Then why not continue with the January freeze order together with simple relief mechanisms for hardship cases and a simple adjustment formula for those very few manufacturers who might have excessive prices, instead of issuing a regulatory monstrosity which has only an "interim character.".

Title 8

OPS, admitting that it was "a practical impossibility to consult in detail with representatives of all the industries,' states that "consultations were held with a special group of business leaders selected from many major branches of the industry, and their advice and suggestions were given most careful consideration in the formulation of the final regulation."

The inference is that much of the advice and suggestions given by American industry leaders were accepted. It is difficult, if not impossible, to conceive how any business leader could have given his sanction to the principles and detail of CPR 22 and CPR 30.

Title 9

The Director of Price Stabilization considered the issuance of these price-ceiling regulations to be imperative instead of waiting for the issuing of tailored regulations on an industry-by-industry basis. He states that "to permit such delay would be to court disastrous effects upon production and distribution.'

Again no consideration seems to have been given to the possible disastrous effects of CPR 30 itself upon production and distribution.

SPECIFIC COMMENTS ON CEILING PRICE REGULATION 30, DATED MAY 4, 1951 Construction and mining machinery, including subassemblies and parts, are specifically covered by CPR 30.

Title 10

THE INEQUITIES OF THE BASE PERIOD

It is fallacious for OPS to conclude that a January price is excessive if, in comparison with that which prevailed during any quarter of the year from July 1, 1949, to July 1, 1950, it is higher than what certain cost increases would allow it to be. Apparently some, but not full, consideration was given by the Office of Price Stabilization to the possibility that during that 1-year base period certain lines of products might have been priced abnormally low. Certain passages in the statement of considerations in CPR 22 indicate awareness of a possible inequity.

For

Several segments of the construction equipment industry operated at below normal prices and profits during the entire year preceding July 1, 1950. that reason it is unjust and inequitable to limit the base period to that 1 year.

For instance, shipment statistics of the Power Crane and Shovel Association indicate in relation to previous years that operations between July 1, 1949, and July 1, 1950, were considerably below the normal capacity of the industry. During the same time period, there accumulated large inventories of finished machines in manufacturers' and dealers' hands. Raw material and machines in process inventories rose all out of proportion to total shipments. Inventories had to be brought down by forcing sales at low prices, particularly during the second half of 1949 and until after the middle of the year 1950.

Title 11

THE PREVENTION OF MAXIMUM PRODUCTION ACHIEVEMENT

Manufacturers in any line of endeavor, particularly those who have a diversified line produced in several factories, must make very accurate calculations, as in this entire operation the profit structure and production schedules of a company are directly involved. Because of the restrictions imposed by OPS in its CPR 30 with respect to certain costs, any company, before it can complete its survey, will be confronted with all, some or most of the following decisions and questions.

(a) Will production schedules for the balance of the year 1951 and into 1952 have to be seriously curtailed because they make necessary the use of conversion steels, the extra price of which under CPR 30 is an unallowable cost?

(b) If as a consequence of reduced production schedules skilled manpower should be lost, what are the chances to regain this manpower in the event military and essential civilian demand should oblige manufacturers again to increase production schedules?

(c) It is unfair to disallow an administrative cost which is incurred directly because of actions on the part of Government. Why disallow increased costs in purchasing departments which were brought about by the obligation on the part of manufacturers to do buying under a multitude of Government regulations,

which in turn have to be interpreted and applied in each and every purchase? What about the cost of going through the enormous job of recalculating prices in line with the complicated and unrealistic approach which CPR 30 is giving to this entire matter?

Title 12

contracts.

THE DISREGARD OF SMALL BUSINESS INTERESTS

It has been the continual aim of Congress to safeguard the interests of small business; likewise it has been an established policy of the military to see to it that small business participated as broadly as possible in the execution of defense Accordingly, larger manufacturers in order to fulfill the purposes and aims of both Congress and the military establishments, and enable themselves to execute large military contracts, resorted to a very great extent to the method of subcontracting. Thus small businesses actually participate not inconsiderably in the execution of prime contracts, and are kept gainfully occupied under competent supervision of the prime contractor. Instead of having hundreds of smallbusiness men contact procurement offices, Washington Government departments, and military establishments for the purpose of obtaining direct contracts, their affairs are being handled competently by a relatively small number of prime contractors. Untold hours of negotiation and information work are saved; expense of doing business is reduced; duplication work is eliminated; responsibility is centralized; eventual contract termination procedure is simplified; and, above all, the intent of Congress to allow small business fully to participate in defense work is carried out.

Then why, in the face of all of these facts, does OPS through its Ceiling Price Regulation No. 30 restrict the recovery of increased costs due to subcontracting? Should prime contractors eliminate subcontractors, and in that way prevent participation of small business in the execution of defense contracts?

Title 13

THE INEQUITY OF TREATMENT

Obviously it is the intent of OPS to allow small manufacturers (those with gross sales under $250,000) to retain their present ceiling prices estbalished under the January freeze order. No doubt the underlying thought is that these small manufacturers simply don't have the talent nor time, nor can they afford to hire the talent to make CPR 30 applicable to their operations. If this reasoning applies to small manufacturers, it applies equally as well to the large manufacturer. Accordingly, it is very difficult to understand why every manufacturer should not be given the option of either applying CPR 30 or continuing under January freeze prices, particularly if such manufacturers could prove, on the basis of prices quoted in January in relation to prices quoted at any time previously and since the ending of the war, that January 1951 prices are reasonably in line.

Title 14

THE LACK OF CONSULTATION

"It is recognized that there may be problems peculiar to some of these industries which may require some variation from the standard methods. Where this necessity is demonstrated by an affected industry, it is proposed to issue a supplementary regulation to treat with such problems.' Again OPS made it a point that it was "impossible to consult in detail with representatives of all the industries affected. However, in the preparation of this regulation conferences were held with many industry and trade-association representatives."

There has been no consultation between OPS and any representative group or segment of the construction equipment industry or any of the trade associations in the construction equipment industry.

CONCLUSIONS AND RECOMMENDATIONS

CPR 30 should not be made applicable to the products manufactured by the construction equipment industry. The industry should continue under the general ceiling price regulation, with frozen prices established at the level at which equipment was offered for sale during the base period December 19, 1950, through January 25, 1951. This amended general ceiling price regulation should be placed into effect with the provision of a simple relief mechanism for those manufacturers for whom the ceiling prices thus established are too low. Any segment of the construction equipment industry should have the right to be heard in the event OPS should believe it has evidence that such segment established excessive prices prior to January 25, 1951.

May 24, 1951.

DEFENSE PRODUCTION ACT AMENDMENTS OF 1951

THURSDAY, JUNE 7, 1951

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10 a. m., the Honorable Brent Spence (chairman) presiding.

Members present: Messrs. Spence, Brown, Patman, Multer, Deane, O'Brien, McKinnon, Addonizio, Dollinger, Bolling, Burton, Kluczyn ski, Gamble, Talle, Cole, Scott, Nicholson, Widnall, Buffett, and Betts.

The CHAIRMAN. The committee will come to order.

The clerk will call the first witness.

Mr. HALLAHAN. The first witness is Mr. George E. Leighty, representing the Railway Labor Executives' Association. The CHAIRMAN. Mr. Leighty, you may proceed. Mr. LEIGHTY. Thank you, Mr. Chairman.

STATEMENT OF GEORGE E. LEIGHTY, PRESIDENT OF THE ORDER OF RAILROAD TELEGRAPHERS AND CHAIRMAN OF THE RAILWAY LABOR EXECUTIVES' ASSOCIATION, APPEARING FOR THE RAILWAY LABOR EXECUTIVES' ASSOCIATION, WASHINGTON, D. C.

Mr. LEIGHTY. Mr. Chairman and members of the committee, my name is George E. Leighty. I am president of the Order of Railroad Telegraphers and also chairman of the Railway Labor Executives' Association. I appear here in support of certain proposed amendments to the Defense Production Act as the spokesman for the 19 standard railway labor organizations affiliated with the Railway Labor Executives' Association, and for the record would like to name them: Switchmen's Union of North America; Order of Railroad Telegraphers; American Train Dispatchers' Association, Railway Employees' Department, A. F. of L.; International Association of Machinists; International Brotherhood of Boilermakers, Iron Ship Builders and Helpers of America; International Brotherhood of Blacksmiths, Drop Forgers and Helpers; Sheet Metal Workers' International Association; International Brotherhood of Electrical Workers; Brotherhood Railway Carmen of America; International Brotherhood of Firemen and Oilers; Brotherhood of Railway and Steamship Clerks, Freight Handlers, Express and Station Employees; Brotherhood of Maintenance-of-Way Employees; Brotherhood of Railroad Signalmen of America; National Organization Masters, Mates and Pilots of America; National Marine Engineers' Beneficial Association; International Longshoremen's Asso

ciation; Hotel & Restaurant Employees and Bartenders International Union; Railroad Yardmasters of America.

The amendments which we propose are limited in their application to persons subject to the provisions of the Railway Labor Act, as amended. Their purpose is merely to re-create, during the present emergency, machinery for the approval of wage or salary adjustments for railroad employees identical to that authorized during World War II under the then existing stabilization law. We feel that as long as Congress determines that controls are necessary, we should recommend the use of those in the railroad industry which were successfully employed during a past critical period of our history.

For this reason, before discussing the specific amendments which we propose, I should like to first point out briefly what procedure was utilized for the approval of wage adjustments in the railroad industry during the period of the last war emergency.

On May 22, 1942, a National Railway Labor Panel was created under authority of Executive Order 9172 for the purpose of supplementing the procedures under section 10 of the Railway Labor Act, as amended, during the period of the war emergency.

Now, I have prepared copies of that Executive order, if the committee should wish to have them, and they are available here today. This order provided that panel emergency boards would be provided in dispute cases, including wage disputes, after the parties involved had failed to resolve their differences under the mediation and arbitration provisions of the act. These emergency boards, composed of three members selected from the panel, were made available to the parties to the dispute whenever, in the judgment of the panel chairman, the dispute was such that it might interfere with the prosecution of the war. This removed the necessity of taking strike votes and setting strike dates. The emergency boards thus selected from the panel operated subject to the provisions of section 10 of the Railway Labor Act.

We contemplate that the President will find it desirable to reestablish the National Railway Labor Panel during the present emergency, and we base that expectation on a letter addressed by the President on April 6 of this year to the Economic Stabilization Administrator, Mr. Eric Johnston, wherein it was requested that consideration be given to the establishment of machinery similar to that utilized during World War II for the settlement of unadjusted disputes in the transportation industry. If this is done, the question arises as to whether the panel chairman and panel emergency boards shall approve the wage adjustments of railroad employees as consistent with the stabilization program, as was the case during World War II.

We also have prepared and have available copies of that letter of April 6 which the President addressed to Mr. Johnston, if you desire to have it.

The CHAIRMAN. You may insert them in the record, if you desire. Mr. LEIGHTY. All right, Mr. Chairman, we will do that. (The copy of the letter of April 6 referred to is as follows:)

Immediate release.

APRIL 6, 1951.

The President has today sent the following letter to the Honorable Eric Johnston, Economic Stabilization Administrator:

MY DEAR MR. JOHNSTON: On March 1, 1951, a collective bargaining agreement was signed between the carriers represented by the Eastern, Western, and South