based on an audit made a survey made by the Department of Justice in addition to our own, which shows that the profits of this company range from 120 percent down to certain cases in which the company suffered losses, but the great majority of their contracts

The CHAIRMAN (interposing). What was the average?

Mr. TOLAND. I don't have the average, but the total number of the contracts. That ran a very high percentage based upon our figures.

The CHAIRMAN. What is the average?

Mr. TOLAND. I don't have it.

Mr. BREECH. I have the average in the questionnaire that was forwarded to you, sir.

(The statement was received in evidence, marked "Exhibit No. 169" and is printed in the appendix of this volume.)

Mr. BATES. Why not have him read it out, Mr. Chairman? Mr. BREECH. The average of all contracts, 211 contracts over that period of years, totaling $22,000,000, the profit was 4.1 percent.

Mr. TOLAND. Of course, that is based upon their computation, which is different from ours, and as an example of the profits, I would like to take

The CHAIRMAN (interposing). One minute, Mr. Toland. What period of time did that cover?

Mr. BREECH. The period covered by the request in the questionnaire. I will give it to you, sir; 34, I believe, to July 1942.

The CHAIRMAN. If that be correct, then how do you make a refund of $73,000,000?

Mr. BREECH. That, sir, as I explained to you-I told you that in 1938 and 1939 there was no appraisal of what volume would do to cost. The outstanding orders were $22,000,000. The outstanding orders are now over $350,000,000. That is quite a difference in volume, isn't it?

Mr. TOLAND. As an example, Mr. Chairman, of the cost of a contract that is now in existence with one of the subsidiaries of this company, I have a letter that was written by the Julian P. Friez & Son, division of Bendix Aviation to the Bureau of Ships, in which they compute the cost on ground station equipment. They charged $2,945 for the equipment, and the profit on it is $688.30. I am advised that within the last few days, or within the last week, the company has reduced the price on that. They were requested, under a telegram, to bring with them all the information with regard to that.

(The letter was received in evidence, marked "Exhibit No. 170" and is printed in the appendix of this volume.)

Mr. TOLAND. Do you have that with you?

Mr. BREECH. Yes, sir; I have that, sir, and I would like to make a statement in connection with it.

When I got your wire, we had quite some difficulty locating just what division made the item that you referred to in your telegram. Finally, we located the general manager, and he was in Washington. We couldn't get him until yesterday, for he was in Washington, because the Navy Department, having received this letter of April 21of which you must have a copy, because you referred to itMr. TOLAND (interposing). I just put it in the record.

Mr. BREECH. Upon receiving this, the Navy Department called him to Washington-the manager of that plant, Mr. Lucien Friez. I saw him yesterday, and he told me as follows: "that," according to this letter, "further substitution of materials requires new engineering and new production tools, both adding new cost."

This item referred to is a ground radio receiving station that receives the signals from this little radio set that is sent up in the air on a balloon. Probably some of you have heard about it-most of you. It records the humidity and the temperature and the barometric pressures at various altitudes. It is a weather-recording device, not just for aviation, but for the entire Weather Bureau and the Navy as well.

He couldn't get a priority rating on this item, so he couldn't get aluminum, and not being able to get aluminum, he was going to have to substitute sheet steel and cast iron, change all of his tooling, and adopt new processes. As we know, it is much faster and much easier to machine aluminum than it is to machine cast iron.

When the Navy got this quotation with him telling them that, they went to the War Production Board and got him a priority on aluminum, or rather, got him an allocation of aluminum for the order. Having told him that, he went back to Washington and renegotiated the contract at a considerable reduction in price, which was the same as the old contract-because on the old contract he made too much money. I freely admit it. You have there the record of what he made on it, something like 25 percent. But he took them again at the same price, despite a 10-percent increase in materials since he built those other sets, and a 43-percent increase in labor. That is quite a high increase in labor, but he was loaned labor before that.