records, as it contains a vast amount of historical and factual information concerning the American merchant marine. You have read statements as to the inability to reach our foreign markets at the outbreak of the World War, due to the lack of American ships to take the place of ships of foreign nations withdrawn for war purposes. In this connection I would like to file with the committee a copy of a photograph which came to my attention not long ago, which shows a particular situation in the city square in Talladega, Ala., taken in 1914, showing one instance of what happened due to our inability to take care of our own goods to foreign markets. Europe said to us: "Sell us your cotton; we need it". We said to Europe, "Send your ships and get it; we have no merchant marine". Europe replied, "We need our ships for war purposes, to carry troops and supplies." Now what is the result? A loss of millions of dollars to cotton growers. There was no market for cotton, because deliveries could not be made; warehouses were overflowing with cotton that could not be shipped. In a report of March 3, 1927, to acompany bill, S. 5792, Senator Jones of the Committee on Commerce stated that The loss of our farmers and merchants because they could not get their products to the markets that were crying out for them and willing to pay high prices is estimated to have been at least a billion dollars. The handicaps to operation of American shipping in foreign trade are well known, and they are discussed at some length in the booklet entitled "Some Pertinent Facts Concerning the American Merchant Marine", pages 1 to 22, which booklet has been filed with your committee. They are also discussed at some length in the statement presented by me to the Committee on Merchant Marine, Radio, and Fisheries in February 1928, also on record with your committee. In these statements it is shown that the greatest handicap in the operation of American ships in foreign trade is the higher cost of ships themselves. It is shown, notwithstanding these handicaps, that the importance of American shipping from a national aspect is such as to justify Government aid in maintaining it for the carriage of a substantial part of our own goods in foreign trade. This higher cost of ships in the United States is inevitable under our high standards of living, which we all wish to maintain, and under our wage scales which are very much higher than those abroad. The CHAIRMAN. But if we had a policy of stabilized construction running regularly for a number of years, even then there would be some reduction, would there not? Mr. SMITH. Yes, sir; we would reduce that materially if we had a policy or program of continuous construction. Under the wage scales prevailing in the United States and our high standards of living, American ships inevitably cost more than ships built in foreign countries where the wage scales are much lower. It seems difficult for those not familiar with shipbuilding to understand the difference between building a highly specialized article like a ship and a quantity-production article like an automobile. I think this committee understands, however, what that difference is. A ship is a highly specialized article like an automobile would be if each automobile were made to order and different from every other one, and is more like a house built to special design and wholly unlike any other house. Now, that is a distinct dividing line between the shipbuilding industry and an industry like that which builds in quantity production. A ship is built from information contained in a large number of plans. There are about as many automobiles built by several companies in one day as there are ships built in the United States, in most prosperous times, over a period of 20 years. So that will give you a pretty fair picture of what the difference actually is. Mr. CULKIN. On that point would it not be possible to standardize the production of freight carriers? Mr. SMITH. You might get up to building 10, perhaps, or possibly 20 of a type at one time, but that is about the maximum. Mr. CULKIN. That would eliminate a good deal of overhead, would it not? Mr. SMITH. That would eliminate a good deal of overhead, but would not permit you to produce on a quantity-production basis like sewing machines or automobiles. Mr. CULKIN. I am not talking about that; I am talking about ships. Mr. SMITH. It will reduce it, but never equalize it. Mr. CULKIN. Do not some of those other countries produce standardized freight ships-for instance, Japan? Mr. SMITH. No, sir. There are attempts at standardization, but only within limits. Mr. CULKIN. I notice these oil tankers on the coast are substantially of the same type. Mr. SMITH. No, sir; they are quite materially different. Mr. CULKIN. Are they all different? Mr. SMITH. Oh, yes, sir. Every company's tankers differ from the others. It is very seldom two tankers are built alike. Mr. CULKIN. For instance, the Sun Oil Co.'s tankers; are not they all alike? Mr. SMITH. No. Mr. CULKIN. I mean constructed during the same period? Mr. SMITH. They may have five or six that are alike; but, to keep up to date, it means they increase in size, change in form, and have different types of machinery. So that the results of quantity production or even "number" production are almost wholly eliminated. Mr. CULKIN. So standardization here would be impossible, except to a limited extent? Mr. SMITH. Only to a very limited degree do I think it is possible in shipbuilding. Mr. RABAUT. In that connection I would like to ask if there is not a tendency, therefore, in the shipbuilding industry to hire the older men; is not that true, and they have a chance to get employment, and the artisans in a certain line are not eliminated because they reach a certain age, as they are in the highly specialized industries that have speed-up systems? Mr. SMITH. I was very happy to shake hands a couple of weeks ago with an oldtimer, 75 years old, who was still operating a plant I operated 25 years ago. Mr. RABAUT. I am very much interested in that. Mr. SMITH. Those who are trained to the trade and trained in the art Mr. RABAUT. They keep them on? Mr. SMITH. They keep them on. Mr. CULKIN. It depends on how they spend their youth, I guess, more or less? Mr. SMITH. There is a good deal in that; yes. Mr. RABAUT. We have a lot of them that have their youth worn out at 36 in the automobile industry. Mr. CULKIN. There is no arbitrary longevity? Mr. SMITH. Most shipyards have retirement provisions. Mr. CULKIN. I am in sympathy with the suggestion of Mr. Rabaut. Mr. SMITH. The cost of the plans on one combined passenger and cargo ship of 18,000 gross tons may amount to as much as $500,000. This may be somewhat startling to you gentlemen. And that means not only hundreds, but many hundreds of plans and every piece of that ship must be built to that plan. That is one of the factors, and the most important factor, of course, involved in the cost is the fact that it is so highly specialized. Therefore, if you were building one ship, the cost of those plans is $500,000 against that ship. If you could build 10 ships to that same design, you would have only $50,000 against each ship; if you could build ships like they build automobiles and could build a thousand, then the whole cost for plans would be only $500 against each ship. In other words, the item would be so small it would be absorbed and set off in the quantity production. But when you put $500,000 against a particular ship, there you have a substantial part of the entire first cost. Mr. HAMLIN. I do not want to stop your very understandable and illuminating and interesting talk to me, but I would like to ask you, Mr. Smith, relative to the Bath Iron Works Corporation which I have down here and which seems to be the only place in Maine, which I misrepresent [laughter], that we have as a shipbuilding concern. Could you tell us how well up that is in the amount of shipbuilding which it does as compared to the others? Mr. SMITH. Well, at the present time it is engaged in the construction of two torpedo-boat destroyers for the United States Government. It is a shipyard of the highest class for its size. It never has attempted to build large commercial ships; it never has aimed to do that. Mr. HAMLIN. So that it is one of the small shipbuilding concerns among these that you enumerate? Mr. SMITH. It is what you might call intermediate as to size, but very efficient and a very excellent plant. Mr. HAMLIN. Just one more question: What board fixes the place for the building of the ship, names the place for the building of the ship? Mr. SMITH. If the owner has a ship to build, he puts it out at public bid, and practically generally the lowest bidder gets the job. That is likewise the case with naval vessels; the two ships they have now were secured on competitive bids. Mr. HAMLIN. I want to get some trade up there in Maine if I can. Mr. SMITH. Bath at one time did build one of the battleships of the United States Navy, the Georgia, which was delivered some 25 years ago. Mr. MANSFIELD. Speaking of standardization, Mr. Smith, were not the ships that were built during the World War more or less standardized? Mr. SMITH. Yes, sir; they were, but in groups, with a maximum of about 50 in one group built at Hog Island, which were all supposed to be of the same type. In other yards they ran as high as from 5 to 8, or possibly 10 in one or two instances. And with the small vessels on the Lakes, I think there was one instance where there were 35. Mr. RABAUT. What boats were those that Henry Ford built during the war-submarine chasers? Mr. SMITH. No; they were what were called "Eagle " boats, a little larger than the submarine. Mr. RABAUT. He turned out about three a day at one time, did he not, toward the end? Mr. SMITH. He said he was going to, but he did not. The CHAIRMAN. All this was in answer to the plea to "bridge the sea with ships", was it not? Mr. SMITH. Yes. The CHAIRMAN. They sought to get ships regardless of the particular plan or the particular quality of the ships. Mr. SMITH. Yes; a great deal was sacrificed undoubtedly to speed of construction and to get them into service. Every part of a ship must be fabricated to a plan with the result that the cost of a ship in the United States, as compared with the cost of a similar ship abroad, is much more closely related to the actual labor rates in the United States as compared with those abroad and is very much higher in the United States than abroad. In this connection there will be found on page 130 of the book filed with your committee entitled "The American Merchant Marine", a statement of the wage rates of various representative trades in shipbuilding in the United States, Great Britain, Germany, and Italy in 1930. The CHAIRMAN. That is the booklet entitled "American Merchant Marine "? Mr. SMITH. Yes. Unfortunately, I have not the rates today, but the best information we have is that the differential is a little greater than it was at that time. Mr. CULKIN. In our favor, or in their favor? Mr. SMITH. In their favor. As you will note on page 130, the wage rates in the United States are approximately, on the average, two and one-quarter times what they are in Great Britain; from two and three-quarters to three times what they are in Germanythey were, in other words, at that time-and about three and a half times what they are in Italy. Now, of course, I cannot tell you what the relative efficiency is, but I have no reason to doubt that the efficiency of the mechanics, I know in Great Britain, is of a high quality and I have no reason to doubt the efficiency of the mechanics in these other countries. But in view of the fact that about half of the total cost of the ship is expended in the shipyard, where you have to compare these relative labor rates you can see it involves in the United States a much higher cost than it does abroad. When you make a purchase of steel, copper, and the various products that are purchased in great quantity in the United States, because of our enormous buying power in this country, why then, of such items that are produced in great quantities, the price in the United States as compared with abroad is more nearly equal. There is still a differential, but it is not comparable to that of the labor rate. Steel, for instance, might range from 10 to 15 percent higher, sometimes as high as 20 percent, depending on conditions. Mr. CULKIN. There was a witness here who said that our steel companies compete in the English market, the German market, and the Italian market in the sale of steel. Mr. SMITH. Not very much. Mr. CULKIN. And compete successfully. Mr. SMITH. I think it is mostly in products of a particular kind. Mr. CULKIN. You mean in specialized products? Mr. SMITH. Specialized products. It is more in that line. I cannot tell you what products are sold most to foreign markets, but it is a fact that they do sell some abroad. At what prices, I do not know. Mr. CULKIN. That statement was made in connection with the joint ownership of the steel companies by the construction, yards. He made some criticism of that. I do not know whether you were here at the time or not. Mr. SMITH. Yes; I was here when that criticism was made. As far as I know, the shipbuilding industry has had very little advantage-and in many cases I might say the reverse-in those two or three plants that are associated with steel companies. There are only two of them. The CHAIRMAN. What are they? Mr. SMITH. The Bethlehem plants and the Federal. But I have been on the operating side and have been on all sides of the business, and I have never seen any differential in the price that gave the shipbuilder any advantage. He had to stand on his own. The CHAIRMAN. This witness tried to make us believe that practically all—although I believe he did class the Newport News Shipbuilding Co. as an independent-but that nearly all of the rest were owned by the steel companies. Mr. SMITH. That is not right; I think that is absolutely wrong. The CHAIRMAN. I think there was one out in San Francisco and Mr. SMITH. Of course, the Bethlehem has several plants, which are mostly in the repair business at the present time, except the Fore River plant, and the Federal has one plant at Carneys Point, N. J. Mr. CULKIN. How many are owned by steel companies? Mr. SMITH. Only the Bethlehem plants and the Federal plant. The Fore River plant is the one that is doing shipbuilding now. It has numerous repair plants both on the east and west coasts. Mr. CULKIN. You can say generally, then, there is no tie-up of unjustified charge for steel by reason of any such tie-up between the steel companies and the construction companies? Mr. SMITH. Certainly not. |