Mr SMITH. In our particular industry I am sorry to say that the er ravinent has been less than it would have been on new ship. t. lng, because of the fact that most of our contracts were naval extracts entered into shortly after the code went into effect, and the way to get employment in shipbuilding is to speed up during tehst, 9, or 10 months with everybody you can, in order to open at work on the ship outside, where a larger number of men can be *5* Loved. A question arose before this committee as to what saving might be involved in the building of duplicate ships, and I am glad to form the committee that a substantial saving in cost is involved være more than one ship from the same design is built. The actual anent of savings due to duplicate construction depends a good deal in the type of ship and other factors but will range from 6 to 8 pervent reduction for each of 2 ships over the cost of 1, up to about › pervent for each of 4 ships from the same design, and some retion, which is more or less indefinite, beyond that point and ... unfortunately, we have not had an opportunity to show what we might do, because we have not had the ships, except during the war time, at any time of more than 4 of one type. A factor of great importance in the cost of merchant ships is the baking of naval vessels in private shipyards. The more vessels tre are under construction in a shipyard, within the working caa ty of the yard, the greater will be the distribution of the overLea i involved against each ship under construction. A considerable part of overhead is what is known as "fixed overhead" that must vetine whether 1 or 5 ships are building, such as management, cartaking, policing, lighting, heating, and many other items, so that the building of naval vessels will for this reason substantially deerase the cost of a merchant vessel building in the same shipyard, because of the fact they will absorb part of this overhead expense. The present trend toward the construction of the larger percentage of naval vessels in Government navy yards rather than in private yaris will result in a higher cost of merchant vessels in those yards. Now you asked Mr. Saugstad this morning about the possibility of tabulating the cost differentials, or the advantage of other countres. In a very brief way, there has been shown on pages 90 to 99 of this booklet (Pertinent Facts) the more recent subsidies. There as a double page there for each of the countries concerned that gives me of the high spots. They are so different in different countries, that it is almost impossible to tabulate them in such a way that they are comparable. There was a question arose at one of these meetings as to ships ba.iding in the shipyards of other nations and I have here a copy of the Glasgow Herald on those ships that shows the actual ships buit last year in each of the yards in all of the nations of the world, whh I would like to file with your committee. (The paper referred to will be filed with the committee.) Mr. CULKIN. Can you state, generally, how much tonnage Italy has built abroad? Mr. SMITH. That Italy built abroad? Mr. CULKIN. Yes. Mr. SMITH. No; I cannot. You mean in other countries! Mr. CULKIN. I do not want to delay the hearing, but I think if you can summarize it it would give us some definite impression, just offhand. Do not bother searching for it. Mr. SMITH. No; I cannot give it to you off-hand. But since the first of the year-you say built abroad? Mr. CULKIN. Built out of Italy. Mr. SMITH. I think comparatively little. Mr. SIROVICH. Their contract only provides that in the event Italian construction companies charge more by 15 percent than another outside bidder, they can have that vessel constructed on the outside. Mr. SMITH. That is the rule in France, and I believe the same in Italy. There is some rule to that effect-that if they are within a limited percent higher, they still build in the Italian or French yards. Mr. SIROVICH. You brought out in your testimony before that we only built 2 cargo ships in comparison to 34, and the tremendous increase that England and Germany have had during the last 10 years? Mr. SMITH. That is right. Mr. SIROVICH. Why is it, considering the fact that the United States has the largest construction fund of any country in the world, that the construction companies of our country have not availed themselves of the service of building? Mr. SMITH. Because you have been faced with the development of this merchant marine in the foreign trade and, of course, you can only expect new ships to be built as they are required to be built under contracts entered into under the act of 1928, or as these companies are enabled to conduct their business profitably. Mr. SIROVICH. Is it not a matter of fact that the ship-construction companies of our country that are building ships today and are in a position to build, independent of where they are found, are capable of turning out the finest constructed ships comparable to those of any nation of the world? Mr. SMITH. Yes, sir. We can produce ships that are the equal of those built anywhere in the world. Mr. SIROVICH. Therefore, my criticism would not be leveled against the construction companies that I think are capable of doing their work, that are living up to their contracts with the Government so far as labor conditions are concerned, and since 80 to 85 percent of all construction funds go for the development of labor, I believe the sentiment of Members of Congress is in favor of giving a subsidy that will represent the differential between the cost of construction in our country and in Europe, but the whole trouble with our country, as I see it, is with the operators of our merchant marine. Mr. SMITH. Well, sir, if we had not been through 6 years of depression, you would have seen a great many more ships built than were built. Mr. SIROVICH. My reason for saying the operators did not is because, as a surgeon, I have always tried to go and see what the cause of the conditions was. We have a $150,000,000 fund for construction and for replacement and for the scrapping of obsolete ships and replacing them with new ones; we have the finest ship yards in the world, capable of rebuilding ships and constructing rew ones, with the exception of the injustice that has been done to te Pac.he coast, where no construction has taken place; therefore, we have no fault to find with the construction yards. The fault t: at I believe exists is in our operating lines, with the companies perating ships that have operated them in such a way as to bring aut investigations by Congress and having reports buried in the Postmaster General's office, which have not been brought out, tw why we have been a failure in operating ships. Mr. SMITH. Of course, you must take this into account, sir, the Lep operator must have a definite policy under which he operates, over a long term of years, if you expect him to put new money • to the construction of ships and the building up of ships and 11ng up of his services. He cannot be expected to build unless can see a return on it, and unless he knows what is going to ast ten to the ships he builds. CHAIRMAN. And that $150,000,000 fund has been used to the extent of all but $38,000,000, so that there is only a balance of ******), left in it now! Mr. SMITH. There is a $250,000,000 fund, I believe. 1. CHAIRMAN. It was $250,000,000, but then it was limited afterThe act of 1928 authorized $250,000,000, Mr. SMITH. That is right. The CHAIRMAN. But a subsequent act of Congress limited it to Mr. SMITH. Yes, 11, CHAIRMAN. And in that fund there is only available now Mr SMITH. That is right; there is not very much available at present time. Mr. StROVICH. What have we got to show for that $150,000,000, has more than any construction fund of any nation in the 1 On the terms that our Government has given under that en-truction fund, of 75 percent of the mortgage to be amortized ver a period of 20 years, it has put us in a position that we have, ar bg to your record here, about 5 percent of the ships that are not more than 5 years old and the rest are all ready to be scrapped i Is that not true? Mr. SMITH. You have asked me, sir, what do we have to show. A- I have stated, you have 31 of the finest ships that have ever been t by any country of the world, which I think are suitable, with ain.te policy-which I anticipate you gentlemen will formulateo form the backbone of our future merchant marine and will be worthy of what they were intended to do. Mr. SIROVICH. In other words, since you have quoted the testimony of Professor Haag, you believe if we went on for the next 7 years with a construction program and a reconstruction program, under wh we wouli put out about 300,000 tons of new ships every year, that we could equal, within a period of 7 or 10 years, any ration of the world in foreign-cargo tonnage? Mr. SMITH. You could equal it in tonnage--- Mr. SIROVICH. I mean you have the modernity, you have the ***, you have the newness. Mr. SMITH. Yes. Mr. SIROVICH. Those are the three elements which I understand are necessary. Mr. SMITH. That is right. Mr. SIROVICH. To put into a new ship. Mr. SMITH. That is right. Mr. SIROVICH. You made the statement that if you could standardize ships-and you used the comparison of automobiles-you could bring down the cost of the architects' fees? In other words, each ship may have an average of about $500,000 in the cost of construction to start off with, for design, plans, and everything? Mr. SMITH. The cost of your plans, as I have said, on a 18-knot ship might run as high as $500,000. Mr. SIROVICH. Would it be possible to do just as we have been doing in the city of New York in building schools, where we standardize 5 or 10 schools so that we bring the cost of construction down because the overhead is always the same? The CHAIRMAN. But you are building the schools in New York, and these people are building ships throughout the world. Mr. SIROVICH. Yes; but my theory, Mr. Chairman, is, instead of building 1 or 2 ships, that we try to standardize 5 or 10. The CHAIRMAN. I understand the theory, but you are referring now to New York. Mr. SIROVICH. No; I am just trying to bring out the fact that we have brought down the cost of construction of schools not by making every school alike and turning them out as they do a Ford automobile, but by having 5 or 10 schools built from the same design, which has brought the cost of production down and saved the taxpayers money. Mr. SMITH. That is what I considered here. You probably can save 10 percent if you would build up to 4 or 5 ships of the same design; 10 percent on the cost of each one. Mr. SIROVICH. Because the only differential that I can see between the cost of production in the United States and in foreign countries is the cost of labor, that is the differential. Mr. SMITH. That is right. Mr. WELCH. Mr. Smith, you referred to the plants owned and operated by the Bethlehem Steel Corporation. Mr. SMITH. Yes, sir. Mr. WELCH. How many plants are owned and operated by that corporation? It Mr. SMITH. It has the Fore River plant, in Quincy, Mass. has a repair plant in Boston. It has a repair plant in Baltimore that has done no building in many years, except a barge.or. something of that sort. It has the Union Iron Works plant at the city of San Francisco; and then the drydocks at Hunter's Point. And it has a plant at San Pedro, Calif. Mr. WELCH, Why is it that the Bethlehem Steel Corporation has done no shipbuilding in their Pacific coast yards for many years? Mr. SMITH. Well, they have built two vessels for the Hawaiian trade some years ago and that is about all, I think, that they have built of commercial vessels since the completion of the war program in 1922. I think that was the last ship that they completed on the Pacific coast, or in 1921. There have been no commercial vessels balt on the west coast except those two and small craft, since t: war. Inere have been, however, the General Engineering ship a: ́s, who have built five. I think, vessels for the Coast Guard. And the two navy yards, of course, the one at Mare Island and t = one at Puget Sound, have done some work. Mr. Wah. I have in mind private shipbuilding. Mr. SMITH. The Todd Co, built two cruisers at Tacoma since the war Outside of that, there has been no commercial shipbuilding of the West coast, Mr. WEL H. The Government of the United States has made ava abe approximately $150,000,000 for shipbuilding and the shipting interests of this country, not one dollar of which has been tert in the construction of a ship on the Pacific coast. Our shipis have gone to wrack and ruin. Shipyards, the gentleman will ve, are a part of our national defense, but they do not exist on - west coast. Can you suggest anything to this committee that revive shipbuilding on the Pacific coast! Mr. SMITH. I would like to say this, however, in the first instance, that I am entirely sympathetic with that point of view, that there b some private shipbuilding facilities maintained and contored on the west coast, from the standpoint of the national defense. It nk it is very important. In the first place, however, you have got you are faced with the probem of the owner, that you cannot stop him from buying a ship -re he chooses; and that, of course, is a problem. There is some 4.fity-the only handicap at the present time-the essential bar reap is transportation. The labor rate is substantially the same; very little, if any, difference. Ise transportation is high. We figured it out some time ago for a cargo ship and it worked out from 2 to 21 percent higher. I think, as you know, for many, many years the Congress, in a:ropriating for the building of naval vessels, allowed a differential of 4 percent; and most of those naval vessels built at the old Union Iron Works in San Francisco were built under that differential; that they took that into account, and, if they were not more than 4 percent higher than the bid on the east coast, they got the ༢ཝཱ !t⌘》,$ Mr. SIROVICH. Why should there be that increment in the cost of p-luction over there? Mr SMITH. Well, it is because most of the materials they use come from the east coast. Mr. SIROVICH. The transportation cost? Mr. SMITH. Steel has to be transported from the east coast. Mr. CULKIN. Can you state, Mr. Smith, whether or not the organirst.on of the International Mercantile Marine has had an unfavorate effect on the construction of ships and the American shipping! At I take into consideration, in answering that question, the fact that we od subsid ze some foreign ships. Mr. SMITH. Oh. I would say positively that there have not been arv unfavorable effects. It has been quite the reverse. They built tree of the finest ships in the intercoastal trade, the California, gisia, and Pennsylvania, and they built the largest ship for the trais Atlantic service that we have ever built in this service, |