Mr. COURTNEY. I think the record shows that they delivered 85 in the month of March? Colonel MEDBERRY. That is correct. Mr. COURTNEY. The month of the negotiations. Mr. COURTNEY. That is right; isn't it? Colonel MEDBERRY. That is correct. Mr. COURTNEY. Now, on the 25th of March, where was the material that went into these 85 planes? Fifty had been produced and 35 yet to come, with 5 days in March. Where was the material for these planes? Colonel MEDBERRY. We can't answer exactly, but substantially the majority of it was Mr. COURTNEY. It was all delivered, wasn't it? Colonel MEDBERRY. Was on hand or available. Mr. COURTNEY. It was either on hand or deliverable. It was on hand and you can see it? Colonel MEDBERRY. As I said, the limiting factor was the ability of those materials to be assembled in an airplane that was geared to produce two plus per day. Mr. COURTNEY. And wasn't there material on hand and in the factory for the segment to follow in the next quarter at the time you were conducting these negotiations? Colonel MEDBERRY. Oh, Mr. Courtney, I am satisfied, without knowing exactly, that virtually all material to complete the contract was there. Mr. COURTNEY. To complete the whole contract? Colonel MEDBERRY. Yes. As I said before, the machine shop had already completed all of its operations. Mr. COURTNEY. Then am I to understand that the only thing about which you were in any doubt at the point of negotiation was the time within which the material on hand could be assembled into a plane? Colonel MEDBERRY. This is not the only thing we were in doubt on. There were a number of unknown factors that we didn't have, as there are in every negotiation. Mr. COURTNEY. What were they? Colonel MEDBERRY. If you are discussing production, the primary limiting factor in production at this particular plant was how fast could they take those components, put them down on an assembly line that was geared to build 50 airplanes a month. General Motors, when they revised their estimate, said they could do it by July 8. In looking at their performance and figuring that they had leveled off at about 65 airplanes a month, this seemed like a pretty reasonable thing to us. We based it on that-we based our planning on that sort of a basis. Mr. COURTNEY. Then you could forecast, could you not, that if General Motors were to make any profit over what you had forecast, it would come as a result of an accelerated performance schedule; wouldn't it? Colonel MEDBERRY. I suppose that is one way, with increased efficiency that they might utilize in making a profit over the factor that we had figured in estimating the price. Mr. COURTNEY. What did you say to that, Mr. Saxton? What do you say to that? Mr. SAXTON. That is right. I agree with that. Mr. KUHN. Colonel Medberry, you said that in March, prior to going into negotiations, that the Air Force had accepted approximately 40 of the 85 planes? Colonel MEDBERRY. It was 49, I believe, Mr. Kuhn. Mr. KUHN. Forty-nine, that were accepted by the Air Force in March; is that correct? Colonel MEDBERRY. That is right. Mr. KUHN. How many of the 85 were produced at that point? Colonel MEDBERRY. I can't answer that question, sir. Unfortunately, the production records are not something that we maintain for a number of years. I just can't, frankly, answer it. I am sure Mr. KUHN. Well, would it be a fair assumption to say that the majority of the 85 were produced? Colonel MEDBERRY. No question about it. They were produced; out of the factory and in the flight-test stage. Mr. KUHN. All right. Then there would be a balance, then, of 179, making a total of 599, that were still to be produced between that point and the end of the contract; is that correct? Colonel MEDBERRY. I haven't checked your figures. If you say so, that is fine. Mr. KUHN. Ninety-one in April and 88 in May is the record that we have before us for acceptance by the Air Force. Colonel MEDBERRY. All right. Mr. KUHN. Of that 179, how many would you say had been produced in total, counting all the partial completions of that 179? What percentage of that 179 had been completed? Colonel MEDBERRY. I can't answer that question, Mr. Kuhn. Very frankly, my memory isn't that good. The final assembly line, I am sure, was filled with airplanes. The flight-test section, which generally had about-I don't recall how many airplanes they had in there at that time. But the flight section, I am sure, was filled with airplanes. Other than that, I can't honestly remember. Mr. KUHN. Then as I understand your testimony, you believe that most or all of the 85 that were finally accepted by the Air Force in March had been produced? Colonel MEDBERRY. Generally completed. Mr. KUHN. And that 49 had been delivered. That left 36 for acceptance by the Air Force in that month? Colonel MEDBERRY. Yes. Mr. KUHN. And these 36 were accepted between sometime earlyColonel MEDBERRY. Between, say, the 20th of March, when we left the plant, and the end of the month. Mr. KUHN. And the 31st? Mr. KUHN. At what rate had they been testing them up to the 20th of March? Colonel MEDBERRY. They had completed and tested 49 up through the first 20 days of March. This testing is a very flexible thing, because it is dependent upon the problems that they run into. In other words, you take one airplane up and fly it. It may perform perfectly. The next one you have to pull an engine on, or you get something else that is wrong. Mr. KUHN. Well, if there was a perceptible increase in the testing at the plant during the period between the 20th and the 25th of March, and the individual you left in charge when you left the plant would certainly notice that, and that would have a definite bearing on the capacity of the plant to deliver planes to the Air Force; is that not correct? Colonel MEDBERRY. I don't know that I understand your question, Mr. Kuhn. Mr. KUHN. Well, between the 20th and the 25th, the week of the negotiations, they were continually testing the planes during that period? Colonel MEDBERRY. That is correct. Mr. KUHN. To test the balance of the 36. If there was a perceptible increase in the per day testing there, which would reflect in the capacity of General Motors on a monthly basis to deliver planes to the Air Force for acceptance, would he call that to your attention? Colonel MEDBERRY. He might or he might not. I don't think that a specific day's acceptance would necessarily have been significant enough for him to call us out of the negotiation. Because, you see, there was a tremendous fluctuation throughout the entire contract on the numbers of airplanes accepted in any one day. Mr. HARDY. Can I get into this little phase of it a second? Mr. HARDY. Thinking in terms of the information that was available at the time of the negotiations: We had testimony in here Friday that as far as the fuselage assemblies, which were an extremely important element in this thing-the last ones were delivered in the first week of March. Colonel MEDBERRY. Yes. Mr. HARDY. That was 2 or 3 weeks before these negotiations took place; is that right? Colonel MEDBERRY. That is right. Mr. HARDY. You were getting into sort of the end of March at the time you were negotiating? Colonel MEDBERRY. That is right. Mr. HARDY. By the time these negotiations began, the General Motors negotiators had available to them information as to the extent of subassemblies which had been completed, presumably. Colonel MEDBERRY. Yes. Mr. HARDY. You probably did not. Colonel MEDBERRY. I think probably we had some figures on it. They may not have been quite as accurate as General Motors, but we had some. Mr. HARDY. Well, the thought that occurs to me is this: The extent to which your subassemblies have been completed gives you a pretty good prediction as to a comparison at least with respect to the amount of labor that is going into those and a determination as to a time when they are going to come off the final assembly line. Colonel MEDBERRY. Well, this is what I have tried to explain, Mr. Hardy. This isn't necessarily true. In other words, you can have all the components to build an airplane in the plant waiting to be assembled. If you have a capacity to build two plus per day on your final assembly line, you can only put them together that fast. Now, in this instance, the General Motors did a fabulous job. They put those together they went 1 day up to 6 a day. We didn't believe and I don't think they did, either, that they could put that many airplanes that rapidly down that final assembly line. Mr. HARDY. Well, of course, that is something that I am in no position to speculate on, what they could do on the final assembly line. But, certainly, if they were already in a position to close down some of the subassembly lines, which apparently they were Colonel MEDBERRY. Yes. Mr. HARDY. Apparently some of them had been closed before the negotiations started. Colonel MEDBERRY. The only one that had been closed was the basic machine shop. Mr. HARDY. I wonder if that is factual. I wonder if you have made a determination actually as to whether some of the others hadn't already been closed. Colonel MEDBERRY. I can only go on what the record shows and my memory and the only ones I remember. Mr. HARDY. Of course, your memory wouldn't be too good on that. As a matter of fact, you may not have asked actual up-to-date information with respect to that at the time you sat down to negotiate, which is entirely possible. Because I would think there would be a little bit of lag in the information coming to you, unless General Motors people voluntarily told you. Colonel MEDBERRY. If it was outside production in plants other than the one where my people were located, you are quite possibly correct. Mr. HARDY. And maybe I am just as wrong on that as I can be, but assuming that subassemblies had been completed and that your main concern then is with the output of your final assembly line, if you were in a position to close down some of your other subassembly lines, is it conceivable that a little extra effort could be put on your final assembly to speed them up? Colonel MEDBERRY. Well, obviously, that is what happened. Mr. HARDY. Obviously it is what happened. Wouldn't a manager in a plant be in a pretty good position to evaluate that possibility? Colonel MEDBERRY. I would say yes and no. He is in a good position to evaluate it and to determine what would happen so long as he does not run into any extremely difficult problems. And fortuitously, really during the last end of this contract they didn't have any serious problems. Mr. HARDY. Well, undoubtedly there was some element of fortuity in this proposition. But, I am wondering if it was all there. Maybe some of it was just darn good trading. Colonel MEDBERRY. Some of it is darn good production. Mr. HARDY. Undoubtedly there was good production involved. But I am also wondering if there wasn't an element of good trading at the negotiating table, too. I am wondering, also, if this argument over the 13,050 hours that Mr. Saxton spoke about awhile ago if there might have been a little bit of facetiousness in this provocation that seems to exist. Mr. SAXTON. I don't think so. Because that is 25 percent less than what they had.__That is a pretty big item. Mr. HARDY. You know very well they were in a better position to make an accurate estimate on it than you were? Mr. SAXTON. On the hours? No, I don't think they were. Mr. HARDY. You don't think they were? Mr. SAXTON. No, sir. Mr. HARDY. With a full firm knowledge as to the extent which they had completed the subassemblies at that time? Mr. SAXTON. Well, we had information available to us for years and years that we have accumulated there at the Air Force on labor hours and trends like that. Mr. HARDY. You might have Mr. SAXTON. They had a lot, yes. Mr. HARDY. You might have information on trends, but that is not nearly as good as the actual? Mr. SAXTON. No. The actual is the best, that is right. Mr. HARDY. If they had the actual on subassemblies up to the time of negotiation, a good many of which were already completed, they are in whole lot better shape than you were if you didnt know that. Mr. SAXTON. Yes. I see here in my notes in supporting our price that I stated to them that most parts, subassemblies and assemblies, are done. So apparently our price-when we were negotiating we knew that. Because I told them that any how. Mr. HARDY. They testified that they accepted your figure of 13,050 hours. Mr. SAXTON. Yes. Mr. HARDY. Have you computed how much additional profit they would have made if you accepted their original figure of 17,000 or even their amended figure of 16,000. Mr. SAXTON. I would be afraid to. It would be too high. Tremendous. It was $2 an hour. So there would be 3,500 hours. Mr. HARDY. $7,000 a plane. Mr. SAXTON. $7,000 a plane; 300 planes. That would be another $2 million. Mr. HARDY. Yet, that is what they came to the table with, which was supposed to be their best estimate, and they should have been in a position to make as good an estimate on the job as you were. Mr. SAXTON. Yes. Mr. HARDY. They were the people that were actually started. Mr. HARDY. That is just exactly my point. Mr. SAXTON. Yes. Mr. HARDY. I am not too impressed by all of these crocodile tears that were shed because they had to come down to 13,050 hours. If |