PARAGRAPHS 101-102-PLATE GLASS. the cost of production. (See Annexed report of the Audit Co.) This was not important originally, because the production in this country was not equal to the demand for large sheets and there were large quantities of all sizes imported. The manufacturer in those days contented himself with selling such quantities of small glass in the two brackets named as resulted from breakage and was incidental to the operation of his plant, which amounted to about 10 per cent. Prices to consumer.-The prices to consumers of plate glass in the United States have, on the whole, been in distinct contrast to the upward tendency in the price of most commodities during the last 10 years, while the manufacturers have been compelled to pay more for the materials entering into its production and have been compelled to increase wages in keeping with the general upward tendency of wages, all of which for a time increased the cost of production. Nevertheless, by the introduction of labor-saving devices and new inventions, the tendency in the cost of production for the last four years has been downward, and the cost to the consumer has also had a downward tendency, as is shown by the following table, giving the retail price to the actual consumer: COST OF MANUFACTURE OF GLASS IN THE UNITED STATES. At the hearing before the Ways and Means Committee in 1908 there was a conflict of testimony as to the cost of manufacturing plate glass in this country. At that time a representative of the importers of plate glass stated that the importers "would ask for nothing better than to have the subject (cost) gone over by a public accountant and the new tariff based on the difference between the cost of production here and abroad." (Hearings of 1908, Schedule B, p. 1124.) Upon receipt of your notice of these hearings the Audit Co. of New York was authorized to proceed at once with the work of ascertaining the cost of production of the American manufacturers of plate glass by auditing the books of the plate-glass manufacturers in this country, and has worked diligently upon the preparation of this audit, but has not been able to complete an audit of all the companies up to the date of drawing this brief. It has found that the average cost of manufacturing plate glass by the companies so far examined was, in 1909, 28.16 cents per square foot and in 1912, 23.98 cents per square foot before adding depreciation. With depreciation added, but without allowing anything for interest on bonds or capital invested, the cost of glass per square foot was, in 1909, 33.71 cents and in 1912, 28.45 cents. (See audit annexed.) The Audit Co.'s chief mechanical engineer has carefully estimated the cost of depreciation over and above the sums which have been charged for repairs and maintenance. The aggregate charged for the maintenance of buildings and equipment, including the depreciation, aggregates but 12 per cent on the actual costs of the buildings and equipment, which is not higher than exists in many other lines of manufacture in the United States, although the strain on much of the equipment is very great, owing to the very high temperature and the necessity for running power plants with less than normal rest. The average selling prices obtained during the years ending July 31, 1909, and November 30, 1912, were as follows: A comparison of the foregoing costs before deducting depreciation or any interest in bonds or capital, compared with the average selling prices for the same periods, show that all glass under 5 feet was sold at a large loss, while the margin of profit on glass PARAGRAPHS 101-102-PLATE GLASS. over 5 feet was but 1.81 cents per square foot in 1909 and but 4.66 cents in 1912. If we include depreciation, which is an actual cost of production and should be invariably considered, there existed on sales of glass over 5 square feet an actual loss in 1909 and but nineteen one-hundredths cent profit per square foot in 1912. The companies which have been examined by the Audit Co. on the average therefore show losses instead of gains, after considering depreciation, but before allowing anything for interest on bonds or upon actual capital invested. The companies examined are fair examples of a majority of the manufacturers. If this committee desires it, the audit company will be instructed to proceed with the audits of the remaining companies or we shall be glad to have the committee designate any competent auditing concern to complete the audits. FOREIGN COST OF PLATE GLASS. The cost of plate glass abroad is understood to be from 10 to 11 cents per square foot, and this is borne out by the United States Daily Consular and Trade Reports of July 22, 1912 (p. 376): "Eight years ago the cost of manufacturing glass in Belgium was 9 to 10 francs ($1.74 to $1.93) per square meter (10.76 square feet). At present it is 5.60 to 6.50 francs ($1.06 to $1.25), and rough glass is now manufactured at the cost of less than 2.50 francs (48 cents) per square meter (10.76 square feet), or 4 cents per square foot." And November 6, 1912 (p. 688): "The advantage of a low cost of production (11 cents, United States currency, per square foot of polished plate glass) is assisted by the successful operation of the international syndicate of plate-glass manufacturers, which regulates the selling prices according to conditions existing in each foreign market. The present Belgian cost, as above, is the cost on the basis of operating at 66 per cent of their capacity, and would be decreased if the foreign syndicate should release the excess capacity and let their factories run to full capacity. FREIGHT RATES. The transportation problem is another phase of the tariff question, and must be taken into account. Plate glass can be imported from Antwerp, Belgium, to any of the Pacific coast cities for approximately 2 cents per square foot and in any quantity. We now pay the railroads in this country about 73 cents per square foot to transport plate glass from the factories to the Pacific coast in carloads and about 10 cents on less than carloads, and the railroads have filed rates to increase this charge to 10 cents per square foot in carloads and 18 cents per square foot on less than carload quantities. The rate from Antwerp to New Orleans is less than 1 cent per square foot regardless of the quantity of plate glass shipped. The rate from the Pittsburgh district factories to New Orleans on American-made plate glass is about 3 cents in carloads and about 5 cents per square foot on less than carloads. ALL PLATE GLASS COSTS THE SAME PER SQUARE FOOT, REGARDLESS of size. It should be borne in mind that a square foot of plate glass costs the same amount whether manufactured in large or small plates, because it must of necessity be cast first in large plates exclusively. Glass can not economically be melted in small quantities. It is necessary to manufacture in large sizes, in the course of which manufacturing process the unavoidable breaking and cutting down for imperfections produces some smaller sizes under 5 square feet. Normally this production of small sizes, to wit, under 5 square feet, is about 10 per cent. In answer to the statement made by the representative of the importers four years ago, that the cost of small glass was not the same as the cost of large glass, and to the effect that the small glass was a by-product, we wish to distinctly say that neither one of these statements is in accordance with the facts. Assuming now for the sake of argument that the 10 per cent of glass under 5 square feet above referred to is a by-product, it must be borne in mind that the consumption of the country for glass of this character has now grown to be nearly 50 per cent of the entire production, which compels the manufacturer to cut 35 to 40 per cent of additional glass which would normally be large sizes down to the market requirements under 5 square feet, and which can certainly not be considered a by-product from any standpoint. The query may naturally arise as to why the manufacturer should supply this additional glass if he does it at a loss. The answer is that by increasing his output PARAGRAPHS 101-102-PLATE GLASS. by this large additional amount of business he is enabled to operate his plants nearly to their capacity, and thus reduce his general production cost. If the American manufacturer were to cease to supply this business, the cost of production would be advanced at least 3 cents per foot. We do not claim that all glass under 5 square feet is sold at a loss, because for the finer qualities we get what appears to be a fair price; but in order to secure the small pieces of fine quality, it is necessary to cut out of the large plates the patches of fine quality, with the result that this cutting reduces the balance of the plate to odds and ends and strips. The average price secured for all the glass sold under 5 square feet has always netted a loss to the manufacturer. FOREIGN TRUST SELLING AGENCY A NEW PERIL TO THE AMERICAN INDUSTRY. The great danger to the American plate-glass industry is that the foreign trust, through its newly formed selling agency, is in a position to run its plants at increased capacity, and by so doing reduce its general cost very considerably and to dump the surplus product into the United States at shop cost or less. The foreign trust selling agency can sell its surplus product in the American market at a price of 10 or 11 cents per square foot. This price, plus the existing rate of the American tariff, would enable the glass to be sold to the jobbers in the United States at an average price which the American manufacturer would have to meet at a loss. This would drive the American manufacturers out of business. When it is considered that there is this trust in Europe which has controlled the output for years and that within the last 30 days it has organized a selling agency which will handle the entire product and sell it at such prices as may seem best to the foreign manufacturers, and that the only market in the world in which they can dump their product is the American market (the only market they do not now control), your committee must realize that there is a grave danger hanging over the American industry which should incline Congress to increase rather than to maintain the present rate. The argument so far has treated of cast polished plate glass, unsilvered, covered in paragraph 102 of the existing tariff. All glass covered by paragraphs 100, 103, 104, and 109 is competitive with the product of the American factories, and the differences between the rates of tariff fixed in those paragraphs and those fixed in paragraph 102 are in logical balance with the difference in the character of the products and cost of production, and the same relation should be maintained. Respectfully submitted. Allegheny Plate Glass Co., Glassmere, Pa.; American Plate Glass Co., JANUARY, 1913. THE AUDIT Co. oF NEW YORK, To the Committee of Plate Glass Manufacturers, New York City. DEAR SIRS: Agreeably to your request, we have audited the books and accounts of certain plate-glass manufacturers for the two years ending July 31, 1909, and November 30, 1912. PARAGRAPHS 101-102-PLATE GLASS. The average sales prices obtained for the various sizes and the costs of production we find to be as follows: Costs after depreciation but before adding interest on bonds and capi- We hereby certify that the foregoing average results form a true showing as prepared from the books of the companies audited by us, excepting as to depreciation, which we have carefully estimated. Very truly, yours, THE AUDIT Co. OF NEW YORK. REPLY BRIEF SUBMITTED ON BEHALF OF THE AMERICAN PLATE GLASS INDUSTRY. [Represented by the following companies: Allegheny Plate Glass Co., Glassmere, Pa.; American Plate Glass Co., Kane, Pa.: Columbia Plate Glass Co., Blairsville, Pa.: Federal Plate Glass Co., Ottawa, Ill.; Heidenkamp Mirror Co., Springdale, Pa.; Penn American Plate Glass Co., Alexandria, Ind.; Pittsburgh Plate Glass Co., Pittsburgh, Pa.; Saginaw Plate Glass Co., Saginaw, Mich.; St. Louis Plate Glass Co., Valley Park, Mo.; Standard Plate Glass Co., Butler, Pa.; Edward Ford Plate Glass Co., Rossford, Ohio; Kittanning Plate Glass Co., Kittanning, Pa.] To the honorable Members of the Committee on Ways and Means, House of Representatives: By permission of your committee we file this supplemental brief in reply to the briefs filed by Semon, Bache & Co., on December 1, 1911 (at least bearing that date, though perhaps filed later), and January 13, 1913, In the interest of the economy of your time, it will be necessary to call your attention to a few of these misstatements. At the outset it should be stated that the briefs were written by importers either not knowing or suppressing the facts, who naturally view the matter from the standpoint of advancing their interests through creating a large market in the United States for European products, and are wholly indifferent, if not hostile, to the prosperity of the American manufacturer. We wish particularly to call attention to two features of their brief: I. That the Audit Co., of New York, which made a report that certain of the companies it had examined had produced little, if any, earnings, had selected those companies with a view of being able to make such a report. The fact is wholly misrepresented. These companies are among the most modern and representative of the whole industry; and, until the committee indicated no desire to have the remaining companies examined, it was intended that the Audit Co. should make a complete audit of all the companies engaged in this industry. That offer was made on the oral argument, and still holds good. II. The assertion to the effect that the foreign plate glass convention is "not a trust at all," is sufficiently contradicted by themselves in their statement in the same paragraph that the convention only primarily adjusts production, and incidentally fixes prices. To show the inaccuracy of this statement, and the real scope and power of this foreign trust, we append in original' and translation, in Exhibit A hereto annexed, articles from the Action Economique, a Belgian publication, of December 1 and 8, 1912. The novel but incidentally criminal course suggested in the importers' brief is for the American manufacturer to retaliate against the foreign trust by itself engaging in what in this country would be a conspiracy. The foreign trust may seem of little significance to importers inasmuch as it is their ally; but to the American manufacturers its significance is of vital importance, because Translation only printed. PARAGRAPHS 101-102-PLATE GLASS. it is a legalized organization which can so control an industry and dictate prices as to enable its members to make 75 to 80 per cent a year, and possesses a power which, if unfairly favored by American legislation, must inevitably be exercised in this market to the disaster of the home industry, even now struggling to keep its feet. Another evidence of the importers' willingness to confuse the subject and make it difficult for the committee to clearly comprehend the actual conditions existing in this industry in regard to importations, is that their briefs do not show the division between glass in which the American manufacturers compete only among themselves, and glass in which the American manufacturers are in active competition not only among themselves, but with the foreign producers. The plate-glass business divides itself into two general classes, viz: First. Glazing quality (the kind of glass used for windows), with regard to which there is the keenest and most active domestic competition, and which forces the manufacturers to sell it without any regard to the rates of duty imposed; and, Second. Glass of silvering quality, glass of selected quality and sizes for special purposes, with which the American manufacturers are now, and always have been, in keen competition with the foreign manufacturers. The imports, no matter whether large or small, for the last 15 or 20 years have been almost exclusively of this character. Disregarding this fact, the importers, when they compare American prices with foreign prices and the existing rates of duty, show only the prices for glazing quality, as to which we are not in competition with the foreigner, and give you the impression that this is the only kind of glass the American manufacturers make, suppressing the fact as to the prices for silvering and selected qualities and special sizes, with which we are in active competition with the foreigners. Four years ago, when these importers were before the Committee on Ways and Means, they stated that the American manufacturers could not produce silvering and selected qualities and that they were not, therefore, entitled to protection thereon, the inference being that if we were able to make silvering quality, and were therefore actually in competition with the foreign manufacturers, we might be entitled to proper protection. Mr. Goertner, the importers' representative at that time, made the following statement (p. 1125, Vol. II, Tariff Hearings 60th Cong.): "The glass now imported is imported because it is especially suitable for the purposes. It is not really in direct competition with American glass." Now that it has been conclusively shown that the American manufacturers are able to supply the fine qualities required, the importers carefully fail to state the fact that while glazing quality is selling at low prices the American manufacturers are in active competition with the foreigners on all silvering and selected qualities and special sizes, which represent a very important part of the business. It has been intimated that a tariff on plate glass should be on a scale corresponding to the large number of gradations in the quality, but this is impracticable from an administration standpoint. The distinction of grades is a matter of expert judgment, made under special conditions, requiring such a large amount of space that it would be impracticable in the Government warehouses, and every sheet of glass imported would have to be separately inspected. A tariff based on quality would be productive of endless disagreement and frauds. As proof of this statement, we quote Mr. Goertner (Hearings of Nov. 23. 1908, 1131): p. "Mr. UNDERWOOD. Can you describe to the reporter the distinction technically between these two classes of glass (silvering quality and glazing quality) so that the committee can technically distinguish it? "Mr. GOERTNER. It could not be described to anybody, Mr. Underwood. I could not describe it to another man in the trade; you can only point it out when the two classes are in front of you. It is the most intangible proposition in the world; it is a matter of judgment.' In answer to the importers' reference to the large increase in the production of what is ironically characterized as "a languishing industry," we wish to say that this increase in production was caused primarily by the enormous increase in the consumption of the country, and incidentally by the fact that once embarked in business every manufacturer is compelled to make every possible effort to reduce his costs and keep in line with progressive conditions, and volume of output is always one of the principal determining factors in reducing costs. To accomplish this, the manufacturers in this country have been compelled to put in large amounts of new money for the purpose of keeping their equipment up to date; and while these additional investments have not been profitable to the extent that investments normally should be, they have been absolutely necessary in order to escape dry rot and the ruin which otherwise would have inevitably overtaken them. |