Weighted average production costs of subdistricts in major mining districts—Cont'd.

Mr. FRANCIS. The first exhibit starts out with-
Mr. VINSON. Which one do you call the first?

Mr. FRANCIS. This large sheet here, which is headed "Districts in 'minimum price area 1'."

The second one is a chart showing at 5-cent intervals the cost of production-including selling expenses and administrative expensesand the tonnage in each cost class for mines in the West VirginiaVirginia smokeless coal fields, producing approximately 96 percent of the commercial tonnage, during the 8 months' period ended November 30, 1935.

The third one is a statement of five typewritten pages showing the production costs weighted averages for the 10 months' period, April 1934 through January 1935, for the major mining districts included in "minimum price area no. 1."

In regard to the first and third exhibits, which, are of course, figures made from the same compilation, these are taken from the N. R. A. statistics. They do not represent the entire production from this area.

They represent such figures as were filed with the N. R. A. and compiled from these districts.

I believe they are fairly representative because during this period of 10 months they represent 175,000,000 tons of production for the 10 months' period, which is approximately 60 percent of the tonnage produced in that area. I believe they are typical.

It is difficult to analyze this bill because it is difficult for me to understand this bill,

But this exhibit no. 1 shows the cost of production in the socalled "minimum price area no. 1", as set out in this bill, for 175,000,000 tons, broken down on this larger exhibit by major districts, making up the no. 1 district. It shows the weighted cost of production to be approximately $1.85 per ton.

Mr. VINSON. That is under N. R. A.?

Mr. FRANCIS. Yes; and that is cost, not the selling price. It shows, for instance, in the State of Indiana, in that district a cost of $1.52 a ton. It shows a cost in Illinois of $1.553; it shows in northern West Virginia a cost of $1.667; it shows in the Panhandle of West

Virginia a cost of $1.727; it shows in Ohio a cost of $1.803; it shows in the Virginia field, southern no. 2, high volatile coal, a cost of $1.819; it shows in western Pennsylvania a cost of $1.941; it shows in the smokeless fields, the low volatile fields, southern no. 1, a cost of $1.943; it shows in Iowa a cost of $2.112; it shows in eastern Pennsylvania a cost of $2.118; and it shows in Michigan a cost of $3.185. That is the variation in cost under the N. R. A. wages and hours, which are generally still in effect, and which are voluntarily in effect, so far as I know, in this district. So I do not have any reason to believe that the costs in any of these districts are today any less than they were under the N. R. A.

Mr. VINSON. The selling price is approximately 40 cents a ton less?

Mr. FRANCIS. The current selling price; that does not mean that the coal moving is 40 cents less on the sales being made today, because there are a great many sales that were made two or three weeks or a month ago for a contract period over year which we may still be moving at a higher price. So the average is not 40 cents under, but I think the current market would probably be 40 cents under. Mr. VINSON. But that dollar proposition dealt with the cu.rent price?

Mr. FRANCIS. That dollar proposition dealt with the current price. Mr. VINSON. In other words, you did not mean to say it would be a dollar more than coal that was moving under contract at a higher price?

Mr FRANCIS. No; I did not mean that.

Mr. VINSON. Let us get the figures. What is coal at its current price selling for today, on the average?

Mr. FRANCIS. Mr. Vinson, we produce in this minimum price area no. 2, from the five or six thousand mines, approximately 40,000 different kinds and sizes and qualities of coal. That certainly illustrates how impossible it is to say just what the market price is because each of those coals has a different value and a different use.

Mr. VINSON. I realize that; but you have in the record a statement that if this bill passes the cost will be a dollar per ton above the current price. What I would like to have for the record is a statement as to what price you used.

Mr. FRANCIS. The current price for the 10 months' period I am referring to

Mr. VINSON. I am not talking about that.

Mr. FRANCIS (continuing). Was approximately $1.85. So, if you take 40 cents off, I would say coal today is currently moving at approximately $1.45 or $1.50 a ton.

Mr. VINSON. The $1.85 is the cost per ton under N. R. A.?

Mr. FRANCIS. It happens, however, that the selling price for the same period for that area was approximately the same as the cost. Mr. VINSON. I think some one said it was on the plus side about 2 percent, so as we get it there the selling price for this 10 months' period was approximately the cost price.

Mr. FRANCIS. That is true.

Mr. VINSON. Then you are using the $1.45 as the current price level.

Mr. FRANCIS. I would say that is near the current price level of coal moving today. That is coal generally in this whole area; that

is coal that is being sold this week. I may be a little bit low or a little bit high, but I think that is my guess.

Mr. VINSON. Coming back now to a former question I asked you. The operators in this area-I believe they call it area no. 1?

Mr. FRANCIS. They call it minimum price area no. 1.

Mr. VINSON. In the sales of their coal, that is, the current sales, they are averaging 40 cents a ton less than the cost of production for those current sales; is that a fair statement, and is it substantially correct?

Mr. FRANCIS. That is my estimate. It might be 50 cents. I may be 10 cents off, but they are less than the current cost of production; there is not any question about that, in my mind, as a whole, that is, considering the good mines, and the bad mines, and the indifferent mines.

Mr. VINSON. Of course, you may use your own course, but I would like for you to break down that 60 cents added cost, if the SnyderGuffey bill passes, that is, the added cost above the N. R. A. cost, of 60 cents a ton.

Mr. FRANCIS. In the first place, we have going on here today in this city a wage conference trying to arrive at a wage scale. The operators are proposing to continue the N. R. A. hours and wages. The miners are asking for a 6-hour day and a 5-day week and an advance in wages.

The estimate of the operators here is that if the wage increase is granted by the operators it will add to that wage increase, and also account for the decrease in hours, if the demands should be granted, and that it would cost approximately 46 cents a ton more above the current cost for those items alone.

Mr. VINSON. Let us get away from current prices or costs, because we get confused when we talk about that. My question is as to what it would be as compared to the N. R. A. cost.

Mr. FRANCIS. All right. As far as cost is concerned, I would say that the current cost and the N. R. A. cost is practically the same thing. The difference today is between the N. R. A. selling price and the current selling price. I do not think there is any substantial difference between the N. R. A. cost and the current cost. So we might just refer to the cost.

Mr. VINSON. You consider that they are substantially the same? Mr. FRANCIS. Yes; they are substantially the same, because there has been no change in any factor, or any substantial factor of cost during this period.

But if we should have this bill passed and should have these boards set up, or have these commissions set up, I think we are going to pay, and the country is going to pay, the increased wage cost, and that makes approximately 46 cents, that the employees are asking for. That is 46 cents of the 60 cents.

This bill provides for a tax of about 4 cents a ton, and that would make 50 cents. Certain costs under the bill, and certain inefficiencies that would result from starting and stopping with shorter hours, if they should go in effect, would amount to an item of 15 or 20 cents a ton, I would think, instead of 10 cents.

Mr. VINSON. What are those things?

Mr. FRANCIS. When you have the plant cost, and you have a plant installed to run 8 hours a day, and you cut that plant down to

7 hours, your overhead is the same as it was for 8 hours. You could cut it down to 6 hours and still increase it.

Your depreciation goes on, and your selling and administration organization goes on, and we have less tonnage per unit.

There is a certain intangible expense connected with starting and stopping and in operation that has to be taken care of, and you have less hours of slack to take it up in, and all those things will figure in your additional cost.

Mr. VINSON. That 7- to 10-cent increase in cost to which you have just referred is based, in a major degree, if not entirely, upon the reduction in the hours of labor?

Mr. FRANCIS. Yes; that particular one..

Mr. VINSON. That is what I am saying; that particular one.

Whatever would be agreed upon in regard to wage scales between the operators and the miners that would be less than the estimate of the operators, would decrease to that extent the 46 cents cost, in addition to the N. R. A. cost?

Mr. FRANCIS. That is true.

Mr. VINSON. That is correct, is it not?

Mr. FRANCIS. That is correct; yes, sir. And it makes this estimate of 60 cents. There is another item I would like to get to that may cost the public-I do not see how it is going to work out, but it may cost the public another 45 or 50 cents a ton to try to correlate these prices. It is a question of trying to bring the prices together.

Mr. VINSON. Is not that what the Appalachian Coals seek to do? Mr. FRANCIS. No.

Mr. VINSON. I thought that was a sort of get-together agency, with the operators trying to stabilize the market and to get a fair price for the operator, so the operator could make some profit and pay the miner a living wage. That is what has been claimed for it. It is your baby, and I know you are thoroughly familiar with it.

Mr. FRANCIS. Appalachian Coals seeks, as the selling agency for the producers it represents, to sell its coal on the market at the best price obtainable. It attempts to do away, and has done away in that area to a large extent, with a lot of abuses in selling and marketing coal.

Mr. VINSON. Is there not coordination in prices, and is there not, in substance, an allocation of tonnage, a gentleman's agreement as to the allocation of production, so that you will not have cutthroat competition, and all that sort of thing.

Mr. FRANCIS. Not a gentleman's agreement, but a contract agreement. The contract does not allocate production. It does provide that the selling agency in its attempt to sell coal shall try to sell as much coal for one producer in proportion to his output as it sells for the other.

Mr. VINSON. And at a price higher than those operators were getting before Appalachian Coals was organized. Is that right?

Mr. FRANCIS. That is true; its purpose was and is to attempt to get a higher price for coal through cooperative effort than by eliminating abuses about selling practies and about marketing practices, than we had before.

Mr. VINSON. The condition that obtained when you started to work, and which resulted in the creation of Appalachian Coal think that I am correct in saying that you led the way for Appalachian Coal, Inc.

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Mr. FRANCIS. I am just one of many.

Mr. VINSON. I think you are modest, because I recall something about that in a general way.

The condition that obtained in the coal fields in our country was a very demoralized one, was it not?

Mr. FRANCIS. Very demoralized.

Mr. VINSON. The operators in the coal country were possessed with the same fever that a poker player has in regard to the producing of coal; is not that true?

Mr. FRANCIS. Not being a very good poker player

Mr. VINSON. If you are not a good one you ought to know more about it than if you were a good one.

What I mean to say is that so far as the production of coal is concerned, men will stay in that game and produce coal at a loss for months, and years, hoping that something will eventuate that will give them a good price, so they can recoup their losses.

Mr. FRANCIS. That is true to a certain extent, but it is based upon the proposition whether they will lose more money by abandoning their capital and closing their property down, or will they lose more money by continuing to operate taking a period of losses.

Mr. VINSON. Now, we find this condition that certainly no one who is acquainted with the situation can for a split second deny, that cutthroat competition was rampant and the operators were selling below cost of production, and impressing their losses upon the miner in reduced wages, running one day a week or two days a week. And your idea in Appalachian Coals, Inc., was to avoid that condition, was it not?

Mr. FRANCIS. It was to avoid as many of those conditions as possible. I might illustrate

Mr. VINSON. Just tell us about Appalachian Coals, because it seems to me that in this matter Appalachian Coals, Inc., has sort of led the way. I have not been unfriendly to Appalachian Coals, Inc., I think it served a splendid purpose. After Appalachian Coals, Inc., we bad the N. R. A. The N. R. A. followed in the train of Appalachian Coals, Inc., and I take it you and your associates were materially benefited under the N. R. A., were you not?

Mr. FRANCIS. We made more money under the N. R. A. than before. Mr. VINSON. Did you favor extending it for 2 years?

Mr. FRANCIS. I did. I thought there were a good many things in the administration of it that should have been changed, but so far as the N. R. A., as a voluntary code was concerned-Í favored the extension of it.

Mr. VINSON. Was the N. R. A. in its operation, even though there may have been some points in the administration of it that were not in conformity with your views-in the main, was it not bottomed upon Appalachian Coals?

Mr. FRANCIS. It embodied, of necessity, a great many features of Appalachian Coals. It did one thing that Appalachian Coals did not do or could not do, under the court's decree. N. R. A. attempted actually to set a minimum price for coal and to bring large regions together and have them agree upon a minimum price for coal in order to create a very large base upon which the price of coal would stand. Mr. VINSON. N. R. A. had the advantage of having an exemption from the antitrust laws as affecting coal, that Appalachian Coals did not have?