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CONFIDENTIAL 
 
 ^Report of Conference 
 
 Held at Washington, D. C. 
 on May 19, 1919 
 
 between 
 
 Shipbuilders from Great Lakes, 
 Atlantic and Gulf Coast Districts 
 
 and 
 
 United States Shipping Board 
 Emergency Fleet Corporation 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 1919 
 
, '., ft 
 
 I ^~S 
 
CONFERENCE BETWEEN SHIPBUILDERS AND D. S. SHIPPING 
 BOARD EMERGENCY FLEET CORPORATION. 
 
 WASHINGTON, D. C., May 19, 1919. 
 
 Morning session convened at 11 a. m., recessed 1 p. m. After- 
 noon session convened at 2.30 p. m., adjourned at 5.35 p. m. 
 
 Present, representing United States Shipping Board Emergency 
 Fleet Corporation: 
 
 Messrs. Edward N. Hurley, president; R. B. Stevens, vice president; 
 John A. Donald, vice president ; J. H. Rosseter, director of operations, trustees. 
 
 J. L. Ackerson, vice president ; I. A. Campbell, admiralty counsel ; James V. 
 Converse, assistant secretary. 
 
 W. C. Ward; H. V. Amberg; H. C. Sadler, naval architect; P. S. Tyre, staff 
 assistant to Vice President Ackerson. 
 
 Present, representing shipbuilding companies: 
 
 American International Shipbuilding Corporation, Hog Island, Pa. Brush, 
 
 M. C., president. 
 American Shipbuilding Co., Cleveland, Ohio. Davison, J. E., vice president; 
 
 Kelley, H. A., general counsel ; Smith, A. G., operating manager. 
 Atlantic Coast Shipbuilding Co. Carroll, J. B., assistant secretary. 
 Atlantic Corporation, Portsmouth, N. H. Proskey, W. Scott, vice president. 
 Baltimore Dry Dock & Shipbuilding Co. Evans, H. A., president ; Willis, J. M., 
 
 vice president and general manager. 
 Bayles Shipyard (Inc.), Port Jefferson, Long Island. Smiley. J. B., president 
 
 and general manager. 
 Bethlehem Shipbuilding corporation (Ltd.), Wilmington, Del. Smith, H. G., 
 
 manager. 
 
 Carolina Shipbuilding Co., Wilmington, N. C. Dilke, F. C., president. 
 Chester Shipbuilding Co., Chester, Pa. Smith, W. T. 
 Wm. Cramp & Sons Ship & Engine Building Co., Philadelphia. Mull, J. H., 
 
 president. 
 Doullut & Williams Shipbuilding Co., (Inc.), New Orleans, La. Doullut, M. P., 
 
 president. 
 
 Downey Shipbuilding Corporation, Staten Island. Downey, W., president. 
 Globe Shipbuilding Co., Superior, Wis. Cooke, B. C., president ; Massey, C. A., 
 
 vice president. 
 Great Lakes Engineering Works, Detroit, Mich. Pessano, Antonio C., chairman 
 
 of board of directors ; Russel, J. R., president. 
 
 Groton Iron Works, Groton, Conn. Morse, E. A., president ; Morse, C. W. 
 Los Angeles Shipbuilding and Dry Dock Co., Los Angeles Harbor. Napthaly, 
 
 Sam L., vice president and general manager. 
 
 McDougall-Duluth Co., Duluth, Minn. McDougall, A. M., president. 
 Manitowoc Shipbuilding Co., Manitowoc, Wis. Geer, T. E., secretary and 
 
 treasurer; McClellan ; Nash, A. T., auditor; West, Charles C., vice 
 
 president and general manager. 
 
 Merchant Shipbuilding Corporation, Bristol, Pa. Smith, W. T., vice president. 
 Newport News Shipbuilding & Dry Dock Co. Gauntlet, T. J., Washington 
 
 representative. 
 
 Oscar Daniels Co., Tampa, Fla. Sadtler, Edwin B., consulting naval architect. 
 Pensacola Shipbuilding Co., Pensacola, Fla. Soule, F., second vice president 
 
 and general manager. 
 Standard Shipbuilding Co., Shooters Island, N. Y. Dickerson, H. L., auditor ; 
 
 Hunter, H. C., secretary. 
 
 (3) 
 
 36055 
 
Saginaw Shipbuilding Co., Sagniaw, Mich. Stiner, C. W., naval constructor. 
 Submarine Boat Corporation, New York City. Carse. Henry R., president. 
 Sim Shipbuilding Co., Chester, Pa. Haig, Robert, vice president; Pew, John C., 
 
 president 
 
 Terry Shipbuilding Co . Mobile, Al.a. Brittain, H. L., vice president, 
 Toledo Shipbuilding Co., Toledo, Ohio. Calder, Charles B., vice president and 
 
 general manager; Wilkinson, H. S., president. 
 Virginia Shipbuilding Corporation, Alexandria, Va. Morse, C. W., director. 
 
 Present, representing shipbuilding companies: 
 
 Brittain, H. L., vice president Terry Shipbuilding Co. 
 
 Brush. M. C., president American International Shipbuilding Corporation. 
 
 Calder, Charles B., vice president and general manager Toledo Shipbuilding Co. 
 
 Carroll, J. B., assistant secretary Atlantic Coast Shipbuilding Co. 
 
 Carse, Henry R., president Submarine Boat Corporation. 
 
 Cooke, B. C., president Globe Shipbuilding Co. 
 
 Davison, J. E., vice president American Shipbuilding Co. 
 
 Dickerson, H, L., auditor Standard Shipbuilding Co. 
 
 Dilke, F. C., president Carolina Shipbuilding Co. 
 
 Doullut, M. P., president Doullut & Williams Shipbuilding Co. (Inc.). 
 
 Downey, W., president Downey Shipbuilding Corporation. 
 
 Evans, H. A., president Baltimore Dry Dock & Shipbuilding Co. 
 
 Gauntlet, T. J., Washington representative Newport News Shipbuilding & Dry 
 
 Dock Co. 
 
 Geer, T. E., secretary and treasurer Manitowoc Shipbuilding Co. 
 Haig, Robert, vice president Sun Shipbuilding Co. 
 Hunter, H. C., secretary Standard Shipbuilding Co. 
 Kelley, H. A., general counsel American Shipbuilding Co. 
 
 McClellan, , Manitowoc Shipbuilding Co. 
 
 McDougall, A. M., president McDougall-Duluth Co. 
 
 Massey, C. A., vice president Globe Shipbuilding Co. 
 
 Morse, C. W., director Virginia Shipbuilding Corporation and Groton Iron 
 
 Works. 
 
 Morse, E. A., president Groton Iron Works. 
 
 Mull, J. H., president Wm. Cramp & Sons Ship & Engine Building Co. 
 Napthaly, Sam L., vice president and general manager Los Angeles Shipbuilding 
 
 and Dry Dock Co. 
 
 Nash, A. T., auditor, Manitowoc, Wis. 
 Pessano, Antonio C., chairman of board of directors Great Lakes Engineering 
 
 Works. 
 
 Pew, John C., president Sun Shipbuilding Co. 
 Proskey, W. Scott, vice president The Atlantic Corporation. 
 Russel, J. R., president Great Lakes Engineering Works. 
 Sadtler, Edwin B., consulting naval architect Oscar Daniels Co. 
 Smiley, J. B., president and general manager Bayles Shipyard (Inc.). 
 Smith, A. G., operating manager American Shipbuilding Co. 
 Smith, H. G., manager Bethlehem Shipbuilding Corporation (Ltd.). 
 Smith, W. T., vice president Merchant Shipbuilding Corporation and Chester 
 
 Shipbuilding Co. 
 
 Stiner, C. W., naval constructor Saginaw Shipbuilding Co. 
 
 Soule, F., second vice president and general manager Pensacola Shipbuilding Co. 
 West, Charles C., vice president and general manager Manitowoc Shipbuilding 
 
 Co. 
 
 Wilkinson, H. S., president Toledo Shipbuilding Co. 
 
 Willis, J. M., vice president and general manager Baltimore Dry Dock & Ship- 
 building Co. 
 
 Mr. HUELEY. Gentlemen, at a recent meeting of the board of 
 trustees of the Emergency Fleet Corporation it was decided to ex- 
 tend to all the shipbuilders on the Atlantic coast and the Great Lakes 
 an invitation to attend a conference with the members of the board 
 and the officers of the corporation, with the thought in mind of hav- 
 ing a round-table discussion as to the various points referred to in 
 my recent letter to the companies with which the corporation has 
 contracts, and to consider ways and means to continue the shipbuild- 
 
5 
 
 ing industry along sound, practical, commercial lines, to compare 
 notes, and endeavor to solve the problems with which we have 
 to contend in connection with the shipbuilding program, and to re- 
 ceive suggestions from you as to the operation and ownership of our 
 merchant marine, and as a result of this meeting we hope to receive 
 many beneficial ideas to aid us in arriving at a definite conclusion. 
 
 We have been working under war emergency conditions, and per- 
 haps for that reason the point of contact has not been as close as we,, 
 the trustees, have desired ; however, everything that was done during 
 the past two years has received our approval and we indorse the ac- 
 tions of our former representatives. With the cessation of hostilities, 
 however, we faced new conditions, and one of the objects of this 
 meeting is to acquaint you with the suituation confronting the board 
 with regard to securing funds from Congress to proceed with the 
 shipbuilding program, which funds have heretofore been authorized 
 but not appropriated. We are going to recommend the building of 
 ships larger than those built under war conditions, but obviously we 
 can not appear before the Appropriations Committeee and urge the 
 appropriation of money to construct ships at the high prices which 
 prevailed under war conditions. We must present specific information 
 as to the cost of construction of the new types of ships we will recom- 
 mend. With that thought in mind, and the fact that we have con- 
 tracts for a number of ships, the keels of which have not yet been 
 laid, all of which were contracted for under war conditions, we 
 thought you gentlemen who are so vitally interested in the future of 
 the shipbuilding enterprise should be advised of the conditions con- 
 fronting the board, and we hope as a result of this conference and 
 at which we exchange views to incorporate some definite recom- 
 mendations in the plan the Shipping Board will present to Congress. 
 The Congress is not going to grant appropriations as quickly as 
 heretofore and we can not and should not expect them to do so. "The 
 congressional committees will demand figures as to the cost of ship 
 construction which, under war conditions were not available or 
 could not be complied without great loss of time. We are planning 
 to ask for approximately $690,000,000; we were authorized by Con- 
 gress to spend $3,671,000,000. We are now within the amount au- 
 thorized. That is, we have not gone beyond these figures, but we do 
 want to present, when we are asking for an additional appropriation, 
 some definite data as to the cost of the ships the keels of which have 
 not yet been laid. We desire your cooperation and the benefit of your 
 advice and views, so that the plan presented by us to Congress will 
 include the views of the experienced shipbuilders as well as the board. 
 I am going to ask Mr. Stevens to make a few remarks, also Mr. Don- 
 ald, and when any gentlemen addresses the conference, or when you 
 stand up during the hearing we are going to be in session all day, 
 so that we may have a free and frank exchange of views you are re- 
 quested to announce your name and that of the company you repre- 
 sent so that the stenographer will have all the facts, and I want each 
 gentlemen present to feel that the board desires a candid expression 
 from each man. We want the facts, and if we do not get them we will 
 be seriously handicapped, so do not hesitate to interrogate us ; we are 
 seeking information and we are going to ask you questions, so do 
 likewise with us. 
 
Mr. STEVENS. The main purpose of this meeting is to discuss with 
 the shipbuilders in what way the cost of ships, where the keels have 
 not yet been laid down, may be reduced in order to justify the board 
 in asking Congress to appropriate the necessary money to complete 
 these contracts. Now that the war is over, we have to justify that 
 demand for more appropriations, not by war conditions and war 
 needs, but by peace conditions. During the war revisions and changes 
 in contracts were made to meet emergency conditions, and the trus- 
 tees of the Emergency Fleet Corporation were in hopes that now 
 the war is over it might be possible to secure some revision of the 
 contracts where the keels are not yet laid down, so that the ships 
 when built might cost somewhere nearer what their value will be in 
 world competition than they would under the original contracts. 
 That is, as I understand it, the chief purpose of this conference, and 
 we want to get directly from the shipbuilders, before any definite 
 plan is adopted by the trustees, their point of view and their sug- 
 gestions on this matter, which of course is so vital to them. 
 
 Mr. DONALD. It seems to me, gentlemen, that the indefiniteness 
 of the contract that we have, as to cost, is something that we are 
 going to be held very strictly accountable for by this Congress which 
 is meeting now, and I think if you gentlemen can address your- 
 selves to getting a lump-sum price, instead of a cost-plus contract, 
 that that is a thing which will go very far toward establishing your- 
 selves in the eyes of Congress, and that is a matter which we our- 
 selves would like to see as being the proper thing to do in this 
 crisis. I think that now that you gentlemen have had the experi- 
 ence of two years of building ships, you ought to come very near 
 getting the costs as to what you are going to build the ships for. 
 Practice brings perfection, and you are going to do better, I think, 
 in the future, in building ships than you have done before. Now, 
 you must have some definite idea as to what the cost of building 
 the ships will be, and I can only urge you to meet the views of Con- 
 gress as much as possible in bringing the price to a lump-sum basis 
 which you will be able to go ahead for, and we are anxious to see 
 you get the contracts on that basis. 
 
 We have to keep the shipbuilding industry going in this country. 
 You gentlemen have large sums of money invested in it; many of 
 you have made large sums of money, and I would appeal to you 
 to do the best you can to meet the present conditions. We know 
 you have all made money, and it has come around that way, and I 
 would like to see a lump -sum contract as a substitute for the condi- 
 tion under which we are working now. I do not think I have any- 
 thing else to say at this time. 
 
 Mr. HURLEY. The board appreciates the necessity of the ship- 
 builders making money, and in outlining your plans, we are par- 
 ticularly anxious that the margin should be safe and sound, both 
 from your point of view and the workmen's. We do not, however, 
 want to get into a discussion, in any way, which might involve the 
 reduction of wages. 
 
 It is our idea to increase efficiency and by so doing reduce the 
 cost of shipbuilding, which will be good for the yards, good for the 
 country, and good for the Government. 
 
 The embargo against building steel vessels for foreign account, as 
 you know, gentlemen, has been lifted by the President, so long as 
 
it does not interfere with the building program of the American 
 merchant marine. It is our idea, however, that all contracts ne- 
 gotiated by you for the construction of ships for foreign account 
 should clear through the Shipping Board, as a matter of record. I 
 think we can be helpful to everyone of you in getting some foreign 
 contracts, but we are very anxious, when you make your bid to a 
 foreign purchaser, when the deal has developed to such a point, that 
 before closing your transaction you consult with the trustees of the 
 Emergency Fleet Corporation and Shipping Board and keep in 
 touch with them; the information you give us will be considered 
 confidential and will not be distributed, and your competitors will 
 know nothing about it. While negotiations are going on we are not 
 particularly keen that you should advise us what you are doing, but 
 when the matter comes to the point where the deal will be closed, we 
 ask that before finally closing you consult with the. Shipping Board 
 and receive its approval. 
 
 Now, there are two foreign governments planning to place orders 
 in this country. They have negotiated for about 1,500,000 of ship- 
 ping. I do not know just what has developed during the past few 
 weeks, but we will have, within a few days, definite information as to 
 the type and style of ship they require, and about the price they 
 want to pay. If we can get a line on the prices that you gentlemen 
 can build ships for of certain sizes and types, it is going to be very 
 helpful to us in closing negotiations. For example, who represents 
 the Great Lakes here ? 
 
 Mr. TYRE. All the Great Lakes companies are here. 
 
 Mr. HURLEY. How many of them are here ? 
 
 Mr. TYRE. Seven. 
 
 Mr. HURLEY. How many keels are there to be laid on the Great 
 Lakes out of the seven companies ? 
 
 Mr. TYRE (reads). "Keels to be laid, after May 15, 65 dead- 
 weight tonnage, 263,000." 
 
 Mr. HURLEY. Well, that is one of the localities in which we are par- 
 ticularly interested. First, on account of the large number of the 
 Lake boats we have on hand, and, second, the fact that we can not 
 substitute a large type ship for any cancellations that may be made, 
 so that if the Great Lakes people will get together and give us a re- 
 vised flat price, we may be able to transfer the contract to some for- 
 eign Government and have the entire number of ships contracted for 
 built. I do not know how you gentlemen work together on these 
 things, but I presume the contracts were practically the same with 
 all the seven shipbuilders on the Great Lakes. 
 
 Mr. ACKERSOX. It was fixed at $180 and $20,000 for military re- 
 quirements. I think it is a flat $200,000. 
 
 Mr. HURLEY. What are the ships costing us now ? 
 
 Mr. PESSAXO (of the Great Lakes Engineering Works). About 
 $190,000. 
 
 Mr. HURLEY. Well, if we were to cancel the laying of the keels, and 
 get a substitute which we could sell at a pretty fair price, couldn't 
 you gentlemen work out some plan whereby that could be reduced, 
 so that we could make a sale without the Government losing the dif- 
 ference ? If we continue to build, we know that we have to sell them. 
 A foreign government would not pay this sum. 
 
8 
 
 Mr. PESSANO. Mr. Chairman, speaking for the Great Lakes Engi- 
 neering Works, we have all of our keels down now, with the excep- 
 tion possibly of six, and for these six the materials are very well ad- 
 vanced. I would say, in a number of detailed instances, the materials 
 are 100 per cent out and ready for installation as soon as the hull has 
 been launched. It must be taken into consideration that, as far as 
 our company is concerned, we have not had one dollar from the 
 United States Government or from the Shipping Board or from the 
 Emergency Fleet Corporation, and that we have paid for the vast 
 improvements that were made, and which were made I was going 
 to say, as a suggestion, but I will put it in other words, in the terms 
 of an order Commander Ackerson was the only gentleman present 
 representing the Emergency Fleet Corporation. That meeting was 
 held on the 20th day of May last year, in Cleveland, and we were 
 told then that we should reduce our prices, which we did. 
 
 Mr. HURLEY. What were you getting before that? 
 
 Mr. PESSANO. I had made contracts before that as high as $875,000. 
 
 Mr. HURLEY. How much is that a ton ? 
 
 Mr. PESSANO. That ran about $225 a ton. We reduced our prices, 
 due to the fact that we had gone on and made improvements and 
 spent our money and learned to do things quickly. We reduced our 
 prices to a basis, including military equipment, of $800,000. We ac- 
 cepted $800,000 for these ships and then agreed to spend all that 
 money 
 
 Mr. HURLEY. How much money did you spend ? 
 
 Mr. PESSANO. Over two and a half million dollars. 
 
 Mr. HURLEY. How much a ton deadweight are you getting now? 
 
 Mr. PESSANO. At the present time, about $190. We have had the 
 question of cancellation up. In other words, we have completed our 
 contracts, Mr. Hurley. We were running six months ahead of time. 
 We would have completed everything by the latter part of July, 
 when the armistice came on, and it was a question of readjustment 
 by the board, and we took it up with Mr. Schwab and Mr. Piez 
 and Mr. Donald is familiar with the facts, I came to see him in 
 your absence and it was decided then, as a matter of good policy, 
 in the interest of the employees, that instead of going on at the rate 
 we were going, we should slacken up; keep the employees at work, 
 reducing their hours and stretching our contract to the point where 
 it called for completion, which was the 15th of November. We will 
 complete the contract by the 15th of November, although we would 
 have completed it in July, if we had not followed the policy of the 
 President. I know it was your policy, as expressed by Mr. Donald, 
 to do everything we could to keep the shipbuilders at work. All the 
 shipbuilders of the Lakes followed that out. I think the American 
 Shipbuilding Co. would have completed their contract well in ad- 
 vance of the obligation. I think one or two of the smaller concerns 
 have fallen behind there, but the great majority would have been 
 finished in time. 
 
 Mr. HURLEY. Don't you think that was a wise policy ? 
 
 Mr. PESSANO. Patriotically speaking, yes. 
 
 Mr. HURLEY. From a business standpoint it was not good policy 
 to continue on the lines we were working on during the war. You 
 could not have proceeded as economically under that policy as you 
 could under a sane, orderly procedure. 
 
Mr. PESSANO. I don't quite agree with you, Mr. Hurley. I tell you 
 right here ; we had the right, as shipbuilders, to expect that freedom 
 of trade was going to follow in the shipbuilding line, as it was in 
 other lines of trade, and the shipbuilders naturally looked for the 
 embargo to be lifted with respect to contracting with foreign coun- 
 tries for ships. I had that under discussion with Commissioner 
 Donald, and he quite agreed with me. Mr. Piez agreed with me, in 
 your absence, and I think a cable was sent asking that that be done. 
 
 I had a contract with the French people for 10 ships, terms agreed 
 to and prices exactly the same as the Shipping Board would pay. 
 They agreed to that they agreed to the terms of the contract, which 
 was more along commercial lines. When I speak of it as " com- 
 mercial," I mean in line with what we do commercially rather than 
 what we do with Government contracts. Now, that was agreed to 
 when the thing was thrown in the air by reason of the gentleman's 
 request which came from Paris to suspend further negotiation. 
 
 Mr. HURLEY. It was never suspended; it was never authorized. 
 The law prevents that. 
 
 Mr. PESSANO. We knew nothing about that up to that time that 
 we would not be permitted. When the Shipping Board itself -said 
 to us, " We have no further business to give you," we said to them, 
 "We will be out of a job, and we will need steel to lay new keels 
 along about in May." 
 
 Mr. HURLEY. How may new ways did you put in your yard ? 
 
 Mr. PESSANO. We just about doubled up. We added five new 
 ways. 
 
 Mr. HURLEY. How many ways have you got altogether, ten ? 
 
 Mr. PESSAXO. We have eleven. 
 
 Mr. HURLEY. So that the war ways are five. Your old ways were 
 six? 
 
 Mr. PESSANO. Yes. 
 
 Mr. HURLEY. You spent two and one-half million dollars for five 
 ways and machinery 8 
 
 Mr. PESSANO. Not for five ways, but for the necessaries. We had 
 our engine plant and everything that went with it. 
 
 Mr. HURLEY. That is the amount of money you spent for war 
 purposes ? 
 
 Mr. PESSANO. The money we spent for war purposes was two and 
 one-half million dollars, and we see no way of getting that back 
 unless we are reimbursed through commercial contracts which will 
 give us a fair price. If we are not to get these commercial contracts, 
 that is all scrap to us, and we would have never done it, Mr. Hurley. 
 Mr. Donald knows that, and Commander Ackerson knows it. We 
 would not have spent that money if it had not been for certain 
 assurances given us in the event that we got into the game and just 
 doubled our output, in other words, gave you just double the ton- 
 nage we had previously agreed to give you at a reduced price. 
 Otherwise it certainly would not have been the part of business wis- 
 dom to jump in. It was on the request of Mr. Schwab. We were 
 urged as were all the builders " man to man." We were urged to 
 get in and build these ships. Of course, it is true it may be said 
 truthfully, in other cases and in the case of every other shipbuilder, 
 excepting the company I am representing, and for whom I am 
 speaking, companies were allowed if I recollect, about two-thirds of 
 
10 
 
 their total cost of plant improvements, but in the case of the Great 
 Lakes Engineering Co., while it was offered to us, we said : " Under 
 the circumstances we will contribute all that money." Our stock- 
 holders had to go down in their pockets and pay that money. That 
 money came out of pre-war contracts. We have not made any 
 money yet, because the first contracts, the present contracts, are 
 the only contracts we have had. We have not completed them yet. 
 I do not know what the cost will be. We do know, however, that 
 our costs are running very much higher. 
 
 Mr. HURLEY. Now? 
 
 Mr. PESSANO. Yes, sir. 
 
 Mr. HURLEY. Not as high as they were during the war: you have 
 increased efficiency. 
 
 Mr. PESSANO. Yes ; except, if you count out overtime work- 
 Mr. HURLEY. That is an important part of the cost. 
 
 Mr. PESSANO. You pay for that. 
 
 Mr. HURLEY. Do I understand that it is costing you more ? 
 
 Mr. PESSANO. Yes, sir. 
 
 (Mr. Hurley left the meeting at this point.) 
 
 Mr. STEVENS. As Mr. Hurley outlined and as I suggested in the 
 few remarks I made, the board feels that there is some possibility in 
 view of the desire on the part of Congress to reduce expenditures 
 and cut off war expenditures, that there is a possibility and perhaps 
 a probability that Congress will refuse to appropriate the money 
 necessary to complete ships the keels of which have not yet been 
 laid down, and it will certainly greatly strengthen the board's posi- 
 tion if it is able to report to Congress that the readjustment of these 
 contracts has been taken up and some readjustments and reductions 
 are possible. I would like to ask Mr. Pessano if he thinks it is pos- 
 .sible for shipbuilding companies on the Great Lakes to make any 
 proposals for the ships which are not yet laid down, which will reduce 
 the cost of these ships. 
 
 Mr. PESSANO. Mr. Stevens, I can not speak for the shipbuilders 
 on the lakes. We had no intimation of what was to come before 
 this meeting, and the shipbuilders have therefore not conferred, 
 but I can say to you they had already reduced their prices when 
 they took their last contracts. They reduced their prices then, and 
 in our special case it is still further reduced by the fact that we 
 spent all that money $2,500,000. We just doubled our capacity in 
 1919, which I already said we were doing, and were running six 
 months ahead of our schedule, and I would say that that would be 
 a matter that would have to be well considered by the lake builders, 
 but, speaking for myself, I see no possibility of our reducing our 
 figures still further without endangering our own conditions. We 
 have no real data before us yet, and will not have until these ships 
 are completed, but we do know our costs are daily running higher. 
 
 Mr. STEVENS. Higher now than during the war ? 
 
 Mr. PESSANO. That may sound strange to you 
 
 Mr. STEVENS. It does. 
 
 Mr. PESSANO. In the first place, eliminate the overtime business. 
 That was an extraordinary war-time condition, and did not concern 
 us, because the Shipping Board was paying it. I am speaking 
 of the basic contracts. We are surrounded by conditions today, due 
 
11 
 
 to more exacting instructions, and due to different annoying things 
 I will put it that way that come up from day to day, which causes 
 us a very large amount of expense, where we have to do this and 
 do that and do the other thing, all of which we would not commer- 
 cially be subjected to, and all of which we were largely not sub- 
 jected to during the war. I can appreciate the feeling of the Fleet 
 Corporation and the sentiment of the technical department, and 
 their desire to have these ships, now that there is not such a great rush 
 to have them, built more exactly in line with the specifications, and 
 there are some details which were not considered in the specifica- 
 tions, not even dreamed of, all of which we have acquiesced in, and 
 in a great many instances allowed without asking recompense. When 
 you take that into consideration, with respect to our own com- 
 pany, I see no way of reducing that which has already been heavily 
 reduced. 
 
 The labor question, of course, is another question. We have taken 
 the position from the beginning that we should go on and pay the 
 same wages, make no attempt to sidestep or go around in any way, 
 but to maintain the wages set up by the Macy scale, and we intend 
 to do it. We do know,"however, that there is a very strong feeling 
 among the men with respect to the uncertainty of the whole situa- 
 tion. That feeling has been brought about unfortunately, more or 
 less, by the published statements put out through the press over the, 
 entire " country to the effect that there were going to be cancella- 
 tions throughout the entire country. It has the labor element 
 stirred to the limit, and the result is if you knew labor as I do 
 you will know when such a feeling gets among them that your 
 efficiency suffers, and that is what is costing money lack of effi- 
 ciency. Regardless of all we can do to bring up the efficiency, all 
 we, can do to bring it up is offset by the public statement made in 
 the press with respect to the cancellations. All the other lake ship- 
 builders are here, Mr. Stevens; they can speak for themselves. 
 
 Mr. STEVENS. It certainly would be the best thing for the industry 
 on the Great Lakes to get all the work it could, ,and continue these 
 contracts, both from the company's point of view and labor's point 
 of view, but with the possibility of not having money to finish these 
 contracts which are not yet laid down it seems desirable, to say the 
 least, that the companies on the Great Lakes should work with the 
 Shipping Board in every possible way to reduce the price of these 
 ships. Of course, if it absolutely can not be done we will have 
 to so report to Congress. Who else is here representing the ship- 
 builders on the Great Lakes? (Is Mr. Smith of the American Co. 
 here?) 
 
 Mr. A. G. SMITH (of the American Shipbuilding Co.). I would 
 refer that matter to our vice president, Mr. Davidson. 
 
 Mr. KEIXEY (of the American Shipbuilding Co.,) Mr. Davidson 
 has asked me to speak. I can only say that Mr. Farr, the president 
 of our company, is in Europe, and he has personally attended, not 
 only to all of the negotiations connected with our shipbuilding con- 
 tracts, but has personally made the figures on which these contracts 
 were based. In his absence it would be out of the question for those 
 now in charge of the company to even intimate, in any positive way, 
 what we could do or would be able to do. Mr. Farr is expected to 
 
12 
 
 sail for this country very shortly. We expect him probably before 
 any definite action will be necessary, and I feel I am quite sure 
 from some conversations I have had with him before he left, it would 
 be his disposition to cooperate in any way possible with the board 
 in making any savings which are in the range of human possibility. 
 We have succeeded in increasing very largely the efficiency of our 
 plant and in some ways have even surprised ourselves in that respect. 
 You are familiar, I believe, with the form of our present con- 
 tracts, and they make it certain the board will get the benefit of every 
 possible economy we can put into effect. As to definite figures, I 
 must ask the board for time enough to consult with Mr. Farr as 
 soon as he returns, and I will be very glad to take it up with you 
 again, and I hope it will not be too late for your conference with 
 Congress. I assure you Mr. Farr will give it his attention as soon 
 as he lands. 
 
 Mr. STEVENS. Of course, we did not expect to arrive at any definite 
 figure here to-day. Is it costing your company more to build ships 
 now than it did before the armistice was signed? Do you find the 
 same conditions confronting you that Mr. Pessano finds ? 
 
 Mr. A. G. SMITH. Our costs are running up, due to a great many 
 circumstances. 
 
 Mr. STEVENS. You say costs are running up over what they were 
 before the armistice ? 
 
 Mr. A. G. SMITH. Yes ; due to the fact that a number of the items 
 mentioned by Mr. Pessano enters into it, and another one, that he 
 failed to mention, and one which has a large bearing on the matter. 
 The fact of the reduction from 10 to 8 hours brings into the 8-hour 
 period the same number of lapses that occurred in the 10-hour period. 
 We have the same period of stoppage at lunch time and at quitting 
 time in the 8-hour period that we had in the 10-hour period, and 
 this gives us a greater percentage of loss in the 8-hour period than 
 it did in the 10-hour period. It has a very large bearing on the 
 increased cost. 
 
 Mr. STEVENS. Is Mr. Calder here, of the Toledo Shipbuilding Co. ? 
 Mr. CALDER. Mr. Wilkinson, our president, is here. He will speak 
 for us. 
 
 Mr. WILKINSON. I seem to be called in here very frequently. 
 Mr. STEVENS. You come voluntarily sometimes. 
 Mr. WILKINSON. Yes; once in a while. Well, I think, gentlemen, 
 that there is a great deal to say about this matter. We have had no 
 time for any discussion among the various men on the lakes, because 
 this question has been entirely a new one, and we had no idea of 
 getting together. There is no doubt but that we should get together 
 to know what the conditions are. 
 
 Now, it is hardly fair to assume that the conditions are the same in 
 our plant, and that the same conditions could prevail in all plants. I 
 think that there should be a fairness existing between the board and 
 the shipbuilders on the lakes, as well as in other parts of the country. 
 Now, there are concerns that began early to increase their facilities 
 to assist in the carrying out of the war program. There were others 
 that did not believe they were in a position to extend, either finan- 
 cially or with room and organization and various other reasons, and 
 did not attempt to increase their facilities for some time after others 
 
13 
 
 had been making improvements and preparing to give a greater 
 efficiency and a greater service to the country. In the case of our 
 own plan, as an illustration, we were hemmed in pretty well and, 
 as we thought, pretty well buttoned up with the one unit which we 
 had at Toledo. Mr. Schwab and Mr. Piez came to Cleveland and 
 urged us to increase our capacity. I made a little statement at the 
 time that they were there, rather objecting to our attempting to in- 
 crease our capacity at the time, and was quite promptly sat down 
 on as being rather unwilling to do all that I could for the cause, 
 which, of course, always touches me a little, and finally Mr. Schwab 
 and Mr. Piez went to our yard, looked the situation over, and they 
 thought we could do something more than we were doing and urged 
 us into the programs, much against our own opinion of what we could 
 carry out in time to render any very efficient service to the country. 
 
 Mr. STEVENS. How many ways did you have originally 
 
 Mr. WILKINSON. We had four ways at the time ; no ; three ways at 
 the time, and we built, at a cost of $1,200,000, three more ways and all 
 the various developments that were necessary, and which are not quite 
 finished yet, but which will be finished probably within 60 or 90 
 days. NOW T , on the basis of the contract which we signed, we made 
 an investment of $1,200,000, of which a percentage was to be given 
 us as outlined in the contract which we took. 
 
 Mr. STEVENS. What.do you mean by that, a percentage of the cost 
 of the ways? 
 
 Mr. WILKINSON. Yes; there was an understanding in all these 
 contracts that, if we invested a certain amount of money, about two- 
 thirds of it should be considered as a part of the cost of the 
 proposition. 
 
 Mr. STEVENS. Did you have a flat sum? 
 
 Mr. WILKINSON. Yes; they were all flat sums. Everyone of the 
 Great Lakes contracts is a flat-sum contract. 
 
 Mr. STEVENS. That sum was large enough and was supposed to 
 cover a part of the cost? 
 
 Mr. WILKINSON. Yes. 
 
 Mr. STEVENS. How many contracts did you have? 
 
 Mr. WILKINSON. We had a contract for 16 vessels, and we were 
 to put in $600.000. We agreed to put in $600,000. Now, when we 
 started with the $600,000, we were no better off. We could not 
 build any more boats with the $600,000 in there, than we could if 
 it had not been put in. It was necessary to make a complete unit. 
 
 We had to^have the power and the machinery and the punch shed 
 and everything. The capacity had to be balanced up in order to get 
 the use of the ways. The balancing of the plant required an ex- 
 penditure of $1,200,000. 
 
 Now I propose to take a little different view from anyone in 
 this room on this question. In so far as a reasonable profit, and in 
 so far as our expenditures made in this investment, and the necessary 
 completion of contracts, to take care of this proposition, I believe 
 it to be not only legally but morally right that we be protected 
 to the extreme. Such business as is not necessary to the carrying 
 on and completing of this program with a fair return to the men 
 in the business, could and should, I believe, be subject to a reason- 
 able competitive basis, and a reasonable adjustment made if neces- 
 
14 
 
 sary with the Shipping Board. We do that in law; we do that in 
 various lines of industry. It has been the usual recent business 
 method of trying to take care of extraordinary conditions, and these 
 are extraordinary conditions. They are not the usual business con- 
 ditions. 
 
 Now, I do not care what anybody else does, and I do not care 
 what anybody else's contract is. So far as I am concerned, and so 
 far as my company is concerned, we would be willing to make any 
 reasonable business deal that is right and just, by which we are 
 made good and safe on our proposition for all business that comes 
 
 in the commercial end of the business 
 
 Mr. STEVENS. What do you mean by that? 
 
 Mr. WILKINSON. I mean that in the case of any contracts that are 
 not necessary for the amount of investment we have made for the 
 purpose of assistance of the Government, but which we could not 
 get out of, we would consider these contracts upon some basis of 
 adjustment, the same condition applying with the Government that 
 would apply with a customer to whom we went out to obtain that 
 business. Upon that basis I would be willing to sit down with the 
 board as an individual and adjust that question without involving 
 or implicating anybody else in the business. 
 
 I do not care what the other fellow says. It is a question of what 
 I do myself. I do not care what the other fellow's views are; these 
 are my views. As president of this- concern, I am responsible to my 
 stockholders for the policy I pursue, a,nd I will be held accountable 
 to them for the policy I pursue. Outside of that I do not care any- 
 thing about compensation or conditions or what not. There is a 
 reasonable condition under which I am willing to do my part to 
 adjust any contracts with the Government or anyone else upon an 
 equitable basis that arises out of an extraordinary condition, and that 
 is the feeling we have in Toledo. 
 
 Now, as to our suffering for something which no one is to blame 
 for I was fool enough to think that the war would last two or three 
 years. God help us, I am glad it did not last any longer, but it was 
 a condition that no one could foretell, and while we made fools of 
 ourselves and while I am willing to say to those around here who 
 went in on this on the advice of various people that about 50 per 
 cent of all the plants are probably going into the hands of receivers, 
 and we will have to make some kind of an organization to help our- 
 selves out it seems to me that this is a part of the suffering the busi- 
 ness men will have to take, the same as the boys who paid the price 
 and stayed over in the fields and are buried on the other side. Now, 
 that our Government here at home, and our Congress and our Senate, 
 should have no sense of appreciation of what may or may not have 
 been done by the men in the game, and that it should not be considered 
 any part of the war cost, and that the great losses sustained by many 
 of these shipbuilding plants should not be of any moment to Con- 
 gress or Senate, that is something I fail to see. 
 
 I know a man who put $1,000,000 in and borrowed $2,000,000 
 more and he has lost his $3,000,000". Nobody is going to reimburse him 
 for that money. The lake situation was an extraordinary situation. 
 It had, perhaps, the greatest efficiency for small boats of any place, 
 which was proven by the number of rivets driven and the accom- 
 
15 
 
 plishments made. Naturally, we did not go through as many 
 vicissitudes as the man on the Atlantic coast who built new plants. 
 He did not have all the efficient conditions and he did not have our 
 opportunities. We should not be penalized for that. We should be 
 given a reasonable compensation for the condition in which we are 
 in, because there will be a great deal of money spent by this board 
 and by the Government where there was no efficiency, and no prac- 
 tical results will come back to aid the great cause for which we 
 fought. 
 
 Now, I do not believe that you can make a rule that will apply to 
 all. I have wanted to say something at various times, and I was 
 asked to-day to speak plainly, and I am willing to do it. 
 
 Mr. STEVENS. That is what we want. 
 
 Mr. WILKINSON. I went out of this office, or an adjoining office 
 here, with a contract in my pocket, signed at 10 o'clock in the morn- 
 ing for eight ships. I saw an old man, nearly 80 years old, in the 
 afternoon, who has signed a contract for six ships for $200,000 less 
 per ship ; signed a contract with the same man, and under the same 
 conditions. Now, I will tell you, I said then, and I say now, that 
 that did not look good to me, and it does not look good to me yet. 
 Because one man insists upon receiving one price for his contract 
 and his competitor a few miles away shall take one from the same 
 man for $200,000 less, because re does not know any better and, 
 perhaps, does not know his own costs, and so forth, brings on a con- 
 dition, Mr. Stevens, by which it is pretty hard to say that he must 
 make exactly the same conditions in the readjustment of his contract 
 and his building program that his competitor makes who may have 
 had an entirely different proposition. There are men in this room 
 who have taken about $200,000 more for ships than I ever got out of 
 a ship in Toledo, and I got $200,000 more a ship than other men got 
 out of the ship for the same kind, the same dimensions and the same 
 program. 
 
 Mr. STEVENS. You mean there was a difference of $400,000 on some 
 of the contracts let on the lakes ? 
 
 Mr. WILKINSON. You heard here that the prices dropped from 
 $225 to $190 a ton. It depended a little on when you got your con- 
 tract. There are men who made lots of profit on this business earlier 
 in the game ; not later. On a rising market, before it was up, not on 
 the market after it was up. The earlier contracts that were taken, 
 before the wage had reached its maximum and before conditions 
 were established made an entirely different condition from that 
 which has prevailed in the past 12 months. Only just one year ago 
 we began making the first money that we made in Toledo in five 
 years, and we lost, the year before, a considerable amount of money, 
 so that we had to drop our dividends. Now, we come in here with 
 a contract, a supposedly high-priced contract with a $1,200,000 build- 
 ing program attached to it under which we have been able to build 
 a few of the vessels and pay a part of that improvement. 
 
 Now, I am willing to sit-down with this board upon any basis of 
 equity and justire and judgment and do the absolutely fair thing 
 between man and man on any contract that I have taken with this 
 board for the Toledo Shipbuilding Co., but there are a great many 
 things that ought to be taken into consideration, such things as Mr. 
 
16 
 
 Pessana has mentioned. If one concern invested money and re- 
 ceived nothing from the Government they should receive a consid- 
 eration for that. If another concern received two or three or four 
 million dollars from the Government, that should be taken into con- 
 sideration. The contract and specific conditions should be also taken 
 into consideration in the readjustment, or the same thing will pre- 
 vail that is prevailing on the Atlantic coast and all over the country 
 and will mean chaos, which should be avoided if possible by the 
 Shipping Board and the Government, and I think that is the aim and 
 purpose not only of this meeting, but of the work going on in the 
 Shipping Board. But I do not believe it is possible to sit down and 
 say how much per ton everybody could build their ships for and 
 what price per ton will be the price of ships everywhere under all 
 conditions. I think you will all agree with me that it is not the 
 purpose of the Shipping Board to give many more vessels to the 
 Great Lakes. I think you will all agree that that is true. They 
 have an enormous program of expenditures and the greatest service 
 returned by any particular department of the shipbuilding business, 
 so that I think it is vital to the 
 
 (Mr. Hurley reentered the meeting at this point.) 
 
 Mr. WILKINSON (continuing) adjustment of this that we get at 
 a fair basis as between the various interests and not attempt to 
 classify them all and put them all in one category and assume that 
 the same conditions prevail everywhere, because they do not, and 
 with that qualification I say to you that at all times I am willing to 
 sit down upon any unfinished business or business that is yet to be 
 completed and make any adjustment that may be right as between 
 the Shipping Board and the shipbuilding plants. 
 
 Mr. STEVENS. I think Mr. Wilkinson's remarks have been very 
 helpful, and I can assure him there has been no plan or purpose here 
 to put everybody in the same box and make a uniform rule. Any 
 revisions will have to be made in the light of the circumstances sur- 
 rounding each contract. 
 
 Mr. HURLEY. We are glad to get your point of view, Mr. Wilkin- 
 son, because that is what we are here for to get individual points of 
 view. Of course, there was one disadvantage on the Great Lakes, 
 and that was that they were so efficient that they built too many ships 
 for peace times. 
 
 Mr. WILKINSON. I am sorry you did not get all my remarks. I 
 recognized that you did not intend to extend your operation of these 
 passenger steamers. It looks to me as if this was the final call and 
 that you are saying to the Great Lakes builders, " Now, of course, we 
 are through with you. We have to settle up. What will you take ? " 
 
 Mr. HURLEY. We are trying to take the problem as a whole the 
 Atlantic coast and the Great Lakes, and the Pacific and the Gulf 
 and we realize that the ships that were built on the Great Lakes were 
 badly needed during the war. We needed them as badly as we 
 needed those built on the Atlantic coast and the Pacific and Gulf. 
 They were mighty welcome and came in very, very handy. It seems 
 to me, in justifying our position, and continuing to build ships under 
 peace conditions into 1920, and the last half of 1919, and asking 
 Congress for additional appropriation, we realize we can not dispose 
 of the Great Lakes ships as readily as we can some of the others, and 
 
17 
 
 they can not go into the trades we are trying to work out that some 
 of the other ships can go into. 
 
 Mr. WILKINSON. Just a moment: I made that remark to Mr. 
 Schwab and Mr. Piez at the lovely luncheon which we had at the 
 Union Club, at which we were all so happy, and there seemed to be 
 no disposition to take into consideration the fact that we knew that 
 we were inland seas. I tell you it makes a difference whether you 
 locate your 10-story flat in the Great Sahara Desert or in the heart 
 of New York City. The rentals are different. And it is different if 
 you put in three or four million dollars in extending shipbuilding 
 business. It is a home business. We never built boats for the ocean. 
 We built simply inland sea tonnage, and we were capacitated to take 
 care of the great inland seas, and that was performing our part of 
 the work. The Toledo Shipbuilding Co. should never have doubled 
 its plant. I said to our men this morning, " If I had stood with 
 Charlie Schwab, instead of letting him bluff me over; if I had just 
 stood there with our plant where it was and taken our contracts and 
 built all the boats we could have built, we would have given you 
 about the same anyhow one a month if I had stood there I would 
 be all right now." But, now I am just finishing up that program 
 there and have not built a ship with it. 
 
 Mr. HURLEY. Have you laid keels? 
 
 Mr. WILKINSON. We have laid two keels on the first program. I 
 am perfectly willing, as I say, to make reasonable adjustment on 
 anything that is right. I am putting all my cards on the table. I 
 have twice the capacity at Toledo that I will want in a good many 
 years, unless a canal is made big enough to let us become competitors 
 with the Atlantic coast shipbuilders, and I won't see that in my time, 
 Mr. Hurley. Therefore, I consider this part of this world cost and 
 this war cost, and I do not think this Government should criticize 
 the people who gave almost 50 per cent of the needed tonnage at 
 the time, and at the expense of a good many millions of dollars of 
 capacity which they can not get to the seas. They are confined, like 
 a man who has gone inland and built his capacity. I think the Gov- 
 ernment should take that into consideration, and take into consid- 
 eration the conditions which confront us, that we are not open to the 
 competition of the world, and can not build under any conditions 
 for competition. We realize that we are through. What we will get 
 out we will get. If I can read the signs of the times, I think there 
 are Atlantic shipbuilding companies enough down here to take care 
 of most of the 4,000-ton boats. I think these gentlemen will see that 
 we do not put any more of them down here than is necessary. 
 
 Mr. HURLEY. You mentioned the fact that .you did not think the 
 Government should criticize. This meeting is not one of criticism. 
 
 Mr. WILKINSON. There is another question I did not treat on. It 
 is in the minds of every man here, and it is giving everyone much 
 concern. We were told that you would do all you could for us on the 
 amortization of this additional property, but you could not assure us 
 that we would not be called upon to pay the Government, providing 
 they arbitrarily took that view of the situation. I do not know 
 whether they will go back or not and ask us to take the cash and bond 
 our properties to pay for the deductions made on this war program, 
 as they did in a company in which I have just had a little difficulty. 
 12103519 2 
 
18 
 
 We had $2,600,000 of bonuses paid everybody, from the stenog- 
 raphers up. There was a large bonus, but it was very widely dis- 
 tributed. None was taken by the chairman, if you please. The 
 Government said, " That is a nice thing to do ; splendid, but you 
 must pa} T us $1,300,000 of it, and then you can give them the whole 
 company if you want to, but you can not charge these bonuses into 
 the expense of the business until after you have paid us the tax 
 upon it." You know we will fight a little, but we will probably lose. 
 
 Mr. HURLEY. That all should be taken into consideration, and 
 when any adjustment is made you should be satisfied, from all Gov- 
 ernment agencies, where you stand. We are not in any way trying 
 to take advantage of a condition which we all know is very uncertain, 
 and I do not think any man should make a settlement or adjustment 
 without being assured by the Treasury Department and by the Gov- 
 erment that he is free after he adjusts his claims on the lines mutually 
 worked out. 
 
 Mr. WILKINSON. On that basis I think a good many million dollars 
 would be saved by this corporation and the shipping industry. I am 
 trying to protect our company, in the remnants of our last contracts, 
 so that when a man comes in and says : "All right, we do not care what 
 they told you, you have to pay this amount," I do not want to make 
 a settlement by which I give that back to the Shipping Board, and 
 then when we have given it back and haven't anything, have them 
 come in and have to give it to them out of cash assets, on the 
 ground that there was no authority for that, and that you had no 
 right and we would have to pay it. 
 
 Mr. STEVENS. You do not want to be taxed on what you give back? 
 
 Mr. WILKINS. No. 
 
 Mr. HURLEY. I do not think it is fair to the shipbuilding industry 
 as a whole to have one branch of the Government urging them to 
 get their prices down in order to stabilize the industry as a whole, 
 thinking of the future of the industry while other branches of the 
 Government jump on them, and take everything away from them. 
 That can not be done. Everything will have to be clarified. We 
 first must think of the industry as a whole and every branch of the 
 Government should cooperate with the Shipping Board in working 
 that problem out, and I want to say that every member of the board 
 here is heartily in favor of that sort of cooperation. How many 
 of the Great Lakes shipbuilding concerns have we heard from? 
 
 Mr. ACKERSON. Mr. Pessano and Mr. Wilkinson. 
 
 Mr. HURLEY. I would like to hear from the other gentlemen. 
 
 Mr. ACKERSON. Also Mr. Smith. 
 
 Mr. WILKINSON. Mr. Smith is a little concerned about a statement 
 I made here. I said we had two keels laid, but we have laid keels 
 for six in the last program. There have been two already launched, 
 and we have laid keels for six of the eight in the last program. We 
 had sixteen. 
 
 Mr. STEVENS. You had sixteen. You have eight laid. There 
 are eight yet for which the keels have not yet been laid. 
 
 Mr. WILKINSON. We will lay the keels for the next one in a few 
 days. 
 
 Mr. HURLEY. I would like to ask Mr. Pessano and the other gen- 
 tlemen on the Great Lakes the amount of the investment they put 
 in ; that is, their own money that they put in ? 
 
19 
 
 Mr. PESSANO. A little over two and one-half millions. 
 
 Mr. WILKINSON. $1,200,000. 
 
 Mr. ACKERSON. That wasn't your own money ? 
 
 Mr. WILKINSON. W T ell, we have $800,000 there was $800,000 of 
 our own money ; in other words, the Shipping Board agreed that we 
 should have four, so we put in eight of our own money. 
 
 Mr. ACKERSON. We agreed to give you at least two-thirds, as I 
 recall it. 
 
 Mr. WILKINSON. That was the amount in the contract. 
 
 Mr. HURLEY. I want to find out what you have put in for war 
 purposes. 
 
 Mr. WILKINSON. $800,000. 
 
 Mr. HURLEY. And the Government put in 
 
 Mr. WILKINSON. $400,000. 
 
 Mr. PESSANO. We have put in two and one-half million dollars of 
 our own money. 
 
 Mr. HURLEY. And the Government? 
 
 Mr. PESSANO. None. 
 
 Mr. HURLEY. All right ; what about the other Great Lakes yards 
 the American Shipbuilding Co.? 
 
 Mr. A. G. SMITH. The American Shipbuilding Co. has a contract 
 which takes care of that. We put in yard extensions something over 
 $7,000,000. 
 
 Mr. HURLEY. Of your own money ? 
 
 Mr. A. G. SMITH. Our own money, up to date. 
 
 Mr. HURLEY. For war extension? 
 
 Mr. A. G. SMITH. War extension. 
 
 Mr. ACKERSON. How much did your contracts provide in addition 
 to the base price, to take care of that ? 
 
 Mr. A. G. SMITH. We have no base price. Our present contract is 
 a modification of the original contract. 
 
 Mr. ACKERSON. It is taken over on the cost-plus? 
 
 Mr. HURLEY. I am trying to get the investment in the Great Lakes 
 yards. 
 
 Mr. A. G. SMITH. Our yard extension amounts to something over 
 seven millions. When it is completed it will be nearly seven and one- 
 half millions. 
 
 Mr. C. W. STINER (Saginaw Shipbuilding Co.). We have put in 
 over $1,000,000. 
 
 Mr. HURLEY. For war purposes? 
 
 Mr. STINER. For war purposes. 
 
 Mr. HURLEY. What other yards? 
 
 Mr. CHARLES C. WEST (of the Manitowoc Shipbuilding Co.). We 
 have put in a million dollars of our own money, and of that $264,000 
 is applicable to the Schwab contract, provided we are allowed to com- 
 plete it. 
 
 Mr. HURLEY. What do you mean? 
 
 Mr. WEST. The last 12 ships. 
 
 Mr. HURLEY. How much money did you have in your yard before 
 you put this in? 
 
 Mr. WEST. About a million dollars. 
 
 Mr. HURLEY. And you have put in an additional 
 
 Mr. WEST. Million and a half. 
 
20 
 
 Mr. WILKINSON. Upon the completion of these ships we were to 
 receive $400,000. The agreement, first, was this : Two-thirds of this 
 amounted to $400,000, but we had to put $1,200,000 in. We found 
 there was no use of putting that in unless we built everything that 
 went with it. We had to increase the unit. If we increased the 
 capacity, we had to increase the power and everything accordingly. 
 
 Mr. MCCLELLAN. We had in about $3,000,000. 
 
 Mr. HURLEY. American Shipbuilding Co. what did you have ? 
 
 Mr. A. G. SMITH. You mean our original investment in plants? 
 
 Mr. HURLEY. Yes. 
 
 Mr. A. G. SMITH. That is a pretty hard question to answer. 
 Roughly I am guessing about this thing roughly, I would say 
 that the original investment was in the neighborhood of $15,000,000 
 before the war. That is a very rough estimate. 
 
 Mr. PESSANO. Mr. Chairman, may I offer a suggestion? I think 
 what you have in mind is to get at the difference in contracts. These 
 contracts, which all these increases in plant account are responsible 
 for, the contract given by Mr. Schwab and Mr. Piez just a year ago, 
 as Commander Ackerson will remember, these contracts were written 
 at $800,000 as a base price. All of the other contracts take into con- 
 sideration an allowance of $20,000 per ship for plant account. That 
 made all the other contracts $820,000, against our $800,000. That 
 was allowed for plant account, as stated by Mr. Wilkinson; about 
 two-thirds of the total cost of it. 
 
 Mr. HURLEY. That covers another matter. I am trying to get the 
 total war investment in the Great Lakes yards. 
 
 Mr. MCCLELLAN. We originally had $1,100,000 in our plant. We 
 added $900,000, and on the Schwab contract put in $1,700,000, on 
 which we were allowed, under the terms of contract, $375,000. 
 
 Mr. HURLEY. For plant expenses ? 
 
 Mr. MCCLELLAN. For plant expenses, yes, sir. 
 
 Mr. HURLEY. The actual amount you have put in is how much ? 
 
 Mr. MCCLELLAN. $2,600,000 for war purposes. While I am up I 
 would like to correct something that has been said about yards being 
 reimbursed to two-thirds of the costs on these last contracts. We 
 were reimbursed for $375,000 and spent $1,700,000. 
 
 Mr. B. C. COOKE. (Of the Globe Shipbuilding Co., Superior, Wis.). 
 We have spent about $600,000 of our own money. 
 
 Mr. HURLEY. What was the original investment? 
 
 Mr. COOKE. Our plant was built entirely for war work. When the 
 war contracts came on we just had one berth and contracted for two 
 boats, and then we went into the war business and everything from 
 then on was for war work. We took 10 boats of the last Schwab 
 boats. First, we took five and were allowed $20,000 a boat, the same as 
 the others, and then five more without any allowance whatever. Our 
 plant is up in the Northwest there. It is* built on a swamp. It is of 
 temporary nature. Our machine shop is a disgrace, costly of opera- 
 tion, because we have to do things quickly and get out boats at the 
 same time, and when we are through with our war work, the plant 
 has to be scrapped absolutely; and if there is any question about 
 that, we are perfectly willing to put it up for sale to the highest 
 bidder to establish the truth of that remark. That is the position we 
 are in. We want to meet the board fairly and squarely and will show 
 
21 
 
 every card in our hands. But, as I look at it, about 50 per cent of 
 the plants on the Great Lakes have got to quit business and go into 
 the hands of a receiver. There is no use for them. We can not build 
 ships for the ocean and there is 100 per C3nt more capacity upon the 
 lakes than necessary for local business. It sems to me we have sim- 
 ply got to quit business. We have no dry dock and no repair 
 facilities, and our plant is built of second-hand timber. It is 
 racking itself to pieces. The ground is shaky, and since I have been 
 East here, part of the power plant the walls fell down. 
 
 Mr. HURLEY. We won't have any trouble with you. You won't 
 build ships. [Laughter.] 
 
 Mr. COOKE. I am frank; the only thing that saved our organiza- 
 tion is that what work we have turned out has been good work and 
 that has been due to the organization and not to the plant. When 
 I go through these Atlantic coast plants, it makes me wonder how our 
 men could turn out the work. 
 
 Mr. HURLEY. How many ships have you built? 
 
 Mr. COOKE. We have built five and have five ready to go out this 
 week. 
 
 Mr. HURLEY. How many ways? 
 
 Mr. COOKE. Five. 
 
 Mr. HURLEY. How many more keels to lay ? 
 
 Mr. COOKE. Only five more to lay, and we slowed up our program 
 for the sake of the others, because we wanted to keep our men work- 
 ing as long as we could. 
 
 Mr. HURLEY. You have $600,000 in the plant? 
 
 Mr. COOKE. Yes, sir. 
 
 Mr. HURLEY. Did the Government put that in? 
 
 Mr. COOKE. No; we did. The Government put in a total of 
 $100,000 for the whole thing. 
 
 Mr. HURLEY. What other Great Lake yards are there? 
 
 Mr. PESSANO. You have heard them all. 
 
 Mr. HURLEY. I would like to take up some of the other yards, and 
 I think every man here ought to have an apportunity to express his 
 views. The board feels that we will all profit by each man explain- 
 ing his own conditions, and there is no question but that each man 
 must have a different treatment from the others. We can not adopt 
 any general rule to apply to all. I think we had better start up here 
 at this end. 
 
 Mr. HENRY R. CARSE (of the Submarine Boat Corporation). I rep- 
 resent the Submarine Boat Corporation and the Newark Bay Ship- 
 yard. We were the first people who brought to Gen. Goethals the pos- 
 sibilities of constructing in large quantities cargo vessels from com- 
 mercial steel, using the forces of the bridge and tank shops of the 
 country with the idea of fabricating as much as was possible in the 
 shops as far west as the Mississippi, and then taking the full force 
 of these shops to assemble the material on the Atlantic seaboard. As 
 Gen. Goethals suggested, all our calculations were made on the basis 
 of flat prices we to provide the yards, the plant, and all facilities. 
 As you all know, certain difficulties arose in the Shipping Board, and 
 when the question came up again with Admiral Capps, the only sub- 
 ject discussed by him with us was on the cost-plus-fee basis. He was 
 not interested in a flat-price contract, and he insisted upon taking 
 
22 
 
 over the lease which we had arranged for the property at Newark 
 Bay, and acquiring the plant at the expense of the Emergency Fleet 
 Corporation. Of course, we did not object to that proposition, as it 
 was similar in every respect to the proposals that were then made 
 during the summer of 1917 to the American International Co., who 
 proposed the yard at Hog Island, and to the Merchants Co., who pro- 
 posed an extension of a plant that they then had at Bristol, Pa. 
 These contracts were signed about September 12, 13, or 14, 1917. 
 
 We found quite a few difficulties in carrying through the cost-plus- 
 fee agency contract, because of interference with our management 
 by the representatives of the Emergency Fleet Corporation, and 
 Mr. Hurley will remember that I discussed the subject with him, and 
 he requested that we give a study to the entire subject and see if we 
 could not make a proposal of taking over the whole proposition on 
 our own account. 
 
 We were working along these lines, when Director General 
 Schwab, a few days after his appointment, called at the yard with 
 Vice President Piez and Assistant General Manager Bowles, and 
 they brought up the question of canceling the contracts and taking 
 a new contract on a flat price, at the price stated by them. The 
 price made by Admiral Bowles was $966,000 per vessel, of which 
 $600,000 per vessel was to be paid to the Fleet Corporation as rent 
 for the yards. Our contract of September was based on an esti- 
 mated cost of $150 per dead-weight ton. Our vessels were then being 
 estimated at 5,000 tons dead- weight, but because of certain changes 
 made in the vessels, they measure, as built, 5,350 dead- weight. The 
 estimated basic cost was $750,000, of which $350,000 was calculated 
 to be the cost of material, and that covers the freight; $200,000 
 the cost of labor, $200,000 overhead, in which was included the cost 
 of doing the fabricating work at the bridge and tank shops through- 
 out the country. We always calculated that these shops were simply 
 branches of our plant. The revised flat-price figure was determined 
 really by guess. Sitting around the table on April 24, 1918, at 
 luncheon, we guessed that the cost of the material entering into the 
 cost of the vessel would be $400,000'. As the thing worked out, it was 
 found that the material entering into that vessel will cost approxi- 
 mately $440,000. We guessed that the increase provided for by the 
 schedule of labor adjustment, as of April 6, 1918, was an increase of 
 40 per cent over the wage scale in the port of New York of July, 1917 ; 
 which was the basis of our original contracts. It has been cal- 
 culated by our auditors, and I find that it has been confirmed by 
 other ship yards, that the wage scale of April 6 was an increase of 
 43 to 44 per cent above the scale of July, 1917, and they provided 
 an increase of 15 per cent over pur overhead, which really is much 
 less than it actually is, so that instead of the readjustment in 1918 
 to the flat-price contract adding to the cost of the vessels to the 
 Fleet Corporation it really provided for a very substantial decrease. 
 That price was determined at the time with the full knowledge 
 on the part of the officials of the Fleet Corporation, and of our- 
 selves, that the cost to us at that time on the vessels which we 
 were erecting was very largely in excess of that contract price, 
 which figures at $179 a ton, but we also believed that we could 
 greatly reduce that charge. As everybody in the shipbuilding busi- 
 
23 
 
 ness knows, any calculations made in 1917 as to what they were 
 going to do in producing ships turned out absolutely wrong. There 
 is no one who made any calculation based on experience or judgment 
 of what he could do who found he hit anywhere near it. 
 
 There are many things that sometimes we do not like to go into 
 detail about, but I think that shipbuilders instead of being assisted 
 by many of the governmental boards and functions were hindered; 
 many of the rules laid down hindered instead of assisted the eco- 
 nomical construction of ships. The rules of the labor adjustment 
 board, I think, every one found to be very, very costly. Some of 
 these were provided for by the Fleet Corporation undertaking to 
 assume any increase in cost by reason of rules and regulations of 
 such boards. 
 
 We ran along during 1918 ; we were doing very well indeed, when 
 we were stopped by the nondelivery of proper machinery for our 
 vessels. We were hung up for four months, while the Fleet Corpora- 
 tion were endeavoring with the contractors they having comman- 
 deered the plant of the Westinghouse Co., who were doing our ma- 
 chinery, and ordered our men out of the W es ti n ghouse plant to 
 work out the defects that had developed in this machinery. We had 
 over 20 hulls in the water with no machinery. We were running 
 behind half a million dollars a month. We had to spend a very 
 large sum of money above that which we were receiving for the 
 work done, so that it was necessary for us to slow down very quickly, 
 and we reduced the capacity of the hulls at least one-half. Of course 
 we could not reduce the overhead, and we ran along until that ma- 
 chinery was put in proper condition and since that time, since about 
 March, we have been able to do rather effective work, and to increase 
 the efficiency of the plant, so that now we are running well within 
 our contract price, and unless some other matters, which we do not 
 foresee now, similar to matters which we did not foresee in 1917, 
 may arise, we believe that we will be able to finish our contract 
 rapidly, and with some profit, but the profit will be unknown to us 
 until the contract is finished. 
 
 Of course we all know that the Newark Bay Shipyard is a very 
 large yard. We have 28 ways, and we have about 13,000 men. In 
 order to attain commercial efficiency in a yard of that size, it is 
 necessary to have large orders ahead, because if the men can see the 
 end of the job with nothing new in sight, they will disappear; they 
 will be looking for more permanent jobs, and if that should happen 
 our costs will mount again, the same as they did last fall when we 
 were stopped for want of machinery. We have launched 45 hulls. 
 We have delivered 20 or more. We have delivered 3 or 4 ves- 
 sels a week now to the Shipping Board, and the others are in 
 the water. The hulls, as we launch them now, are practically com- 
 plete, and with machinery coming along in proper shape we calcu- 
 late we will be able to finish equipping a ship in about 30 days. 
 We have done it in a little less. In addition to the 45 ships launched, 
 we have laid 28 additional keels. We have material in the plant 
 for most of the other war contracts for 150 vessels. The 150 ves- 
 sels require, I believe, about 270,000 tons of steel. I believe we have 
 in our yard about 225,000 tons of steel, upon which one-quarter of 
 the work necessary to complete the ship has been done at the dif- 
 
24 
 
 ferent plants throughout the country. The water tube boilers we 
 have in the yard, a part for the entire 150 vessels we have the en- 
 tire boilers for 120 vessels, and the other material entering into the 
 construction of the ship is piled up in our yard or adjacent thereto 
 in like proportion. 
 
 We feel that we made the adjustment in our contract a year ago 
 which Mr. Hurley is now discussing. We had some very serious 
 thoughts during last fall and this spring as to where we were going 
 to land with that adjusted contract. The executive officers, I think, 
 had some very unhappy moments, but we have finally evolved a 
 system of doing the work which, if we can continue, we believe will 
 bring the cost of erecting these vessels down to a commercial basis 
 where we can compete with anybody in the world. I am not saying 
 this in any bragging manner I am simply stating a plain fact, 
 but a yard of that size requires much work, or else it can not be 
 accomplished. Your overhead, if you do not have sufficient work, 
 would simply swamp you. Our pay roll runs over a half million 
 dollars a week. We, of course, all understand that the Newark Bay 
 Shipyard is owned by the Emergency Fleet Corporation. We had 
 made a lease of this property from the city of Newark for two 
 years with an option of renewal months before we had any con- 
 tract. We believed that the need of the country for cargo vessels 
 was so great that a contract would come to us eventually, although 
 there were many delays before we signed a contract. We had to 
 spend or had obligated ourselves to spend a half million dollars, 
 and the day the contract was signed 500 tons of structural steel left 
 Buffalo and was in the yard in a few days, and that was one reason 
 why we managed to get so far ahead of the other yards. 
 
 Mr. HURLEY. How much money has the Government got in there? 
 
 Mr. CARSE. The Government, I believe, has between 15 and 16 mil- 
 lion dollars invested in the plant. The appropriation was for a larger 
 amount. We have not spent the entire amount appropriated, and we 
 do not expect to spend it. We have tried in every way to save money. 
 There are many things in the plant which are there because they were 
 ordered there by officials of the Fleet Corporation, which we do not 
 consider necessary. The plant costs a great deal more than the orig- 
 inal calculation, because of the nature of the soil. The engineers of 
 the city of Newark told us the soil was so firm that any buildings 
 could be erected on it, but when we commenced to lay our railroad 
 tracks in warm weather we found they were disappearing, so that 
 in order to get any firm soil we have placed on 120 acres over 500,000 
 tons of cinders, about 4 feet of cinders. In building our ways, because 
 of the nature of the bottom, and the failure of the Army to do the 
 dredging in the time calculated, so that the ways had to be built 
 outboard, they cost a great deal more money, and then, there are 
 certain buildings that we hardly consider necessary to have there. 
 
 Mr. W. SCOTT PROSKEY (of the Atlantic Corporation). This is my 
 first appearance at a conference of this kind, and I was wondering 
 if you would take it in good part if the larger and more important 
 yards should be heard from first. 
 
 Mr. HURLEY. I have no objection. 
 
 Mr. H. L. DICKERSON (of the Standard Shipbuilding Corporation). 
 Our final contract with the Fleet Corporation is for 10 boats on a 
 
25 
 
 lump-sum price, of which 3 have been launched, 6 are on the ways, 
 and the final keel is to be laid this month, probably the 26th. The 
 contract was signed March 1, 1918, prior to the first award in that 
 district of the Macy Board. The contract price was $179 a ton, which 
 carried the usual protection on the labor and items of that kind. 
 
 Mr. HURLEY. That contract is with the Fleet Corporation? 
 
 Mr. DICKERSON. Yes, sir. The plant expenditures by the company 
 are about $2,000,000. The Fleet Corporation has expended about 
 $3,000,000, without any provision for amortization, and an adclit r onul 
 million dollars predicated on the assumption that we should get 
 additional contracts, which we did not get. 
 
 Mr. HURLEY. Your corporation has spent an additional million 
 dollars? 
 
 Mr. DICKERSON. No; the Fleet Corporation, so that the Fleet Cor- 
 poration have spent approximately $4,000,000, of which the one mil- 
 lion is salvaged, and three million not covered by any provision for 
 amortization or salvage. 
 
 Mr. HURLEY. There is a mortgage on the plant? 
 
 Mr. DICKERSON. Yes, sir. 
 
 Mr. HURLEY. You have $2,000,000 in and the Fleet Corporation 
 have four million. 
 
 Mr. DICKERSON. Yes, sir. 
 
 Mr. HURLEY. We have four million ? 
 
 Mr. DICKERSON. Yes, sir; the Fleet Corporation have invested 
 about $4,000,000. 
 
 Mr. HURLEY. For extension? 
 
 Mr. DICKERSON. Yes. 
 
 Mr. HURLEY. How many additional ways are there? 
 
 Mr. DICKERSON. Two additional ways, with additional boiler and 
 engine and machine shop capacity. 
 
 Mr. HURLEY. Is that all finished? 
 
 Mr. DICKERSOX. About 99 per cent finished. 
 
 Mr. HURLEY. How many requisitioned ships did we take over? 
 
 Mr. DICKERSON. Thirteen, all of which have been delivered. 
 
 Mr. HURLEY. Who had these contracts? 
 
 Mr. DICKERSON. Originally? 
 
 Mr. HURLEY. Yes. 
 
 Mr. DICKERSON. I can not give you the names, but there were 
 some for Norwegian and Italian owners, two for French owners, and 
 two or three for the Cunard Line. 
 
 Mr. HURLEY. Have you any knowledge of what the contracts were 
 taken over for? 
 
 Mr. DICKERSON. The original contracts signed for? 
 
 Mr. HURLEY. Yes. 
 
 Mr. DICKERSON. Yes; $147.50 to $180 a ton. I think they will 
 average about $165. 
 
 Mr. HURLEY. And the requisitioned ships have all been delivered? 
 
 Mr. DICKERSON. Yes, sir. 
 
 Mr. HURLEY. And you are working on Fleet Corporation con- 
 tracts? 
 
 Mr. DICKERSON.. Final contracts with the Emergency Fleet Cor- 
 poration. 
 
 Mr. HURLEY. And how many more keels are to be laid? 
 
26 
 
 Mr. DICKERSON. One. We have a launching on the 26th. Ninety, 
 per cent of the material was ordered before the armistice was signed 
 and practically all the plate shop work for all the boats is completed. 
 
 Mr. HURLEY. Have you any idea as to the cost of these ships; 
 what it is costing the Fleet Corporation ? 
 
 Mr. DICKERSON. The requisitioned ships cost about $202 a ton; 
 the contract ships, these final 10 I estimate will cost about $212. 
 
 Mr. HURLEY. I thought that was $221, the last estimate. 
 
 Mr. DICKERSON. No, sir. 
 
 Mr. HURLEY. $212? 
 
 Mr. DICKERSON. Yes, sir. 
 
 Mr. WILKINSON. May I ask a question? Is that cost the invest- 
 ment of the Government? 
 
 Mr. DICKERSON. It is the cost to the country labor, material, and 
 overhead. 
 
 Mr. WILKINSON. That is the selling price? 
 
 Mr. DICKERSON. That is the contract p>rice with protection. 
 
 Mr. JOHN C. PEW (of the Sun Shipbuilding Co.). I should like to 
 wait until some of the others have spoken; our yards are small and 
 we are new in the business. 
 
 Mr. C. W. MORSE (Virginia Shipbuilding Co. and the Groton Iron 
 Works). This is quite interesting to me, because of the conclusion of 
 the wooden contract I made with Gen. Goethals. He asked me to 
 build some 5, 000- ton steel ships, and I established a yard for that 
 purpose. I objected; I said these ships are not going to be worth 
 anything when the war is over. I did not want to build anything less 
 than 9,000 tons. He said that Mr. Franklin said that Europe would 
 build the big ships and we could build the little ones, so that it is 
 interesting to me to see that the board wants to cancel little ships 
 and build big ones. 
 
 As a result of the conference I had, we contracted for 12 ships at 
 Groton and 12 at Virginia. Of the 12 ships at Virginia, one was 
 launched about two months ago. If we ever get through making 
 alterations for the Government, we will deliver her, but the last I 
 heard this morning was to take off the upper deck, the fly deck. 
 There will be another vessel launched there on Saturday next. There 
 will be two more launched before the 4th of July. The contract there 
 was for 12 ships, at $165 a ton, on the basis of wages and material. 
 Now, as I understand, the object of this meeting was to see if we 
 could not reduce the price in some way to help the Shipping Board 
 out of this emergency; we would be glad to, if we could. 
 
 We would be glad to meet the Shipping Board in any way that it 
 is possible, but in the first place, the labor we can not touch ; we are 
 
 Prohibited from putting that down, and our contract is based on that 
 ibor scale; second, our contract is based on the price of material 
 for 80 per cent and anything we save in that goes to the Shipping 
 Board. There is a long list that is called " Schedule C." What can 
 we save for you gentlemen on that? I do not see how we can save 
 but very little outside of what you save yourselves in the purchases. 
 We are willing and want to assist in every way we possibly can, but 
 I can not see how, except you save in the purchases or allow us to, and 
 be a little more considerate in your changes. I think we have had a 
 hundred changes at least since we started. We are getting them 
 
27 
 
 every day, and it is very expensive and adds tremendously to the 
 cost/ You asked us to be frank 
 
 Mr. HURLEY. Don't hesitate to say what you want. 
 
 Mr. MORSE. It seems to me that is the principal thing the Govern- 
 ment can save in the 9,400-ton ships the changes that are daily 
 being asked of the shipyards. The next thing is the purchase of ma- 
 terial. If we could have the cooperation of the board, we could save 
 a lot of money that way. 
 
 Mr. HURLEY. In what way ? 
 
 Mr. MORSE. Furnish the cash to buy the stuff with. 
 
 Mr. HURLEY. How much money have you invested ? 
 
 Mr. MORSE. The yard cost $3,300,000; the Shipping Board put up 
 $750,000; the rest we put up. 
 
 Mr. HURLEY. That is the Alexandria yard ? 
 
 Mr. MORSE. Yes. 
 
 Mr. HURLEY. What about Groton? 
 
 Mr. MORSE. The Groton yard cost about four million ; the Govern- 
 ment, according to the progress payments to date, according to their 
 way of figuring, the Government owe us $2,600,000 and on the wood 
 yard $1.600,000. 
 
 Mr. HURLEY. What is your original investment in the wood yard ? 
 
 Mr. MORSE. We owned the wood yard long before we entered into 
 the contract. 
 
 Mr. HURLEY. Yes ; but what is the original investment ? 
 
 Mr. MORSE. I think $400,000. 
 
 Mr. HURLEY. And the Government has an additional $1,600,000 
 in there ? 
 
 Mr. MORSE. No. 
 
 Mr. HURLEY. How much did they spend? 
 
 Mr. MORSE. I can not tell you; they started in to make progress 
 payments; then they changed to imprest fund; then they stopped 
 that and paid the pay roll part of the time and part of the time they 
 did not. 
 
 Mr. HURLEY. How much have we put in the housings at Groton ? 
 
 Mr. MORSE. I think about $1,200,000. 
 
 Mr. HURLEY. What was the original contract for housing? 
 
 Mr. MORSE. Two million; we stopped you from putting up any 
 more. We put up $350,000 ourselves, the Government came in there 
 and we made a contract with the Government I do not know whether 
 it has been framed or not to throw in our $350,000, and they would 
 take the housings and take all the risk. 
 
 Mr. HURLEY. What about the steel ships in the Groton Iron Works? 
 
 Mr. MORSE. One sailed from New York. 
 
 Mr. HURLEY. How many contracts have you? 
 
 Mr. MORSE. Twelve. 
 
 Mr. HURLEY. How many have been finished? 
 
 Mr. MORSE. One has been delivered ; one is ready to be delivered ; 
 one is to be launched on the 30th of this month ; and as near as I can 
 estimate, one every month. 
 
 Mr. HURLEY. How many ways? 
 
 Mr. MORSE. Six. 
 
 Mr. HURLEY. Any keels laid? 
 
 Mr. MORSE. Yes, sir ; there are 7 keels laid, 8 keels laid out of 12. 
 
28 
 
 Mr. HURLEY. Four yet to be laid? 
 
 Mr. MORSE. Four to be laid. 
 
 Mr. HURLEY. Of what capacity ? 
 
 Mr. MORSE. Six of them are 8,800 tons; six of them are 9,400; all 
 at Virginia are 9,400. But, regarding a saving of price, I do not see, 
 as far as our contract goes we have no cost-plus contract I do not 
 see but what it is up to you more than to us. If you can show us any 
 way we can do it, we will be glad to cooperate, but you see you pro- 
 hibit us on labor, you say out of savings on 80 per cent of material, 
 that it goes to you, and I do not see where we can contribute. 
 
 Mr. HURLEY. Has your staff and workmen increased their efficiency 
 any since the armistice has been signed ? 
 
 Mr. MORSE. Oh, yes, sir. Our turnover is large down there for a 
 new yard. You must bear in mind that both our yards are new yards. 
 The ground was broken in Alexandria on the 1st of February a year 
 ago, and we have had to build the works at the same time that we 
 were building the vessels. We have down there 10 vessels fabricated ; 
 have the steel out. We will be through the 15th of next month our 
 fabricating work for the Government, provided they do not give us 
 the two ships they suspended. 
 
 Mr. HURLEY. What do you think these ships will cost per dead- 
 weight ton, Mr. Morse ? 
 
 Mr. MORSE. Well, you know I made an offer for three boats at $215 
 a ton ; $225 for the * Gwiston Hall. When a man can get credit to 
 build ships I do not hesitate to say that I could sell every ship we are 
 building at the cost to you. I think they will cost you about $1,800,000 
 or $1,900,000 apiece. 
 
 Mr. HURLEY. $225 a ton. 
 
 Mr. MORSE. Not that, probably. 
 
 Mr. HURLEY. Are they 7,500-tonners ? 
 
 Mr. MORSE. No; 9,400. Of course, I do not know the policy of the 
 Shipping Board, but if I am allowed to make a suggestion- 
 Mr. HURLEY. Glad to have it. 
 
 Mr. MORSE. Sell some of the ships you now have on favorable 
 terms and J T OU can get out of them all the money they cost. 
 
 Mr. HURLEY. Would you transfer the flag? 
 
 Mr. MORSE. Not necessarily. This proposition was not a transfer 
 of flag, and, so far as the wooden ships go, Mr. Hurley, I wrote a letter 
 to Mr. Piez on the 1st of January, according to which he could have 
 gotten out on four wooden ships we built at their cost, and 45 days 
 later I got an acknowledgment of the letter asking if the matter was 
 still under advisement. The offer on the Gunston Hall was made, I 
 think, at $225,000 $100,000 down, one-quarter before she went to 
 sea, and the balance over a certain time. I make bold to say that I 
 could get for you, if you make the terms reasonable, the full price of 
 these ships as they come off. 
 
 Mr. HURLEY. What do you means by reasonable terms, install- 
 ments ? 
 
 Mr. MORSE. I mean one-quarter down and one-quarter 4, 8, 12, or 
 16 months; something like that. You see, Mr. Hurley, they can 
 not borrow money and there are very few people who have the cash 
 to pay for a $2,000,000 ship that they will pay right down for it. If 
 the Shipping Board gets all that he earns, it seems to me that they do 
 not take much risk, unless they could get somebody to pay cash down. 
 
29 
 
 Mr. HURLEY. You would want a little more than you could charter 
 the ship for. 
 
 Mr. MORSE. You want some earnest money from them. 
 
 Mr. HURLEY. That is the thing we have before us. 
 Mr. MORSE. You could figure the freight; you know what they get, 
 and if you get one-quarter of a million dollars, and all she earns, and 
 something more, it seems to me that would be one way of meeting 
 that financial difficulty. I do not know how the 4,500-ton ships would 
 sell ; I am speaking now of the 9,400-tonners. 
 
 Mr. HURLEY. We are trying to find what the cost of these ships is 
 on the average, not as an individual ship. 
 
 Mr. MORSE. As it has been stated here, the cost has not gone down 
 any. The greater part is labor; the labor that enters into the con- 
 struction of everything that goes into the ship, as well as the con- 
 struction of the ship itself. I think the cost of material, if it goes 
 down, you get the benefit of it under your contract. 
 
 Mr. HURLEY. Do you think that we could compete with Great 
 Britain on the building of ships ? 
 
 Mr. MORSE. Under certain conditions; yes, sir. If you will make 
 a contract and let the American bureau, or British Lloyds vise the 
 work and everything that is done in the ships, and allow the people 
 money enough in progress payments to discount the bills, so that 
 they can buy in the cheapest market, they can compete with any place 
 in the world. We can at our yard, I do not hesitate to say, but if 
 you are going to have eight or ten inspectors, who keep changing the 
 ship every day they come along you can not get at the lowest cost. 
 Our ship was changed from turbine engines to reciprocating, and 
 from water tube boilers to Scotch boilers. It should have been Scotch 
 boilers at first in my opinion. And then, regarding all the little 
 fixings. As I say, that ship is lying there to-day, and it should have 
 been off a month ago. I can furnish the next ship for you, as an indi- 
 vidual, a month sooner than I could furnish it for the Shipping 
 Board, and at a good deal less cost, and make it conform to all the 
 specifications in the contract, but when you make a contract and then 
 continually change nobody can tell what the cost is. 
 
 Mr. HURLEY. You mean by that, if you revised that contract and 
 took upon yourself the entire responsibility of finishing the ship, you 
 could reduce the cost of it? 
 
 Mr. MORSE. Let the British Lloyds of the American bureau have 
 their inspectors there, and we will guarantee the ship to class. 
 
 Mr. HURLEY. And you could reduce the cost, and it will be more 
 satisfactory to the Government and to you ? 
 
 Mr. MORSE. Yes; you have things on that ship that are utterly 
 uncalled for. You have a companionway for an old tar to go down 
 on the ship, and he has always been used to going down a rope 
 ladder. Then you have teakwpod furnture and fixtures. Nobody 
 would think, 011 a merchant ship, of putting in these things. You 
 could get the same efficiency, and the same earnings out of a ship that 
 would cost you a lot less money, get the same classification, and that 
 is all a ship sells for. You could not sell a ship because the Emer- 
 gency Fleet built it for any more money than you could if the 
 American bureau or British Lloyds passed it. That is what you fall 
 
30 
 
 back on. The men who are put in the technical department think 
 they must do these things. They are put there for some purpose, and 
 these changes come in from day to day. But, if you want to save 
 some money on the ships, give us the contract, let us change the con- 
 tract wherever there is absolute waste and give you the benefit, and 
 have the ship classified. I would not hesitate to say that any ship- 
 owner in New York or anywhere could sell one of these snips at 
 $100,000 less and satisfy him and satisfy the Government. I make 
 that suggestion to you and I think it is perhaps well for you to con- 
 sider it. Now, you say that there is over three billion that the Gov- 
 ernment has appropriated. 
 
 Mr. HURLEY. The Government has not appropriated it. It has 
 authorized three billion and some millon dollars to carry out this 
 program. 
 
 Mr. MORSE. Has the board exhausted that? 
 
 Mr. HURLEY. Not the authorization. 
 
 Mr. MORSE. Didn't that cover all the commitments? You will 
 have to excuse me, but Mr. Piez repeatedly told me they had plenty 
 of money. It seems to me you are very close-fisted if you have. 
 
 Mr. HURLEY. We are short of money. Don't you understand 
 that Congress authorized us to make contracts; but they only ap- 
 propriated enough of the money authorized to go from July 1 to 
 June 30 in each fiscal year. Now, then, we are getting very short 
 of money, and we are up against it in so far as continuing. 
 
 Mr. MORSE. They have not appropriated enough money to carry 
 out what they authorized? 
 
 Mr. HURLEY. Oh, no; they never do. They only appropriate for 
 one year. That applies to all Government agencies; every depart- 
 ment here must have money appropriated, not authorized. Authori- 
 zation and appropriation are different things. 
 
 Mr. MORSE. I thought you said they had authorized that. I 
 thought that was the same as appropriated. 
 
 Mr. HURLEY. They have authorized it, but not appropriated the 
 money, and have not placed in the Treasury for our account the 
 entire amount authorized. Now, we must go before Congress, inas- 
 much as the urgent deficiency bill was not passed at the last Con- 
 gress ; otherwise, we would have had all the money required to carry 
 out our contracts, but we must go before Congress, explain the situ- 
 ation and they will ask us for a recommendation. 
 
 Mr. MORSE. I do not like to put our troubles before you people, 
 but the Emergency Fleet, when the Groton Iron Works went into the 
 receiver's hands, owed them $4,200,000. That is the statement ren- 
 dered by the receivers to you, and the reason we had to put it in 
 the receiver's hands we did it ourselves was because we had checks, 
 signed by our company, and by the Emergency Fleet Corporation, 
 which the bank did not have the money to honor. That is what oc- 
 casioned that concern going into receiver's hands. There was no 
 more need of that concern going into receivers' hands than the United' 
 States Government. 
 
 Mr. CARSE. Mr. Hurley, one thing you mentioned. In regard to 
 the question of American yards competing with British yards in 
 building merchant vessels, I think it should be very clearly under- 
 stood, in the question of competition, that the vessels should be of 
 the same nature and class. These vessels being built in the United 
 
31 
 
 States now are very much more expensive than vessels for similar 
 work being built in Great Britain, because they have very many 
 things on their vessels which the British do not even think of, and 
 these things add very greatly to the expense ; but I believe, I see no 
 reason why, for similar ships, the shipyards of the United States 
 should not fairly compete with British yards. 
 
 Mr. H. A. EVANS (Baltimore Dry Dock & Shipbuilding Co.). 
 What is the relative rate of wages in Scotland and this country 
 among shipbuilders? 
 
 Mr. CARSE. I do not know. 
 
 Mr. EVANS. It is two to one. We pay twice as high wages. Are 
 shipbuilders in Scotland better trained, or as well trained as the 
 shipbuilders in this country ? 
 
 Mr. MORSE. Very much better. 
 
 Mr. EVANS. Then, how can we talk about competing in cost with 
 Scotland ? 
 
 Mr. MORSE. I said in course of time. 
 
 Mr. HURLEF. Mr. Evans, I would like to answer that. Do you 
 know anything about the production per man in Scotland yards ? 
 
 Mr. EVANS. Some of us were educated over there, and we know 
 that practically in our yards the majority of our best trained men 
 are called " Mac " Scotchmen. There are exceptions, of course. 
 Ask some of the old shipbuilders who have been in the business all 
 their lives. These men over there not only give the man a training; 
 there are opportunities for education. 
 
 Mr. HURLEY. I would like to talk to you a little later on that 
 question. I have been making a study of that. 
 
 Mr. MORSE. In 1905 I contracted for two ships with the Clyde Co., 
 the Savannah and the Mexico, $1,050,000 a piece. I could have 
 gotten the same ship on the Clyde for $650,000. That is the relative 
 prices at that time. Now, as I understand it, I may be misinformed 
 upon it the prices on the Clyde have gone up more than they have 
 here. I understand there is a labor situation there that is worse 
 that is higher in percentage than here. 
 
 Mr. EVANS. The average wage is about 43 to 45 cents an hour. 
 
 Mr. HURLEY. We have all these figures, Mr. Evans, and also the 
 production per man, if you would like to go over that with me. I 
 do not think you are right. That matter will come up later. 
 
 Gentlemen, we are very much obliged to you for coming here. It 
 is 5 minutes to 1 now, and if you will return at 2.30 this afternoon, 
 we will appreciate it, and put in the afternoon. We want everyone 
 to have something to say. This is instructive and helpful to us, and 
 we appreciate the spirit in which you have come here. Do not hesi- 
 tate to ask questions. We are here to answer them. 
 
 (The meeting thereupon recessed, to reconvene at 2.30 p. m.) 
 
 AFTER RECESS. 
 
 The board reconvened at 2.30 o'clock p. m., pursuant to recess. 
 
 Mr. HURLEY. Gentlemen, if there are any new arrivals I would 
 like very much to get names. I mean if there are any gentlemen here 
 now that were not here this morning, we would like to have their 
 names. 
 
32 
 
 Mr. Dilke, you represent the Carolina Shipbuilding Co. I would 
 like to hear from you. 
 
 Mr. F. C. DILKE (president of the Carolina Shipbuilding Co., 
 Wilmington, N. C. ) . We have an agency contract, and we probably 
 haven't had enough experience as yet to contribute very much to 
 the subject of this meeting. We are very much interested, however, 
 in hearing the expressions of the shipbuilders. 
 
 Mr. HURLEY. I wish you would tell how much money you have 
 put in and how much the Government has put into your yards, so 
 that we may have the whole story. 
 
 Mr. DILKE. This is a four-way yard. We have four ways com- 
 pleted. The plant is just now practically completed with four ways. 
 
 Mr. HURLEY. And the keels laid ? 
 
 Mr. DILKE. We have four keels laid, and are hoping to launch the 
 first ship on July 4. We will have the second one ready to go within 
 30 clays after that. 
 
 Mr. HURLEY. HOW T many ships have you contracted for? 
 
 Mr. DILKE. Twelve 9,600-ton Federal ships. We have our steel 
 practically complete for the first four ships, and we have the steel 
 practically 75 per cent complete for the second four. We are having 
 the midship section fabricated at Roanoke, Va., and we are fabricat- 
 ing the rest of the steel at Wilmington. We have four ways and 
 all of the plant facilities for installing and outfitting complete. 
 The engines and boilers, of course, come from the outside. 
 
 Your investment there up to the present time is about $2,200,000, 
 but that includes a lot of extra work that was done on two additional 
 ways that were not completed, and were canceled; and in building 
 the yard on a layout providing for eight ways. We started with a 
 four-way yard, you understand. I don't know whether all this is of 
 interest or not ? 
 
 Mr. HURLEY. Yes, indeed ; go ahead. 
 
 Mr. DILKE. We started with a four-way yard planned for more 
 ways, and after Mr. Schwab came in he and Mr. Piez talked to us 
 about making an eight-way yard. We rather held back from eight 
 ways, feeling that the community was not large enough to support 
 a yard as large as that, but we were given an order to build a yard 
 on the plan of making eight ways possible, and then at a later time, 
 being given an order to build two additional ways, which meant of 
 course correspondingly increasing the other features of the plant 
 capacity, and all of those other features were added for the six-way 
 yard, but the two additional ways were not finally completed. They 
 are all excavated, but were stopped on the 15th of October. 
 
 I haven't yet been able to get an estimate that I feel is accurate 
 enough to talk about as to the probable cost of the ships we have on 
 the ways. It will probably run over $200 a ton, but I don't think 
 very much. 
 
 Mr. HURLEY. How much money have you spent on housing ? 
 
 Mr. DILKE. All we spent on housing was $48,000, which was for a 
 hotel, Fleet Corporation property, the hotel which we are operating. 
 The housing proposition never went through and that $48,000 is in- 
 cluded in the figure I previously mentioned as cost of the plant. We 
 found that very helpful in holding the men there. We are pretty 
 much isolated, 110 miles off the main line of the Atlantic Coast Line, 
 
33 
 
 and while our experience so far has been better than we hoped for 
 with men coming there, it has been difficult at times, very difficult to 
 take care of them. This hotel has been a very useful feature. 
 
 Mr. HURLEY. How many men do you employ ? 
 
 Mr. DILKE. We have about 1,800 on the pay roll now, and they are 
 running from 1,400 to 1,500 men a day at work. About 50 per cent 
 of them are Negroes, and the last figures I had in the middle of last 
 week 52 per cent of our riveters were Negroes. They are doing very 
 good work and we have succeeded so far in working white riveters 
 and Negro riveters on the same ship. 
 
 Mr. HURLEY. Have you increased the number of rivets in the past 
 month or two over what you formerly did? 
 
 Mr. DILKE. No sir; we'have not, we have been running an average 
 of 22 rivets per gang hour for about two months. 
 
 Mr. HURLEY. Working piecework? 
 
 Mr. DILKE. Altogether, that is I saj^ altogther, there are always 
 some few odds and ends that have to be done on day rate, but the real 
 driving is all on piecework basis. 
 
 Mr. HURLEY. How far advanced is the material on the last four 
 ships that you have a contract for? 
 
 Mr. DILKE. About 30 per cent of the material from the mills, plain 
 steel has been delivered, and due to some operations which we could 
 not control at the beginning there has been a total of about 12 per 
 cent of the steel fabricated for the last four ships. 
 
 Mr. HURLEY. Where was the material fabricated? 
 
 Mr. DILKE. At Roanoke, Va. ; the Virginia Bridge & Iron Co. We 
 have not fabricated any of the last four at Wilmington. We are just 
 finishing up our fabrication for the first four, and we have started 
 on the finishing of the shapes for the second four, and the Virginia 
 Bridge is now shipping steel and has been for about two months 
 on the second four. 
 
 Mr. DONALD. How much money have you got in your yard alto- 
 gether ? How much have you invested in your yard ? 
 
 Mr. DILKE. $2,200,000. 
 
 Mr. DONALD. So the Fleet Corporation has given you all the money 
 in your yard ? 
 
 Mr. DILKE. We are working with an invested fund. The yard is 
 owned by the Fleet Corporation. The Fleet Corporation furnished 
 all the money except for 60 days at the beginning, when we had to 
 use about $200,000 of our own to get going promptly. 
 
 Mr. W. SCOTT PROSKEY (assistant to the president of the Atlantic 
 Corporation, Portsmouth, N. H.). We have a contract to build ten 
 8,800 ships, of which we have two practically complete and five 
 others on the ways, three keels not having been laid. Of the five on 
 the ways three are well along toward construction. 
 
 We have a five-way shipyard with a very complete fabricating 
 and machine plant. We make our own engines with another com- 
 pany that is affiliated with us, the Mason Machine Co. We buy our 
 boilers. 
 
 We expect before the end of the year to have completed the con- 
 tract which we have submitted. There was much delay in what I 
 might call cooperation between the board and ourselves, dating from 
 four or five months back. For instance, the first ship that we put 
 12103519 3 
 
34 
 
 overboard should have been in commission some time ago, as we 
 understand she Avas chartered some time ago, and it was due pri- 
 marily to the Shipping Board that we were not able to deliver but 
 two ships. However, w r e hope that the helpful spirit shown by Mr. 
 Hurley will enable us to adjust our differences and fix the matter 
 so that whatever ships we are allowed to complete shall be com- 
 pleted in harmony and with satisfaction to the Shipping Board and 
 ourselves. 
 
 Mr. HURLEY. What is your figure? What do you think the ships 
 will cost per deadweight ton ? 
 Mr. PROSKEY. Around $200. 
 
 Mr. HURLEY. And how much money has the Government got in 
 your yard ? 
 
 Mr. PROSKEY. I understand about $3,000,000. 
 Mr. HURLEY. How much has the Corporation got in? 
 Mr. PROSKEY. The Government was to furnish two- thirds and we 
 were to furnish one-third. 
 
 Mr. HURLEY. How much have you put in? 
 
 Mr. PROSKEY. There is a controversy about w T hat we have put in 
 now. 
 
 Mr. HURLEY. There isn't any doubt as to what you have put in. 
 You know what you have put in ? 
 Mr. PROSKEY. No, sir; I do not. 
 
 Mr. HURLEY. You were to put in one-third and we were to put in 
 two-thirds, and we have put in $3,000,000. You haven't put in your 
 third? 
 
 Mr. PROSKEY. There is a controversy over that, as I say. The 
 Shipping Board says we have not. I am not prepared to say whether 
 they are right or not; we don't think they are. 
 
 Mr. HURLEY. What about the material for the ships where the 
 keels have not been laid ? 
 
 Mr. PROSKEY. It is practically all there, sir. 
 
 Mr. HURLEY. Have you any accurate figures on the cost, or just an 
 estimate of what it will cost? 
 
 Mr. PROSKEY. It is as accurate as we can make it at this time. We 
 expect within a week to have more accurate figures. 
 
 Mr. HURLEY. The controversey with your company is that the 
 Emergency Fleet officials feel you have not put in your portion ? 
 Mr. PROSKEY. Yes, sir. 
 
 Mr. M. P. DOULLUT, president of the Doullut & Williams Ship- 
 building Co. (Inc.), New Orleans, La. Our yard is at New Orleans, 
 Lake Ponchartrain. We have a contract for eight 9,600-ton ships, 
 on a lump-sum basis. 
 
 Mr. HURLEY. How much a ton ? 
 
 Mr. DOULLUT. Well, the figures have changed so much owing to the 
 labor price, etc., that I am not sure, but I figure it is in the neighbor- 
 hood of $182. 
 
 Mr. HURLEY. What was the original contract ? 
 Mr. DOULLUT. About $170. I am not positive, but it was about 
 $170. 
 
 Mr. HURLEY. How many ways have you ? 
 
 Mr. DAULLUT. We have four ways. We have four ships on the 
 ways now. We have received the steel for the whole eight ships. The 
 
35 
 
 plant is ours; we put in half a million dollars of our own and the 
 Shipping Board loaned us on our contracts $600.000. Our plant is 
 complete and we would have ohips around now had we not been 
 delayed by the Shipping Board owing to different changes in decid- 
 ing on boilers, etc. 
 
 Mr. HURLEY. You put in Scotch boilers or water-tube boilers? 
 Mr. DOULLUT. Water-tube boilers. It was only decided about a 
 month ago that we were going to use water-tube boilers. 
 
 Xow we have no suggestions to make. We have been in the boat 
 business, tugs, barges, etc., for 40 years, but we are new in the ship- 
 building end. 
 
 Mr. HURLEY. You have not delivered any ships as yet? 
 Mr. DOULLUT. Not yet. 
 
 Mr. HURLEY. When were you to launch ships? 
 Mr. DOULLUT. In the latter part of August, four ships to be com- 
 pleted about the same time. The fabricating material is coming for 
 the four ships together. 
 
 Mr. HURLEY. What is your thought as to the actual cost of the 
 ships when they are all finished roughly ? 
 
 Mr. DOULLUT. Well, I am not prepared to give any figures, Mr. 
 Hurley, but I don't feel that at the price of building ships there is 
 any money to be lost. I think we will pull out all right. 
 Mr. HURLEY. Do you think you will make a profit ? 
 Mr. DOULLUT. Yes, provided, of course, we build the whole eight 
 ships, because we have got a good deal of experience on our first 
 four ships. 
 
 Mr. HURLEY. You buy the engines and boilers, ,of course, outside ? 
 
 Mr. DOULLUT. No, sir ; we buy them through the Shipping Board. 
 
 Mr. DILKE. I want to correct what I said about the possible cost of 
 
 our ships. Just guessing, I think we have reason to believe that after 
 
 the first two we can get the cost a little below $200. I think we will 
 
 get our costs well below $200 per deadweight ton. 
 
 Mr. JOHN C. PEW (of the Sun Shipbuilding Co., Chester, Pa.). I 
 am a little new in the game, so I may not use the right expression, but 
 I will go ahead and tell what I can. 
 
 The Sun Shipbuilding Co. was organized and w^as about complete 
 when the United States went into the war. We had at that time a 
 complete shipyard, I believe, of five ways, a boiler shop, and w r e made 
 our ow T n engines. After the war started we spent about $1,000,000 
 additional at the suggestion of Mr. Schwab and other officials of the 
 Fleet Corporation in building a second wet dock, in extending our 
 machine shop and boiler shop, etc. 
 
 We have about $7,500,000 in the bare 'plant. We have, as you 
 know, only contracts for four cargo boats. The rest of our boats 
 were requisitioned boats. We have to-day in our wet docks three 
 cargo boats that are transferred changed to transports. We have 
 on our ways four tankers and one cargo boat. We have three cargo 
 boats yet to build that are 90 per cent fabricated in our shops, or 
 better. 
 
 We feel that we could get business when the matter is settled so 
 that the general public who are inquiring will know just w r hat the 
 Government is going to charge them for the boats if they sell them. 
 That seems to be the question. You talk to a customer and he w r ants 
 
36 
 
 to know what the Government is going to do. He says : " If I can 
 buy a boat cheaper from the Government than I can from you. of 
 course I am going to buy it from the Government." And that seems 
 to be one of the questions to-day, and that is what we are rather 
 interested in. 
 
 Mr. HURLEY. Have we any money in your yard? 
 
 Mr. PEW. You loaned us we had to put in some money 
 $2,000,000. We paid part of that off, probably $200,000. I don't 
 know the exact amount I mean I am not carrying that in my head. 
 
 Mr. HURLEY. You are planning to pay all that back? 
 
 Mr. PEW. We expect to pay it back. 
 
 Mr. HURLEY. On ships you are now building? 
 
 Mr. PEW. I don't know whether we will quite succeed in doing that 
 or not, but we expect to do it in time. They have a mortgage on the 
 plant for $2,000,000. 
 
 Mr. HURLEY. What do you figure those ships will cost, Mr. Pew? 
 
 Mr. PEW. We have built about five different kinds of ships, and no 
 two of them are alike. They have probably cost anywhere from $175 
 to a trifle less than $250 a ton. 
 
 Mr. DONALD. You mean for the tankers ? 
 
 Mr. PEW. No; I mean for the Luckenbach boat, which is now <i 
 transport, our most expensive boat, twin screw, a 14^-knot boat and 
 a very high class cargo boat. 
 
 Mr. DONALD. Of course she would be more expensive than the 
 ordinary cargo ship. 
 
 Mr. PEW. Considerably more expensive than the cargo boat; yes. 
 We do feel that we are improving our conditions; that our costs are 
 going down, and we believe they will go down. 
 
 Mr. HURLEY. What is your thought regarding the Government 
 selling ships and at what price they should sell them? We would 
 like to get your personal view on that. 
 
 Mr. PEW. My thought is that the Government should sell these 1 , 
 boats at a cost that they could be duplicated for to-day. If they sell 
 them for less than that they will shut down the shipyards. In our 
 case, unless we get some business and the Government makes some 
 decision, we will have our fabricating shops shut down the middle of 
 next month, for we will be through with the Government work so far 
 as that is concerned. In fact, at the fabricating shop we have cut 
 clown our force now, and we will gradually cut down the force all 
 over unless the public buys or the Government buys. 
 
 Mr. HURLEY. Supposing the Government offers ships for sale to 
 private ship operators at cost and they did not purchase, then what 
 steps should be taken? 
 
 Mr. PEW. At cost, you say? 
 
 Mr. HURLEY. I say, if the Government offers ships for sale at a 
 price, say, about what they cost or some reasonable price. 
 
 Mr. PEW. I would think, off hand, that they could probably even 
 sell them at less than" the war cost somewhat and still let the ship- 
 builder do business with the general public. 
 
 Mr. HURLEY. Yes. Well, we will say we offer then at a lower 
 figure than that war cost, and the public doesn't buy: what position 
 iire we in then? Then what should we do? I am just looking for 
 information, vou know. 
 
37 
 
 Mr. PEW. I don't know, Mr. Hurley: I wish 1 did; but I don't 
 think the Government should offer these boats at such a figure below 
 the present cost of replacement that they would shut down all the 
 shipyards in the country, have a great many men idle, and have a 
 great many people who have been running these shipyards and w r ho 
 haven't obtained anything yet in the way of a return on their money. 
 I don't believe any of them have. The plant may be worth a little 
 more and may be worth a little less when they get through with 
 them, but I don't believe any of these people have ever made any 
 money out of the business, and to keep this going to keep the men 
 working they will have to sell them at about the present-clay cost. 
 
 Mr. HURLEY. What is the present-day cost ? That is what we are 
 trying to find out. 
 
 Mr. PEW. I don't know exactly, because no two boats are alike. 
 You ask for the present-day cost on an IH-knot boat, and it would 
 be one price; on a 14-knot boat it would be another price. I am not 
 sufficiently versed in the shipbuilding business to answer that ques- 
 tion. There are 'men here, I presume, that do know. But I know in 
 our own case there has been quite a difference in the cost. 
 
 Mr. HURLEY. Yes; there is no doubt of that. We recognize that. 
 
 Mr. PEW. What we are anxious to do is to have some decision so 
 we can keep on going. Mr. Haig just suggested that we had eight 
 boats canceled a little while ago. Of course, I don't know whether 
 those will come back or not. If the Government continues in the 
 shipbuilding business we would like to have those reinstated. 
 
 Mr. HURLEY. What size were they? 
 
 Mr. PEW. 10,300 and 10,500-ton boats. They were tankers the 
 whole lot 84,000 tons, Mr. Haig says; the same size as our cargo 
 10,000 tons the total amount canceled was 84,000 tons. 
 
 Mr. HURLEY. We are very much obliged to you, Mr. Pew. 
 
 Mr. E. B. SADTLER (engineer for the Oscar Daniels Co., Tampa y 
 Fla.). We are building ten 9,500-ton steel ships, designed similar 
 to those built by the Texas Co. in Bath, Me. We have seven keels 
 laid, two boats overboard waiting for machinery, and the third 
 ready to lauch, waiting for propellers. We were delayed very much 
 at the start getting our material, and after three months of work 
 on the contract we had our engines changed and the people we were 
 told to make the contact with by the Shipping Board promised to 
 send the engines in October for the first delivery, and the first one 
 has just arrived there now part of it. It is not^all at the yard yet. 
 The second one we hope will be along inside of a month. The ship 
 has been overboard a month waiting for it. The first ship has been 
 overboard nearly three months, and the third ship is ready to go 
 overboard as soon as we get propellers for it. It has been held up 
 owing to a change in the propellers. They were bronze propellers 
 and it took some little time to get them. 'The blades are cast and 
 are in the shop now being worked, and we hope to have them before 
 very long so that the third ship will then be overboard. The fourth 
 will be ready to launch as soon as we get the third out of the way, 
 and the fifth is close behind that. The sixth and seventh, which have 
 only had their keels laid since the first and second went overboard, 
 are not so far advanced. 
 
38 
 
 We have material for all ships in the yard, and a large portion of 
 it fabricated a large proportion for the ship. Beyond that there 
 is not so much. We have had to slow down our fabricating shop 
 and only have about half of the working force because we can't 
 take care of the material outside. 
 
 We think we have made pretty good progress considering the 
 amount of holding back we have had from various sources, and the 
 constant changing as has been referred to before in our plans, con- 
 stant additions, mostly small items, but they all take time ; and due 
 to the fact that we are so far in the South it takes some little time 
 for our plans to be approved, and w r e can't make very rapid headway 
 on that account. 
 
 Our production in the yard is getting along very much better. We 
 were very slow at the start because we were in New York. We leased 
 the yard from the Tampa Shipbuilding Co., and they had two 3,500 
 steel ships on the ways which had been commandeered by the Ship- 
 ping Board, and they were three or four months later in getting them 
 overboard than they expected when we took the yard which inter- 
 fered with us. Their ways were too small and we had to build new 
 ways, and we built four ways, and then were urged by the Shipping 
 Board to build a fifth, which we did. Now we have them all occu- 
 pied and work going along, we think much more happily than it 
 was earlier. Our force is fairly well organized now, and is working 
 harmoniously, and while our present ships are costing us more than 
 we think they ought to, we feel that we can reduce the price some- 
 what in the future. 
 
 Mr. HURLEY. How much are these ships costing? 
 
 Mr. SADTLER. We don't know exactly, because of the fact that we 
 haven't yet completed one; but my personal opinion is that it will 
 " be close to $200 a ton for the first. I think we will get below that 
 later on. 
 
 Mr. HURLEY. Have you spent any money in housing? 
 
 Mr. SADTLER. None whatever. 
 
 Mr. HURLEY. HOAV much have you put into the yards, your corpo- 
 ration ? 
 
 Mr. SADTLER. We have put everything into the yard, practically. 
 I think there has been an advance of $250,000 on account of the con- 
 tract from the Shipping Board, but the yard is entirely financed by 
 the owners. That money, I understand, is to be paid back or taken 
 out of the payments. 
 
 Being a leased yard, of course we only have the equipment there. 
 We had to double up a number of tools, increase the number of shops 
 and put in a great deal which was not in the yard, in order to meet 
 the requirements of the Shipping Board, such as fire prevention and 
 matters of that sort. We put in five new ways and new derricks to 
 serve them, and all new docks with the exception of one. There was 
 one clock there that belonged to the owners of the yard. 
 
 We think, considering the circumstances, we are making good 
 progress, but when I speak of that price of completion of the ships, 
 it is dependent on completing our contract, under which the keels 
 for three more ships are yet to be laid. The next ship, however, is 
 ready to be laid and will 'be laid as soon as we can put this ship over- 
 board. 
 
39 
 
 Mr. HURLEY. When do you think you will finish your entire 
 contract ? 
 
 Mr. SADTLER. That is problematical. If we are going to be de- 
 layed as much as we have been on our engines, it is a very difficult 
 thing to say. The boilers have been changed also for several of the 
 ships; we think they will be furnished more rapidly now. We have 
 them in three ships now, and the fourth, which has been changed to 
 a different type, is to be shipped to us very shortly. 
 
 I am afraid there will be delay on the engines. They are being 
 furnished by a Birmingham firm that never built engines of that size 
 before, and they were turned over to us by the Shipping Board, and 
 we were directed to make a contract with them. Their work has 
 been very slow and a very great deal of it which came down had to 
 be sent back for corrections. The result is we have been very much 
 delayed in that respect. 
 
 Mr. HURLEY. It looks more encouraging now? 
 Mr. SADTLER. It does now ; yes. We have got a first-class marine 
 engineer watching everything at their plant now, and I think we are 
 going to get better results. This first engine, as I say, is mostly in 
 the yard now being installed, and if we get them one a month here- 
 after, that will regulate about how soon we will get through with the 
 contract. I don't think they can furnish them much faster than 
 that. They say they can. but, judging by previous experience, I 
 doubt it. 
 
 Mr. HURLEY. What are these, reciprocating engines? 
 Mr. SADTLER. Reciprocating, yes. We started out with turbines, 
 but owing to delay in getting the turbines the Shipping Board .di- 
 rected us to put in reciprocating. They are water tube boilers. 
 
 Mr. WILKINSON. Is that an old yard or an entirely new yard? 
 Mr. SADTLER. The yard was built, I think started about two 
 years previous to our taking an order, to build boats for running 
 up the Hudson river. They never built but that one steel boat. 
 Previous to that they had two 3,500-ton steel ships contracted for by 
 private parties, sold to the Cunard Line, and commandeered by the 
 Shipping Board. That was the Tampa Shipbuilding Co. When 
 Ave took the yard it had about half the capacity, about half the num- 
 ber of tools that it has noAv. We built five new ways. We are not 
 using any of the old ways ; they are too small and too slightly built. 
 In fact, only one there was up to 300 feet and the other one was still 
 smaller and very slightly built and couldn't handle a ship of any 
 size. 
 
 Mr. HURLEY. How much money have you in the yard as a whole? 
 
 Mr. SADTLER. I am not prepared to say, Mr. Hurley. I am only 
 
 the engineer of the concern, and am not thoroughly familiar with 
 
 the financial end of it. I think, however, in the neighborhood of 
 
 $700,000. 
 
 Mr. HURLEY. Mr. Hunter, have you anything to say? 
 Mr. H. C. HUNTER (secretary of the Standard Shipbuilding Co., 
 Shooters Island, N. Y.). We have a contract for ten 9.000-ton, what 
 we term ''merchant type," ships similar to those being constructed 
 by the Merchant Corporation, Bristol and Newburg. 
 
 Our yard has five ways, with full capacity for fabrication, ma- 
 chine-shop work and outfitting. These ships were fabricated by the 
 
40 
 
 American Bridge Co. straight bodies ; practically 85 per cent of the 
 fabrication is done by the American Bridge Co., and the balance 
 done in our yard. We have the material for all ten ships in the 
 yard except for certain outfitting equipment. The fabrication be- 
 ing done by us is practically completed. We expect to finish that 
 entirely by the 1st of July. 
 
 We have one ship ready for delivery, one will be launched this 
 week, and two others as fast as we can get the ways from under 
 them. 
 
 The reason for the development in that particular way, four ships 
 coming along so nearly together, was due to the fact that the fabrica- 
 tion by the American Bridge Co. was in units of four, so that the 
 material was all delivered practically at the same time that is, four 
 in each division and our work naturally went forward as that ma- 
 terial was received. We have tried to work away from that as much 
 as we could in order to bring the development along more in line 
 with the possibilities of individual deA 7 elopment, but it has been diffi- 
 cult to separate the work. We expect now to have the last keel laid 
 August 1, and to complete the delivery of these 10 ships by the end 
 of the year. 
 
 We had an additional contract for six ships of the same type which 
 has been suspended. The material for these six ships was in the 
 process of fabrication by the American Bridge Co. at the time of the 
 suspension. 
 
 The cost per deadweight ton probably will run approximately 
 $200, as nearly as we can now figure it. 
 
 Mr. HURLEY. How much money have you in the yard? 
 
 Mr. HUNTER. The yard is a new yard constructed entirely for the 
 emergency. We have side launching with five ways and an outfitting 
 berth that will take care of four ships at one time. 
 
 Mr. HURLEY. How much money have you invested in the yard ? 
 
 Mr. HUNTER. The plant was entirely financed by the Emergency 
 Fleet Corporation under a lump-sum contract. There was an ad- 
 vance made of 10 per cent at the time of the contract, and progress 
 payments made from that time on. We have ourselves advanced 
 certain moneys necessary to carry on our operations. The Emergency 
 Fleet Corporation has a mortgage on the plant which is to be reduced 
 as the ships are delivered, in proportion. 
 
 Mr. HURLEY. The Government owns the entire yard? 
 
 Mr. HUNTER. The Government has a mortgage on the plant. That 
 mortgage is to be reduced as the ships under contract are to be de- 
 livered. 
 
 Mr. HURLEY. But it was financed by the Government? 
 
 Mr. HUNTER. Yes. 
 
 Mr. HURLEY. Thank you very much. 
 
 Mr. W. T. SMITH (of the Chester Shipbuilding Co., Chester, Pa.). 
 We have already gone through the process of adjustment, Mr. 
 Hurley, as the result of a proposal made by us in December. 
 
 We had at the time the Emergency Fleet Corporation was cre- 
 ated 30 contracts, under which we have delivered 10 boats. The ad- 
 justment made in December set a price of $150 a ton, in which there 
 was a calculated profit of $10 a ton. The boats are running about 
 that in cost about $160. 
 
41 
 
 Mr. HURLEY. $160? 
 
 Mr. W. T. SMITH. Yes. the adjustment was made as a result the 
 contract prices on which we were requisitioned varied from about 
 $80 a ton up, and the adjustments were made by precise calculations 
 as to the exact difference in cost between the estimates and what the 
 cost was running as result of the various Macy Board rulings. So 
 we figure we have already gone through that process of adjustment, 
 having anticipated your request now. 
 
 Mr. HURLEY. Do I understand you to say that of the ships you are 
 now building you delivered 10; you have got 20 more to deliver, 
 all of which were requisitioned ships, and you are building the last 
 20 on the $170 a ton basis? 
 
 Mr. W. T. SMITH. All of them. 
 
 Mr. HURLEY. The entire 30? 
 
 Mr. W. T. SMITH. Yes. 
 
 Mr. HURLEY. At the flat price ? Have we any money in the yard ? 
 
 Mr. W. T. SMITH. No; certain demands had been made prior to 
 that time by the Emergency Fleet Corporation, but it was invested 
 in inventory, and that inventory is held in your name and not in 
 ours until it is applied to the boats and credited against the contract 
 price. 
 
 Mr. HURLEY. What class of ships are you building? 
 
 Mr. W. T. SMITH. 9,000 tons. 
 
 Mr. HURLEY. All of the same size ? 
 
 Mr. W. T. SMITH. No; we had both tankers and cargo ships. We 
 have now laid down four of the standard boats similar to what we are 
 building at Bristol, with differences in equipment which came as a 
 result of different purchases. Otherwise the boats are similar in 
 type and installation. There has been invested in the yard about 
 $5,500,000. 
 
 Mr. HURLEY. That is your own money you have put in? 
 
 Mr. W. T. SMITH. Our own money ; yes. 
 
 Mr. J. M. WILLIS (of the Baltimore Dry Dock & Shipbuilding Co., 
 Baltimore, Md.). May I ask Mr. Smith if that $160 and $170 he is 
 speaking of doesn't refer to his requisitioned price? 
 
 Mr. W. T. SMITH. They are all requisitioned. 
 
 Mr. WILLIS. Ships where the price was obtained for material and 
 auxiliaries before the war? 
 
 Mr. W. T. SMITH. Yes ; practically all the material was purchased 
 before the entrance of the United States into the war. 
 
 Mr. HURLEY. You purchased material at very much lower prices? 
 
 Mr. W. T. SMITH. Very much lower prices ; yes, sir. 
 
 Mr. H. B. WILKINSON, of the Toledo Shipbuilding Co., Toledo, 
 Ohio. And the difference is about $45 per ton. 
 
 Mr. W. T. SMITH. About $20 a ton. 
 
 Mr. WILKINSON. And on auxiliaries about $15 more, about $30 or 
 $35 more. 
 
 Mi-. W. T. SMITH. Xo: I am speaking about the material when I 
 say the difference is about $20 a ton. That includes engines, boilers, 
 and plates. 
 
 Mr. WILKINSON. The difference on four of our requisitioned ships 
 will run about $30 to $32 a ton on what we paid as to what we are 
 paying to-day. 
 
42 
 
 Mr. HURLEY. He said $20 a ton included engines, boilers, and 
 plates. 
 
 Mr. W. T. SMITH. I think also that the volume of our business 
 may have had something to do with that, because some of this was 
 purchased for 15 boats. Naturally we got all the advantage on that 
 volume of purchase. And they were not bought on time. 
 
 Mr. J. M. WILLIS. Were not a lot of these ships complete, where 
 you are giving this average cost, before the advance in wages ? 
 
 Mr. W. T. SMITH. Only two of them. 
 
 Mr. WILLIS. But on a number of them you had done a great deal 
 of work ? 
 
 Mr. W. T. SMITH. Yes; we laid the keels of some of them in the 
 early part of 1917. 
 
 Mr. HURLEY. But most of your increased cost of labor is going 
 into these ships now to help make this high price. 
 
 Mr. W. T. SMITH. Well the scale has been going steadily up, and 
 as we have laid down the different boats the same rate of wage has 
 not applied to any two of them. 
 
 Mr. HURLEY. Well, you have got a third of them finished. When 
 did you deliver the 10, the last five? 
 
 Mr. W. T. SMITH. Two in 1917 and eigh't last year seven last 
 year and one this year so far. 
 
 Mr. HURLEY. Well, up to the last part of last year you probably 
 had lower wages? 
 
 Mr. W. T. SMITH. Up to the 1st of October. The decision of the 
 Macy Board in October increased the cost of the labor obviously by 
 the difference in the rate and reduction in the hours. It is also true 
 that during 1917 and 1918 we worked 9J hours instead of 8. 
 
 Mr. HURLEY. But the 20 that you are now finishing up, on the 
 jncreasecl wages how much of the material of the. last 20 you are 
 building had been purchased in 1917 ? 
 
 Mr. W. T. SMITH. Probably half of it at least. 
 
 Mr. HURLEY. And the other half you got the regular prices on? 
 
 Mr. W. T. SMITH. Yes, it may be interesting in view of Mr. 
 Corse's statement that they were the first conceivers of the fabricated 
 ship to say that before he went into the business the Chester Ship- 
 building Co. had bought the material from the Newark Erecting Co. 
 We don't claim to be the originators of the idea; we give credit to 
 the New York Shipbuilding Corporation. 
 
 Mr. PESSANO. May I ask if the material you bought was not all 
 fabricated and delivered to you fabricated? 
 
 Mr. W. T. SMITH. Why, the ships that were done in advance of the 
 present time, similar to what we are doing at Frisco, the American 
 Bridge Co., furnished about 65 per cent in weight. We figure about 
 40 per cent in labor is ours, of fabrication. Now later boats which 
 w r e are doing at Frisco come from the Manitowac and also Merrill & 
 Stevens. They run about 82 per cent in weight, about 55 per cent 
 in labor hours and fabrication. The material. conies to the yard 
 with about 125,000 rivets driven. 
 
 Mr. PESSANO. May I ask if you can tell us how much per ton 
 you paid for the original fabricated material delivered? 
 
 Mr. W. T. SMITH. I think it was in the neighborhood of $28. 
 
 Mr. PESSATS T O. That is the answer. 
 

 43 
 
 Mr. HURLET. What part of the 30 ships did you pay $28 a ton for? 
 
 Mr. W. T. SMITH. The first 10. 
 
 Mr. HURLEY. But on the last 20 you are paying the regular market 
 price for them ? 
 
 Mr. W. T. SMITH. Yes. 
 
 Mr. HURLEY. So that on the ships you are building now, under 
 present labor and material conditions, vou are building for $170 a 
 ton? 
 
 Mr. W. T. SMITH. Yes. 
 
 Mr. WILKINSON. How many has he delivered 
 
 Mr. HURLEY (interposing). Just a moment, please. You are build- 
 ing the last 20 with labor and material at the present market prices, 
 and you are figuring on making $10 a ton at that price? 
 
 Mr. W. T. SMITH. Yes ; the contract restricts us to that profit. 
 
 Mr. HURLEY. Well, what do you do when you make more than that ? 
 
 Mr. W. T. SMITH. Return it to you. 
 
 Mr. HURLEY. Go ahead, Mr. Wilkinson. 
 
 Mr. WILKINSON. I would just like to get some comparisons as we 
 go along. We want to be fair. 
 
 Now just to give you a thought, we built 12 ships last year, and we 
 gave the Government $1,200.000. We got $180 a ton for our ships, 
 4,000-ton ships, which are nearly all equipped with engines and boil- 
 ers and all the modern improvements. We paid the highest price for 
 all that material that has ever been known, and the highest price for 
 labor. That is $180 for a 4,000-ton ship. We have here $190 that we 
 can see in sight, and the Lord only knows how much more, and I want 
 us to get down somewhere on a basis and see how we compare. 
 
 Mr. HURLEY. Now, Mr. Wilkinson, you gave $1,200,000 to the Gov- 
 ernent ? You mean in taxes ? 
 
 Mr. WILKINSON. Yes. 
 
 Mr. HURLEY. Well, you went to the Avrong department. This is 
 where we want that money. [Laughter.] 
 
 Mr. WILKINSON. I was waiting for the wind-up, and then I was 
 going to make a suggestion along that line, but I might just as well 
 complete it now. 
 
 When you get down to comparison of prices on a plant that has 
 no profit and has returned the Government nothing, but which the 
 Government has put millions of dollars into, as against the plant 
 that has received practically nothing from the Government and has 
 turned the Government $1*200,000 on 12 ships that is $100,000 a 
 ship, which brings your vessels dow^n to $180 a ton. Now when you 
 come to amortise from that your measley little four or six hundred 
 thousand dollars to put in additional improvements, down goes $15 
 more a ton, and we are giving you the ships at about $165 a ton, so 
 far as the Government is concerned. 
 
 Now I agree with you that it is too bad that the money can't be 
 turned in here, and probably can, and if you can fix up any way 
 whereby we can pay that money to the Shipping Board instead of 
 to the Government, I am perfectly satisfied except in this, that I do 
 think that unless the Government gets the money from some source, 
 we probably won't build any ships. 
 
 Mr. ROSSETER. $100,000 a ship on a 4,000-ton ship, that is $25 a 
 ton, more or less. 
 
44 
 
 Mr. WILKINSON. Yes. 
 
 Mr. ROSSETER. Do you recall about what the rate of your tax 
 what your tax ratio was ? Was it 50 per cent or 60 per cent or what ? 
 
 Mr. WILKINSON. Our tax ratio was about as I remember, we had 
 about $350,000 left. 
 
 Mr. ROSSETER. I mean you tax ratio. Were you paying 50 per cent 
 or GO per cent? 
 
 Mr. WILKINSON. We were paying nearer 80 per cent about 70 
 per cent. Of course the amount of cash, real cash that we had left 
 when we got through was smaller, because we amortized. 
 
 Mr. ROSSETER. But this is the point I wanted to get clear in my 
 mind : If you paid the Government $25 on a TO per cent basis, that 
 left more or left $15 as the manufacturer's profit, 
 
 Mr. WILKINSON. Yes. 
 
 Mr. ROSSETER. So, therefore, the excess cost which you were pay- 
 ing to taxes and the normal return that the manufacturer would get 
 was $40 per ton ? 
 
 Mr. WILKINSON. Yes. 
 
 Mr. ROSSETER. I just wanted to be clear on that. 
 
 Mr. WILKINSON. Out of that we paid our shipbuilding improve- 
 ments, because there was added to our contract, as Mr. Pessano has 
 told you, the difference between the amount which made up the 
 profits: or, in other words, the agreement with us was that we 
 should put so much per ton into improvements, so that on the basis 
 I am giving the whole profits, the gross profits, not the profit after 
 we amortized or took out the amount, so we did not have $15 left 
 so far as the company was concerned, but we did so far as percent- 
 age was concerned. 
 
 Mr. ROSSETER. I would like to make clear that my question was 
 not at all critical. I was just endeavoring to be helpful more than 
 anything else. 
 
 Mr. WILKINSON. I understand. I am only sorry that we could 
 not have kept the difference between $1,200,000 and what we put 
 into the new improvements. Then we would have had a fair per- 
 centage for the stockholders, but had we not put it into improve- 
 ments the Government would have taken it anyhow, so there will 
 be no regret, because we couldn't help it. 
 
 Mr. ROSSETER. Such figures are very interesting to me when we 
 come back to the question of relative costs in America and Great 
 Britain on this point of amortization and taxation and plant allow- 
 ance and items like that, That will come very prominently into com- 
 parison of British costs and American costs. 
 
 Mr. HURLEY. It is very important. Mr. Smith, on your $10 a ton 
 profit you have to pay out of that your percentage to the Govern- 
 ment? 
 
 Mr. W. T. SMITH. Yes ; that is the earnings of the company with- 
 out regard to the tax law. We will pay a percentage on that. 
 
 Mr. HURLEY. And you have figured on that ? The point I am try- 
 ing to get is this: On the line Mr. Wilkinson has been developing 
 we are trying to get the facts about the situation as a whole; what 
 the Government is doing to you men and what they are doing to the 
 industry when they are forcing shipbuilding to pay this heavy toll. 
 That is what we are trying to get at. 
 
45 
 
 Mr. W. T. SMITH. I don't confuse the question of cost in our rela- 
 tion to the Government. 
 
 Mr. WILKIXSOX. Did you have any taxes to pay the Government 
 on $170, if you please ? 
 
 Mr. W. T. SMITH. That remains to be seen. 
 
 Mr. WILKIXSOX. That is what I was contending, Mr. Hurley. If 
 they built three ships on an investment of $15,000,000 for the Gov- 
 ernment I don't see how they are going to have very much taxes to 
 pay the Government, especially if they lose a couple of million. 
 
 Mr. W. T. SMITH. We are not going to cross that bridge until we 
 come to it. 
 
 I am also here representing the Merchant Shipbuilding Corpora- 
 tion, Bristol, Pa. 
 
 Mr. HURLEY. We will be very glad to hear from you about the 
 Merchants. 
 
 Mr. W. T. SMITH. There, of course, we are in the capacity of 
 agents, and figure rather that the fee we get is for services rather 
 than for profit. We contracted to design and build the plant and 
 organize a working force and build the vessels for which we con- 
 tracted. We have done the two first and are now doing the second. 
 We have laid down 22 keels and have launched 10 and delivered 7. 
 
 Mr HURLEY. I think it would be a good idea if you would outline 
 what the yard cost and how much you have got in and how much 
 the Government has got in. I would like to have all those things 
 brought out. 
 
 Mr. W. T. SMITH. The plant cost about $14,200,000. 
 
 Mr. HURLEY. How many ways? 
 
 Mr. W. T. SMITH. Twelve. We also have a service shop and do 
 considerable manufacturing of machine parts ourselves fittings, etc. 
 
 The plant was originally owned by us and we had started in on our 
 program when this question came up. We then turned the property 
 into the Government and received a rental for it and went on and 
 constructed a plant on that property. 
 
 The cost has varied from about $212 a ton down to $182 a ton, mak- 
 ing an average of about $175. It is consistently going down. 
 
 Mr. HURLEY. Do you allow a fixed charge on your investment? 
 
 Mr. W. T. SMITH. No; no charge for depreciation or amortization. 
 
 Mr. HURLEY. Well, if you don't allow any of that, of course your 
 prices ought to be low. What about your housing? 
 
 Mr. W. T. SMITH. It is your property, you see. 
 
 Mr. HURLEY. I understand. 
 
 Mr. HEXRY R. CARSE. I think that was explained, that the agents 
 in charge have accounts furnished by the Fleet Corporation. 
 
 Mr. HURLEY. I am not questioning that. I know about that, but 
 I want these other gentlement to know the facts, too. 
 
 Mr. W. T. SMITH. We have on hand at the present time, manu- 
 factured and raw material to the value of about $20,000,000, all of 
 which has been converted and handled and is in the average cost 
 which I gave you. So the average to-day doesn't truly express the 
 cost of the vessels completed to-day. 
 
 Mr. HURLEY. What investment have you in housing? 
 
 Mr. W. T. SMITH. A little over $6,000.000. 
 
 Mr. HURLEY. Is that in the original figures? 
 
46 
 
 Mr. W. T. SMITH. Xo; that is separate from the plant and is 
 handled by your Housing Division. 
 
 Mr. HURLEY. You have got over $20,000,000 invested in the plant 
 as a whole? 
 
 Mr. W. T. SMITH. And the town, yes. 
 
 Mr. HURLEY. Are there any questions you would like to ask him, 
 gentlemen ? 
 
 Mr. WILKINSON. You are building 30 vessels? 
 
 Mr. W. T. SMITH. Forty. We have a contract for 60, 20 of which 
 have been canceled so far. 
 
 Mr. H. A. EVANS. I think that some people here are not quite clear 
 about that $160 cost yet, and I would like to put it to Mr. Smith this 
 way. Were not these ships contracted before you were interested in 
 the Chester Shipbuilding Co.? 
 
 Mr. W. T. SMITH. Yes. 
 
 Mr. H. A. EVANS. Were they not contracted at prices of about $80 
 to $90 per ton? 
 
 Mr. W. T. SMITH. Yes. 
 
 Mr. H. A. EVANS. Which would have bankrupted the concern if 
 they had to carry those contracts out? They would not have bank- 
 rupted your concern, but I mean there would have been a very large 
 loss, and the Government came in and adjusted the contracts. 
 
 Mr. W. T. SMITH. The boats were taken at a very low cost per ton. 
 The material also for the boats was at a very low cost per ton. 
 
 Mr. HURLEY. On 10 ? 
 
 Mr. W. T. SMITH. Yes, and there is some doubt in pur minds, due 
 to the lack of data as to just what they estimated their labor to cost 
 as against what our actual experience is. But the point is that we 
 took all of the contracts that we had on hand at the time; we took 
 .everything which was possible. The estimates which we use for the 
 future was our existing experience. In other words, we simply pro- 
 jected, figuring that it would not get any worse, and it is not get- 
 ting any worse. Of course we are getting the advantage of our fore- 
 sight, and I expect Mr. Hurley would like to hear something favor- 
 able at the meeting as well as unfavorable. 
 
 Mr. HURLEY. Yes. We have requisitioned a great many ships from 
 many yards, and in doing so we changed the contracts to meet new 
 conditions as they developed on account of the war, and this is a 
 favorable adjustment, taking into consideration the present price 
 that we are paying for many of these ships. That is the only thought. 
 Are there any other questions you would like to ask, Mr. Evans ? 
 
 Mr. EVANS. Those contracts were taken w r ell below the market ? 
 
 Mr. HURLEY. That doesn't enter into this question here at all. If 
 he got them at $10 a ton in 1917 S and on the 20 that he is now build- 
 ing he bought material at the present market price, and the labor 
 cost him the same and he is building them for $170 to us, why it 
 doesn't matter what happened in 1916 or 1917. He i. the fellow 
 that has confidence in his ability to finish them under present condi- 
 tions. A paper contract doesn't amount to anything; it is the ma- 
 terial and labor going into it. 
 
 Mr. W. T. SMITH. Another factor which I think Mr. Evans is over- 
 looking ; I made the statement that we had received certain advances 
 from the Emergency Fleet Corporation for which they had a certain 
 
47 
 
 value in money. All of the parts of these vessels are manufactured 
 in series, which is obviously the cheaper way to manufacture than to 
 manufacture for one boat at a time. That is our claim as to the 
 superiority of the standard ship from the price standpoint, and we 
 believe it is true. 
 
 Mr. HURLEY. That is a manufacturing proposition. 
 
 Mr. TV. T. SMITH. Yes. Xow there has been some statement made 
 about changes made in the contract about which I would like to ask 
 you. There are a good many changes, Mr. Hurley, by the corpora- 
 tion and, as you know, the same interests have an operating organiza- 
 tion. We are sometimes at a loss to understand just what these 
 changes express in policy. We can see w r here some changes are de- 
 sirable, where a corresponding increase in operating cost after the 
 boat is delivered is going to enter into it, but at the present time 
 changes seem to be a little bit sporadic and not quite under control. 
 We think that might be modified a good deal, because in the stand- 
 ard ship any change you make you never can recover in cost. 
 
 Something was also said about costs going up. We have found 
 costs going up since the 1st of October, due to the fact that we have 
 got 12 ways at Frisco, which absorbs a certain amount of overhead. 
 Obviously you can finish boats quicker by a proper and discreet use 
 of overtime or any other means that appeals to you, and the overhead 
 absorbed by that boat would be considerably less than under the 
 present arrangement. There is a distinct going down in getting 
 them under precise control, which is a difficult thing to do. 
 
 Mr. HILL (of the Cast Steel Ship Corporation). We are just nego- 
 tiating to build two ships, and the price probably will be of interest 
 to the shipbuilders in this country. We are contracting to build the 
 hulls of two 11 -knot cargo ships, 10,000 tons, for $70 per deadweight 
 ton for the hulls alone for the first one and $65 for the second one; 
 and we calculate a very wide margin of profit. 
 
 We want to help the American shipbuilders as far as they would 
 like to have us do so. and from that point of view I thought I 
 would make a very brief statement. 
 
 Mr. HURLEY. Where is your plant ? 
 
 Mr. HILL. We have no plant at the present time. We are just 
 negotiating to put up a plant for certain private interests to build 
 these ships, and then turn it over to the private interests and retire 
 from the actual shipbuilding ourselves. We are naval architects. 
 
 Mr. HURLEY. Don't you think we have got enough plants here now 
 without building any more? 
 
 Mr. HILL. Well, the plants are all right, but your costs are way up, 
 and there is where we hope to help. If American shipbuilders want 
 to get down to a point where they can compete with the foreign 
 builders, why we can help by our process of shipbuilding. 
 
 Mr. HURLEY. That is the cast steel? 
 
 Mr. HILL. The cast steel, yes. 
 
 Mr. W. DOWNEY (of the Downey Shipbuilding Corporation, 
 Arlington, Staten Island, N. Y.), We have a contract and are build- 
 ing ten 7,800-ton, lOJ-knot boats, our own design, and we are 85 per 
 cent completed. Six of them are launched and seven w r ill be launched 
 this week, and if there are not too many changes introduced we will 
 deliver the last ship in September. 
 
48 
 
 Mr. HURLEY. Deliver it or launch it? 
 
 Mr. DOWNEY. Deliver it. Including all of the excess costs that is 
 the excess wage costs and all of the alterations, changes, etc. and we 
 have a tremendous amount of that based upon what we known of, 
 about 85 per cent of the; physical, actual cost, and estimating the bal- 
 ance, we think the ships will cost the Fleet Corporation about $192 
 possibly $193 per ton dead- weight. 
 
 Mr. HURLEY. You have four ways? 
 
 Mr. DOWNEY. Four ways, yes. 
 
 Mr. HURLEY. How much money have you invested in the property ? 
 
 Mr. DOWNEY. My associates and I furnished $900,000, and we have 
 borrowed $750,000 from the Fleet Corporation on a five-year mort- 
 gage. 
 
 Mr. HURLEY. Is that all the Emergency Fleet Corporation has in it ? 
 
 Mr. DOWNEY. That is all the Emergency Fleet Corporation financ- 
 ing that has been done for us outside of our regular shipbuilding con- 
 tract. We made the contract and took a regular first payment on a 
 shipbuilding contract, and instead of furnishing a, surety bond, a 
 contractor's surety bond, we paid for our property in toto, free and 
 clear, and then we gave the Fleet Corporation our own bond, a con- 
 tractor's bond, secured by mortgage on our property, and that bond 
 is being liquidated pro rata as the ships are delivered. 
 
 Mr. HURLEY. You are referring to the $750,000 ? 
 
 Mr. DOWNEY. No; the first ship payments. We gave a bond for 
 that, a performance bond secured by mortgage on our property. 
 
 Mr. HURLEY. A first or second mortgage? 
 
 Mr. DOWNEY. A first mortgage. That was secured by a first mort- 
 gage. That is a security mortgage. Then, in May of last year, 
 when Mr. Schwab came with the Corporation, he was very much 
 interested in the quality of ships that we were building, etc., and he 
 assured me that the Fleet Corporation would want us to do a large 
 amount more of shipbuilding, and he asked me what we could do to 
 help, and I told him that if we had to do more than the 10 ships we 
 had already spent about $1,400,000 in the plant in additions, and I 
 told him we needed about $750,000 to round it out and balance the 
 plant for a ship a month. So he loaned us $275.000 on a straight 5 
 per cent mortgage on the property. 
 
 Mr. HURLEY. Is that all the money the Emergency Fleet has in 
 your plant? 
 
 Mr. DOWNEY. That is absolutely all. We have worked along with 
 our own money and contract money; we have spent probably all of 
 our possible profit in that contract in our shipyard additions, and 
 we have progressed to a point now with a good plant, and we intend 
 to refinance and refund and pay back the Fleet Corporation in toto. 
 
 Mr. HURLEY. When do you figure you will finish, in September ? 
 
 Mr. DOWNEY. We will deliver our last boats in September. Mr. 
 Hurley, without a doubt, barring some abnormal conditions. 
 
 Mr. HURLEY. How many ships have you delivered? 
 
 Mr. DOWNEY. Three, and the fourth will go within the next week, 
 and the fifth will go about the same time, and the last in September. 
 
 It may be of interest, Mr. Hurley I am deeply interested in the 
 success of the United States in shipbuilding, regardless of my own 
 interest, and I am in hearty sympathy with your attempts, the 
 
49 
 
 attempts of the Shipping Board, to 'try to ascertain what the real 
 cost of ships is and what we are going to be able to do in the future. 
 Now, predicated upon our experience with this shipbuilding con- 
 tract, I may say and it is beyond question that the starting take 
 a group of 10 ships, the first one of our 10 ships has cost unquestion- 
 ably 25 per cent more than the last one of our 10 ships, and I am 
 confident that if I had 10 more duplicates of that ship, I could go on 
 and reduce those costs very materially. And on the subject of the 
 efficiency of men now, as against what it was when we started, and 
 against what it was in January, building up a new shipbuilding 
 organization that is, the personnel is fearfully expensive at the 
 start. But this is interesting: We received our first steel in Novem- 
 ber, 1917. It was very late. Now by January, 1919, I received a 
 record from the Fleet Corporation, Production Department, inform- 
 ing me that our yard had been the most efficient on the Atlantic 
 coast in the matter of production per man. That was in January 
 of this year. In March we had practically finished all of our fabri- 
 cation of the 10 ships, and our fabricating department was going dry. 
 The men had been looking forward to additional shipbuilding con- 
 tracts; and not having them they saw the plant, the work, dying 
 down. Now the efficiency of those men in January was way up and 
 splendid, but since that, owing to the fact that they saw the job 
 petering out, the efficiency has been going down again very much. 
 Now the other day I contracted for 11 ships from private owners, 
 American owners, and just the fact that that contract is closed has 
 started the men up again with a very visible improvement. So that 
 these costs we talk about are regulated largely by the amount of 
 duplication we can do and the continuous employment of the men. 
 If the men see ahead for months that their job is secure, you will have 
 a more efficient organization. Seventy-eight per cent of our men 
 were greenhorn men in shipyards; had not been in a shipyard two 
 yoars ago, and are doing splendid work, and in January they got up 
 to an efficiency superior to anything I have seen in a shipyard in old 
 days with regular shipyard mechanics. 
 
 Now on the matter of competition between American and the 
 United Kingdom on ship costs, I don't know what the shipyard costs 
 are in the United Kingdom, but I had a visit from an English banker 
 and shipowner about two weeks ago, and he spent half a day in the 
 yard and was greatly interested. He owned nine ships prior to the 
 war. He lost five of them in the war and said they wanted to con- 
 tract to build back the fleet again, but he told me and I think he 
 was perfectly frank and truthful about it he said he couldn't get 
 any definite price from a responsible English shipbuilder. He said 
 that the only thing he could do was to get cost-plus contracts, sub- 
 ject to so many possibilities that he didn't dare to close a contract to 
 fill up his fleet and was just letting it drift along. Now so far as I 
 have been able to make a study of what little information we can 
 get in the world generally regarding ship cost, the present and pos- 
 sibilities of the future, I don't believe that a good ship, a good nor- 
 mal ship, is going to sell for very much less in the next three years 
 than what it is costing noAv. That is my belief. Of course there is 
 a difference in cost of ships and quality of ships. The type of 'ship 
 alters the tonnage price $15 or $20 a ton easily, and the quality of 
 12103519 4 
 
50 
 
 ships for instance, the Submarine Boat Corporation with merchant 
 steel and a straight ship and a great number of duplicates should be 
 able to build that ship for very much less than the normally designed 
 ship built to the full requirements of British Lloyds or American 
 Bureau of Shipping. And it is a most interesting study, and I con- 
 gratulate the Shipping Board on this attempt to get together the 
 shipbuilders and develop the truth. I would like to see the truth 
 on the table all the time. 
 
 The shipbuilders are entitled to a fair profit, and I think that is 
 all they could ask, but I do believe that if they keep on in harmony 
 and common sense that there is a very good possibility that we may 
 be able to compete with the United Kingdom. I think that their 
 condition, Mr. Evans, has gone up very much more than we think. 
 This English shipowner and banker told me some things rather 
 from the inside that do not at all appear on the surface, and when 
 he saw one man punching a big ship plate in our plant he said as 
 he looked at him : " We can't do anything like that ; we would have a 
 gang at that." Instead of one man punching a ship plate in Eng- 
 land you would probably see three or four or five men around that 
 plate. Now, where the individual is getting less money, therefore 
 there are so many more individuals that I believe in the ultimate analy- 
 sis we are punching that plate cheaper than they are. So all of those 
 things are valuable, and I would be glad, Mr. Hurley, at any time to 
 do anything I can to help in this program. 
 
 Mr. HURLEY. Mr. Downey, on your figures there you say you only 
 have $750,000 of the Government's money invested in your yard. 
 These figures show you have had advanced or loaned $3,255,000. 
 
 Mr. DOWNEY. Mr. Hurley, we closed a shipbuilding contract with 
 the Fleet Corporation at $155 per ton, and w T e received a first ship- 
 building payment, just the same as the Norwegians would have paid 
 us only 5 per cent less. The Norwegians prior to that had been 
 paying 25 per cent upon a single contract ; the Fleet Corporation paid 
 us 20 per cent upon a single contract, and w r e gave them a bond a 
 performance bond and gave them a mortgage on our property to 
 secure that performance bond. That has always been mistaken as 
 money that the Fleet Corporation loaned us. That is not a loan. 
 
 Mr. HURLEY. An advance. 
 
 Mr. DOWNEY. It was the first payment on a shipbuilding contract, 
 for which we had to make good or lose our property under the bond. 
 
 Mr. HURLEY. Well, you brought that up and I just wanted to ask 
 you that question. 
 
 Mr. DOWNEY. I am glad to have it understood, because it has been 
 gossiped around that the Fleet Corporation has loaned us that enor- 
 mous amount of money. The Fleet Corporation simply made us that 
 first shipbuilding payment, the same as I would have gotten from 
 the Cunard people if I had closed a contract with them, as I was 
 prepared to do. The only money we have received from the Fleet 
 Corporation is $750,000, and that is secured by a mortagage on a New 
 York City property that was appraised the other day by the Ameri- 
 can Appraisal Co.' at $6,080,000. And the Fleet Corporation will 
 receive all that if we don't pay. 
 
 Mr. HURLEY. Well, I don't want to go into that part of it. 
 
51 
 
 Mr. CARSE. I might say, the vessels that are being built by the 
 Submarine Boat Corporation are rated by Lloyd's and the American 
 bureau at the highest rating given to any ships. 
 
 Mr. DOWNEY. That is very interesting to know, and satisfactory to 
 me. Now, then, if we could get Lloyd's and the American bureau to 
 give any shipbuilder, or the Fleet Corporation or the Shipping 
 Board, the highest class on a ship built of Merchant's steel, we could 
 build ships cheaper than we are building them now. No doubt about 
 it. So anything that can be done toward substituting Merchant's 
 steel and a straight designed ship instead of the orthodox designed 
 ships if that can be accomplished, that will reduce the cost very 
 much. 
 
 Mr. H. G. SMITH (manager Bethlehem Shipbuilding Corporation 
 (Ltd.) , Wilmington, Del.) . I haven't a great deal to say, Mr. Hurley. 
 It seems to me that most of the points I had in mind have been pretty 
 well covered. 
 
 We are operating, as you know, five yards, and our work is, or a 
 considerable percentage of it, Navy, and some of the yards three of 
 the yards exclusively Emergency Fleet, and the other two more 
 than 50 per cent Navy. 
 
 The statistics of contracts on hand and the exact status of each 
 contract are filed with the Shipping Board each month. My recol- 
 lection is we have about twenty-odd contracts not yet completed for 
 the Shipping Board, work on which is progressing very rapidly, 
 material being on hand for practically all of them. 
 
 The one thing that has come up in the discussion here to-day that 
 impresses itself upon me very firmly is the argument in connection 
 with possible reductions in cost, t don't want to deceive myself, 
 and I wouldn't want to deceive the board into any possible error as 
 to my opinion on reduction in costs. It is my very firm belief that 
 there is no possibility of expecting quick and large reductions, dating 
 from the time of the signing of the armistice. The reasons, the ele- 
 ments affecting costs have been pretty clearly outlined. They start 
 first with labor and material. As we all know, the labor, if anything, 
 is a little higher on account of adjustments than it was a few months 
 ago. The material has fallen very little. Now labor and material 
 are elements that are beyond our control, and as I see it, considerably 
 beyond the control of the board. The item that affects the ship- 
 builder, and in which he can effect a saving, is of course greater 
 efficiency, but that affects labor only, and there is only a certain 
 degree to which he can sow, and that can be brought about only with 
 time. It can not be brought about suddenly, as you must gradually 
 develop on a different basis from the bases you were on in war times. 
 
 There are three other very important elements that have been 
 mentioned here affecting costs, elements that are absolutely under 
 the control of the Shipping Board, and those are the elements of 
 changes, inspection, and the rumors of cancellations. 
 
 This question of changes is one that I have dealt with for many 
 years in Navy contracts, and there is no question in my mind but 
 that if you insist on changes you are going to increase enormously the 
 cost of your vessels, for two reasons: First, on account of the in- 
 creased cost due to the change itself ; and secondly, on account of the 
 
52 
 
 disorganization that results in your force. And one way to affect a 
 great saving is to say : "Here is your ship ; go ahead and build it ex- 
 actly in accordance with the plans." 
 
 The other element of inspection is one that very seriously increases 
 costs if we are not careful. That has been very thoroughly dis- 
 cussed by Mr. Downey and others, but it is a serious matter in connec- 
 tion with costs. Assume that during the war period your ships were 
 good and that they are giving entire satisfaction in operation, and as- 
 suming that in gradually increased efficiency the shipbuilder him- 
 self is turning out even a better ship in peace times than he did in 
 war times, you are gradually obtaining through the shipbuilder 
 that particularly increased efficiency, and if you add to it close and 
 minute inspection upon the part of the Shipping Board itself, you 
 add a large element to the cost, because you are going to slow down 
 production, and you are going to increase the cost in consequence 
 thereof. 
 
 The third matter, one of cancellations, is one that has been pretty 
 thoroughly discussed, and it is a very disturbing thing, this uncer- 
 tainty in various yards as to whether they can complete their con- 
 tract, whether their job will last to complete all the contracts that 
 they have, or whether ships are going to be canceled and they are 
 going to be thrown out. 
 
 I think those are about the only points I have in mind. 
 
 Mr. HURLEY. Mr. Smith, you made the statement that the ques- 
 tion of efficiency depended entirely upon labor. You didn't mean 
 by that that you can't increase efficiency anywhere else ? 
 
 Mr. H. G. SMITH. Now, I mean in the increased results that we can 
 get with labor; increased efficiency if you carry it through the ma- 
 chinery or the material. It is labor that is involved in getting' that 
 increase. I mean it is through the management I mean by labor, 
 starting with the manager from the top down. 
 
 Mr. HURLEY. Yes, that is what I am trying to get. It is fifty fifty. 
 If you have an inefficient management, no matter how efficient your 
 labor is, you don't get results. 
 
 Mr. H. G. SMITH. Absolutely. 
 
 Mr. HuRLEf . You made a statement, Mr. Smith, that the question 
 of price that is quoting the prices by foreign builders, that they 
 would not reduce it materially that is, they could not afford to 
 reduce it. Do you know of any prices that have been quoted by for- 
 eign builders that are very much lower than the prices that we are 
 
 H. G. SMITH. I am not familiar with the prices that have been 
 
 paying ? 
 
 Mr. H. (jr. k-jMiTH. 1 am not familiar with the p 
 quoted. I have heard a great many rumors of all kinds of prices, but 
 I don't know of my own knowledge just what prices have been 
 quoted. 
 
 Mr. HURLEY. I mean by American shipbuilders to foreigners. 
 
 Mr. H. G.. SMITH. I don't know. 
 
 Mr. HURLEY. That is all, Mr. Smith. 
 
 Mr. DOWNEY. I might supplement my statement by just confirming 
 the impression regarding great delays and great additional costs, 
 because of unnecessary changes and drafting inspection. Those are 
 not necessary to make a good ship. My judgment is that our ships 
 on an average will cost about $75,000 more because of unnecessary 
 
53 
 
 changes, and we are undoubtedly months and months behind in 
 finishing ships because of that. 
 
 Mr. H. A. EVANS (of the Baltimore Dry Dock & Shipbuilding- Co., 
 Baltimore, Md.). Our capital stock is $1,100,000; $500,000 preferred, 
 *600,000 common, $254,000 bonds. We had a well-organized repair 
 plant with two buildings, a good organization, and capable men. The 
 time came when there was an urgency for ships, and we thought with 
 the organization we had that it w y as our duty to get into the ship- 
 building scheme in a large way. We also thought that it was a good 
 opportunity to make a profit. We went to Gen. Goethals and put 
 the proposition up to him, and he promised us sixteen 8,800-ton 
 ships, which at that time was the favorite. He stated that he could 
 not enter a contract for more than eight, because he had promised 
 the committee that he would not go beyond a certain date ; but that 
 he would enter into a provisional contract if Congress authorized 
 him to go further. The provisional contract for the eight was drawn 
 up, but he declined to sign it, saying that he could not sign a con- 
 tract like that, that he was advised by the Legal Division not to 
 sign it, but that we would get the eight additional ships. 
 
 On the basis of having 16 ships we went into the new plant. We 
 have put all told the part of this that I am giving you includes the 
 additions made for the large oil tankers $4,800,000. 
 Mr. HURLEY. That is plant investment ? 
 
 Mr. EVANS. Yes, sir. Real money. We have four ways in the new 
 plant, one of the most modern plants in the world, everything built 
 substantially of steel and concrete. 
 
 Our eight ships were taken on the basis of $158 a ton with pro- 
 tection both on steel and labor. Of those eight we have delivered 
 six, and one will be launched on the 31st, and another one about the 
 middle of June. We would have advanced much more rapidly in 
 these contracts except for the fact that we had a large amount of 
 repair work. Employing as many as 3,500 men, the number of men 
 available was limited, and Mr. Schwab directed as Mr. Ackerson 
 knows that we keep men on the repair work as it was more im- 
 portant than new work. 
 
 We then entered into a contract later on, when the demand for 
 tankers arose, for twelve 10,500-ton tankers, and six 6,000-ton 
 tankers; 12 at the new yard and six for the old yard. These con- 
 tracts required material addition to our ways, our plant, the lengthen- 
 ing of the ways, additional air compression, additional pipe line", 
 additional pipe machines, and so forth. We have two of those 
 tankers on the ways now ; the third over 3,000 tons fabricated at the 
 head of the ways, and two of the 6,000 tons on the ways, and a 
 large amount of the two next tankers fabricated. The Emergency 
 Fleet Corporation has suspended on us six of those twelve 10,500- 
 ton tankers, and two of the 6,000 tons. 
 
 At the present time I know and I think that everybody in this 
 room knows that there is a very great demand for tankers. We 
 hope that we are going to get some of those tankers reinstated. 
 
 In our old plant within 40 days we will be out of work. I don't 
 mean that the plant will be shut down, but I means that we will have 
 to lay off men out of our fabricating shop in the lower plant. We 
 can go quite a little bit longer in the new plant. On the letter that 
 
54 
 
 Mr. Hurley sent out I assume that that was a general letter, because 
 most of the provisions did not apply to us. The revision of com- 
 mandeered contracts we had two contracts at $116 a ton that were 
 commandeered. We didn't ask the Fleet Corporation to take those 
 over at cost-plus; we took our medicine and lost money on both of 
 them. 
 
 Mr. HURLEY. Did you make any claim? 
 
 Mr. EVANS. No, sir ; because we have later contracts that there were 
 very much profit in, and the $116 one we just threw into the fire. 
 
 The Government has nothing invested in our plant. The appraised 
 value of our old plant, appraised by Day and Zimmerman about two 
 years ago, was $2,500,000 two million four hundred thousand dol- 
 lars and some odd. In the new plant we have put in $4,800,000. 
 
 Mr. HURLEY. Additional? 
 
 Mr. EVANS. Additional. 
 
 Mr. HURLEY. $6,500,000 altogether? 
 
 Mr. EVANS. Yes, sir ; more than that, $7,500,000. 
 
 All of our contracts are lump-sum contracts. We absolutely re- 
 fused to take any cost-plus contracts. There is a fixed price, but 
 there is the protection on labor. 
 
 Now the cancellation first the suspension that we had, and then 
 the newspaper talk of further suspensions and cancellations has hurt 
 our working force a very great deal. The efficiency of our men after 
 the armistice was signed increased materially. I don't mean that we 
 were getting up anywhere near what we should have had, but it in- 
 creased materially. When this talk of wholesale suspension came 
 out for example, when the order went out to suspend work on all 
 ships whose keels were not laid, we would lay off in seven days be- 
 tween 4,000 and 5,000 men. The men knew it, and instead of being at 
 their work now they are discussing among themselves what is going 
 to happen. That has reduced our efficiency. We hope that very soon 
 some action will be taken. 
 
 Mr. HURLEY. There has been no action taken toward suspensions or 
 cancellations. 
 
 Mr. EVANS. No; but I mean the newspaper talk. I think that 
 covers everything I have. 
 
 Mr. HURLEY. What were your prices on tankers and cargo per 
 dead-weight ton? 
 
 Mr. EVANS. We assumed first on the tankers that they were going 
 to be about $10,300 ; but, as a matter of fact, they run over that. It 
 will be less than $220. It is something less than $220, depending 
 what that tonnage is. It will probably be about $215 a dead-weight 
 ton. The small tankers are higher. They run about $230. 
 
 Mr. HURLEY. What about the cargo boats ? 
 
 Mr. EVANS. The cargo boats were $158 the flat price. .Now I 
 have heard various shipbuilders telling here what the ships were 
 going to cost the Fleet Corporation. I don't know how they can 
 do it, because we can't. We have these large number of changes, 
 many of them not through any fault of the^Fleet Corporation, but 
 partly our fault in getting in the estimates late, being late in doing 
 the paper work, and there have been large number of changes, and 
 ships that we should have delivered six months ago have not yet been 
 settled. It is just through the machinery we were late in getting the 
 
55 
 
 estimates in, but we can't tell what those ships are costing the Fleet 
 Corporation until those things are settled. More than that, when 
 you asked costs, I assumed you meant everything, overtime every- 
 thing. We have only in the last two weeks settled our overtime 
 claim. About two weeks ago, so that we know how much we were 
 
 foing to get; how much the Fleet Corporation was going to pay, so 
 can't give you any idea of what those ships actually will cost the 
 Fleet Corporation. 
 
 Mr. HURLEY. Take the $158 contract price, and add to that what 
 would be the overtime and increased cost of labor. 
 
 Mr. EVANS. The increased cost of labor, and more than that there 
 was added to that the advanced price of steel. The Fleet Corpora- 
 tion didn't buy the steel at the price that was put into our contracts. 
 
 Mr. HURLEY. They did not? 
 
 Mr. EVANS. No, sir. 
 
 Mr. HURLEY. You bid $225 on the tankers? 
 
 Mr. EVANS. Xo sir; it is about $215. 
 
 Mr. HURLEY. For the large tankers? 
 
 Mr. EVANS. For the large, and $230 for the small ones. 
 
 Mr. HURLEY. And all flat prices with labor and material guar- 
 teed? 
 
 Mr. EVANS. There is no material guarantee. They simply stated 
 that they would furnish the steel at a fixed price, that is all, which 
 was 3^ cents then. There was no material guarantee. 
 
 Mr. HURLEY. Are you having that same trouble that Mr. Wilkin- 
 son has had about paying too much tax to the Revenue Bureau ? 
 
 Mr. EVANS. We are paying our share. 
 
 Mr. HURLEY. Well, are you pajdng so much that it affects the 
 cost of producing the ships? 
 
 Mr. EVANS. Our repair work, Mr. Hurley, is so large we run 
 a very large amount of repair work sometimes having as many as 
 3,500 men on repair work, and it is a fact that the larger part of 
 our profits are made out of repair work. 
 
 Mr. HURLEY. Of course your accounts are kept separate? 
 
 Mr. EVANS. Oh yes, the accounts are kept separate, undoubtedly. 
 Then a large amount is made out of foreign repairs. I have had 
 that fully analyzed by outside accountants and turned over to Mr. 
 Piez, and I think it has been given to Mr. Ackerson, for their 
 personal information, not to be used officially at the present time, 
 giving every contract that we have our repair work for the Govern- 
 ment, our repair work for American private owners, repair work for 
 foreign owners, and full analysis with the labor, material, over- 
 head, amortization, revenues, profits and losses; and when you put 
 in that you must write off this $4.800,000 plant except for the scrap 
 value, and within two years you don't show a profit. 
 
 Mr. HURLEY. Have you any suggestions to offer regarding how we- 
 could cooperate with the Treasury Department about working out 
 this problem of paying the high taxes? 
 
 Mr. EVANS. Well, I think, sir, it is going to be a very serious 
 problem. Of course, you can't do it legally now, but aside from that 
 here is the fear that the shipbuilder has. Suppose we put in our 
 tax returns this year and they accept our statement of writing off, 
 say, $2,000,000 or"$l, 500,000. Suppose we made some settlement with 
 
56 
 
 you on that basis. Now, they have accepted it; it is passed, we have 
 paid our taxes. The law allows them three years to come back after 
 we have got this all settled, and they can come back and say : " This 
 plant is worth a good deal more, and we won't allow you that." 
 
 Mr. HURLEY. Do you think it is fair to the shipbuilding industry, 
 and the operating feature of our American merchant marine, where 
 we are trying to work out a shipbuilding problem and a ship-operat- 
 ing problem, for the Government to come in and take an enormous 
 percentage of the returns, forcing the shipbuilders which they have 
 to do to keep in a measure their prices up for construction, and in 
 turning his ships over to the operators at a high price and forcing 
 them to operate in competition with other nations? 
 
 Mr. EVANS. That is not the way to build up a merchant marine. 
 
 Mr. HURLEY. That is what I want. 
 
 Mr. EVANS. That is not the way to build up a merchant marine. 
 
 Mr. HURLEY. That is the reason I thought we might get an ex- 
 pression on that. 
 
 Mr. EVANS. But we paid in taxes last year, where we had not 
 started we have not taken a profit up to December 31 on a Gov- 
 ernment contract; any profits that our company has made has been 
 from requisitioned ships where we had contracts with foreigners, 
 and from repair work. We paid something like $700,000 in taxes 
 last year. 
 
 Mr. HURLEY. I am thinking more of the future than I am of the 
 past. 
 
 Mr. EVANS. It is 80 per cent with us, sir, owing to our low capitali- 
 zation approximately 80 per cent. 
 
 Mr. HURLEY. It doesn't strike me as being equitable for us who 
 are all trying to work out a problem and then having the Government 
 iri one particular branch hold us back. 
 
 Mr. EVANS. I quite agree with you, sir. I would like very much if 
 we could have some of those suspended contracts back, because there 
 is a demand for tankers. 
 
 Mr. HURLEY. Could you get an order for some of those suspended 
 contracts from private owners? 
 
 Mr. EVANS. Some private owners through some one else. I am 
 telling, all my business here. 
 
 Mr. HURLEY. Certainly, that is all right. 
 
 Mr. EVANS. They came to me last week and said: "It is going to 
 cost the Government a very considerable amount on the present sus- 
 pensions which it will I mean not the ones suspended at the pres- 
 ent time it is going to cost the Government a considerable amount 
 per ton." This private owner was very much surprised that we could 
 make delivery of a tanker in 9 months, and he said : " Why don't you 
 go to the Fleet Corporation and see what you can settle up those sus- 
 pended contracts for and get what you can out of it, and maybe we 
 can meet and take the rest." I said : " No, I would rather for them to 
 settle it. You go to the Fleet Corporation and see if you can take 
 over those contracts." But Mr. Ackerson, probably has enough pre- 
 liminary figures to know that if these suspensions and cancelations 
 went any further it would cost the Government almost as much for 
 every ship, and you wouldn't get any ships. 
 
 Mr. HURLEY. What is your thought, Mr. Evans, in the direction as 
 to how long the Government should stay in the shipbuilding business ? 
 
57 
 
 Mr. EVANS. That is a very bad one, Mr. Hurley. I believe that with 
 our plant, if we had a chance for two years longer, we would be able 
 to find contracts abroad that would keep us going. In other words, 
 it would be known that we can increase our efficiency ; we know that 
 our men are learning. More than that we are getting a splendid spirit 
 in our yard, and if I was assured of work for two years, I believe that 
 wo could go it along with the foreigners. I don't mean that we can 
 build ships as cheaply as they can ; there will be enough demand for 
 ships to fill them up, and then give us something. We won't make as 
 much profit, but, Mr. Pessano, you have studied this very carefully, 
 do you think that is so ? 
 
 Mr. PESSANO. I agree with you. 
 
 Mr. HURLEY. Do I understand you to say that you feel that the 
 Government should continue building ships for two years in order to 
 
 fet these organizations going so that later they could compete with 
 oreign countries ? 
 
 Mr. EVANS. No, sir ; that was not exactly what I said. I did not 
 answer your question directly. I simply said that I felt in our yards, 
 if we could continue now. Now, as a matter of fact, you, representing 
 the Government, made with the shipbuilders an absolute ironclad 
 contract. There is no cancel ation clause in it. You are breaking- 
 now understand this is not criticism of anybody- 
 Mr. HURLEY (interposing). No; go ahead. 
 
 Mr. EVANS. You are breaking an ironclad contract; we are break- 
 ing a contract which you put me under bond that I would not break ; 
 then you go and break that ironclad contract. While the United 
 States Government simply, promises the wheat growers that it will 
 pay $2.25 for his wheat, and although it is going to cost millions and 
 millions, they are going to keep to it, but the shipbuilder is treated 
 differently. Now, I believe that these contracts, these absolute con- 
 tracts made by the Government should be carried out. 
 
 Mr. HURLEY. What percentage of the contracts that we made with 
 the shipbuilders were later revised upward in order to meet new con- 
 ditions ? 
 
 Mr. EVANS. You made none with the Baltimore Dry Dock & 
 Shipbuilding Co. 
 
 Mr. HURLEY. I am speaking generally. Are you speaking as to 
 what should be done for all the shipbuilders, or just for the Balti- 
 more Dry Dock & Shipbuilding Co. ? 
 
 Mr. EVANS. No, sir; I am only familiar with my own company, 
 I don't know what the conditions were with the other shipbuilders. 
 
 Mr. HURLEY. How many contracts did we cancel with you? 
 
 Mr. EVANS. We have had suspended six 10,500-ton tankers, and 
 two 6.000-ton tankers. 
 
 Mr. HURLEY. How long ago were they suspended; five or six 
 months ago? 
 
 Mr. EVANS. I don't think it was as long as that. Do you remem- 
 ber. Mr. Ackerson? 
 
 Mr. ACKERSON. In January or February. 
 
 Mr. HURLEY. Mr. Mull, we would like to hear from you. 
 
 Mr. J. H. MULL (of the W. Cramp & Sons Ship & Engine Building 
 Co.). I don't think, Mr. Chairman, it would be fair for me to com- 
 ment. 
 
58 
 
 We are running 100 per cent Navy work. I don't think our con- 
 dition is in line with what the gentlemen here present have said. 
 I don't think it would be fair for me to make any remarks, but if 
 I can have a copy of these proceedings I would like to study them 
 for the general interest. I don't think that any remarks that I could 
 make would be of value. 
 
 Mr. HURLEY. We will be very glad to furnish them. I was going 
 to say, gentlemen, that our thought is to print the proceedings here 
 and distribute them to each man here, so that he may know all the 
 facts, and if he has any criticisms to make, make them promptly, 
 so we can make the corrections before they go to the printer. 
 
 Mr. MULL. I might say one thing, however; the business we have 
 done with the Shipping Board has been the finishing up of com- 
 mandeered ships. We delivered the last one on Saturday. We 
 haven't a kick no doubt you have, and if you have I would like to 
 hear it now. 
 
 Mr. HURLEY. That is a ray of hope. [Laughter.] Mr. Brush, 
 we would like to hear what you have to say. 
 
 Mr. M. C. BRUSH (president of the American International Ship- 
 building Corporation). Of course, you know, Mr. Chairman, that we 
 are a Government agency. Our own investment is in the property 
 and the only reason we have an investment in the property is because 
 the Government was not allowed to buy property at the time the 
 contract was made. Our company therefore holds the property in 
 cooperation with the Government. At the moment of purchase turn 
 over to the Fleet Corporation, or the Shipping Board, an option on 
 the property at actually what it cost; therefore we have an invest- 
 ment of about a million and three-quarters in the land, about 846 
 acres, and there is a provision in the contract that after completion 
 of the contract, if the Government sees fit, they may take this land 
 at the actual purchase price; and if the Government doesn't see fit, 
 they may either sell what they have on the land to our company or 
 take it away. 
 
 We have an original contract for 110 7,500-ton ships and TO 8,000- 
 ton cargo ships, since which they have been changed from cargo 
 ships to troopships, troopships to combination passenger and cargo 
 ships, and then to troopships and back and forth, until to-day we 
 stand, so far as the TO ships are concerned the history of the B ship 
 is a very interesting history, Mr. Chairman. A very expensive his- 
 tory to the Fleet Corporation. It has cost you a great deal of money, 
 your B ship program, up to this minute. 
 
 On January 31 we received a suspension order on the last 20 of the 
 last 35 of the TO B ships. About two or three weeks later we received 
 a suspension order on the next 5 of the last 35 or the B ships. A short 
 time after that we received a cancelation of these 35 ships. On the 
 29th day of April we received an order to suspend all work on these 
 ships then on the ways, of which there were 12, up to that time our 
 instructions having been to make 6 troop, 6 combination passenger 
 and cargo ships. We were directed at the same time to notify outside 
 vendors or contractors to suspend their work on the remaining work 
 of the 23 of those 35 ; and we have not yet been notified nor has a sin- 
 gle contractor supplying material for those 23 ships received any in- 
 formation since the 29th day of April, that we are not likely to use 
 
59 
 
 this material and that material is being prepared and the Fleet Cor- 
 poration is paying for it, and we are awaiting instructions. 
 
 We received a letter about a week ago directing us to resume 
 work, after a space of about 10 days or 3 weeks, on these 12 ways 
 resume work on the ships on the way, with the further advice from 
 the division manager, Mr. Higgins, that he would let us know later 
 about the remaining 23 ships. Of course the suspension of that work 
 on those 12 boats is a very serious matter to us, so far as our esprit du 
 corps in the yard is concerned. There was immediately a rumor that 
 all the ships in the yard were going to be canceled and we had ex- 
 actly the same result that all of these other gentlemen had, the result 
 of newspaper comment. In that case, however, it was because we 
 were directed to stop work that night. At 5 o'clock we arranged to 
 take some 5,000 men and try to distribute them over the other 38 
 ways, which we did. We put some of them on night work. We didn't 
 let any of them go. But the rumor that all ships were to be canceled 
 necessarily prevailed and had a very disquieting influence. At the 
 end of a week or ten days we were directed to resume work on those 
 12 ways. We have undertaken to do so, but it will take several weeks 
 to get back to the pace we had at the time of the suspension. So far 
 as A ships are concerned, 110 A ships, we have delivered our 18 A 
 ships, a perfect ship and a satisfactory ship to the operating division 
 of your board. We have launched our twenty-seventh. We will de- 
 liver our nineteenth to-morrow and launch our twenty-eighth to-mor- 
 row at 9 o'clock; and on the 1st day of June we will have launched 
 24 of those ships and delivered 22. 
 
 The 7,500-ton ship according to the contract is now a 7,700-ton 
 ship, as specified by the American bureau. They have measured the 
 ships and the lowest rating they have given is 7,704 tons, and the 
 highest 7,880 tons. 
 
 Mr. DONALD. You mean of the A ships ? 
 
 Mr. BRUSH. Of the A ships. Instead of 7,500 tons they are 7,700 
 tons and over. 
 
 Of the 17 ships delivered up -to Saturday afternoon, when wo de- 
 livered our eighteenth ship, we have the most favorable reports from 
 your own operating division, both with respect to the functioning of 
 the ship and with respect to the earnings which those ships have 
 made while being operated. As an incident of what the ships are 
 doing, so far as satisfaction is concerned, the second ship, the Saca- 
 rappa, made approximately half a million dollars for the Fleet Cor- 
 poration from Rio to harbor a month ago. The Quist Conck, about 
 which there has been so much conversation, has never sunk, has never 
 been in dry-dock, nor has a single ship of ours ever been in dry-dock, 
 and we have a satisfactory report from the inspection of the Quist 
 Conck that the ship is fairly satisfactory to you, and to the master 
 in every respect. 
 
 We also have a letter from your Fleet Corporation representative 
 that the Saugerties was the first ship delivered to the Fleet Cor- 
 poration which upon return from a trial trip under Government 
 contract, without any corrections, or changes or repairs to be made of 
 any character, was accepted immediately upon her return from her 
 trial trip. 
 
60 
 
 We ako have a communication from one of your captains to our 
 own operating man to the effect that the ship which he is operating 
 is, in his opinion, a parfec^ ship. 
 
 I think we should endeavor to make clear, Mr. Chairman, that we 
 are not old line ship builders; that we do not pretend to be, nor 
 so far as I am concerned, nor so far as I have knowledge, do we. 
 intend to be in the future. We were created for the specific pur- 
 pose of building 180 ships, and I assume that when that is com- 
 pleted the disposition of the property will be subject to whatever 
 the Fleet Corporation desires to do, they owning everything on 
 the plant other than the actual plant. We are building the ships 
 on a fee basis, not on a percentage basis, and while allowances are 
 made for changes in fee due to increases, decrease in material or in- 
 creases in labor, etc., the fee is substantially fixed, being a normal 
 maximum and minimum fee above and below which Ave can not re- 
 ceive any sum. 
 
 I assume that in all of these basic stages which I have heard you 
 gentlemen discuss and I will frankly say I am not a shipbuilder, and 
 I have learned more about shipbuilding since 11 o'clock this morning 
 than I ever knew before I assume from my knowledge of some of 
 these contracts which I have had the privilege of reading in the past 
 eight months, that in all these flat-price contracts per ton, allowances 
 have been made for both material and labor and overhead increases. 
 So far as our cost situation is concerned, it is absolutely impossible 
 for us to give you a figure as to what it is costing per ton, due to the 
 fact that we don't know what our overhead will be, and we won't 
 know until we know what is going to happen with the B ships. We 
 don't know whether we are building 30 B ships, 12, or 7. We are per- 
 fectly frank to state we have stated in public before that we re- 
 gret very much that the B ship was ever placed in the Hog Island 
 yards. The yard is a quantity production fabricating yard, and 
 while I am not a shipbuilder, I am engineer enough to be able to as- 
 semble steel according to blue print, and that is all our job is. 
 
 The B ship has been a very serious matter to us in a great many 
 ways. Unfortunately, due to the pressure of the Fleet Corporation 
 w 7 hich was legitimate at the time the B ship was scattered in among 
 A ships. It is unfortunate for a superintendent who is trying to 
 build ships on a quantity production basis to have an 8,000-ton ship 
 and a 7,500-ton ship beside it, as we have known in our halfway yard, 
 5 B ships and 5 A ships. It is defeating in the yards, as evidenced 
 by our own records, the very purpose that the yard was originally 
 created for, and that was a quantity production yard. In our yards 
 1 and 2, in which we have 10 A ships each, our showing, from all that 
 I can learn, compared with other shipbuilding plants, is as fine as 
 anybody could possibly expect. In the other three yards we are 
 handicapped by that mixed type of vessel. 
 
 We have delivered the equivalent or will have delivered on the 
 1st clay of June the equivalent, approximately, of 170,000 tons, and 
 we assume that our job is not dissimilar to quantity production, 
 whether it is air guns or sausages or automobiles or anything else, 
 and our success in getting these ships down to a proper price lies in 
 our being able to do the same thing over and over again. 
 
 Of our 110 A ships, as I say, we will have delivered to the 1st day 
 of June, 22, and launched 34, and will have laid keels for 38 more, 
 
61 
 
 the remaining 38, the ways of 12 being occupied by B boats. For 
 the remaining 38 ships the material is practically all on the ground, 
 or on the way to the plant. That deals not only with the actual 
 steel but with the auxiliary apparatus. 
 
 I think it only fair to say for the Fleet Corporation also that from 
 the time we started the Quist Conck away from the pier, up to this 
 minute, there has not been the slightest trouble in any way, shape, 
 or manner with a single movable part of the ship. The turbines, 
 gears, boilers, auxiliary apparatus, has been absolutely perfect in 
 every respect. The gears and turbines are purchased by the Fleet 
 Corporation and delivered to us. I would like to say, if I may be 
 permitted with all my limited experience, that the subject of changes 
 is so much more serious with us, in my opinion, than it is with any 
 of these gentlemen, that it is a matter of tremendous expense to the 
 Fleet Corporation and the Shipping Board. We had ready this 
 morning the eighteenth ship. We got a receipt for her Saturday. 
 The nineteenth ship had her trial trip Friday. She came in and we 
 would have, gotten our receipt for her Saturday noon had they not 
 decided to put some railings around the hatches. After we had 
 delivered 18 ships, Mr. Hurdey, according to specifications and blue 
 prints, including the eighteenth, there has been 900 changes to those 
 ships since the 1st day of January. We had 14 ships launched 
 when we were notified by the local representative, Mr. Higgins, that 
 he had decided to dry-dock 14 ships in order to lower the intake 5 
 feet. I told Mr. Higgins frankly that if he did, the American In- 
 ternational Shipbuilding Corporation might just as well quit build- 
 ing ships that minute, because we would be explaining the rest of our 
 lives why the first 14 ships we launched had to be dry-docked. 
 Therefore he waived that on the 14, but made me commence on the 
 fifteenth ship on the way, hull 208, and go to work and lower the 
 intake 5 feet; and never once have we heard a single word from the 
 first 14 ships delivered in regard to the intake being too high. That 
 has cost you thousands of dollars. 
 
 We receive orders to make changes in these ships, Mr. Hurley, 
 within 15 minutes of the time we are ready to deliver them. Now 7 
 I don't think that is good judgment for you. It don't cost us a 
 penny, but it costs you a good deal of money. My best judgment is 
 that you haven't made a change on a ship since we started that hasn't 
 cost you $500; because it isn't a question of what these gentlemen 
 are doing on one ship, sending 25 men down there to change it; we 
 have got to go back and make over 500 drawings if we change a hinge 
 on a door. It is quantity production. If we change the color of 
 paint on a panel, it is 500 drawings, and it costs a great deal of 
 money. 
 
 Now that comes as the result of somebody who is operating the 
 ships seeing something which he likes a little better, and it comes 
 down through to us without anybody stopping and saying : " Now 
 wait a minute; is this for the. best interests of the Fleet Corporation, 
 or is it not?" And it comes down to us rubber stamped in our local 
 office down there by our local representative, and goes direct to the 
 engineering department, and the wet basin man, Capt. Bookwalter, 
 is notified to make such and such a change. I think it is a very, very 
 serious matter. 
 
62 
 
 Now if we have delivered, as we have, 18 ships, and your operating- 
 division says that those ships are perfectly satisfactory, and your 
 own captains have written letters saying that the ships are thor- 
 oughly satisfactory, then if I owned the Emergency Fleet Corpora- 
 tion this afternoon I would say to Hog Island, " You duplicate that 
 eighteenth ship, and don't you make a change of any description un- 
 less something comes through where it concerns the safety of the 
 vessel." And I can't possibly, Mr. Chairman, make our position too 
 strong, because we want to make a record for the delivery of our 
 ships, and we can not do it if to-morrow Tom, Dick, or Harry can 
 come running down to the ship and say : " I would like to have a 
 hinge changed," because that is just as bad as changing a steam pipe. 
 
 We took out of a ship here the other day about 50 pieces of pipe 
 down in the bilge, because the specifications, according to this man, 
 said the bottom of the pipe should be within an inch of the bottom 
 of the bilge, and he went down and found that it was an inch and an 
 eigthth, and we held the ship three days to take those out, and the 
 ship is worth $2,000 a day to you. and It cost you $6,000 and didn't 
 cost us a penny. And God Almighty couldn't tell you to-morrow 
 whether it was an inch or an inch and an eighth. 
 
 Now, if the Fleet Corporation if I may make a suggestion with all 
 clue respect if they will forbid us to make a single change that 
 Commander Ackerson does not sign in long hand you would save 
 hundreds and hundreds of thousands of dollars. 
 
 Mr. HURLEY. We will straighten that out in short order. Thank 
 you very much. 
 
 Mr. C. W. STINER (of the Saginaw Shipbuilding Co., Saginaw, 
 Mich.). I just want. Mr. Hurley, to explain I think it has come up, 
 and I think it is quite clearly shown that there are no two cases alike. 
 
 Now, if I don't say anything it may be .assumed that somebody else 
 has told our story for us, perhaps, but we are a new concern. We 
 were organized in 1917, after a conference with Gen. Goethals. We 
 had with us or w^ere able to bring into a company men who had had 
 the shipbuilding experience. We also had in our locality large shops 
 where we could get not only our plant equipment but the equipment 
 for ships as well, in the way of boilers, engines, and practically all 
 of the auxiliaries. We came down and talked to Gen. Goethals, and 
 he strongly urged us to go home and organize a company and get 
 into the business, and told us that just as soon as we could make a 
 proper showing we would be given contracts. We did that, and we 
 came back and we were given a contract for six ships. Now, we had 
 no experience available and no data of any kind, but we did the best 
 we could, and we were given a price which we understood was the 
 going market price with the Fleet Corporation at that time, which 
 was $160 a ton for the first six ships. 
 
 We had to get an organization together. We had nobody. We 
 started in and established schools of training for men. We con- 
 ducted those schools for months. We began the building of our 
 plant this was early in October, 1917, and we carried on ship con- 
 struction just as soon as we had a few men operating. We started 
 building ships and we have delivered the ships. We didn't make any 
 money on them, but we didn't ask for any revision of the contract 
 price. 
 
63 
 
 In January we were given another contract for 6 ships at a much 
 lower price than others were being paid at the time which we knew 
 afterwards. We were working on those, and in May, 1918, we were 
 asked how many ships we could take on additional for 1919 with our 
 equipment as it was outlined at that time, and we replied that we 
 could take on 6 additional ships with those two contracts we already 
 had. Then we were asked how many ships we could take on if we 
 put in large improvements in our plant. We considered the matter 
 and felt that we could, by making large extensions to our plant, more 
 than double our plant, we had the room we could take on 12. We 
 were asked to go ahead and make these improvements, and were 
 
 fiven a contract for 12 ships at the time, at the price that other 
 uilders were getting at that time. We went ahead and we have 
 spent over a million dollars in the extension to our plant to take care 
 of this last contract. Now we have been asked to suspend the work 
 on the last 6. We did not make any money on our first contract, and 
 we hoped under pur last contract to get some of the money back that 
 we put into additions to our plant at the request of the Fleet Cor- 
 poration, but now we are asked to suspend. Our contracts had not 
 been canceled but they are in suspension. The last 6 of the last 12. 
 
 Mr. HURLEY. What type of ships are they ? 
 
 Mr. STINER. Four thousand tons. 
 
 Mr. HURLEY. Where did you say you are building? 
 
 Mr. STINER. At Saginaw, Mich. 
 
 Mr. HURLEY. HOAV much is the Government's investment in the 
 plant? 
 
 Mr. STINER. The Government hasn't anything. The Government 
 in the last contract gave us, or agreed to give us, an extra $15,000 
 per ship over the base price of $800,000 a ship. 
 
 Mr. HURLEY. Your investment was for war purposes ? 
 
 Mr. STINER. We put in an investment for war purposes. That 
 would be $180,000 if we got it, but we spent over a million dollars to 
 do that. 
 
 Mr. HURLEY. And the contract was canceled, and the money you 
 were to get on the ships to be put into yard expenses you are not 
 going to receive. I mean that $15,000 a ship ? 
 
 Mr. STINER. Well, we are not going to get it according to the con- 
 tract, if the contract is canceled. 
 
 Mr. HURLEY. Well, you ought to get that. That is not fair. 
 
 Mr. STINER. But the sin all amount of the contract provided, or 
 gave us, for these improvements that we are paying to carry out this 
 contract, and which the Fleet Corporation admitted at the time would 
 be of no value to us after this emergency is over, is over a million 
 dollars. 
 
 Mr. HURLEY. I don't care anything about the amount, I am speak- 
 ing of the principle of the thing. If the Government told you to 
 construct 10 ships, and allowed so much on each over and above the 
 price for which you were willing to build it to apply to building the 
 yard, and then canceled the ship after you invested in the yard, it is 
 not equitable or just for the Government not to take care of your yard. 
 That is the point. , 
 
 Mr. STINER. We have never gotten to that. We have never had it 
 up with the Fleet Corporation or anyone. We just had notice to stop 
 work. 
 
64 
 
 Mr. ACKERSON. Those points are all being taken into account. 
 
 Mr. HURLEY. I just wanted to let him know our position. 
 
 Mr. STINER. I think the record here is going to be something you 
 can base your judgment on, and I wanted to get that into the record. 
 ^ Mr. HURLEY. We will now hear from Mr. Brittain, of the Terry 
 Shipbuilding Co., and then Mr. Rosseter, the Director of Operations, 
 will address the conference. 
 
 Mr. H. L. BRITTAIN (of the Terry Shipbuilding Co., Mobile, Ala.). 
 I represent the Terry Shipbuilding Corporation, and also the Mobile 
 Shipbuilding Co. Mr. Chairman, speaking for the Mobile Ship- 
 building Co., the original contract given to the Mobile Shipbuilding 
 Co. was for 18 composite ships, given under Gen. Goethal's regime 
 at a price fixed by the Corporation, and based on contract No. 1, 
 which was of a similar type, there being no other method at that 
 time to figure on the composite ship cost. 
 
 In June of the following year the Government canceled 12 of the com- 
 posite type ships, and substituted therefor 12 5,000-ton all-steel vessels. 
 Subsequently we were asked to take the Jahncke Shipbuilding Co.'s 
 (Inc.) contract of 12 ships of the same type, 5,000-ton ships, on which 
 contract the company is now working. 
 
 The six composite type ships have all been delivered. All of them 
 are in service and are bringing in revenue to the Corporation, I be- 
 lieve, of $2,500 a month. 
 
 Our last composite ship never returned from its trial trip to our 
 yard. It was accepted by the Fleet Corporation, by the Division 
 of Operations, I believe, and by the various agencies and by the 
 charterer and taken right to their docks and cargo loaded. 
 
 That completed the six composite ships that the company was 
 
 working on, and we are now working on the 5,000-ton all-steel ships. 
 
 - On the 12 ships that were given to us in consideration of the 
 
 cancellation of the composite ships we have received a cancellation 
 
 suspension order. 
 
 We are launching the first of the Jahncke ships next week, and the 
 second one the week following, or 10 days following and on two ad- 
 ditional I think the state of completion is about 25 to 60 per cent. 
 We have had all of the steel fabricated for all of the ships by the 
 Virginia Bridge & Iron Co., of Roanoke. I understand that most 
 of the steel for the 12 ships has been fabricated, and all the steel for 
 the first six is in the yard and fabricated and ready to erect. At the 
 Terry yards 
 
 Mr. HURLEY (interposing). Let us just finish that Mobile yard 
 first, please. How much money has the Government got in that 
 yard? 
 
 Mr. BRITTAIN. Mr. Chairman, on the first contract, the Govern- 
 ment the first contract on composite ships the Government ad- 
 vanced to the yard $400,000. Upon the cancellation of the 12 com- 
 posite ships that $400,000, which was to be reimbursed out of the 
 last two payments, was put over against the 12 all-steel ships and on 
 the first six that we delivered we have practically canceled the 
 $400,000, although it was to go over against the 12 that were given 
 us for the 1$ that were canceled. 
 
 Now then on the 12 all-steel ships the Government in its contract 
 allowed us an advance of $600,000 for plant extension the com- 
 posite yards being more or less a wooden yard you see allowed us 
 
$600,000 for plant extension for that contract, making the million 
 dollars; we hadn't paid back the $400,000 on the deposit. Now, then, 
 when the Jahncke contract came up it developed, I believe, that the 
 Jahncke Co. had an advance from the corporation of about $300,000. 
 This advance Avas absorbed by us, of $325,000 and the corporation 
 allowed us an additional $172,500 for plant extension, by reason of 
 the increased facilities made it necessary for the building of those 
 12 additional ships, amount to $172,500 for plant extension. That 
 would total $1,500,000 advanced on the three contracts. 
 
 Mr. HURLEY. The Mobile yard and the Jahncke yard ? 
 
 Mr. BRITTAIN. Yes; now based on progress payments to-day, Mr. 
 Chairman, on the number of ships we are way ahead. The payments 
 are more than a million dollars, so our advance up to the present 
 stage of completion has practically been absorbed. We are working- 
 on the basis of an impressed fund, as we are building those 12 ships at 
 considerably less than our estimated cost. 
 
 Mr. HURLEY. What was the cost? 
 
 Mr. BRITTAIN. The 5,000-ton ships were based on the cost price of 
 the Submarine Boat ships, $960,000 plus and amount of $20,000 
 made to us for the plant extension. Our ships, I believe, are a little 
 larger and a little more expensive to build by the way, so that our 
 contract price on those ships is $980,000. We are building them,, 
 however we put in a detailed estimate of the cost of them, and we 
 are keeping count of our progress. The estimate put in as we have 
 progressed shows that our costs up to the present time are consider- 
 ably less than we estimated at that time. 
 
 Mr. HURLEY. What was your estimate? 
 
 Mr. BRITTAIN. Our estimate, put in to you, Avas $960,000. 
 
 Mr. HURLEY. On a 5,000-ton ship? 
 
 Mr. BRITTAIN. Yes. . 
 
 Mr. HURLEY. And it is going to be below that ? 
 
 Br. BRITTAIN. Below that, yes. We are building, erecting, rivet- 
 ing, and fabricating cheaper than we estimated. 
 
 Mr. HURLEY. Now in the other yard? 
 
 Mr. BRITTAIN. In Savannah our contract there was one of the 
 earliest contracts for composite boats, 20 composite boats. Gen. 
 Goethals named the price on that, which was the same price given 
 on the contract No. 1. These two composites were practically the same 
 price it was based on contract No. 1, and subsequently 10 of those 
 were canceled in the early part of April, 1918, and we were given 
 in lieu of the 10 composites canceled a contract for 10 oil tankers of 
 7,500 tons dead-weight. Five of those were subsequently suspended ; 
 and we have fabricated the material for 5, and the first keel shows a 
 progress of about 55 per cent, the other about 35 per cent. We are 
 fabricating all of the material in our yard. We have a yard at 
 Savannah with 10 ways and fabricating capacity there of over 3,000 
 tons a month ; a complete machine shop, /outfitting wharf, a complete 
 plant both for a wooden yard and for a steel yard, and the Corpora- 
 tion has advanced us on that yard of 10 ways, and a fabricating 
 capacity of 3,000 to 3,500 tons a month, $1,500,000. 
 
 We Avere allowed on our tanker contract by Admiral Bowles 
 $1,636,000 for plant extension. I cut that down in the contract that 
 was finally drawn up to half of that, over $800,000, and subsequently 
 
 12103519 5 
 
66 
 
 we voluntarily reduced it to $600,000 ; and we have stayed within the 
 $600,000, the other $900,000 having been expended for the deposit on 
 the composite contracts so that the corporation has in there $1,500,000. 
 
 Mr. HURLEY. In the Savannah yard? 
 
 Mr. BRITTAIN. Yes, sir. We have 4 of the 10 composites on the 
 ways, and suspended we don't know what. 
 
 Mr. HURLEY. What was the cost of the first composite ship that 
 was built? 
 
 Mr. BRITTAIN. Mr. Hurley, in Mobile our first composite ship, the 
 Balino, which, I think, was the first of that type or wooden type, to 
 go into trans- Atlantic trade, and got insurance on a million-dollar 
 cargo, cost $840,000. 
 
 Mr. HURLEY. 3,500-ton ships? 
 
 Mr. BRITTAIN. Yes, about 3,600. 
 
 Mr. HURLEY. Where are the Savannah ships that have been built? 
 
 Mr. BRITTAIN. The Division of Operations, I think, has two or 
 three of them, and one other had been ready for acceptance, and the 
 other two we launched we were waiting for some changes there, and 
 we launched the fifth about two weeks ago. We will outfit that in 21 
 days, and that will be ready for delivery on the 21st. 
 
 Mr. HURLEY. The composite ships that you delivered, are they in 
 service, or are they tied to the dock? Are they satisfactory? 
 
 Mr. BRITTAIN. All of the Mobile composite ships 
 
 Mr. HURLEY, (interposing). I mean Savannah. 
 
 Mr BRITTAIN. In Savannah we were held up by certain changes 
 and the steering gear had to be changed in practically all of those 
 ships. We had finished our work on two of them in November, 
 and with various changes in them I don't know whether Mr. Ros- 
 seter can recall I don't know whether the first one delivered has 
 been in service. I just wanted the story in the record. 
 
 Mr. HURLEY. These two composite ships, as I understand it, the 
 first two that you delivered there at very high cost, are not in service 
 and they can not be put in service on account of their condition. 
 
 Mr. BRITTAIN. I think you are confusing us with the Jacksonville 
 yard. 
 
 Mr. HURLEY. Well, I may be. 
 
 Mr. BRITTAIN. Absolutely we have the highest classification on the 
 first two ships, as I understand it, and they already have been ac- 
 cepted and you have not offered them for service. I know an oper- 
 ator who would be very glad to get them because the operators that 
 are using our composite ships in Mobile are very anxious to have that 
 type of ship. 
 
 Mr. HURLEY. I know about Mobile, but the Savannah ships I had 
 in mind. I know about the Mobile ships ; good ships they are but I 
 will straighten the record about that. 
 
 Mr. BRITTAIN. Now six of the composite ships, we had about 95 
 per cent completed, I believe, and we were instructed not to install 
 engines and boilers in those ships, and they will probably be used as 
 barges. So that is six of the composite, ' and the four 'now on the 
 wayc you haven't determined yet your policy in regard to those. 
 
 Mr. HURLEY. Mr. Evans, I would like to mention a point that you 
 brought out as to the authorizations, if we had not canceled the 
 1,500,000 tons of wooden ships after the armistice was signed, we 
 
67 
 
 would have been way beyond our authorization instead of being 
 within just practically within now. I merely explain that to you 
 gentlemen so that you will know there was a real reason. If we had 
 gone ahead and built the ships and spent one hundred, two hundred, 
 or three hundred million dollars more after the armistice was signed, 
 beyond pur authorization, we would have had a pretty serious time in 
 explaining to Congress. So there was method in our "madness in 
 trying to keep within the authorization. 
 
 Mr. EVANS. I understood that at the time. 
 
 Mr. ACKERSON. We would have been away beyond our appropria- 
 tion. 
 
 Mr. HURLEY. We have money now to keep you gentlemen going, 
 but otherwise we would have had to shut down a number of plants, 
 because we wouldn't have had the money. 
 
 Mr. ROBERT HAIG (of the Sun Shipbuilding Co.). When our presi- 
 dent was speaking of the cost of some of our ships he gave you cost 
 including all the overtime and extra charges. I noticed that in 
 Mr. S adder's statement, I think, and others, they did not so include 
 their overtime. Our ships are about 6,000 horsepower, and they run 
 about $250 a ton. I was looking at some figures on Saturday, and 
 out of that about $20 a ton is overtime and extras. That was up to 
 about the 31st of December, so that our charges on those ships they 
 are twin-screw boats, the very highest class they are too fine to be 
 cargo boats, and many changes have been made in them. I was 
 interested in hearing Mr. Brush speak about changes. He had only 
 two types of ships; we have had tankers, single-screw cargo boats, 
 twin-screw cargo boats, back to tankers, back to cargo boats again, 
 and every one of those ships probably carried, every one of them, an 
 excessive amount of changes. True, it was inevitable, owing to the 
 conditions that we were working under, that changes should come 
 about. But those changes run up the cost and when it comes up to 
 you, sir, you have got to look at the cost of your American ships in 
 comparison to the British ships. Now, I claim to have a fairly close 
 knowledge of the question in British yards. I was trained there and 
 know it very thoroughly. Within the last two or three weeks we 
 have received a number of books sent to us from the other side bear- 
 ing on the riveting cost, calking, and ship costs, and so on, prevailing 
 in the British yards. I started to compare a few of them, and I 
 thought surely I was getting wrong and had lost track of English 
 money from my residence here so long, and I turned it over to our 
 department to estimate, and I found where we were paying 10 and 12 
 cents, I think it is, for riveting our angles in the center keelson as 
 she runs up into the forecastle where we were paying 10 or 12 cents 
 they were paying 4J cents. They were paying 6 cents a hundred for 
 running that work up, and we were paying 10 and 12 cents for the 
 same work. Their calking and shipping did not run up into such 
 differences, but it was so marked that I am having it laid out, our 
 cost and their cost, line by line, and I will be very glad to complete 
 it and send it down to you, because it will be illuminating. 
 
 Mr. HURLEY. Thank you very much. We will be glad to have it. 
 
 Mr. HAIG. That has just come over within the last three weeks, 
 and it is from the most reliable sources because it is from the man- 
 ager's working book out of three yards ; compiled out of three yards 
 
68 
 
 and sent over here. It is not the official book of any union, but it is 
 the working manager's book covering rates charged by the unions, 
 covering certain work. Mr. Evans spoke of the difference in the 
 British yards and here. I have knowledge of them both, but what I 
 would like and I can not too strongly emphasize what Mr. Smith 
 has said, and Mr. Brush, about the cost of operations now on those 
 big boats. We have had four extra bulkheads put into those ships. 
 Now you can imagine w T hat that means in the dissipation of our 
 work. In another ship we had three main boilers in when we got 
 instructions to put in twin boilers. That meant carrying the ship 
 out and bringing this main boiler through the cargo hole into the 
 stoke hole. That main boiler, I think, cost about three times the cost 
 of the boiler before it was landed in the ship. 
 
 Now you can see that, let your organization work ever so efficiently, 
 the price of American ships is going to go up high. They can not do 
 otherwise unless you do as the British builders do. We have some 
 specifications no doubt mo'st of the shipbuilders have of British 
 specifications, and they will not change a thing they wouldn't 
 change a mooring bit on the deck if it is going to interfere with the 
 run of their work. The president of our yard was over in Europe 
 at Christmas time, in January. He was unfortunate enough during 
 the war to lose a British ship, and his money is lying in the Bank 
 of England, but you can not use it except to build a new ship ; and 
 he in conversation wifch the yard that built the former ship, asked 
 them what they would duplicate it for, and they said they would 
 duplicate it for $175 a ton. He said, " No, I will not give you a con- 
 tract. Will you do it for 30 a ton?" They said, " We will build the 
 ship on 6 a ton profit," $30 off and on " but we will not enter into 
 a specific contract." 
 
 'Now that was in January, for a tanker about 8,000 tons dead- 
 weight. But I would just as strongly emphasize at this point, and 
 impress upon you and your board, the necessity of cutting down 
 changes. You may authorize your board may authorize a change at 
 an initial cost of $100, but it will cost you $1,000. You dislocate so 
 much work. You stop that work that is in progress in the vicinity 
 of it; the men get disheartened Avhen they take things out. To-day 
 we have a ship in the docks I am not complaining, mind you; it 
 is our business to do what you want, and we are not complaining. 
 We have the warmest relations with our Shipping Board and with 
 the Emergency Fleet. We acknowledge the services that they have 
 given us; we acknowledge their readiness to cooperate with us; we 
 acknowledge that in full. But now this ship comes back on her 
 first trial trip perfectly satisfactory, but we get an order within 
 three or four days to raise the stack 16 feet. We were told that our 
 stack tank was in excess of what the requirement was, and we were 
 ordered to raise the stack 16 feet, by the operating division. Now, 
 that doesn't seem much. It meant about five days' work lifting the 
 stack off and then elongating it, but our wireless comes within 20 feet 
 from the top of the stack, and that meant that w T e should throw 
 away our topmast and rigging, and we put those topmasts up 20 
 feet. Now you see the initial cost of the stack was very small, but 
 we discovered we scoured the whole country to get a new topmast 
 and finally bought them from the Emergency Fleet in Philadelphia. 
 But they were hard to get and it cost lots of money. I am only giv- 
 
69 
 
 ing you two or three instances now to show you that if you can 
 eliminate these changes the British shipbuilders are facing an in- 
 creasing cost of shipbuilding, there is no doubt about it. The British 
 shipbuilder's cost is not going down; the British shipbuilder's labor 
 is going up. The American shipbuilder's cost is going to come 
 down because his efficiency is improving, and if you can reduce this 
 interference with the contract after it is let and say, "Mr. Smith, 
 there is your contract there are your specifications and we will close 
 it with you ; meet the classification requirements, whatever they are, 
 and we will accept the ship," then you are going to get very much 
 increased efficiency in the cost of the ship, and you are going to get 
 the ship built very much quicker and are going to be able to look 
 the public in the eye and say, "We are building the ship; take it 
 for good or bad, we are all through." 
 
 The American shipbuilder turns out a much finer cargo boat than 
 the British shipbuilder turns out Mr. Donald with his long ex- 
 perience in shipowning will back up what I sav, that we turn out 
 here higher class cargo or passenger boats than are turned out in 
 England for the same class of work. They turn out special ships, 
 special work, that we don't touch, probably, but the cargo boat 
 to-day or the passenger boat to-day that was built in England, and 
 the same type of boat built in this country, this country's ship is the 
 better; and if the American shipowner will say, "I want a cargo 
 boat to carry bulk cargo, two-deck cargo boat, shower baths, indi- 
 vidual sleeping quarters," then he will get his ship according to the 
 specifications, comfortable for the men, good to navigate, and within 
 the money. 
 
 Mr. HURLEY. I would like to ask you gentlemen, is the Newburgh 
 Shipyard (Inc.) represented here? There is a statement given out 
 from some source, not by the press, that they have accepted two 
 orders from the sulphur company at $175 a ton, the United Sulphur 
 Co. Is that correct? Do you gentlemen know anything about it? 
 
 (A portion of the record was here ordered stricken out.) 
 
 I would like to hear from Mr. Rosseter now. 
 
 Mr. ROSSETER. Perhaps all of you gentlemen know that I have been 
 giving my time and energy entirely to the Division of Operations, 
 endeavoring as far as I can to establish and perpetuate the Ameri- 
 can merchant marine. Thus I do not come very closely to your con- 
 struction problems. However, the questions of construction and op- 
 eration after all are very closely related. In the first place, for suc- 
 cessful operation you must have ships which can operate successfully 
 in hard times ; a real hard-time ship. A ship that will do well when 
 rates are high and business plentiful may perish under the reverse 
 conditions. So, going back to the clays the happy days when I was 
 in business life and not in Washington, I remember that the greatest 
 trouble I ever had was to decide on specifications at the time a 
 ship was ordered that would be entirely complete and final. The 
 specifications that were given to the builder and in those days it was 
 generally a British builder were as exact, full, and satisfactory, 
 and as final as they could be. Nevertheless, as time went on changes 
 did develop. We always considered a change from the standpoint 
 of how much it would cost and how much would it delay the ship. 
 The cost we got from the builders ; the delay we figured ourselves. 
 
70 
 
 Now, I say this because I am tremendously conscious of the impor- 
 tance of complete specifications of a satisfactory ship. Still, you 
 gentlemen know that in the hurry of building our emergency fleet 
 not much attention was given to design, or the balancing of the fleet, 
 nor to specifications or class, because there was no time for it. No 
 one was to blame for that ; the problem was to get a ship that could 
 go to sea and successfully arrive at a foreign port. 
 
 Having made a great many changes in November last, I can't help 
 but be very conscious of the fact that a good many of these remarks 
 have been directed at me. However, some of the statements are per- 
 fectly astonishing and surprising to me. I want to say that I agree 
 entirely with Mr. Brush's statement that any change made should be 
 over the longhand signature of an important official. There is no 
 question about that. Altogether I have dealt personally with not 
 exceeding 50 changes in the entire fleet of the Shipping Board. 
 Whether other changes were made I do not know.. If they are made 
 by inspection agencies that discover faults, probably they are well 
 considered, and possibly they are not. But this point I would like 
 to emphasize, Mr. Chairman : It is rather surprising that for the first 
 time I hear of 500 changes having been made. I am very accessible ; 
 anybody can come into my office, and nobody has come to me and 
 said those changes have been made. In fact, to tell the frank truth, 
 I had great difficulty in putting over some of the few changes I made. 
 For instance, I will take the case which came up the other day, that 
 Mr. Ackerson knows of, where I wanted a No. 5 double-bottom con- 
 nected up for fuel oil. I wanted that No. 5 bottom coupled up for 
 fuel oil for the reason that it was not required for fresh water, and 
 by adding this double-bottom to the oil supply it would enable the 
 ship to make a complete European round, without replenishing 
 bunkers. Well, I think it was three days, probably, before that 
 change was ordered. 
 
 You know we find some very funny things about ships. Mr. Brush 
 has told you how favorably the Division of Operations reported on 
 the Hog Island ships. That is true. I have been interested to see 
 the " come-back " from our operators and from our supercargoes 
 and from the captains. Nevertheless, it is very fresh in my mind that 
 the first ship that came out, the Quistconck, the Navy refused to 
 man and advised me not to accept because she was considered unsea- 
 worthy. I sent her to sea, gave her a 36-hour trial, and on my own 
 responsibility ordered her accepted. Little points like that, you 
 know, it is well to bear in mind. 
 
 When we come to talk about the cost of a ship, much depends on 
 the type. I was making some figures here a little while ago, going 
 back in my memory. The lowest priced ship that I remember evel 
 being contracted for in England, of a plain cargo type, was con- 
 tracted for at about $32 a ton, the price in pounds Sterling reduced 
 at the normal rate of exchange made that ship cost about $32 a ton. 
 At that very time I ordered four other ships from British builders. 
 I was very familiar with the ship that was ordered at $32; I went 
 carefully over all of the specifications and embodied some features in 
 my own specifications, but added a good many other features. Three 
 of those ships we contracted for at $41 a ton, an advance of $9. That 
 advance in price is not a proper criterion of the cost of building 
 
71 
 
 abroad or building in this country. That has to be considered from 
 the standpoint of efficiency and from the value of the investment in 
 the special features. At the same time a fourth ship I ordered cost 
 $61 a ton. 
 
 Now those ships were not all of the same type, but they were prac- 
 tically of the same type, inasmuch as the $32 ship was 8,000 tons r 
 the $41 ships were 9,400 tons, and the $61 ship was 7,600 tons. So, 
 therefore, you have a spread right away of $9 between the price of 
 the British tramp and the improved cargo boat which we selected to 
 order ; and then again, another spread of $29 to the high type com- 
 bined ship, a ship that had some limited passenger space, that had 
 refrigeration and speed, and had a greater steaming radius. Concur- 
 rently with that order, or within six months afterwards, we ordered 
 three ships in the United States from Mr. Mull. Mr. Mull will cor- 
 rect my impressions I am speaking now from memory but as I 
 recall it we paid $76 for those ships. 
 
 Mr. MULL. That is correct. 
 
 Mr. ROSSETER. We paid, I think, about $15 higher than you would 
 have built a very good ship for us, because we demanded of you a 
 very superior ship. You remember the ship ? 
 
 Mr. MULL. Very well. 
 
 Mr. ROSSETER. Therefore, when you talk about relative British 
 prices and American prices, it is a very misleading proposition. 
 The real analysis of shipbuilding, to my mind, of course, we all 
 know it is made up of three elements; material, labor, and over- 
 head. We are to-day standing with probably no very great advan- 
 tage over the British on the point of material, but we have some 
 advantage. I happen to know, for instance, that there is a large 
 order here from England for ship materials, which is ready to be 
 placed, and on which they will have to pay a freight rate of $20 a 
 ton. That is a cent a pound on steel, practically, and the order is for 
 no less than 60,000 tons. So we do have some advantages, and should 
 have more advantages, on the question of the price of materials. 
 
 On labor we have some disadvantages. But the real crux of the 
 question is, how much do you add for overhead ? Now, gentlemen, I 
 am not talking about emergency construction or what we did in the 
 past, because all of you men have had to take into account a very 
 serious item for overhead if you expected to do war work and under- 
 take an enormous expansion of your yards, as compared with the 
 British shipyards which have existed for 50 years and have been 
 building up slowly year by year, with the capital cost being either 
 written off or reduced to a very insignificant item. 
 
 Now I have asked the opinion of one of the best authorities in the 
 United States you will pardon me for not referring to him by 
 name and these are the figures he has given me Prewar: Labor, 
 $26; material, $24; overhead, $12. Total, $62. 
 
 I reminded him that at about that period certainly just before 
 the war a contract had been let with one of the large Atlantic 
 builders for a tanker at $55 a ton. His answer to that was that those 
 people were facing an initial loss of $7 a ton on that contract. Well,, 
 certainly the cost at that time must have been somewhere between 
 $55, for which the tanker was contracted, and $62, which my friend 
 estimated that it was going to cost. Now coming back to this time 
 
72 
 
 lie figured: Material, $65; labor, $70; overhead, $32; practically a 
 270-per cent increase on all three items. 
 
 If there is one point that I would like to bring forcibly to the 
 attention of the men in whose hands the destinies of American ship- 
 building are entrusted, because they are to-day undertaking that 
 activity, it is the importance of coming to a reasonable basis of 
 overhead. I want to declare here and now that I am seriously and 
 enthusiastically committed to the perpetuation of the industry of 
 shipbuilding in America, but I am conscious and each of you must 
 also be similarly conscious that at this moment you are facing a 
 crisis; we are crossing a river, and if this thing is dropped now, if 
 before private enterprise comes in the Government lets go, I don't 
 know what will happen to the industry. We are undoubtedly facing 
 a situation to-day where we have at least a 100-per cent excess of 
 shipbuilding capacity in the United States. One of the first things 
 we must do is to correct this condition. If it means the wiping out 
 of yards, it means, in effect, the reimbursement by the Government 
 of the cost of installation as war work and as war cost, but it should 
 not be handed down to the future and the coming generations as an 
 element of the cost of what we shall do from this day forward. I 
 am not looking backward ; I am trying to look forward. All of these 
 troubles that have passed concern me very little. As an operating 
 man I know that if we are to have a merchant marine we must have a 
 shipbuilding industry. As I have said on several occasions with 
 reference to the old conundrum, " Which came first, the hen or the 
 egg," I don't know and I don't care which came first, but I do know 
 that if we are to have a merchant marine, we must first have the 
 ships, and we must be able to build ships in competition with the rest 
 of the world. 
 
 'We hear a great deal of stress laid on the disadvantages of operat- 
 ing costs. From the operating standpoint I give very little account 
 to that, but I do attach great importance to this we must have the 
 right type of ship, and on that type of ship the base price not for 
 the refined ship, however must be right. You can not expect Con- 
 gress any more than you can expect private capital to build ships in 
 America at a higher base cost than they can be built elsewhere. I 
 am very glad that Mr. Hurley has given me this opportunity to 
 impress this point on you. I am thinking of this thing day and 
 night. You think of it from your shipbuilding end; if you will 
 allow T me to emphasize it, I think of it from both sides; I think of it 
 as an operator, and, as an operator, where am I going to get the 
 ships? As I said before, the right kind of a ship is a matter of 
 design, but the right price is what we must have from you. 
 
 We are now here it is Mr. Hurley's desire, and I think, the pur- 
 pose of this meeting, to reach a good understanding. So far as I 
 am concerned, and so far as it is within my power, instead of inter- 
 fering with or adding burdens to the shipbuilders, or making con- 
 struction more difficult or more costly, I would say, let us go very 
 slowly and decide exactly what we want; put it down in black and 
 white, reduce it to a blue print, and stick to it. But what were we 
 to do when ships w r hich were built for overseas service had a steam- 
 ing radius of a thousand miles or so, and an initial radius of 2,800 
 miles was required ? Something had to be done about it. 
 
73 
 
 We built ships where the winches were so deficient that they broke 
 down the first time they were started, and every day you tried to 
 work you had to change the winch. There can be no argument about 
 the need for that change. That is what is back of us. 
 
 Now if you find any needless changes Mr. Hurley will no doubt 
 institute a very thorough search of this whole thing, and I shall be 
 glad of it. 
 
 Let us get back to Mr. Brush's idea that if we have to make a 
 change, let us analyze it; let us have the order signed in longhand 
 by the men responsible for it. This matter of cutting an eighth of 
 ail inch off of a suction pipe into a double bottom of course is the 
 height of absurdity. That is one of the stupid things that will occur, 
 a net there must be some appeal from a thing like that. And the 
 heightening of a smokestack do you know what case that was? 
 
 Mr. HAIG. The Marica, the steamer Marica. 
 
 Mr. ROSSETER. Did you ever hear of the change ? 
 
 Mr. ACKERSOX. No. 
 
 Mr. HAIG. We are not complaining, you understand. 
 
 Mr. ROSSETER. I am glad you brought it up, however, for I want 
 the matter investigated. Don't think I am complaining; I want these 
 things brought out. As I have told you, I haven't dealt with 50 
 changes in our ships myself. Here I am in my office where certainly 
 enough people come in who have nothing at all to say to me, while 
 you men, who might have something to say do not come in. I shall 
 be glad to hear you. 
 
 Mr. HAIG. Probablv we will now. 
 
 Mr. ROSSETER. I think I am the most accessible man around here. 
 I have been on the job pretty nearly every day, unless once in a while 
 I have cheated a little and gone away for short rests and recreation. 
 
 Maybe the heightening of that smokestack was an Army change. 
 Now we come back to another condition. We have had the Army 
 and the Navy changing, and then we have had the Army change the 
 Navy. We have then come into the thing and looked at it and have 
 found those changes were wrong, and have gone back as nearly as 
 we could to the original specification. I want to tell you that every 
 time I have looked at a plan, I have looked at it from the stand- 
 point of, "How closely can we adhere to the original drawing?" 
 I think Mr. Mull and Mr. Riggs will bear me out on that. Mr. Mull 
 went over some plans with me when there was a question of moving 
 the bulkheads, and finally we found a way so that there would be 
 no changes in the bulkhead at all. I know it is a fatal thing to go 
 into the yard and upset everything by asking for changes, but on 
 the other hand if a change is essential, is there anybody here who 
 will not say that the time to make the change is when the ship is 
 being built instead of waiting until the ship enters service? There is 
 no argument about that. 
 
 Now, reverting again to the item of ship costs. We hear a great 
 deal about what ships are costing in Great Britain. This same 
 authority that I have quoted before told me that you can authorita- 
 tively say that the best price for which a ship can be built to-day in 
 England is 28 per ton (figuring it at $5, and that is $140) with a 
 stipulation that the buyer will pay any advance in wages and any 
 increase in the cost of materials, as of the date of the contract, and 
 
74 
 
 also with an understanding that delivery would not be made earlier 
 than a year and a half. 
 
 Now the situation in England, as I see it, which is due to the dis- 
 turbed conditions resulting from the coal inquiry, miners' wages, 
 going up, cost of coal increasing, and thus in turn increasing the cost 
 of train operations, manufacturing, and living; and last of all the 
 very serious effect it has on British shipping, inasmuch as it pro- 
 duces higher costs for their propelling power, as they are resting on 
 coal places us to-day in an advantageous position. We have an 
 opportunity now, that probably has never before come to a nation, 
 to really perpetuate this industry of shipbuilding. But Mr. Hurley 
 is conscious, as I am, of the fact that there is an enormous amount 
 of criticism in the House and the Senate of the fact that we have 
 been paying too much for our ships; and that we have been build- 
 ing ships that are not entirely suitable; and that it is asserted that 
 this business of the building of ships by the Government has to stop. 
 A lot of people are saying that the authorizations will not be trans- 
 lated into appropriations, except for the expense of indemnifying 
 the builders for reasonable claims. Well, that is a very unhappy 
 situation, and I can say to you sincerely and Mr. Hurley will bear 
 me out that since January I have tried to bring this message back 
 that no matter what the cost of building in England is, why can't we 
 match it? We can match it in two ways. We must cut down our 
 shipbuilding plants ; we have got to. We have twice as many plants 
 as we need, and we must cut them 50 per cent. Now, where will that 
 cut fall ? Unhappily it will fall. It may fall on a great many men 
 that I am speaking to now, and I am sorry to think of their partic- 
 ular cases, but it will certainly fall on the inefficient; it will also 
 .fall largely, and fortunately, on the Government enterprises of ship- 
 building. Hog Island will naturally have to come down at least 
 to a very much smaller establishment, and probably will be made 
 available for private enterprise as against Government operation. 
 It will fall on the Lakes, because after all the builders on the Great 
 Lakes, because of the limitations imposed by the canal, as all of these 
 gentlemen have very fairly recognized, must go back to the business 
 that they had before the war. That is, they must very largely go 
 back to that. Modern operation requires an entirely different type 
 of ship from what we have had in the past, and a large measure of 
 that difference is in the size. We now have plans for a 15,000-ton 
 ship that can be manned for practically the same cost as our 8,000-ton 
 ship, and at an extra cost of a portion of a decimal. When we enter 
 into this important problem of building up our foreign trade, the 
 bulk of which will rest on space articles like coal, in which com- 
 modity we are going out to get a share of the world's trade in com- 
 petition with Great Britain, we must have a ship that will deliver, 
 as they do on the Lakes, a ton of coal a thousand miles as cheap or 
 cheaper than any other nation in the world can do it. 
 
 In the reconstruction program Mr. Hurley has reminded me of 
 it in the revision of our program great attention has to be given 
 to the larger ship. Unfortunately we can not turn to the Lakes for a 
 great number of ships. When we go out in the world to compete for 
 world trade, those Lake ships, serviceable as they have been and as 
 they are to-day, will be a handicap. 
 
75 
 
 Out on the Pacific coast they build a type of ship generally known 
 as the West type, a very good ship, but we have too many of them. 
 We have too " few ships of more than 10,000 tons. If you gentle- 
 men ever look at the register published by the Division of Opera- 
 tions you will see what a small column represents ships over 10.000 
 tons. Whatever it was that started people in Great Britain to build- 
 ing large, fast ships, led in the proper direction and they were very 
 wise in doing it. As an operating man I can tell you with all sin- 
 cerity that the difference between a moderate-size slow ship and a 
 large-size fast ship is the difference between black and red ink, the 
 difference between success and failure. 
 
 Xow, you can go up to Congress I should like to, so far as I can 
 and assure the members of the Senate or House committees that the 
 American shipbuilder is conscious of his responsibility; that he is 
 going to tide this thing over ; and that such aid as the Government 
 has to give in the way of continuance of this program will be em- 
 ployed to build these 12,500 and 15,000 ton ships, of which I have 
 estimated we should have at least 100, and I believe they will see 
 their way to make the necessary money available. It would not be 
 wisdom for Congress to go on appropriating money for an inefficient 
 program. If you get down to a 10 or 20 year building program, 
 and with it to the old efficiency that you had before the war, the 
 industry will improve its position. But you must get away from 
 the wretched " cost-plus " system, with a lot of drones in the yards, 
 and riveting costing 20 cents not 8 cents or 4 pence halfpenny, or 
 2 and 6 or 2 pence halfpenny or whatever it was, but to 20-cent 
 riveting and that was the general run of riveting and until we get 
 away from the " soldiering " of men and until we eliminate from the 
 yards all of these auditors, comptrollers, and checkers who every- 
 body knows are a handicap to the business and a great cost to the 
 Shipping Board, we will never get down to sound prices. 
 
 Therefore it is your responsibility to come forward and recognize 
 what Mr. Hurley is trying to do here; come forward and look at 
 some of the specifications we have. If you do not like them, tell us 
 how to change them, tell us what you want to do, and then come 
 forward and say : " We will give you a lump-sum price of so much 
 a ton for that program." Then we can draw up a contract and get 
 a price that is justified. 
 
 Xow, finally, before I go, a number of you men have protested here 
 to-day against the changes that have been ordered. You have made 
 me bleed, and if what you say is true, it is a shame. But the correc- 
 tion is in your own hands. Why don't you come forward and say 
 these things ? Please do it. I am here all the time, and at any time 
 that you have a question that you would like to raise, you will find 
 me glad to go into the matter with you, not only from the standpoint 
 of utility, but of what it means in your work, what it will cost, and 
 how much it will interfere with you, and if the balance is wrong I 
 will cancel the change. So far as I am concerned, it will never go 
 any further. Therefore don't hesitate, please, but come and see nie. 
 Is there anything else you want, Mr. Hurley ? 
 
 Mr. HURLEY. No. 
 
 Mr. WILKINSON. Will you give us those figures again on prewar 
 costs and present costs, so that we may take them down? I mean 
 labor, material, and overhead. 
 
76 
 
 Mr. ROSSETER. Labor, $26; material, $24; overhead, $12. That is 
 a total of $62. 
 
 Mr. WILKINSON. Then, since vou gave us the second, will you give 
 that? 
 
 Mr. ROSSETER. The second, material, $65 ; labor, $70 ; overhead, $32. 
 Total, $167. Now please understand these are not my figures. I ex- 
 pect you gentlemen to produce figures much lower than that. 
 
 Mr. WILKINSON. You said that you had an English cost there of 
 so much per ton. What was that ? 
 
 Mr. ROSSETER. Forth-eight pounds. 
 
 Mr. DONALD. That is for tank steamers. 
 
 Mr. HURLEY. We will adjourn in a few minutes. I would like 
 briefly to say that this meeting has been very helpful to the members 
 of the board, and I hope it has been helpful to you gentlemen, in 
 helping us to arrive at a better understanding. 
 
 Now first, Mr. Ackerson, have the gentlemen handling claims in- 
 Philadelphia given instructions to be fair and just and they want 
 to be in the settlement of every claim. W^e are not trying to split 
 hairs on this proposition; we are trying to be just. 
 
 In addition to that we have submitted or will submit a plan to 
 Congress on the ownership and operation of our fleet. That is step 
 number one. 
 
 We had to decide on an objective, how many ships to build. So we 
 decided that 50 per cent of our commerce should be moved in Ameri- 
 can bottoms. Then we started out to find out what sort of ships we 
 should have to move that amount of commerce. If we move 100 per 
 cent of our commerce, our ships will be coming back in ballast. You 
 know the English never moved over 60 per cent. In taking that 
 step we find that we have a great many ships of the Schuyler type 
 still, and a type that is not really efficient. 
 
 Mr. Rosseter is making a report on the style and type of ships that 
 we should have in the operating of a fleet, an efficient fleet. We are 
 not going to take any step until we talk with you men again, but we 
 are all very anxious to have 3^011 study this thing, certainly from the 
 shipbuilder's point of view, from the ship operating point of view 
 and from the country's point of view ; and I want to say that I believe 
 that I speak for the other members of the board when I say that we 
 are going to talk to you men very soon again, and we want you to be 
 ready to say: "Well, we can join with you in your recommendations 
 to Congress heartily, sincerely; we believe you are right, and we 
 would like to have you recommend the building of a million or two 
 million tons of additional shipping, of a type and style different from 
 those you are now building." 
 
 Now that is what we are trying to do, but we have to act quickly, 
 and we don't expect you gentlemen to commit yourselves in any way. 
 
 This has been a sort of a " get together " meeting ; getting ac- 
 quainted. We have profited by it, but we want you to know our 
 'point of view. We are as directly concerned as you are in the em- 
 ployment of labor, the building of ships, and the operating of ships, 
 but we must look at it as a whole, and we must take Congress into 
 our confidence. We must be able to say to Congress : " You are 
 justified in building these ships at these prices." And we are not 
 trying to get you down to $100 a ton. If you gentlemen don't make 
 some readjustments and revisions, and we don't work out some plan 
 
whereby the Government is not going to take all this money away 
 from you and ruin the shipbuilding industry, it is going to be hard 
 to accomplish anything. I am going to start to-morrow morning 
 with the Treasury Department and see what can be done, and in doing 
 that I will advise you what results are obtained. 
 
 Mr. Stevens, have you anything that you want to say ? 
 
 Mr. STEVENS. No. 
 
 Mr. HURLEY. Now I will be glad to get your reaction on these 
 points. I would like to have a committee appointed on this income 
 tax, or to have you make any other suggestions that you want to, but 
 we want you with us, and we want to be with you. We want to build 
 ships in American shipyards. 
 
 Mr. BRITTAIN. What have you found from your study of the situ- 
 ation in England as to the relative costs in American and English 
 yards ? 
 
 Mr. HURLEY. We couldn't buy any ships in the English yards at 
 fifty-fifty. They know as much about it as we do. But we are all 
 getting light. There is no danger about that, either in operation or 
 construction. 
 
 Mr. BRITTAIX. There were some figures that Mr. Haig had there, 
 for instance, about 5 cents. On our tanker construction I just 
 looked at the record yesterday our piecework averages 5 cents, or 
 around 5 cents, while in the straight work it averages from 11 to 13 
 cents for driving rivets on tanker construction. It would be inter- 
 esting to know how that compares with the English yard in cost. 
 
 Mr. EOSSETER. That is a good idea. 
 
 Mr. BRITTAIN. That is on tanker construction. 
 
 Mr. ROSSETER. That is very good. 
 
 Mr. WILKINSON. There is just one word I would like to say and 
 then I am through. Remember that 80 per cent of every vessel to- 
 day in the w^orld is under 5,000 tons, and remember you can't build 
 a vessel for a certain place where the water is shallow and where 
 it will take 25 years to deepen it, any larger than the water is. You 
 can't build it larger than the terminals will take, than the docks 
 will take, than the business will take. Of course, I am an optimist, 
 but you can't turn this shipping business all over into 20,000-ton 
 vessels to-morrow any more than we could take the 4,000-ton boat 
 on the lakes which we started with and put the 12,000 and 15,000 
 boats to all the docks and handle it successfully. The vessels ran 
 for 12 years before they broke even when they made the boats too 
 ]arge. 
 
 I just wanted to put that into your mind so that you may keep 
 your feet on the ground relative to making them all 35.000 tons. 
 
 Mr. BRITTAIN. The largest ports in the world, I think, take 5,000 
 tons or less. 
 
 Mr. ROSSETER. I appreciate you jump in your figures very fast. 
 You jump at from 15.000 to 20,000 and then to 35,000. My own opin- 
 ion is that we should not build over 15,000 tons ; that that is the maxi- 
 mum of size. 
 
 Now, about the draft of the ships, I will tell you this ship that I 
 built in England for $61 a ton steams 12J knots, has a steaming 
 radius of 18,000 miles, and arrives at any port in the world drawing 
 only 20 feet of water. 
 
78' 
 
 Mr. WILKINSON. You have got to have something more than feed. 
 This vessel that I speak of that was too large went to all the ports in 
 the Great Lakes, but they couldn't make a dollar out of her fo. k 12 
 years. 
 
 Mr. ROSSETER. Probably one of the troubles of ocean navigation is 
 that you must not get your large ships too long-legged. You can have 
 them as long as you please, or as broad as you please, unless you are 
 going to Australia where they have narrow bridges and you can't get 
 through ; but, generally speaking, the limitation is the leg of the ship. 
 
 Mr. WILKINSON. I have seen a little in the papers about it. and 
 that was why I thought I would drop a word. 
 
 Mr. MULL. We have built 14 ships of the same type, and that means 
 that they must have given satisfaction, and I will say this, I represent 
 a shipyard that has been in business for 70 years ; 40 years of that 70 I 
 have been with them. And in regard to the big ship, the big tonnage, 
 I think we built the only trans-Atlantic ships that crossed the Atlantic 
 up to the war time, and there were only four the St. Louis, the tit. 
 Paul, the Kroonland, and the Finland, and I know the serious need of 
 ships of that type, more like the Kroonland and Finland, I would say, 
 rather than the St. Louis and St. Paul. They made big speed and 
 held the world's record for several years. 
 
 I want to say further about the prices you gave, Mr. Rosseter, while 
 it is perfectly immaterial to me, I wish you would say I didn't give 
 them to you. [Laughter.] 
 
 Mr. ROSSETER. I am speaking of the prices on English-built ships 
 and the relative percentage between operation, labor, etc. 
 
 Mr. MULL. The other prices I admit. 
 
 Mr. HURLEY. Now, gentlemen, don't hesitate to come in and see us 
 at- any time if there is anything on your mind. We want to work with 
 you and expect you to work with us. 
 
 (Whereupon, at 5.55 o'clock p. m., the hearing adjourned.) 
 
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