Mr. NICHOLSON. I think I have answered that question when I say if that 20 per cent of our business was the whole business we would not be willing to continue it. Mr. UNDERWOOD. Then you say that your annual sales in France and Germany and elsewhere are at a net loss? Mr. NICHOLSON. No, sir. Mr. UNDERWOOD. In France and Germany your sales are at a loss! Mr. NICHOLSON. You did not ask the question in that way. If you had I should say they were. We had trades in both France and Germany that we had worked hard to obtain. Then they enacted tariff measures which made it necessary, in order to retain that trade, to reduce our price below the price at which we went into those markets. That same condition does not obtain to-day in Australia and in some other countries. Mr. UNDERWOOD. In Australia you are not selling at a loss? Mr. UNDERWOOD. But in France and Germany, where you are paying a tariff, you are selling at a loss. I want to know whether the amount or price at which you are selling on the average your files in those markets is less than the cost of production, with freight added? Mr. NICHOLSON. I should say that the actual transactions in those two countries are showing no profit. Mr. UNDERWOOD. But are they less than the cost of production, with freight added, and tariff added? Mr. NICHOLSON. I should think in many instances they were. Mr. NICHOLSON. I could not tell you. Mr. UNDERWOOD. If you have been making a loss over there on these sales, it has been so little-such a minimum amount that it does not impress you if you can not tell me, I suppose. Is that so? Mr. NICHOLSON. I think we can carry a moderate loss in consideration of the advantages and increase that we get at the other end. Mr. UNDERWOOD. I am not asking you for conclusions. I am asking you to answer my question as to whether, on the whole, the goods, the files, you sell in France and Germany, counting your actual factory cost, freight added, and the tariff added that they assess against you-whether you are selling those files in those countries at a loss or below the cost price, taking the whole run of your business in those countries? Mr. NICHOLSON. I should think in many instances we are. Mr. UNDERWOOD. Well, but that is not answering my question. Of course you may lose money in many instances and yet make a profit. I am asking you as to the whole proposition. Mr. COCKRAN. As to the net result. Mr. UNDERWOOD. Yes; the net result. Mr. NICHOLSON. I should think we are. Mr. UNDERWOOD. You think, as a whole, you are losing money in that country?. Mr. NICHOLSON. Yes. Mr. UNDERWOOD. How much is the tariff in those two countries that you have to pay to enter there? Mr. NICHOLSON. In Germany and in France? Mr. UNDERWOOD. Yes. Mr. NICHOLSON. We pay the general tariff. Mr. UNDERWOOD. You pay the maximum tariff in both countries? Mr. NICHOLSON. So much a pound. On 6-inch files and under it is $9.50 for 220 pounds. That ranges down to $2.38 for over 13-inch. Mr. DALZELL. Please state that again. Mr. NICHOLSON. Six inches and under, $9.50 for 220 pounds, and from 6 inches to the 13-inch, $5.95 for 220 pounds, and over 13 inches, $2.38 for 220 pounds. Mr. UNDERWOOD. That is in Germany? Mr. UNDERWOOD. Now, how much are you losing? You say you are making a loss in Germany and France. Mr. NICHOLSON. I can not tell you. What do you want to get at! Mr. UNDERWOOD. I want to get at what you can enter that market on, can make a profit, if the French tariff is reduced one-half. Mr. NICHOLSON. I should say we could not. Mr. UNDERWOOD. You would still make a loss? Mr. NICHOLSON. I should say so. Mr. UNDERWOOD. Then you are making a loss on your files going into Germany of something like $7.50 on 220 pounds? Mr. NICHOLSON. Yes, sir. Mr. UNDERWOOD. Suppose the entire tariff was taken off files going into Germany and France, could you enter the market then with your files and make a profit? Mr. NICHOLSON. I should say we could hold our own then, if we could get back to the prices we had before. Mr. UNDERWOOD. By "holding our own you mean you could sell in those markets at a profit? Mr. NICHOLSON. I think it would help us to make a profit on our other stuff. Mr. UNDERWOOD. I am just trying to get you to answer the question: If the entire $9.50 was taken off in Germany, and you did not have to pay that tariff, at the prices you are selling there now would you make a profit? Mr. NICHOLSON. We would not do that business and consider it profitable if that was our whole business. Mr. UNDERWOOD. That is not an answer to my question. We Mr. NICHOLSON. I should say we would not make a profit, not when all our costs are entered and considered in the transaction. did not go into the thing primarily with that point in view; neither did they. Mr. UNDERWOOD. I am talking about the present cost price. Mr. NICHOLSON. By "cost price," do you mean each item should stand its own proportion? Mr. UNDERWOOD. I mean the factory cost price. That is what I am talking about. Now, you say if you went in there with freight added, without any duty, and sold at present prices you would be making a loss. Is that what I understand you to say? Mr. NICHOLSON. I do not believe that portion of our business has shown a profit before or since the tariff. Mr. UNDERWOOD. Now, how much higher do you sell your goods for in this market than you are selling them in the export market—in Germany, for example? Mr. NICHOLSON. The prices vary in this country on the products that we make. Mr. UNDERWOOD. But on the same class of goods, how much more are you selling them for in this country than in Germany? Mr. NICHOLSON. On the same class of goods, from 25 to 28 per cent, I should think. Mr. UNDERWOOD. From 25 to 28 per cent? Mr. NICHOLSON. Yes. Mr. UNDERWOOD. How much per cent is $9.50 on 220 pounds of files, as you calculated awhile ago? What per cent of the value is that? Mr. NICHOLSON. You can not figure it. It would depend on the sort of composition that made up that 220 pounds. Mr. UNDERWOOD. You said the duty would be $9. What is the value of those files the class you sell in the German market? Mr. NICHOLSON. That would be a haphazard guess. Mr. UNDERWOOD. Give us the price of some of those products. Mr. NICHOLSON. It might be $60. The invoice on that would be 15 per cent, would it not? Mr. UNDERWOOD. It would be about 15 per cent. Mr. NICHOLSON. I think so. Mr. UNDERWOOD. And how much is the freight to take that box over there? How much does that amount to? Mr. NICHOLSON. I could not say, but I should think it might be 90 cents a hundred. Mr. UNDERWOOD. Then, from that statement, Colonel, it is very evident we can cut this duty, except on these Swiss pattern files below the grade of 4 inches-we can cut this duty off, cut it in two, and put you on as good a basis in this country as that on which you are able to sell at a profit in France and Germany. Mr. NICHOLSON. I can not see it. Mr. UNDERWOOD. That is what your figures would seem to point to. You are selling in the Orient part of your products. Are you paying a tariff there in the markets you enter? Mr. NICHOLSON. We are just that. Mr. UNDERWOOD. How much is that tariff? Mr. NICHOLSON. That is only in Japan. I do not seem to have it here. At all events, that and the manufacture there have tended to bar us out there. Mr. UNDERWOOD. Are you making a profit on the files which you enter in the Japanese market? Mr. NICHOLSON. We have only sold 8,000 dozen. Mr. UNDERWOOD. Is that at a loss? Mr. NICHOLSON. We had to reduce our price to get those in. Mr. UNDERWOOD. Are you selling under your factory price your factory cost, with the freight added? Mr. NICHOLSON. You are speaking just of the factory cost and freight added? You include no general expenses, and depreciation, and insurance, or anything else? Mr. UNDERWOOD. Oh, yes; I count that as factory cost. What I count as factory cost is the cost of making the file, the overhead. charges, the interest on your outstanding obligations, without profits. Mr. NICHOLSON. Everything that enters into the cost of the file but the profit! Mr. UNDERWOOD. That is what I call factory cost. Of course, I do not include in that interest on the capital, because that is profit. Mr. NICHOLSON. That is not the way, as a rule, that the American manufacturers view their business-to go for foreign business or the foreigner to go for foreign business. Mr. UNDERWOOD. I understand that; but I am asking a question from my point of view, not from yours. Mr. NICHOLSON. It would show a loss. Mr. UNDERWOOD. How much loss? Would it be a great per cent? Mr. NICHOLSON. I could not tell you. I would be ashamed to tell some people what our loss would be. Mr. UNDERWOOD. Would it be 1 per cent? Mr. NICHOLSON. It would be a loss Mr. UNDERWOOD. Would it amount to a 5 per cent loss? Mr. NICHOLSON. On that basis it would not be a profitable business to enter into for a moment. Mr. UNDERWOOD. Well, I see that you are unwilling to give us the information, and therefore I take it that you are willing for us to come to our conclusions without the information. Mr. NICHOLSON. With a variety of 3,500 kinds of files, with no two bills alike, it is difficult to tell just what percentage of loss a manufacturer would incur. I have stated that we would make a loss. I can not tell you what per cent. It would be ridiculous to attempt it. Mr. UNDERWOOD. In your books at home, where you have estimated for yourselves this business in Germany and France and the Orient-do you carry that business on your books at a loss in your own countinghouse? Mr. NICHOLSON. They are carried there for what they are. We sell them and we get the money. Mr. UNDERWOOD. In your reports and on your books—are you carrying this foreign business on your books as a loss? Mr. NICHOLSON. Yes. If these goods had charged to them their proportion of all the expense, they would show a loss. Mr. UNDERWOOD. I am not putting any "ifs" in. You keep a set of books, do you not? Mr. NICHOLSON. Yes. Mr. UNDERWOOD. And I want to know whether your books disclose a loss on this foreign business. Mr. NICHOLSON. We filled last year over 55,000 orders for files. We do not go through and dissect each invoice to see whether it is a loss, or how much of a loss it is. We know that business is unprofitable. Mr. UNDERWOOD. You keep an account of your foreign trade, don't you? Mr. NICHOLSON. Yes, sir. Mr. UNDERWOOD. In the last nine years, since you have been president of this company Mr. NICHOLSON. Since 1892— Mr. UNDERWOOD. Have you reported since then at any time to your directors that the foreign business that you are doing has been at a loss, as a whole? Mr. NICHOLSON. You ask have I reported it? Mr. UNDERWOOD. Yes. Is there a single one of your reports that shows that fact! Mr. NICHOLSON. Every one of my reports would show it if I were to explain to them that each invoice on each foreign account should bear its proportion to the 100 per cent of expense of making that file. But we never have figured that that would be the basis of entering the export business. If we got our factory cost, our inside cost, that is all we can expect. That enables us to get our other business cheaper. Our inside cost would be enhanced very largely by the total cost. Mr. UNDERWOOD. I understand you to say, when you shipped those goods abroad you certainly make your inside cost with freight added? Mr. NICHOLSON. We try to make our inside cost. I did not say freight. Mr. UNDERWOOD. What is the per cent of your overhead cost as compared with your labor cost on files? Mr. NICHOLSON. I do not believe that condition would be the same in any two factories in the country. Different people have different ways of figuring. Mr. UNDERWOOD. I will take your own figures. I believe you said the labor cost of files was about 65 or 70 per cent, this morning? Mr. NICHOLSON. Yes. Mr. LONGWORTH. That is the large size, or is that the average? Mr. UNDERWOOD. He said the average was 65 to 75 per cent. Now your material cost, you said, was about 17 per cent? Mr. NICHOLSON. Yes. Mr. UNDERWOOD. Seventeen added to 70 will make 87 per cent. Mr. NICHOLSON. Eighty-seven, I should say. Mr. UNDERWOOD. Yes: 17 added to 70 would make 87 per cent. That is right. Now, the other charges would be 13 per cent? Mr. NICHOLSON. Yes. Mr. UNDERWOOD. Then your inside cost has covered all except that 13 per cent? Mr. NICHOLSON. No; they cover that. Mr. UNDERWOOD. They do cover that! Mr. NICHOLSON. We will cover that with the other supplies, and so forth. That makes up the 100 per cent. Mr. UNDERWOOD. You said your factory price was the inside price, which must include the cost of labor and material in the factory; so that the business administration must represent what is above that, 13 per cent. Mr. NICHOLSON. Not at all. If you have been able to get two men to come here who will come here to tell you what constitutes cost in any large factory and have them agree as to details, I will tell you what I would say. We have raw material, we have labor and supplies, we have repairs, we have expenses inside. That is 100 per cent. Now, when you come to shipping, to the interest charges, to the executive cost, to the taxes, to the insurance, to the depreciation, you have got other items; and every fellow that I have had any experience with takes and figures that 40, 50, 70, and 100 per cent. He adds the whole items that he has got first, 100 per cent. Mr. UNDERWOOD. But that all comes under the 13 per cent you left, because if you were stating candidly the facts this morning to the chairman, when he asked you about what the percentage of the cost of the article was in labor, and you said 65 or 70 per cent and then |