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attempting to estimate the value of their services to the public, would destroy any market for coal mined by the smaller producers.
The provisions of lines 6, 7, and 8, page 2, point plainly to such elimination of the wholesalers. The plan as there outlined is to maintain proper "relations between the public, owners, producers, and employees", but wholly overlooks the fact that many producers do not sell their coal to the public except through wholesalers. Many of the smaller mines are highly efficient and most economically operated. They are not burdened with tremendous overheads, bond issues, or interest charges. They market their coal more economically through wholesalers than do large companies through companycontrolled selling agencies which must be maintained not only in times of peak demand but during all seasons.
Wholesale dealers are as much entitled to fair returns on their investments and to recognition of their functions as are owners and producers. Their employees are as much entitled to employment as are miners. The wholesalers are generally more efficient than the company selling agents. This is borne out by the fact that even large producers, with their own sales forces, frequently sell part of their tonnage through wholesalers. The wholesalers are more widely distributed throughout the country. They are more closely in touch with local demands. They are on the spot to meeting competition and create new demands in a manner which cannot possibly be done by a company agency or agencies located in one or more large cities. They travel territory at small expense that is not and cannot otherwise be served. They render real services in the distribution of coal already mined and in creating new demands and new outlets.
In lines 11, 12, and 13, page 3, it is proposed to set up a commission to supervise the industry. Three members, the bill provides, shall have no financial interest in mining, transportation, or sale of coal, oil, or gas. One member shall represent the producer and one member the employees. As drawn, four members may represent labor, but only one may represent mining, transportation, or sale of coal, and there is no exclusive representation provided for distribution of coal, although distribution is the real problem. We have had overproduction but never overdistribution.
Page 5, section 4, lines 7, 8, and 9, proposes to eliminate the application of antitrust laws to producers but no reference is made to distributors. Again, the intention is to regulate the operators, affording no place whatever for the wholesalers.
Paragraph B, page 7, lines 3 to 15, inclusive, proposes to limit the production of coal without reference to export business, and there should be no limitation upon production of coal for export. With every effort of the administration and of right-thinking business men to promote the export business of the United States, and to increase employment, it must be apparent that such regulation is the result of immature thought.
For the reasons given above, it must be apparent that from the standpoint of the wholesalers and of the small producers the hill should not become a law in its present form. Any regulation of the coal industry should do either of two things. It must cover all of the steps between the ground and the actual consumer or exporter, or else be limited to purely producer and employee relations.
The only excuse suggested by the bill for expanding regulation beyond producer-labor relations is by dragging in (lines 2 and 3, page 2) the right of the public to constant and ample supplies of coal at reasonable prices.” With such an excuse and claiming such a purpose, provisions for carrying the claimed purposes into effect should be contained within the four corners of the bill; yet there is no provision for distribution except for marketing by the producer or through producers' associations.
The important function of the wholesaler is entirely overlooked. With this bill a law, John W. Public could prayerfully get his coal from the large producer or the larger producers' associations or could use oil or gas. With four pages, 11 to 14, inclusive, purporting to regulate marketing,” wholesale marketing, except by producers (and small producers do not and cannot maintain sales organizations) is completely ignored.
One of two things must be true. The bill must cover all steps from the ground to the grate or to the export ship, or it must cover only producer and labor conditions. In several conferences held with persons and representatives of associations, and so forth, favoring the bill, they have frankly admitted that amendment of the bill at this late date, in order to properly cover the distribution and use of coal, while probably desirable, would have the effect of defeating it. This is hardly an excuse for attempting to pass a poor bill
. Passage of the bill in its present form could but lead to litigation. This country has sufficient legislation enforceable only until it can be passed upon by the courts. Such medicines are worse than the disease. They invite unrest. They continue uncertainty. They delay recovery.
The Congress is seeking to establish"fair relations between the unions and the producers, and should properly consider both their interests. We have an interest in fair compensation to both operators and miners, and we have a very real interest in any legislation which while not purporting to regulate us, actually would put us out of business. We must be allowed to live and continue our function, to provide continued employment to our men, to afford them a fair compensation, and to continue our real service in promoting distribution. We also have a prime interest in the establishment of prices which will enable coal to compete with other fuels.
Going back, then to part 2, Marketing,” page 11-14, we find that the minimum price to be established by the Commission shall include (p. 11, lines 9-13) “The cost of labor, supplies, power, workmen's compensation, taxes, insurance, administration and all other direct expenses of production, but not including depreciation or depletion." Unless included with the term “administration” (which is certainly forced construction), no provision is made for including in the minimum price below which no sale can be made, any selling expense. Can a large operator, maintaining his own selling organization, be permitted to sell in competition with small producers having no selling organization, and include his selling cost as an item of administration, thereby absorbing it, when no equal privilege is afforded the smaller producers? The small producer cannot meet such competition nor sell to wholesalers at prices enabling them to meet such competition. Marketing cost cannot be avoided. The minimum price to be fixed f. o. b. mines should include in definite terms the cost of marketing, whether such expense is incurred by a selling
organization operated and controlled by a producer or in the form of discount to the wholesaler.
While the terms of section (b), part II, line 23, page 11, and what follows provide that maximum prices may include profits and anything else, and this without limitation of any kind, they specifically contemplate (lines 8 and 9, p. 12) "permitting competition within the bracket of minimum and maximum prices. Thus large orders and the most desirable business will necessarily fall into the hands of those producers who can absorb their marketing costs within their minimum prices. Thus the strong get stronger, the rich get richer, but the weak and the poor are wiped out.
The real purpose back of the whole bill is allocation of production to communities employing labor on such a basis as to provide continual employment for such labor. To accomplish this purpose, an agreement is proposed between big capital and labor whereby small capital would be eliminated, and to further that plan there is a specific provision (sec. 4, p. 5, lines 3, 7–12) removing the application of antitrust laws to such a combination.
The wholesalers take the coal f. o. b. mines, buy and sell in not less than carload lots. The public interest in the price of coal lies in having this wholesale price fixed at as low a figure as is consistent with reasonable returns, continued employment, and so forth. Price cutting is unfair competition, but in the golden mean all proper costs must be included with no excessive cost. It follows then that the f. o. b. mine price, the not-less-than-carload price, must include the cost of selling the coal in not-less-than-carload lots.
The above criticisms and suggestions may not be constructive. We must, therefore, declare our position and be specific. Accordingly, we are unalterably opposed to the bill as drawn for the reasons stated, and believe that it should not become a law. Should Congress, however, consider legislation along this line desirable, the bill should be amended as follows:
Page 2: In line 7, following the word "producer”, insert the words "wholesale distributor."
Line 8: Same addition as in line 7. Page 3: The sentence beginning at line 11 should read: Two members shall have no financial interest in mining, transportation, or sale of coal, oil, or gas, or in any labor organization. One member shall be a representative of the producers, one member shall be a representative of the distributors, whose principal business is the purchase and sale of coal at wholesale, and one member shall be a representative of the employees.
Page 5: In line 8, after the word producer" add the words "or wholesale distributor."
Line 9: Change "have" to "has."
Line 12: Sentence beginning line 12 and ending with line 17, should read:
The provisions of this section shall be formulated by the Cominission into working agreements, to be known as the “Bituminous Coal Producers Code" and the “Bituminous Coal Wholesale Distributors Code'', and hereinafter referred to as “codes.' Producers and wholesale distributors accepting and operating under their respective provisions are herein referred to as “Code members of said respective codes.
Sentence beginning at line 18 should read:
For the purpose of carrying out the declared policy of this act, the Bituminous Coal Producers Code shall contain the following conditions and obligations.
Page 7: Add a new sentence in line 15. There shall be no limit to the production of coal for overseas export. Page 11: For paragraph (a), beginning at line 8, substitute the following:
(a) The Commission shall ascertain the cost of the production free on board the mines including the cost of labor, supplies, power, workmen's compensation, taxes, insurance, administration, and all other direct expenses of production, but not including depreciation, depletion, or cost of marketing, in each of the producing districts as defined herein. The average costs frec on board the mines thus ascertained for the period for each district taken to the next highest even center per ton, shall be the minimum price in each such district at which coal may be sold hy producers for wholesale distribution. Io the minimum production price thus determined shall be added a sum representing the average cost of wholesale marketing in each district as determined by the Commission and the total thereof shall be the minimum fair market price at which coal may be sold. The minimum production price and the minimun fair market price shall be announced by the Commission to all districts boards not later than March 1 of each year as the effective prices in each district for the enusing 12 months beginning April 1. The deterinination of the minimum production price for each year beginning April 1 shall be based on the actual costs for the preceding calendar year, adjusted, if necessary, to compensate for any change in wage rates, hours, or other basis factors. The average cost of wholesale marketing shall be based upon facts and cost figures presented by wholesale distributors.
Page 18: In line 12, after the word “producers” add the words "and wholesale distributors." Line 13: After the word "producer” add the words “or whole
" . sale distributor."
Line 15: After the word "title" add the words "or to a Commission or differential below the minimum code prices."
Page 19: In line 1, after the word "producer" add the words “or wholesale distributor."
Line 6: After the word "code" add the words "by producers." Page 21: In line 21, after the word “mining” add the words "or wholesaling."
Page 23: Add to section 15, line 16:
The term "wholesaler" shall include any person, firm, association, corporation, trustee, and receiver who buys coal for resale in carload or cargo lots, without physically handling it for retail distribution over or through his own vehicle, dock, trestle, or yard,
STATEMENT OF W. EDWARD NEWBERT, REPRESENTING THE
UNITED STATES ENGINEERS, INC. Senator MINTON. Mr. Newbert is next.
Mr. NEWBERT. Mr. Chairman, my name is W. Edward Newbert, and I represent United States Engineers, Inc.
I am appearing here in opposition to this bill for reasons altogether different from any of those that have been heretofore advanced. In fact, I might say that I would be appearing in opposition to any bill being considered anywhere by either House of Congress, because I claim that we have come to the time when we can frame only one measure that will bring us out of the depression, and that is the only measure that we can frame.
I am going to read in a moment from the book I presented to you some extracts only. I would like to have that finally included in the record, inasmuch as it was in the record in the hearings before the Senate Finance Committee on the social security legislation.
Senator MOORE. Are you in the coal business?
Mr. NEWBERT. I have been extensively interested in coal from the standpoint of engineering for over 50 years, being very intimately acquainted with the Kansas, Missouri, Oklahoma and Arkansas coal fields from contact with them to the railroads that I was so long having to work out seeing to putting through the building of sidetracks and matters of that kind.
Senator MOORE. But not in actual coal mining?
Mr. NEWBERT. No. On the Pacific slope I have made reports to the big financial interests in the East on some of the large deposits of the lignite coal in the State of Washington. That has been only recently used, on account of its being so bad in clinkering. Of course, when it comes to coal, I know something about it.
Senator MOORE. All right, sir.
Mr. NEWBERT. The point that I want to bring up now is that none of these measures get us anywhere to get us out of the depression; none of them whatever. They all have that point in common, that they tend to have occupied, sealed, tight compartments separate from each other. The thing that we want to do primarily is to abolish those tight, separate compartments and merge all our efforts into one gigantic effort to get us out of the depression. As long as we keep our minds on these separate compartments we are not going to get anywhere. All the measures now being considered do that, every one of them.
I would like to read a quotation or two from some eminent authorities.
Senator MOORE. Will you get into the coal compartment and tell us why you are against this bill?
Mr. NEWBERT, Yes. I will say this: We can make a very good plan to carry on for the next 90 or 50 years without the least consideration of the use of a single bit of coal anywhere in any form, or any oil or any gas. That is one extreme we can do. We can rely exclusively and solely on hydroelectric power for that. For example, we do not have to have any coal of any sort, shape or description or any oil, or any gas. That is one extreme. On the other hand, we can entirely abolish the use of hydroelectric and say we will not build a single dam and will not have a single bit of energy from hydroelectric, and rely exclusively on further developments of coal and oil and gas. That is another extreme.
Actually, in the set-up that exists we want to get some kind of a mean for the best use of all those different factors to obtain the best results. Of course, when it comes to coal, we are not doing that. We are wasting more of our resources in coal by the way we use it. We ought to develop a plan under which we can gradually transfer those activities from the forms we are using at present to ways in which it will be more serviceable to humanity and particularly to people in this country that are most interested in it. That is another extreme. I am just generalizing a little bit along these lines.
But, primarily, the thing that we want to do is to get out of the depression, and get out of it as quick as we can. Not only that, but if we have got enough gray matter to plan how we can go on without ever having a depression again, that also is a very desirable thing.
Now, along this line, I would like to quote these comments from the chief engineer of General Motors, which I think are important.