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The manufacturer, to begin with, is interested in producing new articles and selling them for the original profit. And he looks upon this material more or less as an obstruction to his regular program and is not very much interested in it.
I think that was the effect that the referral of machine tools had to the machine-tool manufacturers.
It seems to me that you are approaching it from the wrong angle, that there would be all kinds of pressure brought to bear to withhold this material from the market or to refrain from accepting it by the original manufacturer.
Commander FOLEY. I believe this suggestion was premised on the thought that in the experience of this particular service representative, he had sold this material to the original manufacturer at 75 percent of the acquisition cost.
Under the proposed plan, under the APRA plan, I have read, or heard, at least, that 30 percent would revert to the agent outlets as a compensation for his services, plus the shipping cost to the Government to his particular place of business.
It appeared as though a greater return to the Government would accrue if that were possible.
We have not explored that, and I just mentioned it as one of the suggestions which we have received in response to our questionnaire from the field.
Mr. HOLIFIELD. Your group will continue the exploration of this subject, in your cooperation with the Air Force and the Army in working out a centralized program of some kind for improving the present program?
Commander FOLEY. Yes, sir.
Mr. BURNSIDE. There is one thing that has been worrying me quite a bit. What check do you have on items you have already stocked, to see, for instance to determine the amounts. Let us take airplanes. We are changing over to the jet airplanes. What check do you have in checking your warehouses to find what amount of materials you have there that should be gotten rid of soon so that they will not become obsolete?
Commander FOLEY. You are speaking, Mr. Burnside, of materials which are already in our service depots!
Mr. BURNSIDE. They are already in your service channels, or the depots.
Commander FOLEY. Well, sir, we have the aviation supply office, in the case of aeronautical material which is the central repository for all inventory control data on each item of material in the aviation supply system. They have what is on hand, what is under procurement, what is needed and that which is needed is past usage basis, that which has occurred through the years, plus what is intended in future plans as far as the operations of a particular model of aircraft is concerned.
By tying to the future planning the past usage, they are able pretty easily to predict what probably will be required under a certain plan for each item, and they will procure on that basis.
The question of disposal, if there is an excess
Mr. BURNSIDE. There will be an excess, just as the commander said a few minutes ago—there will be a large excess if we get new equipment.
Commander Foley. Yes, of the older type.
Commander FOLEY. We attempt to procure in peculiar aircraft items on a program life basis at the outset.
Mr. BURNSIDE. That is right. As you are getting in these new types of planes, this other will become obsolete faster; yet, the private industry can use it, and if you get it into private industry's hands quickly enough we will get some value from it. If not, it will be outmoded and outdated, will it not?
Commander FOLEY. You are speaking now, Mr. Burnside, of the application of an item which we have on the shelf in private industry?
Mr. BURNSIDE. Yes; that is what I am thinking about: That it soon will be outdated and you will have to discard it.
Commander FOLEY. It is relatively easy, in the case of obsolete material in aviation, particularly. It is, I believe, picked up almost immediately and disposed of, because of our shortage of storage space.
The aviation supply office has been very much on its toes.
Commander FOLEY. In the case particularly of obsolete and obsolescent material. It is not as much of a problem as the disposal of excesses, for example, of hardware; that is, general hardware items.
Mr. BURNSIDE. You require the companies to keep dies of this material in case you have to shift because of immediate stress due to war conditions? They have the dies where they can get the material in case you need it?
Commander FOLEY. Yes; I believe so. The manufacturers store them. I believe after a certain period of time those dies are destroyed when the Bureau of Aeronautics decides that there is no further need, or that there will be no further need, for that particular range of items.
Mr. HOLIFIELD. Are there any further questions? If not, we thank you very much, Admiral Honaker, and all of you.
Admiral HONAKER. Thank you.
Mr. HOLIFIELD. We will next hear from Mr. John A. Priest, of the National Production Authority.
Mr. Priest, you are with the National Production Authority in the Department of Commerce. Will you take the witness stand at this time?
Mr. PRIEST. Yes, sir.
Mr. HOLIFIELD. We would like to have your opinion on this subject, first, from the standpoint of the National Production Authority, and then later we might want to ask you some questions in regard to your previous experience in this line of work. What is the interest in the National Production Authority in the subject of redistribution of excess materials and better utilization?
STATEMENT OF JOHN A. PRIEST, AIRCRAFT DIVISION; ACCOM
PANIED BY EDWARD A. NICHOLS, OFFICE OF GENERAL COUNSEL, NATIONAL PRODUCTION AUTHORITY
Mr. PRIEST. Mr. Chairman and gentlemen, I would like to point this out, if I may: that I am not geared to answer the National Production Authority's interest in this particular series right now. When your request was made, I understood that it was to be based on past history.
I should like to present to you Mr. Nichols of our office.
Mr. NICHOLS. National Production Authority has not looked at the plan as yet. I have no knowledge of it. I am sure that the National Production Authority would like to look over the plan, and then, if it has any comments, we would be glad to give them. We are happy to make Mr. Priest available to the subcommittee. Since National Production Authority has no position as yet on this matter, Mr. Priest's personal views and his broad background may be of assistance to the subcommittee. Mr. Priest is appearing here in a personal capacity, not as a spokesman for National Production Authority.
Mr. HOLIFIELD. Would you ordinarily have interest in that type of a thing? I mean, does it come within your department in any way?
Mr. NICHOLS. I believe the National Production Authority would necessarily be interested in this type of plan.
Mr. HOLIFIELD. You have a certain obligation in the way of allocation? Mr. NICHOLS. The allocation of metals; yes, sir.
Mr. PRIEST. Of the three basic metals, yes; that is where the National Production Authority enters into this program.
Mr. HOLIFIELD. Do you have any information at this time that there are appreciable backlogs of critical materials that are tied up in these aircraft-production plans as the result of engineering changes or termination of contracts?
Mr. PRIEST. I do; yes, sir.
Mr. PRIEST. I have had manufacturers state to me that they have aluminum running out of their ears.
Mr. HOLIFIELD. Only aluminum, or are there other materials ?
Mr. HOLIFIELD. Is that material tied up through one technicality or another in unused inventories? Is it susceptible to declaration as excess ?
Mr. PRIEST. Yes, sir.
Mr. PRIEST. Mr. Chairman, if I may, I want to answer that; yes, sir. It is due to excess at one spot, not used there, which could be redistributed.
Mr. HOLIFIELD. A condition where critical supplies of metals are concerned that are in excess in one plant and in the meantime another plant is going out and buying from a primary producer. In other words, we are not utilizing our metals to the best advantage, are we?
Mr. PRIEST. In the main, I think that is a fair statement.
Mr. HOLFIELD. Do you have any ideas as to the extent of the inventory in materials that might be stalemated ?
Mr. PRIEST. Only in aluminum, sir. I cannot talk about copper.
Mr. HOLIFIELD. Do you have any information in regard to aircraft component parts that are already manufactured being in excess in supply, either by certain military departments that are holding them or refusing to declare them, or by airframe manufacturers ?
Mr. PRIEST. Your hearing, Mr. Chairman, is on a given subject. However, I know that there are certain warehouses that are full of materials that could be redistributed.
That I know, but it is not because of long supplies. It is because of technical orders demanded by the Air Force, and the Navy, as far as inspection is concerned.
Mr. HOLIFIELD. Will you please clarify that a little bit?
Mr. PRIEST. Yes, sir. For instance, technical orders exist wherein an instrument should be inspected every 30 days, 1 out of 12, or 1 out of 10. I cannot quote the order; I cannot even remember the numbers of them. But if they are not handled or inspected during this period of time they get a red tag on them. They sit back in the corner of the warehouse.
And in comes all of the jet material, and back in the corner goes the stuff that they do not have time for, to reinspect.
Mr. HOLIFIELD. To inspect thoroughly?
Mr. HOLIFIELD. In your opinion, there is an appreciable amount of these parts which have been red-tagged because of a lack of inspection and have been held from excess declaration? Mr. PRIEST. Yes, sir.
Mr. HOLIFIELD. It would seem beneficial to the Government if some kind of plan could be evolved whereby speedier declarations of excess would be made by the owning agencies?
Mr. PRIEST. Yes, sir; except that, naturally, the man desires to get out the current type of aircraft demanded by the tactical groups. So, therefore, everything is geared to the maintenance of the jets and back in the corner goes the other material.
Mr. HOLIFIELD. Would these materials be usable by commercial airplane lines?
Mr. Priet. We do not have any commercial jets. Yes; they would be.
Mr. HOLIFIELD. Is it your thought that there could be a greater recovery to the Government if this Government-owned material was declared excess now than to have it withheld for long period of time?
Mr. PRIEST. Absolutely, sir. My own feeling is that those areas of storage could be taken over by commercial people and gain a recovery and do the commercial lines some good.
Mr. BURNSIDE. Right there, on that point; evidently, they are not so short of storage as the commander was just saying.
Mr. PRIEST. They are short of storage. You can ask Mr. Larson's organization. They are trying to buy all of the warehouse space they can; that is, General Services Administration. Is that not correct? Mr. WINKLER. I would rather have our real-property people answer that.
Mr. BURNSIDE. The commander said that, but he said that because they were short of space they were examining this right away. Evidently, they are not examining it if it is stored away.
Mr. PRIEST. You have a priority listing, for instance. My feeling is that what I stated to the chairman before.
Mr. BURNSIDE. They are not checking.
Mr. PRIEST. You have a priority status. If you are going to keep jets going, you cannot check the reciprocatings.
Mr. BURNSIDE. A shortage of personnel in making the checks; is that it?
Mr. Priest. You are the people that give them the money; so I guess it is up to you.
Mr. McVey. Do you think of any remedy for that situation ?
Mr. PRIEST. I think that commercial contracting to relieve the bulging warehouses that the services are now being faced with is No. 1; that is, storage. And No. 2, the merchandising aspect.
I think that negotiations should be made with commercial people.
Mr. HOLIFIELD. In other words, you think that first there should be orders given from above to speed the declaration of this inventory. And, second, that the method of utilizing it should be through some type of free-enterprise redistribution?
Mr. PRIEST. Well, yes, Mr. Chairman.
Mr. HOLIFIELD. As I remember, you have had a lot of experience. You were before this committee during the Rizley subcommittee days.
Mr. PRIEST. That is correct.
Mr. HOLIFIELD. That was back in 1946 and 1947. And, if I remember rightly, you were in the War Assets Administration at that time?
Mr. PRIEST. Yes, sir.
Mr. PRIEST. I was the chief of the section of the Warehouse Clearance Division-aircraft material. I started in the field and personally inventoried, probably, 40 warehouses. And then, due to a certain success in the Midwest, I was presumably brought down here because of my success there and made the Chief of the Depot Clearance Division, as it was called, for the War Assets Administration.
Mr. HOLIFIELD. You are familiar, then, with the competitive-bid sales and with the aircraft-agent type?
Mr. PRIEST. I have handled both and witnesses both and engineered or directed the same.
Mr. HOLIFIELD. Would you advocate the type of aircraft-agent sales that we had before?
Mr. PRIEST. With certain confinement.
Mr. HOLIFIELD. What safeguards would you suggest to prevent diversion of Government dollars into private pockets in an unwarranted manner?
Mr. Priest. That is a very good question. Qualified operators, Mr. Chairman.