LETTER OF TRANSMITTAL SMALLER WAR PLANTS CORPORATION, Hon. DONALD M. NELSON, Chairman, War Production Board, Washington, D. C. DEAR MR. NELSON: This is my first report as Chairman and General Manager of the Smaller War Plants Corporation. When you honored me with the appointment as Vice Chairman of the War Production Board for Smaller War Plants and a Director of the Corporation, the bimonthly period, which is here reported, was within a few days of ending. Therefore, I claim no credit for the accomplishments of the Corporation in this period. It is my pleasure to report that since making full investigations, it is my deliberate opinion that the Corporation has made a substantial contribution to the war production programs, far beyond any credit the Corporation has received. The success of the Smaller War Plants Corporation is due to the leadership of consciousness in Congress of the importance of small business and to the fact that you have rendered every cooperation to Smaller War Plants Corporation. Without a doubt, notwithstanding the serious position in which "little business" and smaller war plants find themselves, lasting benefit has accrued through this program which you have fostered. The point is, however, that this program must be greatly expanded. This Corporation must never be merely a large organization for the purpose of "running" everybody's business, but must give actual aid to small business in order that business will be independent and may develop under the American system of free enterprise. The contracts, subcontracts, loans, and leases effected by the Smaller War Plants Corporation, in the report enclosed herewith, are only one reflection of the forces put in motion by Public Law 603. Passage of the act, and the logic of the facts, brought about profound change in the attitude and thought of the procurement officers. Through the Smaller War Plants Corporation many additional small plants have been brought into the war production program during the past 18 months. The increased participation has been brought about through direct placement of contracts by the procurement agencies, and by expanded subcontracting activities of the principal prime contractors. The Smaller War Plants Corporation was instrumental in having introduced into contracts issued by the armed services a clause which imposes an obligation upon the prime contractor to subcontract to small plants as large a portion of the contract as is possible. In view of the known benefit to small firms and to the economy, it is unfortunate this did not come earlier. Serious problems of smaller plants and businesses lie in the future. Procurement appears to have stabilized. However, enormous diffi culties are faced in regard to termination of contracts, cut-backs in production, the disposal of surplus material and equipment, and the gradual resumption of essential civilian production. The original problems remain, but there are also new problems which are totally different from those now confronting small plants. We are actively at work on all these problems. The manner of the solution of these problems will seriously influence the nature of our economy after the war. The more I learn the nature of the work of the Smaller War Plants Corporation, the problems of small businesses and the need for assistance of all kinds to them, the more I am convinced of the magnitude of the task and of the responsibility upon us. My next report will tell of the first 2 months of my management of the Corporation. However, in this report I have given some indication of the policies we are crystallizing and some of the programs which the Smaller War Plants Corporation must undertake if it is to do the job that Congress and the people expect of it. I cannot close without a personal note. For over 2 years I have served under your leadership. You have had to follow a rocky road. Throughout all this you have resisted many pressures, and have gone on your path as the friend of the little people, of free enterprise, little business, and the American way. It is my hope that in due time all will realize the Herculean service you have so courageously given to our great Nation in directing the greatest actual war production ever accomplished by any Nation in the history of the world. Sincerely yours, MAURY MAVERICK, Chairman and General Manager. TENTH BIMONTHLY REPORT ON THE ACTIVITIES OF THE SMALLER WAR PLANTS CORPORATION, DECEMBER 1, 1943, THROUGH JANUARY 31, 1944 PROGRAMS In Public Law 603, Congress gave a twofold mandate to the Smaller War Plants Corporation, to help win the war and to aid small business. The powers of the Corporation under the law to buy, sell, make loans, lease plants and machinery, and extend other services, were granted with the expectation that they would be used for these purposes. By this act, Congress, in effect, established a representative for a segment of the economy-the small business structure. There are approximately 3,000,000 business concerns in America, each employing 100 or less, constituting 95 percent of the total number of businesses in the country. Of these, 169,000 are manufacturing plants. Public Law 603 does not now authorize Smaller War Plants Corporation to extend its services to all small businesses. We are at present limited to those concerned with production. From the viewpoint of a democracy, small businesses constitute the critical segment of the economy. Free enterprise and economic vigor depend upon the maintenance of small-business opportunity. We want to assure for our returning soldiers and sailors the opportunity to work for themselves, their neighbors, or a free enterprise corporation. This they understand is the essence of the democratic economy they are fighting and dying to preserve. We must safeguard it at home. A CRITICAL PERIOD A massive change is occurring in our war economy. Total war procurement is tending to stabilize. While some programs are expanding, others are being contracted. It is significant that small plants are more generally involved with the programs that are being cut back than with those that are still expanding. Meanwhile, formerly critical materials such as steel, aluminum, and copper, are now available over and above the amount required for military procurements and the most essential civilian production. These circumstances present significant opportunities to adjust plant programs to the production of civilian goods which the American people need and want. American labor and materials should not remain idle while American wants are unsatisfied. Unemployed labor contributes nothing to the war effort except hardship, confusion, and misunderstanding. Smaller War Plants Corporation urges that civilian production be resumed as rapidly as possible whenever it does not interfere with war production. This is not precipitate "reconversion" to a peacetime economy. Nor does it indicate an early end of the war or even of the European phase, but only necessary economic adjustment in an unstable war economy. We believe that small firms should be given preference in this economic readjustment whenever the manpower, materials, and facilities required in their reconversion can be spared from or are not available to war production. This means that we are opposed to the allocation of a fixed quota of production based on each firm's pre-war production, applied equally throughout an industry and limiting the allowed production at the prescribed rate to the concerns that had previously manufactured the item. The desired production of essential civilian items should be assigned to all small firms with available labor, capable of making them, up to the full capacity of the plants; any further requirement to be supplied by the large plants. TERMINATION The cutbacks in war production, permitting the expansion in the manufacture of civilian items, will involve the termination of many contracts. Herein lies a major immediate problem and task of the Smaller War Plants Corporation. Small plants will be affected to an even larger extent in the secondary termination of their subcontracts with the prime contractor or a higher tier of subcontractors. It is essential that small plants receive prompt settlement of their termination claims. They lack the resources and the financial support of the large enterprises. In many cases they cannot afford the legal and accounting talent necessary to insure the full protection of their rights. As the authorized representative of little business, the Smaller War Plants Corporation feels an obligation to counsel and assist small firms in their termination rights. This is a huge task which may require additional authority and a large and capable staff. REDISTRIBUTION OF MATERIALS There is growing evidence of the accumulation of large surpluses of raw and semifinished materials arising out of changes in specifications and in procurement programs. The collapse of either Germany or Japan before the other will create an enormous addition to this supply. If and when a part of this supply is gradually released, small plants, the contracts of which are being terminated, and which have manpower available, can use these materials to advantage. The Smaller War Plants Corporation earnestly advocates immediate consideration of the release of surplus materials to unrestricted use of small plants. This will enable small plants to keep their labor employed, avoid unprofitable idleness, and at the same time provide goods for the civilian market, thereby absorbing some of the inflationary pressure. This program will also soften the ultimate impact of the deluge of excess materials which we are assuredly facing. GOVERNMENT-OWNED TOOLS AND EQUIPMENT The Government has invested $15,500,000,000 in new plants and the finest tools and equipment. These are a valuable addition to the |