federal eminent domain for coal slurry pipelines, let me speak of conditions in the segment of American industry I represent.

Treasury Secretary Donald Regan said last month that the economy is "dead in the water". Nationwide, we are in a recession. We have an unemployment rate of approximately 9 percent.

Our railway supply industry is not in a recession, Mr. Chairman. We are in a severe depression. Our unemployment rate is close to 50 percent.

For us, the economy must be rejuvenated and the railroads' traffic must pick up significantly so that again there will be a strong demand for new rolling stock and locomotives.

Now, let me be specific.

Perhaps you saw in The New York Times of April 25 a chart labeled "Casualties of the Recession", based upon research done by the Mellon Bank. This chart displayed the loss of output for selected industries from July of 1981 through last February. We have attached a copy to this testimony.

Iron and steel output was off by 21 percent. Motor vehicles and parts were off by 24.4 percent. Railroad equipment led that list of casualties. Our output for those eight months dropped not by 21 percent, not by 24.4 percent, but by 41.2 percent.

That one fact, Mr. Chairman, demonstrates why I have said that our members are in an acute depression, rather than a recession. That is why I mentioned survival in speaking of our present condition.

The National Castings Division of Midland-Ross has four plants. One of these, at Melrose Park, Illinois, where 300 persons were employed, is shut down. At other plants in Cicero, Illinois, in Toledo, Ohio, and in Sharon, Pennsylvania, we are operating at about 50 percent of normal employment. In Sharon, there are fewer than 600 working in our plant that normally employs 1,100 workers.

The Greenville Steel Car Company in Greenville, Pennsylvania, employs about 1,250 persons during times of peak demand. Today,

there are 450 at work, temporarily.

In the middle of next month,

there will be none. The company plans to shut down its plant totally until new orders develop.

In Portland, Oregon, FMC Corporation's Marine and Rail Equipment Division shut down its rail car operations last November. Almost 900 people normally employed there are out of work.

These examples are typical, Mr. Chairman. They can be corroborated industrywide. We need only look at the backlog of freight cars on order from carbuilders and not yet delivered. We obtained these figures from the American Railway Car Institute and the Association of American Railroads, and our most recent figure for the backlog is 11,546 as of April 1. Another 1,053 to be built new in railroad shops and 518 to be rebuilt gives us a total of 13,117 cars. For comparison purposes, the backlog three years ago was more than ten times as high. Last year, the backlog was three times as high as it is now.

To put it another way, two or three of the larger carbuilders would consider today's industry-wide backlog normal production for a year.

Mr. Chairman, I have cited these facts in order that this Committee may understand the stake that our member companies have in the coal slurry pipeline issue. We, like so many industries in America right now, are looking for trends that promise growing demand for our products. Transportation of coal is such a trend. Many of our carbuilders, the barometers of the entire rail supply industry, are looking toward railroad investment in new coal cars as one way to restore our plants to normal levels and put thousands of people back to work.

Trans

Coal is perhaps our richest natural and economic resource now. Export coal contributes to our balance of trade. Domestic consumption of coal has lessened our dependence upon foreign oil. portation of coal in freight cars has helped railroads reach a rate of return slightly above 4 percent for the first time in a quarter of a century. That is far better than they were able to do in

97-082 0-82-45

earlier years.

However, a return of 4.1 percent is only about onequarter of today's prime rate and just a bit more than a third of the 12.1 percent rate of return that the Interstate Commerce Commission has determined to be necessary for the industry.

Even in the times of greatest freight car demand, coal slurry pipelines are not needed. We can build the cars and railroads can use them to move the largest volume of coal forecast by the most sanguine observers.

Today, in a recession for others and a depression for us, Mr. Chairman, granting the federal right of eminent domain for coal slurry pipelines would remove the single bright spot in our industry's outlook.

We urgently request, Mr. Chairman, that this Committee not report S. 1844 favorably to the Senate.

We thank you for your concern and attention. to respond to any questions you may wish to ask.

I will be pleased

Attachment

May 6, 1982

CASUALTIES OF THE RECESSION

Loss of output for selected industries from the beginning of the current recession, July, 1981,
through last February

The CHAIRMAN. Thank you very much, Mr. Winger.

Mr. DeHague.

STATEMENT OF GEORGE R. DeHAGUE, RAILROAD COORDINATOR, INTERNATIONAL ASSOCIATION OF MACHINISTS & AEROSPACE WORKERS, WASHINGTON, D.C.

Mr. DEHAGUE. Thank you. My name is George DeHague. I serve as the railroad coordinator for the International Association of Machinists & Aerospace Workers and I'm here representing our international vice president.

I welcome the opportunity to appear before you today to convey the opposition to S. 1844, the proposed Coal Distribution and Utilization Act of 1981.

The IAM is a member of the RLEA, and representatives of the RLEA have testified on many occasions on the subject of coal slurry legislation. The IAM is familiar with the statement which RLEA is presenting to you on this subject and it totally agrees with and supports RLEA's position. RLEA, however, as its name clearly indicates, is an association whose concern primarily rests with railroad employee interests. The IAM, while it does represent employees on rail carriers, is a multiindustrial organization which represents employees under approximately 6,000 collective-bargaining contracts in various industries, including aerospace, transportation, manufacturing, and construction industries. According to the Department of Labor's Standard Industrial Classification Directory, the IAM represents employees in over 350 types of industries.

Due to the divergent industrial interests of the members of the IAM, I appear here today to supplement the RLEA's view of this proposed legislation. The development of coal slurry pipelines, besides being injurious to the rail transportation system, could have severe adverse consequences for other industries as well.

The transportation of coal will serve to illustrate my point. Coal movement generates a significant source of income for rail carriers, located in both the Western and Eastern portions of the United States. Without the coal movements which would be diverted to pipelines, these carriers will undergo extreme financial difficulties; in fact, the transfer of this coal movement from rail carriers to pipelines could bring about financial disaster for some of these rail carriers.

This result would occur quickly for some railroads and over a longer period of time for others. But there is little doubt that the absence of this revenue will lead to a decline of the railroad industry. As a corollary of the carriers' deterioration, there will be serious ramifications for industries which rely upon the rail systems as their source of transportation.

Another specific example of the impact of this legislation can be shown by its ultimate effects upon those companies which manufacture the railcars which haul products to and from coal facilities. These companies would suffer from the creation of such pipelines because rail carriers would no longer require additional cars nor would they utilize, and thus repair, their current stock. A report issued by the Office of Technology Assessment in 1978, and reissued in 1980, projected that if these pipelines were constructed,