is that there is not a shop in several hundred miles or possibly closer than Denver that will touch a tank that has had gasoline in it. Mr. BALLINGER. Who are your suppliers generally? Mr. EHRENBERGER. My supplier is the Gates City Iron Works. I have been very well satisfied with them as far as what they had available is concerned. Mr. BALLINGER. They have had trouble in turn in getting material? Mr. EHRENBERGER. They are manufacturing themselves. I have not been able to find a straight jobber to deal with. I bought from the Lincoln Steel. They have not given me very good service. Then I dealt with a man up in Denver, also the Silver Engineering Co. in Denver, which gives me fair service, but they are also manufacturers of sugar equipment. They use about one-third of their allocation which goes into the jobbing trade and the rest of it is used in their manufacturing. I wonder if there is some way a person could line up with some firm that is just a jobber. We have a stack of letters where we have written to steel firms back East. We had a letter from Bethlehem Steel stating something about some court decision that prohibited them from shipping steel out here to the West. I did not know this meeting was of the type of a monopoly meeting or I would have brought some of the letters along, like from Granite City, Ill., which stated they did not roll sheets at all. We have a grocer in our town that came from Granite City and he said they do roll the sheets. We have had misleading statements. We do not want anything out of reason. we can get along on. All we want is something I also have a hardware place there. We have a small hardware stock, which we put into the blacksimth shop, then moved it uptown. We ran into a little collusion in the hardware business. Some of our suppliers on pipe, like Warner, they sell pipe wholesale to farmers. They will sell pipe to farmers when they won't sell me pipe. My customers are badly in need of pipe for replacement in their wells. It does not look to me like it is fair for a jobber to sell wholesale to farmers. We also had trouble with the Omaha Welding. One of their salesmen came out there and he did sell one big farmer several hundred plow shares and then the farmer sells those to his neighbor for 10 cents profit. Then he wanted to load me up. They wrote me a letter about it. They definitely defended that practice and believed it was right. This farmer in particular, his sole income was from the farm. Sure, he had a shop for his machinery and if his machinery broke down he would fix his machinery before doing customer work. I inquired around and I found their salesmen were selling chain hoists at wholesale. It looks to me like that is an unfair trade practice. I did not know, as I stated, this meeting consisted of unfair trade practices or I would have brought that letter I had from Omaha Welding defending that practice. Mr. FORISTEL. If you wish, I would like you to state the capacity of your business and the number of farmers you are serving. The committee would like to try to help you. Mr. EHRENBERGER. I cannot state exactly how many customers offhand. We draw customers from a hundred miles. Mr. FORISTEL. I wish you would produce that in the form of a letter. This hearing will not be written up until February probably. Mr. EHRENBERGER. Do you want me to send a letter when I get back? Mr. FORISTEL. At the address that I have given you. Mr. EHRENBERGER. That is the address. Mr. FORISTEL. Yes. We thank you. (Witness excused.) Mr. BALLINGER. Anybody else to be heard? TESTIMONY OF CHARLES W. WATKINS (The witness was duly sworn and testified as follows:) Mr. BALLINGER. Give your name. Mr. WATKINS. Charles W. Watkins. Mr. BALLINGER. What is your business? Mr. WATKINS. Concrete-block manufacturing business. Mr. BALLINGER. You have a statement you wish to make to the committee? Mr. WATKINS. Well, I came up for the purpose of discussing something in regard to discriminatory freight rates. I have spoken to you about it and it will not take the committee's time in regard to that as I will write to you in the future. However, being a cement purchaser I would like to discuss briefly the basing-point method because I believe we were the first affected by it, and perhaps give the committee a small idea of how it did affect us. We are a medium-sized concrete-block manufacturer here in the city, being first in production in the city and perhaps our rating within the State is tenth. We find that we have to buy cement wherever we can get it, and, as a result, we can buy from a close mill at around 29 cents. We are buying at the present time from two mills. With the mill basing system we would have to be supplied by the closest mill; otherwise we cannot be competitive in this market at all, as that 29 cents a barrel amounts to 72 cents a sack. It means that those who can be supplied at the closest mill will be able to sell their cement under our cost. It will also affect us in the product that we manufacture. If we are not able to receive the supply from the closest mill, our cost of our product will be higher than it is at the present time. Mr. BALLINGER. In the short run that might be true, but if there is a demand for cement in this area and your local mill cannot supply enough, other mills will come in and supply the cement. If your costs are higher the price of your product will go up to cover that cost. That is the way it is in every other case. Mr. WATKINS. Instead of the cement companies absorbing the freight, we will have to be the absorber. That is what it is today. We will have to absorb the cost from the distant mill and we cannot last very long at that. Mr. FORISTEL. There is a school of thought which believes that if the new system had 2 years to work out this probably would be the best thing for it, because we would get dispersal of manufacture. Perhaps there are some rather immediate disadvantages. 83019-49-26 Mr. WATKINS. I agree with that; that is, if we can disperse these mills. It will take several million dollars to create a mill here in this area and take a lot of time. Mr. BALLINGER. It is a matter of transition. Mr. WATKINS. However, the mills are like steel, they are close to where the source of steel is, the ore. It is not economically sound to carry ore a long way, nor is it economically sound to carry bulk block a long way. Mr. BALLINGER. If there is a demand for it, it is economical. If the people at the other end of the line want that block they will pay the cost and it is always economical. Mr. WATKINS. It depends on who gets the block that is close. Mr. BALLINGER. If the mill cannot supply enough of the product to satisfy the demand, the distant mills will have to ship in and will ship in. That would mean that there will be an expansion of facilities of that plant or there will be another plant. That is, over the long run. Mr. WATKINS. I believe in a very competitive market it would not take very long to eliminate us if we cannot get cement from a close mill. Mr. BALLINGER. Of course, capitalism in theory is a bad system if you are always looking to stay in business or for security and overlook the fact that new inventions come on. When the automobile came on and supplanted the horse and buggy there was a terrible tearing up of things. Fellows went down. That is always part of the capitalistic system. This practice of the basing point is a monopoly and the TNEC says it is a monopoly, it is going to cause a lot of distress but if the practice is unsound we have to get rid of it and get the system going right. Mr. WATKINS. Let me ask you in regard to our own finished product. We manufacture our own finished product. We sell it in north Omaha. The trucks of these various producing plants right here in the city cross and crisscross like a milk or grocery truck. Would we be in violation if we did not set up block prices? That is, we will go into this block for one-tenth of a cent and another block for two tenths of a cent. We are delivering our commodity. If the mill basing point is that close, it will even affect the intercity delivery of milk and thousands of items that cross all the time. Mr. BALLINGER. What is your point? Mr. WATKINS. I am wondering whether we would be in violation if we did not set up a delivery schedule all the way through. Mr. FORISTEL. He means by blocks. Mr. WATKINS. We deliver that to job sites all over. Mr. BALLINGER. We will take that under advisement. Mr. WATKINS. My idea is not to criticize the decision, but I believe that the Congress should give business a chance. Mr. BALLINGER. You would like to see a period of adjustment worked out with every effort being made to ease the shock of the abolition of this system? Mr. WATKINS. If the Congress would give a period of maybe 4 years in which to remove Mr. BALLINGER. Maybe it might be removed in a shorter time. Mr. WATKINS. Any period. Mr. BALLINGER. Any period in which an adjustment can be made? Mr. WATKINS. Yes. Mr. BALLINGER. I am sympathetic with that view. We should make an effort to mitigate the shock of transition. Mr. WATKINS. Well, it is not only the cement business. Mr. BALLINGER. On the other hand, let me point this out to you. If the basing poin system is a monopoly, if it raises prices higher than it ought to, then there is less consumption at the other end of the line and that means there will be less people in business, less opportunity for men like you. You might be one of the first to go. We are being held up by Government spending. Assuming that is gotten rid of, it becomes a question of who can get into the market most economically and how. The basing point system affects not only cement prices and steel prices, but it goes through the entire length and breadth of American industry. If that thing is legitimatized, because of this unfortunate period of transition, it means we are going to fasten upon American industry a monopoly in perpetuity, we are not going to get rid of it. Mr. WATKINS. I am not in position to say whether it is a monopoly. It has not created a monopoly because all mills come into this area and try to supply us and when they come into this area in order to supply us they know that they will not get as much, yet they want to sell their mill output because it is more economical to do so. Mr. BALLINGER. You start off with a base price, whoever fixes it or however it is fixed. There is no sense in a cement plant located in the eastern part of the United States supplying a market in the western part of the United States. Economically there is no justification for that. You can do it, of course, if you will put your base price up to the ceiling so they can absorb the freight from the eastern seaboard to the western seaboard. Then anybody can get into that market, but that is not sound economics. Mr. WATKINS. The transition will cause a lot of monopoly unless there is a period of adjustment. Mr. BALLINGER. The transition will cause monopoly? In many industries they have the basing point system already and the basing point system is desired because it is a system which can be policed. It is the most effective system for bringing about monopoly so that if anybody is in violation you can find them like that. Mr. WATKINS. If you abolish the basing point system you do not abolish monopoly at all. Monopoly can be worked another way. Mr. BALLINGER. You can get together and agree on the mill price. You do not need the basing point system. I suppose all the mills could get together and fix the price at the mill and that would be monopoly, too. Abolishing the basing point system does not mean the abolition of monopoly in certain industries. If we are going to get rid of the basing point system, it seems to me we have to proceed further and see that other methods are not used to restore monopoly. Mr. WATKINS. Of course, I am questioning you. Maybe I do not have that right. Is it your opinion that we should have a period of transition? Mr. BALLINGER. We are going to hear a lot of testimony further down the line. Knowing the sympathies of Congressman Ploeser to small business-I never quote him-I am pretty sure he will be in favor of a period of adjustment and do everything he can to help the little fellow survive. Mr. BUFFETT. That is the way the committee sees it. How can we help small business? The committee will approach it from that standpoint. Mr. WATKINS. That has been very serious with us and if you would do that we would appreciate it very much. Mr. BUFFETT. We thank you. (Witness excused.) Mr. BUFFETT. The committee will now adjourn. |