Mr. HARDY. I understand that you were required to buy radiator cleaner and cement in order to get antifreeze? Mr. HEIMBACH. That is right. Mr. HARDY. Was that because the antifreeze messed up the radiator and you had the cement and cleaner after you got through with it? Mr. HEIMBACH. No; in order to get a scarce item they will give you an item of another character. Mr. HARDY. I thought maybe the manufacturers knew more about the antifreeze than you did. Mr. HEIMBACH. No; I do not think that is so. Mr. HARDY. That is all. (Witness excused.) STATEMENT OF GEORGE W. MARQUARDT Mr. BALLINGER. Give your full name. Mr. BALLINGER. What is your business? Mr. MARQUARDT. Rebuilding of automobile parts. Mr. BALLINGER. Where is your business located? Mr. MARQUARDT. 1619 North Hoyne Avenue, Chicago. Mr. BALLINGER. You have statement that you wish to make to the committee? Mr. MARQUARDT. I have. I am also president of the Auto Parts Rebuilders Association, which is a national organization. Our industry is being starved for parts to rebuild. That is largely due to the action of the car makers and the original equipment manufacturers in taking those parts of the market and melting them up, destroying them as far as their rebuildable value is concerned. That is done very largely through what in reality is a fictitious outright price and an exchange price which is considerably lower. As an example, on a starter drive, if it is sold outright it would bring about $1 more retail than it sold exchange. The old part which is taken in for exchange, the manufacturer gives his distributor about 40 cents for. It has about 2 cents' worth of iron in it which is taken in and melted. We regard that as an unfair loss transaction which starves us of our means by which we can stay in business. Mr. BALLINGER. Are many automobile parts scarce today? Mr. MARQUARDT. Yes, sir. Mr. BALLINGER. Does this aggravate the scarcity very much? Mr. MARQUARDT. Here is an ad that is running currently on starter drives, which I will submit. There are two lines that are eliminated. It says: Old drives. The old drive is worth something to you when returned to your Bendix drive central distributor in its original box. The old Bendix drives are scrapped. It goes on to say: This is your assurance that the Bendix drive you sell is brand new and thoroughly efficient. That drive is worth about 2 cents in scrap. Mr. BALLINGER. During the war this practice did not exist? Mr. MARQUARDT. We were anxious to rebuild all parts during the We were very anxious to rebuild all parts during the war. Mr. BALLINGER. Is there a substantial saving to the customers when they buy a rebuilt part as distinguished from a new part? Mr. MARQUARDT. There is and the lower price is particularly advantageous to people who have used cars who do not have very much money to spend on their car. That has always been our best market. Mr. HARDY. Does that apply advantageously to the consumer or to the repair man who happens to use them? Mr. MARQUARDT. Both. Mr. HARDY. Don't you suppose he charges the customer the price of the new one? Mr. MARQUARDT. He should not. In some cases he may. Mr. BALLINGER. How would you compare the substantiality of the rebuilt part with the new part? Is the guaranty the same on the rebuilt part as on the new part? Mr. MARQUARDT. The guaranty is ordinarily the same. I think most of the guaranties on a new part are 60 days or 12,000 miles, whichever occurs first-something like that. There is no rebuilder I know of that would not guarantee his parts equal to that. Mr. BALLINGER. In Minneapolis we had testimony showing that by buying rebuilt parts you can save approximately 50 percent over buying new parts. That is the way the testimony indicated on a number of items. If you bought a rebuilt part, how long would it last in comparison with a new part? In other words, would the new part last twice as long as the rebuilt part? Mr. MARQUARDT. It should not; no. Mr. BALLINGER. Anyway, if you made a comparison, would you say it would last approximately as long? Mr. MARQUARDT. Approximately as long. Mr. BALLINGER. It is a genuine economy? Mr. MARQUARDT. Yes, sir. Mr. BALLINGER. It works just as well as the new part? Mr. MARQUARDT. Yes, sir. Mr. BALLINGER. Proceed. Mr. MARQUARDT. I have here War Production Board order of May 5, 1944, indicating what they thought of rebuilt parts. Part of it reads: No new replacement parts shall be sold or delivered to a consumer to replace a part which the producer or distributor can rebuild or recondition by use of available local reconditioning facilities. While it sounds very good and looks as if they are going to put the rebuildable parts into use, it does not indicate that the distributor of the automobile has to have that part rebuilt at all. In many cases they have used to aggravate the situation they have put the new parts in, then melt up the old parts and do not have them rebuilt. They do not get into independent channels at all through them. Mr. BALLINGER. Isn't it true that some of the large car manufacturers rebuild parts themselves? Mr. MARQUARDT. Yes, sir. I do not know their inside workings, what they actually do with them, but they sell rebuilt engines, for instance. We know that from time to time they have rebuilt parts; yes. Mr. BALLINGER. We had testimony in Minneapolis that Chevrolet, General Motors, and Ford maintain units which do nothing but rebuild parts. Mr. MARQUARDT. Yes. Mr. BALLINGER. And put them back on the market. Mr. MARQUARDT. United Motors rebuild fuel pumps on a national scale. Mr. BALLINGER. How would you explain the position you have taken, that they apparently scrap them? Mr. MARQUARDT. They do in some instances. Fuel pumps is an item they rebuild. Shock absorbers United Motors do not rebuild. They pay $1.35 for the old shock absorber. For a while they had stations hitting them with a pick so they could not be rebuilt. Now I am informed they are all sent in to a junk dealer in Chicago who is under bond to see that they are broken up and kept off the rebuilt market. Mr. BALLINGER. Could you give a list of the parts that are being scrapped that you can suggest, the important parts? Mr. MARQUARDT. Starter drives, shock absorbers, distributorsMr. BALLINGER. Carburetors? Mr. MARQUARDT. Carburetors, voltage regulators Mr. BALLINGER. Clutch assemblies? Mr. MARQUARDT. I am not familiar with them. Undoubtedly generators. I am not so familiar with them first-hand either. Mr. HARDY. They are junking generators instead of rebuilding them? Mr. MARQUARDT. I believe so, as far as the car manufacturers are concerned. Mr. BALLINGER. Could you give us an example of what the difference in cost is between a new generator and a rebuilt one? Mr. MARQUARDT. I do not deal in generators; I cannot. Mr. BALLINGER. Can you give it to us on any one of these items; that is, an example of the difference in cost to the consumer? Mr. MARQUARDT. On starter drives I think the price has gone up now. The price to the consumer here is listed at $4.25, not exchange; $3.25 exchange. $3.25 on an exchange price would go to the consumer as a rebuilt item at about $1.75. Generators, I believe, go in at about 50 percent of the value new on a rebuilt item. Mr. GRANT. Those of you who are in the business of rebuilding automobile parts are also in a difficult competitive situation because of the application of the excise tax applied by the Bureau of Internal Revenue, are you not? Mr. MARQUARDT. Yes, we are. Mr. GRANT. In other words, if you have a $20 part on which you have $5 worth of repairs, you must pay an excise tax on the $20 transaction, even though it is a trade-in? Mr. MARQUARDT. On the full value of the unit after we have rebuilt it. Mr. GRANT. That would be true even though it comes in and out of your shop a number of times? Mr. MARQUARDT. Yes. Mr. GRANT. You pay an excess tax on its full value each time it comes into your shop and goes out? Mr. MARQUARDT. Yes; not only on the work, but the core value. For instance, on a Ford distributor, the value of our work, we sell at $1.50. That is our exchange price. But the core of that distributor that we work on is worth about $5. So we pay the excise tax on $6.50, and we make a $1.50 sale. Mr. GRANT. If I bring my distributor in and exchange it for a used one which has been repaired, I pay you $1.50? Mr. MARQUARDT. Yes. Mr. GRANT. And you must pay an excise tax to the Federal Government on a transaction of $6.50? Mr. MARQUARDT. On $6.50; yes, sir. Mr. GRANT. How much is that? Mr. MARQUARDT. 322 cents. Mr. GRANT. Which applies against the $1.50, which becomes quite a severe levy. Mr. MARQUARDT. Yes; the percentage there is quite a severe penalty. Mr. GRANT. I think that is something which is crying for attention. I assure you as one member of the Ways and Means Committee it is something we are going to give attention to as fast as we possibly can. Anything further? Mr. MARQUARDT. I think that is all I have. Mr. GRANT. We thank you. Mr. MARQUARDT. I have here this War Production Board order. Chairman PLOESER. What is this? Mr. GRANT. The War Production Board order referred to in his testimony. Mr. MARQUARDT. This is War Production Board Order L-158, dated May 5, 1944, and the part to which I referred reads as follows [reading]: Restrictions on sales to consumers: (1) No sale of new parts where old part can be rebuilt or reconditioned. No new replacement part shall be sold or delivered to a consumer to replace a part which the producer or distributor can rebuild or recondition by use of available local reconditioning facilities. (2) Used part to be turned in. No producer or distributor shall sell or deliver any replacement part either new, used, or rebuilt, to a consumer unless the consumer turns in to the producer or distributor, concurrently with his purchase, a used replacement part of similar kind and size for each such replacement part delivered to the consumer. However, a used replacement part need not be turned in in the following cases: (i) Where the used part has been consumed in use, lost, or stolen. (ii) Where the used part is a cab assembly. (iii) Where the consumer is a Federal or Territorial Department, Bureau, or Agency, or a State or political subdivision thereof which is forbidden by law from making such disposal of replacement parts. (iv) Where the new or rebuilt part is ordered by telephone, telegraph, or mail, or is to be installed by the purchaser. (v) Where the new part to be purchased by the consumer will improve the efficiency of the vehicle, its capacity of usefulness, such parts being as follows: For all vehicles: oil filters; for medium and heavy trucks, truck trailers, passenger carriers, off-the-highway motor vehicles, and motorized fire and police equipment: auxiliary springs, trailer connections, brakes, fifth wheels, auxiliary fuel tanks, governors, landing gears, heavy-duty generators, auxiliary transmissions, power take-offs, heavy duty trailer axles, wheels and rims which do not increase tire sizes, market, clearance, and identification lamps, spot lamps (internally controlled only), fog lamps and back-up lamps, signaling devices, reflex reflectors, windshield defrosters, truck and bus traction sanders. (3) Use of consumer's certificates. In any of the cases provided for in subparagraphs (2) (i), (ii), (iv), and (v) above, in which the consumer is not required to turn in a used part, he must sign and deliver to the producer or distributor concurrently with each purchase, or on the written confirmation thereof if the order is placed by telephone or telegraph, a consumer's certificate in the following form: CONSUMER'S CERTIFICATE AUTOMOTIVE REPLACEMENT PARTS The undersigned purchaser certifies, subject to criminal penalties for misrepresentation, that: (a) The replacement parts covered by this certificate are essential for the maintenance, repair, or improvement of equipment he now owns or operates; (b) these parts will be used to replace parts which to the best of his knowledge cannot be rebuilt or reconditioned by use of available facilities; and (c) he will, within 30 days after receiving the parts, dispose of the old parts, if any, through scrap channels. Date: Address: (Signed) Vehicle owner or operator. The foregoing consumer's certificate must be retained by the producer or distributor making the sale to the consumer as part of his records. (Witness excused.) STATEMENT OF CHARLES MIKRUT Mr. BALLINGER. Give your full name. Mr. MIKRUT. Charles Mikrut. Mr. BALLINGER. What is your business? Mr. MIKRUT. Auto parts jobber, Chicago. Mr. BALLINGER. What is the name of your business? Mr. MIKRUT. Subway Auto Parts, 1025 North Ashland, Chicago, Ill. Mr. BALLINGER. Do you want to make a statement to the committee? Mr. MIKRUT. Yes; I have an antifreeze problem also. In May an eastern manufacturing man came into my store and he said I could have antifreeze if I bought something else to go along with it. He sold me six gross of radiator stop-leak and cement and he promised me 4.200 gallons of antifreeze. The cement was delivered immediately. The antifreeze was to come in about September 1. In the meantime I sent my salesmen out to sell the antifreeze and we got orders for it. I paid for the cement and the stop-leak, then I received a letter yesterday morning that I will not get any antifreeze until February or March of 1949. Mr. GRANT. You took the tie-in and got everything except that which you wanted most? Mr. MIKRUT. That is right, even though I had a good supply of cement and stop-leak on hand. I needed antifreeze for my customers. Mr. GRANT. You were told definitely you could not get it in any other way than to buy the whole thing? Mr. MIKRUT. That is right. Chairman PLOESER. What is the name of this concern? Mr. MIKRUT. The Flows-On Manufacturing Co. Chairman PLOESER. Where are they located? Mr. MIKRUT. I think they are in Pennsylvania; I think Pittsburgh, Pa. Chairman PLOESER. They are jobbing for whom? Mr. MIKRUT. They are manufacturers. They make antifreeze and radiator solutions. Mr. GRANT. It is a good thing they do not make anything else. They would have sold you that, too. |