(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Work materials ..."

BOSTON PUBLIC LIBRARY 

3 9999 06317 398 1 



OFFICE OF NATIONAL REC0V2RY ADMINISTRATION 
DIVISION OF REVIEW 



CASE STUDIES IN PRODUCTION CONTROL 
By 
Louise E. S. Eisenlohr 



WORK MATERIALS NO. 66 



TRADE PRACTICE STUDIES SECTION 
MARCH, 1936 



OPFICE OF iTATIOuAL RSCOViklY ADLilNISTllATION 
DIVISION OF HEVIEW 



CASE STUDIES III PRODUCT lOlI COiTTHOL 

By 
Louise E. S. Eisenlohr 



TRADE PRACTICE STUDIiiS SECTION 
March, 1936 



9855 



CASE STULlJiS ir PnODUCTIGil COITTROL 

Tnole of Co utpii ts 

Page 

SmaiARY - 1 

CHiPT£K : SliirT Li;;iTATIUiI Ii: the COTTCIT BUilSLE 7G2I{ 

SOCK bPlAi:ch cp the hosiery IYDUSTHY - 2 

CHAPTEE II PRODUCTIOi: COITTROL IIT TTI£ i;ACHIi:ED TJASTE 

lEDUSTHY S:^:XIY OP CODE ST'UDY - 13 

A. G-eneraJ. Sta.tenent oE tlie IncVastr^' s Proble-.i - 13 

B. Description of the Industiy - 13 

C. Econonic Conditicns in the Inoiisti-- - 14 

D. Co'ipetitive Situation "./ithin the I/ichistr;- - 15 

E. The Industrr; Under the Code - 16 

CHAPTEH III THE CASLOIT BLACI" IX^JPACT-JPIHG Il^USTPY 20 

TABLE 1. COTTOd BUITDLE -JORIC SOCIIS 32 

Data on Costs - 7 Companies 
TABLE . II . COTd'OlI EUISLE T70PJ: SOClfs 33 

End of Year Inventories - 11 Conpajaies 

TABLE III. COTTOil BUilDLE ^OPJI SOCKS 34 

Appro::inate per cent of Ca;oacit7 at 
miich 11 ilills Operated, 1931-1334 

TABLE IV . COTTOK I3U13LE UOFJC SOCKS 35 

Annual Production - 11 Co:-ip,?jiies 

TABLE V. COTTOiT BUlTIlLE ".TOPJC SOCKS 36 

Aiinual Shi':):ients - 11 Coivoaiiies 



ii 



9855 



-1- 



su:::i:-Y 

Tlio tlirec cacptcrs which folic- re "briof, sini: ary discusGionc of the 
econonic conc.itions in thr ■: i. -i.- t-^i.- s vhich led to ■.iroduction co.itrol, 
aiid of the nature and cffectr i :. is control moas-urc. Lack of tiue, 
and often of iir.terials, h'ls . it ir,rjossiblc to do nore tlian outline the 
ir.portant fct",tiires. 

The- studies arc not i^tc\ided, ^lovrevcr, to 'oe c:;hauGtive investi;-,'",tion 
of tne industries with v/hich they deal, hut rather to indicn.tc , -?t le^.st 
in ;^\rt, th: scope of the cener.^l problem of production control. The in- 
tust-.-ies ccrlt v.'ith have hcen selected partly hcccousc they illuctrace a 
variety of econonic conditions, lea' ina to a varietj^ of measuri^s for 
effectin;;, the control of production. 

Cha'-'ter I; The Cotton Bnoaidlc Yi'ork Soch 3r,anch of the Hosiery 
Industry T/a,s attcrnptinf; to meet the coraparatively simple emergency 
prolDlen of low prices. The code redii.ction of labor hours, it feared, 
would leac" to the general adoption of three shifts, increase production, 
and threaten to oppose price rcstor-.tion* The code prohibition of a 
third shift a-'*^*- rise to contro.. ers;" , because those neinbers of the industry 
T/ho nr'.d litclc or no idle capacity to use m expandin, , the:' r tv^o shift 
operations foii::d. themselves unable to meet demand, v/hiie those witn excess 
capacity v/ere able to. absorb the or'crs thus lost by their competitors. 

Ch:'pter II: The dachincd ■'"aste Industry faced in addition to the 
depression, a lonr;-tijue problur. of rcaaced demand due to the coimetition 
of substitutes. It attcmpttd to savi,- itself by the direct method of 
alloc .tir.a production, Imvina had .little success vmdcr the code with 
price filina, standardization of gr. laes, and a minimum mark-up on rav/ 
materials. The case of this industry illustrates the inequalities a 
production control provision of this ty^oe may im;^Tose upon different sectors 
of an inc'.ustry v;hen it is adopted to save the diminishing business of an 
industry which is shrinlrina, 

Ch.o.pter III: The Cprbon Black Industry had to d«al with a chronic 
condition of instability, due to tccluiic d c vases, which was badly 
aggravated by stock accui^mlations durina the depression. There is no 
indicr:.tion tliat chc inventory -and ca'-.acity control raeasxires which were 
adopted under the code were more thai moderately successful, but the 
issues involved arc peculiarly interesting because the industry was 
apvurently already closely controlled by a few concerns, which conceived 
these measures to be neccssar;- to achieve a degree of stability which they 
had not been able, themselves, to attain. 



s?:n-T LI iTA TioN IF Ti ::~ cctt ci- "m ^ix:: yjghk sqci: ?raj'Gh 

Q" ?'-:3 - -: SI3?Y I' /LUSTBY 

The Coce for the Hosiery Ir:'Of.try induced- in Article IV, Section 6, 
a nrovision for tr^c limit-?tioa of :T"'Chi;ie i.rurs to two shifts of 40 hours 
each Ter veel:, a^- iicebie to :-Ji sections of the Industry. Tue oo.ject 
of tnis study is to outline the effects of this "orovision ur-on the Cotton 
Bundle 'riork Sock n-^.uch of the Industry. 

A brief -orelirninp.ry cu&cri--tion of the Hosiery liicu&try as a ^--hole 
v'ill nelp to oive tnis survey of ^■. single -oroblem in one of its branches 
its nrojer lers 'octive. 

Tne Hosiery Industry has t--c main civisions - tue full-fashioned 
and the seamless. The first malies only v omen's &ili_, r?yon and mixed 
i.osiery, snaoeo and sea:Tied. Ti.e second is subdivi-fed into s-veral branch- 
es, 'amonii:, them ribbed nose, ciAltren's sochs, rork socl:s and £olf hose. 

The rel?tive inroortance of the tv.'o chief divisions may bo seen in 
the follo'"in^ statistics for the value ana voliaiiie of production in 1934. 
Tne full-fasnioned /.ivision pro.aices a hi, her priced ^-rticle than tlm 
s -araless anc nas tnerefore a Ui,:.i.er total value, D\it tne latter has the 
l^rK-:r volioire. 

- Voliufie (doz. -lairs) Valu.e 

Full-fashioned 30,549,000 $18^, 10-, 000 

Seamless 73,3?3,0"r) 103,611.000 

Total 103,8ri,O0O $1^86,714,000 

(Source: 3;vidence Study '"o. 18 of tne Hosiery Industry inre-oared 
by C. .1. Hen^^erson, Hov. 1^35) 

The tio I ivisions ?re.not entirely clear cut, since some 
mills are ev^^.^nc, in the !.i?nufacture of both full-f?.shioned and seam- 
less hose. '- f_rou-nin^ of 5 11 nosiery mills on the basis of their princi- 
pal output snoY's tnem in the follo'^'in ratio: (as of July, 1*^33) 

Fuli-f?s..ioned - 283 
Seamless - o65 

Total - 

8o3 

Tnere is a concentr-^' t'ion of the full-fesnioned division in 
Pennsylvania, vhere nearly one-naif of tne mills, o oeratin^. 58 ■ of the 
total equipment, are loc--ted, 'Vi-.inly m Pnil= ;" el-mia eno. Re?din^. Ctiier 
important ristricts are .'orth Carolina, iei^ Yorlz, He- Jersey and , is- 
consin. Tne seamless division of tne Industry is centered princi-oally 
in two LAstricts: North Carolina, vnere aL,out one-fourth of the mills 
are located, and Pennsylvania v^rich claims 23 .. Half the mills are in 

9855 



the soutnern st;^-toc.(*) 

The cotton L-Lu-Loie irork eock i rnr.Cii comprises T-^leven mills - or 
less tn?.n 3' oi ti.e total irojnber in the 6e?.;:alesi. 'o.ivi&ion. It -rocuced., 
in 1&?4, ro-U--^ii.ly r^-, -OOiOOO dozen o-^irs of soch's, or 4—1/2.. oi" the total 
•oroduction of the seamless division, '^ive mills sre locrted in the 
Horth (Illinois 2, Jew York 2, ?ennE:;l\ snia 1), -?nc six in the Soutn 
(Georgia 4, l-Torth Carolina 1, South Carolina 1). There v-as a Code 
minimum wa|.e differential of $1.00 per veek for knitters in this branch 
($13.00 Korth-$12.00 South). Turee of the eleven com-oenies in this 
branch are notably smaller txian tiie rart; tvo ^re r.otebly l?rior. The 
follovm^ list snoTS tne relative size of the mills orooucin,^ cotton 
bundle vork socks. 



Com -any o_ 



Total ;To. 
" ;. aci.ines 



llelson Fnitting Co., P.ockfcrd, 111. .jb? 

Pov-ell Fnittinfe Co., Pail'-, ekohi? , ra . ( ?4D 

^nd So-^rt-.nb -.rg, S. C. ( 601 also 

(available 

(,. ross tot?.l r.30 3B.1 
3allston-Stillv-atrT 7nittiv::^ Co., 

BallEton, r. Y. ?37 10.0 

jjurh?m Hosiery Mills, Diirn^'rn, "k C. 28'o 8.4 
Forer,t City Frittia,. Co., 'c-'ira, 111. 

(v ■'■ ' r,r- .jord 165 4.8 

(Old. Eoc-ford 100 ?.0 

Total 26b 7.8 

P e rki n s Ho s i e ry k"i lis, Co lumbus , G'^. . 26 " 7.8 

r.ibb Mfg. Co., Macon, C-a. 246 7.3 

Georgia kf£ . Co., Columbus, Ga. 218 6.4 

Grantville kills Co., Crai.tville, C-a. 122 ".6 

Seneca Knitting Co., Senec?, He- York 30 2.3 

3irdsboro Hosiery Lxlls, :k.r6Fboro, r-- . 40 1.15 

Total rZ77^ IOC 

The economic co.'ic.ition of ta-?. I'.iau<^ try, as it is aescriued in the 
statements ma.c e b;, its ..Ou.beis, is - or v^^s at th^ betiiinint: of the code 
■oeiod - '"orse tnan tiie ratner .uPa^,re fr-tn r-vailable m the records vould 
ap-oear to be-r out. Studies bssed on Puryau of Census Statistics (Sr-e 
Research and rlannme. Report on tne Goce for the Hosiery Inc.ustry, 1933, 
and Dillinthsra's Prelimi.-?ry '..r-'^ft Re^iort of tne Hosiery Incustry, 
Feb. 193o) state tii?t the peak year for 'Trodu" tioa raf 1S23 ?no. tn?t c'lr- 
in£, tne depression the ^veate^^t cecli.'e '^'^s only 12.9.' belor the figure 
for 1929. Prices fell considerably more than oroduction. "arly in 1933 
tney wore 46,. belo'" txie level -irevailins, in 1929; from tnat tirae until 
the coce vas a-o-oroved (August -.6, 1?-'^'?) t..e.v rose to 7o.7'. of their 1929 
level. In .Viitu^t, 1934, t^ey ..a; fallen ?,.-in to ^7.8., and thereafter 
ti-ey rose only sli ..tly. 

There was ^.ener-i eivn^efsion tnrovuhout tiia Industry of the belief 
that it w?s suffering.-.., from a condition of swollen inventories. It is 
(*) Research and Plenri.it ddvision Re^^ort on the Coce for the Hosiery 

Industry, 1933. HTJi. files. 
9855 



true that a Cii=--.ri^e !:■■, uvi^,'in_. ii?bits '.vrxrii. tne ICi'O's affected this in- 
dustry as otners nec^ 3f- sit- ti.i^ the .■;.:;■' tenance of l-'-r>^er inventories 
tnan were form&rly k^-t by nia/ua TiCturers; but stvtistice on nrnd do not 
shoF tnat tue in"er.tori-i^ er'isti.i^ at th-? ti -=■ tne coo ''■^.■. a^o trc '--sre 
out of line vitu ti.ovo of -):.evious years. A r-j-ula . seasonality nas 
ore-vailed m tne liiL.ustry cairing tne -la^t dec-^-c e, tne ni^ii months for 
snipments oeinj^, s ri-i^ ^i^a suturnn. larj.. er inventories are •ire---'-red in 
expectation of tnese "e'hs, but a ciirsory survey of r.onth-end inventories 
over a "oeriod of ^'ears snc'S tne.n at all ti:..es of tne y^-^r c= ^^ole of 
suo dying txie cie.--rd nor:^;ally ^ ntici-? t--'c: ::^or t^^-- ^^xt ^ to 10 I'eeks. 
Tiiis t-eneral rule a^^e^rs to :X'lc . occ for botxi tiiO searnless and the 
full-fasi-aoned br^ C;-^-s of tne Indv.ftry. The follorir-;; t'ble vill 
indie: te tnis situation. 

Stocks on nano. December '^l, 13"", and Lecemuer ?1, 1??4, 
com-oar--"d vith sf.i-on:8nts Jan-aar;,^ and February, l!"?;C-l -4. 

(D?ta from Statistic--- 1 "ulletin of tne Hosiery Code Autnority, Vol. I, 
;','-9, F :briiary, l''".j) 

I-\-ll ;"--s..ionec riosiery Sni"ments (coo's) 
l~:r l-^^O l-;r-l IJP.3 19?:^ 1?'^4 

January ;jOB6 1 17 1038 IS-^l 1934 1^^"6 

February ^^--^l ".164 2 ?V0 '''^4j :;,^39 '400 
2 i.onths 

Tot^l ^'""7 4081 <;;0S 4'!V6 4:j6o ^:3:^6 



jecernot-r 



'"'1st stoc'.rs (doc's) 



IbS-'S - 413- ) A"ODroximateiy 2 montns sipoly, by 
1P74 - 445 ) comr'arison vith usixal snipments 



Searalest. Hosiery S-ii":'inents (ooc's) 

i:-'3::; i""C' i ;:;.-i i^rs I9?g i^?4 

January 6865 j76i uOOc o'] 1 4071 4882 

February 6775 ^47" -jfi.:.:-' _."?0 .,y;65 ,.?40 
2 Months 

Total 11:,?r^b ll,:-"4 10,7.1 10,671 10, "^e 10,733 

Decernjer r^lst s.tocks (ooo's) 

19'^^r - 11,850) ) Ai-^^rroyimately 2 months su-v-Ia', by 
1 '^'.. - l'^,48d) c mpsrison A-'ith usual Fhi-?i-,entE 

Similar results are sno'-n by comoarine stocks on \\'=nc i-^rcli, Julj-- aiid 
October, rith shi \ -rnts for tne '■; jolio-in mo^.tns. Stocks equal from 
6 to 10 '"eeks sitTcily. 

In 19-?5 inveiitorie'; incre---^ed ■:.urin._ the e:-rly simmier months in 

98^5 



eroecta tior. of cov.e rsr-trictioup. ■ac^on r L-oC\vtiou. Lirai:>tion aid not 
follov/ in tho m^.r.ner e^roeota.." , ^.nd ?. tf>Tn-''Or!-ry t-lvtt re:3u:i.tGd.. To 
remedy tnis sit'Oi'l.ion tne Coa? A"at..crity succeodod in i-^ininj, a aci- 
rainietrptivG r-.^-orov=^l of a terr?orary r-.aenoriient of Article Iv , Soction 6, 
limiting iTiachine o jcr-^tioris for •-> -verioT of 5 ''-e^i.'s to 2 SiiiftF, or ^^5 
nours e?cn per "^ook. (Aoxiirist"'- tive Cr" er 16-"). 

From the available recorr's (*) it o:-s not -'^j' 1' tii? t tiiorc rare 
any marked differences in the re^ '^er'tive eco-or.ic --0. :iticnP of tne 
tvo major c.ivisicnc of tne Ho&iery Industry, ?ltx^.ov..eXi a- -lajor snift 
from seamlese to full-fasaio-.ed i.?' ocnrred c'urini, the e=^rly '20's 
vhich mi£.ht have heen eyoectud to -iroduce extreme excess ca.-iacity in 
the seamlesf civision. Tids vas ciised hy the svm^ in oenand from 
romen's cotton to full-fasr-iored sill: r.osiery. Ilo'-ever, ty tne time 
the code arose ootn civisions vere '-r-:rl u en t:.e rj-^-d for curtailing 
the use of rirodurtive apichinery. Inr l'.' 1. .;r~ -■' '-i <. to be more 
a^it^tion over tins question in i.n - fuil- ^-^lii- .0 civision than in the 
seamless, and the -Code Autnority Eo^.nt rrucn tine in studying: an adjust- 
betv^een full-f? shioned le^. 1:: ■ njii, I'ooti ., ,.'ir.^..ir3 Q-^er^tions which v^culd 
brini, tne resirec volume of Tvro: '■ .rtion. (**) 

3yr-ct statistical d-t- on the number of machines, -potential 
capacity, per ce.it o.f iclo -- '-^c-ity, and the incit.encs of these factors 
ujon inaivipual -plants m ti. ; I;k'1 stry as a rholo ^.0 not aio"o-r^ar in tne 
record. Tne extei.t to -i-iri. .-.rtr-.r.i ir I3 r-: -^acity ■ r t tne c=u.se for 
the geneial den.anv for restri';'tion of ^:^ro u-tion : firnt therefore be 
determined. State.iients /I'.a : e by tne Code A'-.ti^ority an. by m.embers of 
tne Industry do, no'-ever, i^riuj,, out tne c if ficulties -111011 -oroduction 
control vas d.^Ei^ned to reioedy. '.'one 0;; ti.;et-- statements- concerns idle 
capacity. Tiiey ce-it^i" =--rour.;' tvo m»in voi.nts; 

1. T/.e orice structure. 

.2. Tne balance of ^^rocuction and demand. 

In an^ly^j : .-, .,, :jc . -. t Ir.- duLlJc Hearln>.^, on Au^iist 10, 

19?3, Lr. Z-a-l :■, . .' . \ 1, Ti;c-c!or of the National Associa- 

tion of Hofjiery 1... ^..■. -o.ui-;r&, s^ id tn^'t av-iiable lata indicated that 
the reduction in ucur'^- from tde ire-'oce average of 110 ^er veek 
(2 snifts of o.j hours) to 60 ('•" snifts of ^'0 ncurs) vould lalance oro- 
duction against den^and vith only a r-asonable -rotective mar in. 



(*) The records ey-minec for this cc se ftaoy -'■■re tiiose in the Central 
J'iles and the files of the IdvisiDn of Research =nd flnnninf; of 
".'.r..A., out CO net j.nclucp files of Coce Atitnority or tnose of 
otner a^enci^s of tne '. .A. 

(**) ^or an account of tnis foe '^emorrn.j.um on the "focter shift" 

■oroblem, Hosiery Incu try Tiles of tne I ivieion of Pesearch and 
Plan- in , , ?ol'-?r 16-10 - Research Studies. 



9855 



TliG expectation of such redaction was to reduce production by 27;3.(*) 

To insure this result a snift limitation was of course a 
necessary corollaiy. Y^ithout it an increase in shifts raig^ht have 

destroyed the results of hours' limitation - rhich, thou<;,h pri- 
marily a labor measure, 'was also an exoression of the industry's in- 
terest in reducing production. 

Briefly, the code provisions for production control ^ere 
these ; 

1. That -oroductive equiioment be operated not more 
than 2 shifts of 40 hours. Article IV, Section 5. 

2. That in the full-fashioned branch footing 
operations be limited to one shift of 40 hours 
or two of 35 hours, according to the method in 
effect on July 34, 1933. (Amended February 1934 to 
provide 2 shifts of 36 hours) Article IV, Section 
7. 

In viev of the fact that no excessive stocks appeared to exist, 
the desire to limit production may be oartially explained by the price 
situation. This has already been touched upon. The Code Authority 
gave much cf its time during the life-time of the Code to the study 
of the price structure and to the enforcement of the code provision 
against selling below individual costs. A Code Authority Bulletin of 
March 17, 1334, makes the folloFin^ statement, which indicates the 
direct connection bety;een the production control measures of the Code 
and the price situation: 

"It i-'n.s decided to set uo a s-oecial committee to 
ttu'^y inventory and other sut;gestedL methods of 
::rocu.ction control. This subject is fundementally 
the most imi^ortant one we have before us because 
-yro-jei- solution of it will brin^ us the desired 
im:n-ovement in our ~ rice structure." 

Later in a memorandum to De-mty Ar^ministra tor Zing (May ^4, 1~"^A) 
Mr. Constantine made the follo'^'in.?; st-^tement: 

"The condition of over--orodu.ction continues to 
give us keenest i:)rice coifioetition of a character 
tlmt makes ineffective that -irovision of our 
code which i^rohibits the sale of a product be- 
loi" the manufacturer's individua.l cost. Prices 
today are so low and ujistable as to discourage 
rather than encourage buying." 

To remedy this situation the Code Authority, acting a.roarently 
to enforce the code -nrchibition of selling below cost (Art. VIII, 4), 



(*) Transcri->t cf Fearing, nps. 5-6. IIHA files. 
9855 



had rniioi-'Jicod on Anril ''7-, 1""4, a .nandatory miniraum orico for 
for ftill-fasliioiiod hosiery, Srlep belov; this 'orico verc to 
constitxitG sellin;;- 'belo'- cost in viol?/tion of the Codo. A 
simile.r measvire for scanless hosiery v^.z also to og annoimcGd. At 
tho se.rae meeting- fu-rther rest-_'ictio-.-.s ipon -•■rodiiction wuxo con- 
sidered. 

Ihether there v.'?.e any definite intention on the -j^rt of the 
IndAistry, or sections of it, to effect a re-".llocation cf :^ro- 
dr.ction throw.h the restrictive neasuros of the Code is not to "be 
ascertained from the record. Tiis.t th;.;. was a resv.lt of the operation 
of these measures, is, however, clear. In the aljove mentioned memor- 
and-om to Depu-ty Administrator ICiht,, this aspect of the iinatter is 
TDror^ht out. The memo randiun ajiotes from Hr. Constantino's letter 
of ;>-rch 15, 1934-, to C-eorcc Sloane, then Chairman of tlie Cotton Tex- 
tile Institvite, as fcllo\-s: 

"The reduction of nochly machine hours in. our 
industry fro:.: ?n avpra^;e of 110 to EO, equivalent 
to 2%i has 1t£.c" the effect of spreadin<;; production 
into many plants '-.'here there ras inadequate" pro d.uc- 
tion prior to the Codo, 

"Anotnor interesting, development vThich Y;as not 
foreseen 'o^ i-'-s has liGen tliat larger plants v:ith 
•^,ood sellin_, or merclmndisinj;; facilities, vdicn 
their prod\iction v/as shtrirly redu-ced, pi'cccoded 
to enter arrangements v.-ith SLialler mills "by 
v'hich such small mills m?-nufacturc c::clusively 
for the larger mill, i-ith one ord.er aiitoma.ti- 
cally follovdne another. The 7>rices on such 
inter-m.ill orders do net, I coaicss, ^ive the 
sma.ll mill much ms.r^in, hut this is offset "by 
the fact thiS.t the small mill i:; relieved of a 
selling problem, and "by the further fact tha.t 
in most of these con.tra.cts the "btT^'in^- mill 
supplies the comraodity or yarn, so tliat 'the 
small mill merely lends its eopiipment facilities 
and applies its lahor. It is my .jud,pnent that 
m.any a. sma.ll mill has ■bee:! sa.ved by arranr-cmtnts 
of this character." 

The records of the Acministration do not appear to contain the 
statistical data necesr.ary to stvidy the cxton.t of this interesting- 
d.evelopment. ( *) 



(*) T^'-e Coc"e Ati.thority ' i. files may contain a record of this develop- 
ment, cut there was no o;-:iiortunity in -^reparint: this study, to 
^^.o through them. ITor rar it -oossible tc investigate the records 
of the national Indv.r.trial Heccveiy ~:eview Board, for an accoviit 
of its stimj-ions of the Hosiery Cod.e Atithority to appear before 
it on Harch 13, 13r''4, to answer cterges of monopoly and the 
op-orcssion of small cnter-'riEes. 

9833 



Another inr'.ication that the machine hour li'mitations -orodticed 
rome reallocation ic vounc. in the fn.rthen statement hy ''ir. Con- 
rtantine in the sane memo ran ihun, t?.= t tim desired result of rc- 
Gtrictini_ nrodr.ction had been "oartially defeated hy (l) the -ox\t~ 
chass of additional equipment, and (l) the operation of a second 
shift T'here there was only ore 'before the Code.(*) In other yrords, 
mills vhich before the Code ha,d operated a sinr^le shift of 55 hours 
pnd nov- i.-orked tvo shifts of 4-0 hov.rs, tended in the 35 ad.ditiona-l 
machine hours thus :,ainedL, to absorb the bcisiness x'-'hich former 
110-hour firm.s, no\7 redf.ced to 80 hours, could no longer talze C8.re 
of, er.ce-Tt by pn.rchs-sin,:^ a^dditionai en;ai-^ment. And this abilitj'- to 
-purchase additional equipment was limited to the more prosperous 
fims. 

Briefly, then, it rould a.^ipoar that shift limitation in the 
hosiery incustr;' as a \'hole vras instituted, (a) to forestall a tj'ener- 
al adoptior of three shifts as noi^ensation for the r edv.ction in 
man-hov-rs, '^hich mi:_i^^ht have canir.ed ;.n actual increase in -fii-oduction, 
(b) to insure a de-oendable foimdation for the restoration and mainten- 
ance of prices. 

There appears to be no reason to siropose, from the facts as- 
certainable in the record, tliat the cotton bimdle vorh socJc branch 
of the hosiery indtistry did not a^-ree vith the other sections in 
favoring shift lim-itation in its code; nor were special conditions 
or problems a"oparent which wo\ild ejorlain its support of t. cse mcasrLres 
on ^roimds other than those oi^.tlinecL above. The effects of the shift 
limitation -o revisions upon this --articu-lar brajich were -orobably no 
{jreater tr^.n on the rest of the industry, but tr.e constant ;5rotcsts 
and requests for exem-otion on the ■-'art o;'' one finn - the Forest City 
Coanany of ?ocl:ford. 111., centered attentio'''. upon the cotton b-ujidle 
T'Orh soch ,i ro\.ip. (**) 

The Administration h_ad the caso""of the ""orest City Comnany con- 
stantly before it, from before the_ rate of the Code's ap-nroval until 
the end of the TT^A. The nuestior it had to decide ■'-'as whether ■the' 
l-shift limitation ■"'o^^ld discriminate against t}:.e :^orcst City Conr^any, 
or whether an er.enrotion :n-anted to th:' s com-^-^anv r-oul'-^_ '^'iscrimina te 
a^-ainst its con-petitors. The Code Authority consistently arreed 
with the To rest City Com-oany's ten conrctitors, ti.rrin,:^ the Ar'ministra- 



(*) The Code Authority_ i-?roTiosed in June", l^y^, to restrict the 
installa-tion of new machinery, bvit after a --'ublic hearing on 
J-aly 9th ^-'as loersuac'ed by the Administration to ^-^ ithdra'w its 
proposal. 

(**) The remainder of this re-.-o-t 'Ira-'s heavily for material? u-non 

those .r^atherod by Cai-lton "', "^on-'er^^on fo^^- his ? tn.^y q-" th@>otto:- 
rundlc '"orl: Soc"': Branch of the "osiorv Industr y, '■'arch 7, 1'^"':', 
(con:fidcntial) -h-q-ooi-qp fo- the Division- of Research anr; Pl?nnin-. 



tion tfet an injv.sti-.G -s do-o i- oxerr^W-- -oi'cst Citv ^ron_a ^ 
provipi:-v to-iii'Ta-11 nf the -.nrvrtry v-s ^•oimc.. ^hc LaT^or Advisory 
Soard o-^-'oscd th.:- ihi--.:_'-hi.ft on .-onoral labor r^olicy ■'■r'^njT-\s.J*) 
The Divirior of ^cpcrrci. an(^ ?lp"nir- ^l^-o ?t first o-^^^usc^ ^ly^'-PJ^- 
tion for the Forest Cit:' Cor-'^ary (**) , '^:> thou"h. some months later it 
Y'as rcsarvin::' its opinion -oenrinf- tlio or.tcorac of its o^-v. invostip;a- 
tion of the case. 

The ?orcst City Corriar- filod its first rotition for oxoTrotion 
immediately after the m^tlic hcarin;: on i^n cnc'c, on Av,rust 1?, l*^^".. ^ 
A^rr;a-_-pntly no action vas ta!:en, and on Fo-otcmhor 11, (+hc code Mvin-;^ _ 
tieco iG effective on Sc"otcml)er 4) the ^:)etition i-'=e ronc^-ed. On th- s=';ac 
d--tc th.-i rorcst City corioany 'oegan to operate three shifts, in viol=^tion 
of th-e Code. This sittuation vas a.-^parontly discovered only in j;ic<"Pr:foer, 
v'hcn a statement to this effect r^-s na-e to the Co'-'e A^ithority hy the 
conoany's. counsel and its "oresidcnt. "^hc record f'iscloses no action 
u-T tc t"is tine on the p?rt of the Ar-r.iristratio" tovrard ^ranting the 
exemption. __ _. .. . 

After Porcs't City's o-nen admissio:i of its viol^tioii^, hoi-eyor, 
the Code An.thority transmitted to '^e-n-'aty Af-i-nl^-istrator Payson I^-in 
(Jam;£.ry 11, 19r54) a corjplcto record of the case. A hearin-'^ i^as _ 
thcretipon arranf;Qd and hold on Potmary 1'^, l"'^-'^, --^nc' on AT)ril ?Oth 
the Arininistration, rfter lon^- consi'.r'er?tirn,_ finally ezcr-T-ited the 
Forest City CorTi^ny for a -■^-rio'-'' of '" ^^ r=^ --s fro-' f.ic restrictions of 
Article IV, Sncti^n C o:^' t^o Code. (A'^ninist-^ ti^-e Order "'o. lS-17) . 

Uhcn the co'-'ro?ny ashed for an er.ter.sion of the 0-^cer in Jp-l3''» 
1^34, the rcqpicst was denied oh t".:o ha sis of the claims mar'o during 
the "oeriod of the cxcmrotion hy the ^0':-e Authority and the comoetitors. 
of "^orcst City. After the o;-nii'-tion of the Order, thorefore_,_the __ 
Forest City Corm^ny reduced its oncr-ticns to t^o shifts, hut continu- 
ed to iTctition the Ad:"iiniFtr5tior "or c--ermTtion.. '^hc c^re vras_fin?lly 
taken to_ the Industrial ApTieals ^o: -d n- Oetoh.;-- ", l"^",^:, -here it yas 
decided tha.t the Division of '^es^^^re'i -^n" Pl^nnin-" shopild co nd.uct an_ 
investiga-tion to determine fir-^l c'lsio".! t:\on o-" the uloa, T-'hich,__pe Tid- 
ing the decision, shcu.lr he .•^■r^nted. louuty A'.'ministrator Oo-nenheimer, 
in a sujruiH-y of the case -"or tlie :^'-<tion^l Industrial 'docovery T'oard, __ . 
stror.£;ly opposed the granting' o^" ? fu-thnr oxerTotion. This.oiinosition 
\«.'as overru-lcs, hoFCver, an^^ fr^op. '''o^'ernher "■a, l'^"4, until the invalida- 
tion of r?A the Gonropny i-as elToi"ed to onrrate throe shifts. ";'hG_con- 
clusions reached hy.P.csearc/i pnd Pl'^nninr that the entire cotton hnnr^le 
v'orh sor'- oranch h.c "■err.ittce to o~iorate three shifts came too late 
for official action. 

Actiia.lly, it is very douhtful if the shi'.ft limitation -provision 



(*) Sc^- m^moran^''um to Pe-^ut" James C. '"orthy, ■fovcmher '^•^, 19'^4, 
Certr-^1 files. Hosier"' '"olror, - "^o^'cst Cit:r Comn?ny. 

(**) See memorandum to Assistrnt ■n^-nuty 'I'rrned, in sane fol-er. 

9853 



-10- 



produced pny effect in ' the cotton liimrlo i^'o ri : , so cl: TDranch, exce-ot 
nerha-ps to orinr some idle raachinen' Isac'': into v.se_. All of the 
firms except one were alreac'v geared to ? tro-phift -nrorram, P-iad 
this sir.-;lfc three-shift fira, the "^orcst City nonnany, continued 
to operate three shiftt; nndcr tlie Code. (*) 

'The "re-code sitnation was t'lu?, altei-cd only hv the reduction 
in lahor hoiirs. This clia.nfe did not neccscarilv entail do creased. "nro- 
dtiction, since the branch as a. ^.Hiole, an'' each of the firms oxceiot 
one, -iTas -'rodr-cing conriderahly los-^i than its "ootential ca.-oacity. 
(See Tahlc III). 

The I'orest City case is, ncAro -^theless, a valixahle illustration 
of one t;roc of -orohlem vhich may •?-i:'ise i.inr'cr a shift ' limi taction 
•provision. ' It is that of the nlant i-ri-iicV;^ '^Ireac'y o-oeratin^: near 
capa.city, must choose hetrcen incveasin.5 its caiiitpl investm.ent in 
order to maintain its volume q:^ th;joo shifts on a ty;o-_shift basis^ 
or relinquish a portion of its "br.sinoss to its corrpoetitors. Me_reovcr, 
there ^"'erc s'occial fa,ctors yhich mar'o the first alternative almost 
as xnidcsirahlc, from the point of ^dor of the "^orcst City Corroany, 
as the scccnd. 

The situation confrontinr ''orort Citj' ^-f-^s hricfl^/; this:_ Since 
1003 it ha.d heen operating: all of its mac]\ines on a three-shift 
hasis. There were t-'o main reasors ?''or this: (l) _To meet demand; __ 
and (?) to eliminate t>.e larf'c.amovnt of V'-astc rhich i_s prodn.c_cd_ _ 
during the first _h3.1f-hou.r of oncrrtion. I'his factor of the waste 
involved in starting wa-s so .vreat 9s to ca.use an increase in waste 

ciXjoenscof !(':, i.e., from .?!,■* to "/ nor dozen, when two shifts in- 

stea.d of three v;ere operated. Other cost incrca-ses rcsiilti^i,-;" from 
the operation of two shifts instca'" of three, i.Tj.iscd_ the total costs 
hy 10 cents rjcr dozen. (See Tahlc l). f^orest City's costs on a 
three-shift "b^sis were alrcah" >-i;:her than those of any of its_tit"o- 
shift cometitors, cxccnt the Fo^'-'cll Comnany, apd to h?y_e. m.et the 
prohlem'hy the installatio]- of additional machinery, sufficient to 
ma.intain its usual volnjiic of riroduction, t-ouIc' h-?vc increased this 
. disadvantafe. 

The difficulties of f;etting eddition'-^l cqn.i-om_ent, moreover, 
were Qree.t. The Few '^.ockford ma chine _wa.s the solo nronerty of this___ 
company, and had been fT evelo-'-ieci {.-:radua.lly in the factory. yo_ riatte-^ns_ 
existed and no machine manaifactii.rer had over -erodiiced one. An estimate 
. lyhich the com:T-?ny received for the constructicn of addition^d- mechines 
qr.oted a "rice of from ^ilZO to '|'>1'"00 -^or n.nit, ^^nc' estimated the tim.e 
necessaiy for -nrodn-cinr the 100 ivnits needed to onerate on a t'™-shift 



(*) Three shifts were oneratcd hy this company cxce->t durin.^- tho_pcrioc' 
Ji"'ly ::50 - October ?,?, 197A-, '^vo". f-c inception of the Code n-n.til 
Anril lP'3d-, when an excmi?tior. •'-^s first ::rantcd it, the "^orcst 
City Como^ny oricratcd three shifts in violation of the Code., 



985S 



-11- 



basis as fror. ?. ye'^.v to ei:;]-teen vionthr;. The com=>n"'s e::nstin~ carii- 
talization ras then olOn,000, so th?t ths acr-.ition of 1^'" nachines 
TiovlC. aTT^:roxirn-?.telj'- Mve dorJiDled its investment. "Ms i^as neverthe- 
less the cou.rso chosen "by the l^orost City Cornnpny, ^nr^ in the' last 
months of the V~di it •nlacer"'. an orc.cr for the manufacture of 10^ 
addition=-l new P.ochforc'. m?chinss. The alternative of ?lloi^inf:'_ 
other '"orh soch/orodr.cers to tahe over the "business ??hich it would 
have lost Ly operating' two inctear of three shifts ^-'Ps a-ni^arently 
less accenita"blQ. 

Pron the i^oint of view of certain ronsiTOors, it i'^ allc.'TGd, _ 
the effects of limitation of I'Tev P.ochford soch i-) reduction mi^ht havo 
■been the forced use of undesired. suhstitutcs.. The rew_ Pochford soch 
differs from other work sochs in th^.t it has no scams, either in the 
foot or in the leg. All other brands ?-^":arently ha.ve at leastone 
seam, buyers of new RoclTford sochs, it is claimed "by the "^orest City 
Comoany, are not satisfied rith other brands; rcfailar tmsolicited orders 
are placed year after yca.r, and the comoany ha.s not foiiri.d it neccssarv 
to employ more than one "oart-time salesman. Comr)etin'^. companies deny 
the superiority of the ITew '^ochford soc''-, and claim th^t ail ^ork socks 
are su.f :"icifc!ntly comparable to be entirely competitive. 

The probably effects of tvo-shift oi^erations on the i^orest City 
Connanj'' from 1931 thi'ou'jh 197A T'orc these. The coTwi?.nj maintained 
a stea.dy and conservative year-end inventory comparable with tha.t of 
the indv.stry as a whole, althou/h larf;er (?s_ a ■•-lercent of .annual 
shipments) th^.n those of some of its comnetitors. It was, moreover, 
selling more tlia/n it could h^.ve •■iroducod on a two-shift bapis. (See 
Tables II, IV °nd V) . It appears ftirther tha.t if the comnany ha.d__ 
been limited to two shifts dxirinr; 1T^4 it rrould have lost orders 
for 55,140 dozen pairs of new "^.ock.ford socks, worth !';59,0'i3. (*) ^ased 
on an ayerajj^e of sales taken over t:ic last four years their loss would 
ha.ve been 102,808 dozen pairs, with a value of Ol07,94S. Based on an 
ei^;ht year average the loss to the cora^^pany would have been 114,840 
dozen, or ol20,582. 

It is probable thi?.t most of thxf; loss of an entirely noLTnal 
volu.ie of orders would h-a.ve been the rain of the ""olsor. Com^pc.ny, also 
situa.tcd in ?iockford, Illinois, and one of rores.t City's largest 
coTTpetitors, or of the Powell Company-, whic ha.d s. large amoxmt of 
idsl capacity and claimed to produce a product indistinguishable 
from the ilew "ockford sock. The amovmt of idle capacity in the 
Iia.nds of the conrpctitorn of Z'orcst City indicates tlia.t in this res- 
pect the latter ^7as normally in a comparatively'' favorable position. 
(See Tpble III). The Powell Conipany in 'oarticv-lar reported 601 machines, 
o'O-t of a total of 950, retired, although apparently available. The com- 
plaints of the conrpanies coiiToctin.; with Forest City did not, hoA7cvor, 
involve the capacity situation. They centered rather on the large vol- 
uie of ^oo'ds which the Porest City Conn^ny coulf, anc;, they claimed, did, 



(*) See G. 



■■APr- 



produce "b-y- ope/atirifi; three siiiftr:? ac cor,To?.red v.-ith. their tro , and 
the imsetting of the market r/liich rorr.ltcd. A s'arvej- of the iir:ures 
for sliiprnents in 15.^.4, hov;over,' chcT t:-L\t Torest City s'nared in 
the general decline of the entire hrancV., '•■hilo three other companies, 
one larri-c - Ballston-Stillvrater - and tv.o !:,naller - Seneca and Per- 
kins - (v'hich ■orcvioi:-&ly ha.d been prodncin; .chiefly voolen ^-ork 
socks), made shipments lar^jer than in 1933. luoreo-ver, there v;as a 
genei-al increase in shipments throu,; ho\it the hranch in 193o, (over 
1933), in H:ich Forest City shared jracticaliy not at all. 

'Ih3 -^recise ohj.ects of shift liridtation in this "branch of the 
industry v;ere nov.'here specifica.lly declared. It can probahly he 
asswaed tiiat the cotton work sock rrovro simply sh^.rcd the ^'cneral 
desire of the ind'astry to consolidate its price struct-are and prevent 
ovcr-procxiction. The elimination of the third shift in the case of 
the Forest City Compeaiy could not, of course, ho met hy calling into 
use retired raa.chinery. (*) It meant, definitely, an incre-aso in 
:oroductive equipment. Put the general question of the dcsirahility 
of a third shift, as a pqint of later policy, vas net discussed "by 
the indu-stry, although the labor advisors in the Ackainistration con- 
sistently, at Tjiihlic hearings and in briefs, protested the "gra-ve 
yard shift". Tho only point r-hich \-as m^.de an issue in the com- 
plaints against the Forest City Com^^any v/as tiiat of the \mequa.l ad- 
vantage gained by this conTnany in opei-^-ting three shifts. A s^^rvey 
of the available evidence, however, indicates that Forest City's 
three-shift operations p-rodv-ced no undesirable effects upon its 
conroetitors, which viere in any wa<y ipeculiar to the abnormal depression 
period,, or not a part of the normal coirpetitive situation in the in- 
dustry, and tiia.t, on the contrary, the Forest City Conpany '-'ould lTa.vc 
suffered losses throu,gh restriction of its operations to tv/o sMfts. 
These losses v/ould h^vc boen, briefly: 

(1) To deprive the cor.Tp?ny of a --lortion of its 
normal business. 

(2) To allocate this business to its coifPTetitors . 

(3) To deprive consumers of a particular t^r,5e of 
product. 

(4) To force an increase in capacity on the Forest 

City Company. 



(*) The company liad some old P.ockford machines not in use, but these 
'c.o not make the same tj'pc of sock as the ilevif Ftockford machine. 



-13- 

CHAPTER II 

PEODUCTIOH COMTHOL 

IIT THE 

[■iACHI E :i) WASTE IiaUSTRY 

SUiilARY OF COLE STUDY 



A. GEITSRAL^ STATEtllllT OF THE IimUSTRI ' S PROBLEM 

The dilernraa of the Kachined V.'aste iiaiiufacturing Industry consists 
principalis^ in the permanent displacement of its product ty technical 
inprovenents in luhrication processes, particularly in railr-ay cars. 
This has ::epiit a drastic decline in demand and a succession of attenpts 
to prevent market denorali'^ation, culminatinr^ in an effort. "by the lee.d- 
ing manufacturers" to imiDOse allocation of production uion the entire in- 
dustry. 

B. DESCRIPTION OF THE lOUSTRY 

The maiiufacture of laachined T-este consists in the simple processes 
■of sorting the thread v!r..ste bou^'ht in hales from textile plaiats, and mix- 
ing the various t^noes of thread to form the particular kind of "aste 
T^anted for a specific ur;e or to stiit the renuirenents of a specific cus- 
tomer. The mixing is done ■ ith ver-- sinple machines and resembles card- 
ing. TPnen the ?'aste is to "be used for rail^'ay journal box packing a 
little oil is added. The product is then ready for the market. 

The ra'.T ma.terial is the i/aste or hy-product of the textile indus- 
tries. Cotton and ^^ool are "both largely used, and rayon also has some 
demand. The hales are bought _" 'blind" , that is, regardless of the kind 
or quality of thread they contain.' The two essential qualities in the 
finished product ai-e resiliency and absorbtivity, the degree of each de- 
pending U'oon the use. Journal box packin_^ must primarily be resilient, 
while the r/aste used for cleaning raust be lorincioally absorbant. The 
quality of the finished product ir. very variable, and although every 
mantifac-turer makes many different mixtures, and sells them for their 
peculiar qualities, it is actual].y extremely difficult to judge the com- 
position of the finished product, so that even ejrperienced buyers cannot 
be sure if their specifications are met. 

The real- 'ays are the largest single ctistomer -of the industry, vrith 
the Government second in importance. To=;-ether they oons-ume 70;:o to 80-/j of 
the industry's product. The railv;a;ys use machined waste both for journal 
box packing and for defining and lubricating. The Government's uses are 
for the rail^-pys in the insulao" oossessions and in Panama, for warships, 
for army and navy equipment, and for cleaning purposes in its public build- 
ings. The third outlet is to various .industrial consumers, for use in 
cleaning and oiling mechanical equipment. 



9855 



-14- 
C. SCCNOi.IC COIIDITIOIIS IN THE IKDUSTEY 

The i.r.chined T.'aste Industry hos al^" pys "been unorgaxiized. Even under 
the code it v;as impoEsiole to achieve cooperation, although attempts to 
that end have been made for 30 years. There are re-oorted to be forty-one 
individual concerns in the industry. Of these the Ac .mini strati on I/iemher 
of the Code Authority (in an intervievr 'rith the vriter) reported some six 
or ".even to be large units, tv:elve to fifteen of -lediura size, and the 
rest very s}ioll. Statistics -'hich -"ould sho" cefinitely the rela.tive im- 
portance of individual firms are entirely lacking, although it is possible 
that they ma3" exist in the files of the firm of Stevenson, Jordan and 
Harrison, Tniich vas called into majiace the industry under the code. 

Vihen the code ^-'as "oresented to the Administrption it ¥;as accompanied 
by estimated figures of production and capacity. Shortly thereafter 
Stevenson, Jordan and Harrison made a survey of the industry and produced 
the foll.ouing data; (*) Since 1923 no nev members had entered the in- 
dustry. Since 1926 no new capacity had been installed. There pere, in 
1933, 136 machines (ariionp: the 30 members reporting), each machine haying 
an average capacity of 1,200,000 pounds per year of 300 daj^s on an eight- 
hour day operating schedule. The total canacity of these plant, on a 
one-shift b;.\sis, vas thus 1635200,000 pounds, A .graphic -oicture of the 
decline of the industry since 1926 vas shovn in the following figuresS 

^ SHIHffiNTS OF LiACHIKED WASTE IITOUSTRY (30 COLI'AJnES ONLY) 

P ouno-s Gross Sales Value 

91,698,611- $ ,11,030,465 

84,115,598 8,992,067 

'76,982,471 ■ . 8,030,430 . 

79,642,649 8,131,235 

66,241,286 6,166,141 

47,523,590 3,705,367 

32,884,691 , 1,894,590 

18,872,510 1,028,489 

1932 shipvn'ents dropped to 36'^ of the 1926 fi£^;ur8s, while the gross value 
of the shroments dropped to I770. Average prices fell in the same time 
from 12 cents to 5 cents per ^ Bound. 

The caii.^es for this decline, which set in before the general de- 
pression, ai'e of two kinds; a shrinking market due to the development 

(*) The fig^ires are for 30 companies, but 9 of these are based on 
estimates. 

9855 




-15-. 

of tetter liibricrting piethods, the ■: evelopment of the process of reclaim- 
ing used \-aste ai»d the cor/ipetition of cher.p rags imported from Japan, llo 
.new uses have oecn developed to of fret these losses. (*) The Industry 
has claimed that the reclamation of ur;ed '-aste, a practice which the rail- 
ways have be-j'Lin, is unecononic. An atteinpt '^as made to discover through 
the Interstate Commerce Corxaission the exact extent of this practice and 
its effect u-oon the Machined V^aste Industry, 'but no adequate figures could 
"be fotuid. (**) In descriting the process of reclamation, the Ariminlstra- 
tion Henher of the Code Authority (in an interview '-'ith the writer) said 
that a;o-oro::ini-tely 30^ of ne'7 vaste had to "be ac ded to the amount re- 
clained to malce up the portion worn away in use. Seventy per cent of the 
waste, re claimed, J^;jeref ore, represents the loss in tonnage to the indus- 
try fron this displacement of its, products. It is estimated that the 
amount reclaimed runs into millions of pounds annually. 

D. COLiPETITIVE SITUATION WITHIU THE IlIDUSISY 

The decline of the industry to its 1953 level intensified competi- 
tion for the remaining markets. Out of the forty-one firms in the in- 
dustry it ^-'as reported "by the Administration Member of the Code Aathority 
that any six, or the three largest, could su-oply the entire demand. The 
Administration MemDer. appears to telievc that the spirit of fair play in 
the Indus ti-y has prevented the elimination of the weaJcer members "by the 
few ler.:-;e concerns. ?rnile this may be true, it would nevertheless be 
difficult for the larger manufacturers, even if they wanted to, to gain 
complete control over the industry because of the cheap and plentiful 
sup-iolies of raw materials available. T/hile the large manufacturers do 
gain azL advantage over the smaller ones in being able to buy on a con- 
tract basis the entire i-^aste output of large textile mills, they could 
scarcely commajid the total supply thoughout the co'jntry. Nor is the mar- 
ket assured i3o the large manufacturer, for the following reason: The prin- 
. cipal purchasers, the railways, prefer to buy from the mill farthest re- 
moved from the shops for which the raachined waste is destined, so as to 
collect the largest possible freight charges from the shipper. Even when 
the vraste is not shi-oped over the roa,d of the p-urrchasing company, the 
latter ?.s aule by agreement to obtain a pcj-t of the freight charged by 
his competitor. (***) 

The possibility of raonopol ; is further reduced by t^ie fact that in- 
dividual consumers need, or have been persuaded to believe that they need, 
particular mixtures of waste which only a certain company can furnish. 
Practically all com-oan.ies have their ovm "secret" mixtures. 

The greatest advaiitage of the large mmuf acturers is obtained in- 
directly by the fact tar.t all of them are princioally in other lines of 
business, and nrjiufacture machined viaste on.ly as a side line. The 1-rge 



(*) Letter from Administration Member Lionel Bailey to the Deputy Ad- 
miniFtr?tor, Mc:y 15, 1935. Files of the De'outy Administrator, 
Folder: A lninistration M.ember . 
(**) De.iuty't Files, Folder: Coce Authority - General , contains cor- 
rcs^^ondence from the Interstate Commerce Commission giving 
fra,gmentary information on '^aste reclamation. 
(***) Information developed by Administration Member of the Code Author- 
ity, in interviews with members of the industry, and furnished to 

^r.^r. the '"Titer, 
9855 



-16- 

•amount of traffic Fhich they coji offer the railroads through the shipment 
of their principal products is the Duit used to secure pruchase of their 
machined vaste, the sale of vhich, in turn, heliDb to defray freight "bills. 
The Ic'jninistration Memher of fhe Code Authority has said to the writer 
that some of the largest firms raanuf a.ctixring maxhined waste entered into 
this husiness solely f or ■ the freight advantage involved, although their 
main business v'as entirely unconnected with it. The Miller Waste Mills, 
Inc., of Y/inona, Minnesota, for instance, is a l;>,rge manufacturer of mach- 
ined vaste rhose -nrinciTal "business is the wholesale grocery trade. Other 
large uanufacttirers are primaj.-ily dealers in other products with a textile 
base such a-s tret and dry mops, candle v/icks, and "burlap "bags, the raw 
materials for which come, like thread waste, from the textile mills. The 
largest company is the Royal, of Eahway, "11. J., '"'hich is an importing, ex- 
porting, aaid job'bing concern dealing in mops and allied textile products. 
There appears to be a distinct line between these large concerns and the 
smaller ones which are engaged only in machining waste. The textile mills 
which furnish the raw material for the machined waste industry curiously 
do not machine any themselves. The reason aopeai's to be that the manufac- 
ture of waste requires both cotton and woolen thread, so that no single 
mill cajL supply the total raw material necesr;ary, and the effort and ex- 
pense of burring any missing portion is not worth while when the thread 
waste on hand can. be sold readily at a clear profit. 

Ifnile a superior position is thus held 'oy the larger concerns in that 
they can buy raw materials in large quantities on a favorable basis and 
can fulfill the requirements of the largest consumers of the finished pro- 
ducts, in some measure even commanding their custom, the small members of 
the industry are left with a fairly free field among the other industrial 
users of machined waste. The easy availability of war material, the 
cheapness of machinery and the ability to satisfy individual specifications 
give the small manuf exturer a safe nosition in his own field. The in- 
dustry, as v.'ell as the rarrket, is thus divided into two distinct sections, 

E. THE IKDUSTRY U'ffiDER THE CODE 

The Code contained two provisions for controlling production. The 
first, Article III, 2, was a limitation of machine hours to a single 
shift of forty hours per week. There is nothing in the records to indi- 
cate whether any members of the industry had been working more than one 
shift before the Code was enacted, but the decline in the market of the 
previous years makes this unlikely. The industry, ho'-'ever, had been 
working on a forty-eight and fifty-hour week basis, so that with the 
reduction to forty hours, and the shift limitation, a reduction in total 
operating hours must have resulted. There are no figures in the records 
to show the actual effect of this provision on the industry. Its expressed 
object ^"'as to spread eraplo^onent, and the reioort to the President, ?'liich 
accompanied the Code, stated that the increase in emploj^ment would be in 
exact proportion to the decrease in hours of operation. But the nature of 
the machining process is such that while the decrease in hours would 
sutomaticall"' result in a proportionate increase in the number of machines 
opera.ted, "orovided voliurie remained stable, the anticipated amount of re- 
emplo"ient could be avoided by a stretch-out. What the actual results 
were is not a matter of Administration record, but it is important to note 
at this point the supreme importance to the industry of renewing the use 
of as much retired capacity as possible. 

9855 



-17- 

u?he over-cp'oacit^r oroblen i".?,s •anc.on'btedl-'-" -'O; t acute among thoae 
firns in the ino.ustry ^'hich su-Tolied the d\7indlint- rail' 'ay market, "but 
tho soecific eifects of this orovision on individual mein"bers of the in- 
cuctr;- or on sections of the industr/, can onlj"- oe found in the capaxity 
and production statistics oL' individufl concerns. The industry's mnna^^e- 
ment Tim, Stevenson, Jorda:i and Harrison, is reported (*) to have such 
inforar.tion in its files, .r.'t none exists in the records of the Administra- 
tion. 

Article VI, ?, (a) (l) of the Core provided that the Code Authority 
raii'ht recomiend to the Administration the re.-^istration of productive ca- 
nacity and the requirement of certii ica„tes "oexTiitting the installation of 
hev; capacity, ercept for re-nlacernont. It night be noted that, as in tiie 
case of the one-shift lir.itation, the effects of this provision vould 
have been f nvorable, iirst, to the ov/ners of the f:reatest amount of idle 
capacity, rao • -ere •oresiima.'bly those supplying the railways. By a resolu- 
tion of A-oril -3-6, 1934, the Code Aathority did reconmend to the Adrainis- 
tration to restrict installation of new r;iachinerv, biit the Administra,tion 
refused its api^roval. (**) It shoulc' be noted that v/hen the Code >.7as rdop- 
ted there had been no increase incapacity since 1926. 

One'ye^r'r e':perience convinced the industry that the code did not 
serve its interests. The main effort to regulate competition through 
the Code i7a3 by orice fil',in;-;j but this article :)roved entirely ineffec- 
tive as a "aeans of stabilizing price. The great variety of brands, the 
absence of standards, an.d the extreme varia.bility of costs destroyed any 
basis for stable prices. The result ^'as that '-hen the first nrice fil- 
ings cajne in, 721 prices ^-ere filed on cotton and rool raste and journsl 
bo:: packing, in addition to 136 qupjitity discounts, and 53 other charges 
for small-qusntity orders. Cost accounting i"as orovided for in the Code 
but '."as never set u^d. A rainimtun mark-up on raw raaterial cost was loro- 
posed late in the history of the Code, but did not receive administrative 
approval. A committee to establish standards of grade and quality was ap- 
pointed, but the findings ■. ere not acce-oted by the industry. 

Allocation of prodiiction, proposed by the industry at one stage of 
the code's formation, but not accepted by the AfLninistra.tion, was consid- 
ered by the indtistry to be the best solution of its problem. The plan 
propo[:.ed was a typical Stevenson, Jordan and Harrison management plan 
and was -orobably proporod by thera to the industry '-'hose agents they 
were. (***) 

In ilarch, 1934, the reoresentrtive of Stevenson, Jordan and Harrison 
presented a corrolete -jlon of allocrtion to the industry, recommending its 
adoption. This "Dlan '/as appai'ently never lormally pr^-sentcd to the A?l- 
ministrr.tion, al.though it nay have been c iscussed by the Assistant De- 
puty Adjiinistrator pnd the re'Dresenta.tive of Stevenson, Jordan and Harrison 
at a conference on dJmc 19. (****) 



(*) 3y the Acministr-ition iiembcr, in an intervie'-' "dth the writer. 
(**) l"e-DUt-- files, folder: Meet ing's , and Coo e History, p. 39. 
(***) Volui-ne A. MA files. 
(****) A cooy of the -olan is in the files of the Trade Practice Studies 
F-ection of KRA. 

9855 



The plan vras "based on tha lollovinr orinci-oles: 

Tlie determination of the total production of the industry from 
1S26 to 1933. 

The determination of each nenber's -Dercentagc share in the total, 
the first seven years and the last yerr "being calculated separately, 
and s. final average heing determined "by giving 50'>^ weight to each 
period. 

Appeal to the Code Authority for a re-assignment of -oercentages. 

Suhmission of a monthly record of shipments to the Executive Officer 
of the Code Authority. 

The adjustment of shipments so that the average will not "be ex- 
ceeded over a loeriod of months, though it may 6.0 so in any single 
month. 

The adjustment of orders in excess of assigned percentages "by 
transfer to companies not in excess of their monthly alloTrance. 

The industry's attempt to solve its -oro'blems "oy this means was 
interpreted "by the Code Authoritj-'s Administration l'em"ber (in an inter- 
view mth the writer) as an evidence of the spirit of live and let 
live in a. declining industry. This might have "been true had the entire 
industry "been in competition for a single market. In this case, how- 
ever, there was a fairly distinct division of the market into large 
consumers - principallj'- the railways - and the smaller industrial con- 
sumers. The manufacturers sup-olying to large- consumers shared among 
themselves a field of comiipetition more or less apart from that shared 
"by the other units in the industry. Aside from individual competition, 
there was thus a group competitive interest as well. TOien the demand 
for journal box packing "began to decline, it was, therefore, a distinct 
part of the market that was affected, and with it a distinct sector of 
the industry. It is true that a general decline in the use of machined 
waste has occurred, due (a) to the importation of cheap su'bstitutes and 
("b) to the closing of many industrial plants d.uring the depression, 
which has imdouhtedly affected the entire indListry; "but the largest 
decline "by far has occujrred in the journal hox packing market. To in- 
troduce allocation of production at this point, therefore, would "be, 
not to divide equita"bly the industry's common loss, "but to force all of 
its men"bers to share the distress of one group, and to allow the latter 
to share the relatively favora"ble noosition of the other concerns. 

The detailed data necessary to show how allocation would work out 
would have to include figures o'cl individua.1 and tota2 production, and 
figures on sales of individual firms to types of customers. There is no 
definite record of the existence of this information, "but the Adminis- 
tration Mem'ber has said to the irriter that individual statistics on 
sales to classes of customers were compiled "by the management of the 
Code Authority. 



9855 



"19- 

The idea of allocation of ;oroduction has apoarently taken firm 
root in the industry. A new association formed in 1934 is described 
"by the Ac^jninistration Ilemter in the follorzing terms: 

"In the Tall of 1923, the Code Authority finding that Administra- 
tiTe approval was not forthcoming on certa-in amendments and proi^osals 
to control production, leading Liachiners in the Industry met to discuss 
the sittiation and decided to form anotheir Association entirely apart 
from the ITaste Manufacturers' .Associa,tion. After three or four such 
meetings, the Thread Waste Institxite was formed, the organizing ■ mem- 
hershlp heing ahout twelve firms. This new Association has not iDecoTiie 
active since the ohjects of the Institute caniiot "be attained until the 
memhership represents at least 85^ of the industrjr hy volume. 

"The ncmhers of the Institute have api^arently "been ^^ledged to 
secrecy concerning the purposes of the Association, hut from the meej^er 
information ohtainahle to date, it a.ppears that the Institute is to 
supervise an allocation syste^i, wherehy all memhers of the industry 
will reguiate their proc>j.ction as dictated h;/ the Institute. 

"All raemhers of tlie Institute are honded to provide for liquidated 
drjnages or fines in event they violate the instructions given. 

"It is felt that in this way prices vjill return to a level where 
a profit may "be realized on every order, and sales "below cost ended. 

"It is "believed that plans of the organizers will soon he realized 
and the Institute hegin to function, since a clu"b in the form of high 
prices for raw materials is heing waved over the heads of hesitating 
memhcrs. lion-Ins titiit^ memhers will he reouired. to pay half again or 
douhle the price that Institute Uemhers pay for their raw materials, 
which would melee the price of their finished product so high that 
Institute nemhers could underhid then at will, 

"As stated a"bove, these plans have not as yet heen put into action. 
The Administration Member has found tha.t members of the industry mil 
discuss any topic with him but that of the Institvite. Who the officers 
are, the governing body, or -jhere Institute Office is, at this time is 
unloiown . " 

To sum up, it would appear that the industry has gone through a 
logical seouence of develo->Draents, consisting in (a) depression and 
declining markets, loarticularly for one important sector of the indus- 
try; (b) conrolete demoralization of the industry through ciit-throat 
comppetition all along the line, but particularly through price-cutting 
without regard to costs; (c) attempts under the Code to raise prices to 
a profitable level by establishing standard grades, open ^rice filing, 
uniform cost accounting and a minimum mark-up on raw materials, and (d) 
a final attempt to achieve a profitable level and the even distribution 
of business tl^trough allocation of -oroduction. 



9855 



THE C.4P30y B I ACr i'LAJTLTAC TirRIlM & II-TDTJSTRY * -■ ■ 

The Carton Blach Industry had a d^utle -oroljleTn to ne^.t during the 
code period. First, the d^pr=;spion h?d cniis^.d a serious decline in the 
nornal demand of. the. chief industrial consumers of carton hlaclc, prin- 
cipally the tire, industry. Stocks, '^hich had teen excessively large 
since 19P9, w^re dragging do^m the arice level. Second, a new and large 
supply of gp,s, the re.TT material of carton tla.ck, was -TnR.de availatle in' 
Texas in 1935, threatening increased aroduotion and the .aggravation of . 
the inventory and price sitxiations trought onty the depression. Some- 
instatility in the raw material sun-il j^ is a normal condition in the. car- ■ 
ton tlack industr^;^, arid is. a determining factor in the volume of pro- 
duction. The Texas situation i=.'as more than usually disturting, ho#ever, 
due toth to the volume of the new suo^lies and to the special circ\ijiistan- 
ces of the depressi'^n. 



discussing the economic conditions of the industry and the 
measures adopted to deal with them it might te of some value to examine 
triefly the .teclinical tackground of carton tlack manufacture. 

Carton Blac>- is a jet-tlack, fluffy, extre^iielv finely divided ma- 
terial made ty turning natural gas in a deficiency of oxygen. 

There are two methods of r.roduction - the "contact" method, in which 
the , tlack is deposited .when the gas flame impinges on a relatively cold 
surface, and the "furn .ce'" or "retort" method in which the gas is pre- 
hea.ted and then turned '^ith insufficient oxygen under pressure in a tower 
containing refractory ma.terial. (**). 

The Natural G-as Products Association (***) vrhich presented the Code 
for the Carton Black Manufacturing Industry to the I'TEA recognizes only 
the -oroduct of the contact me'thod a.s a true carton tlack and the contact 
product only is covered ty the code, which defines it a.s follows: 

The term 'carton tla.ck' includes any tlack pi^ients produced in 
whole or in -nart from natural gas, casing-head ga.s, or residue gas 
ty the impinging- of a flame uoon a channel, disk, or plate. (.;''*** )' 

(*) This Chapter has t'^-^n prep.a.red from, material gathered ty Mr. 
A. L. Cox. 

(**) Mineral Resourc-s of the United States, ig'^Q - Part II 

(***) The Code for the Carton Black J'anufacturing Industry "as sponsored 
- ty the National 'G-as Products Association, estatlished in 1920, 

the office of which is located at 500 Fifth Avenue, New York City, 
The Association claimed to., represent eleven of the sevente=>n 
5iem.ters of the Industry and 9Zfo of the total production. Three 
of the six menters not represented ware ina.ctive, 

(****) Approved Code No. 269, Article II, Section 1. 



>-3l- 

Some of the riLialities of contact iDlachs are atsent in the retort iiro- 
duct, although -tihe yield of the latter Tier thousand cutic f°et of gas is 
much greater. 

The contact method nay he further classified as chan^iel, disk, nlate 
and roller -orocesses. (*) The nane indicates the tin?e of surface on 
which the' hiack is deiDOsited. The channel iDrocess accounts for ahout 80 
■oer cent of total -oroduction. A nlant consists of a grou-o of "burner 
"buildings, soraetines one hundred or more in numher, hailt of she°t iron 
and steel. In each hv.ilding, a multitu(je of gas flames imioinge upon 
slc'"rly oscillating channels, disks, plates, or rollers. The "black is 
deposited on the surfaces fron which it is S'-^raped hy aiitomatic scrapers; 
falls upon screw conveyers, hy which it is carried to the P3.cking houses 
and is there mechanically sifted, holted ,and com-oressed and packed in 
IP-- pound hags. The process is largely automatic (**) and is continuous 
as intermittent operation interferes Fith the qu-^lity of the product. 
No person can sa.felv enter the hurner "building while the process is go- 
ing on. 

The ahove descri'ber'. pr-cnss has "been in use for many years and few 
technological a.dyances lia-vo "b^en made, e^rcept in -nrepara.tion for ship- 
ping. Carhon Black can no^r "be comir^ssed into hard, sliO'-iery pellets 
ahout the size of numher 7 or 8 shot. These pei:^ets can he shipped in 
hulk thus eliminating the necessity for compressing the hlack and pack- 
ing in hags. It is understood tha.t this --rocess h^s "o^-t^n pa.tented and 
that its use is heing licensed to other m--^mhers of the Industry. 

Carhon hlack as a coloring pigment h^gan to compete -^ith lamp hla.ck 
after 1860, hut hecaus^ of its more intense color and greater tinting 
strength its use in inks and paints gained rapidly in importance. Al- 
though the present conspjnption of carhon hlack in -orinting ink is not 
large, relative to other uses, it is perhaps the most important iise for 
no other product will duplicate its spreading properties for ink. One 
pound of c."rhon hlack mixed -^ith eight -oounds of oil gives enough ink 
to cover nearly an acre of surface. No other coloring ma.terial can ap- 
proach this "covering nowor." (***)^ 

As measured hy volume, the most i^'p-'ortant use of carhon hlack is 
as an ingredient in the m.anufa,ctxi.re of ruhher. This use ^-'as first 
tried in 1915 and since then has steadily increased. As recently as 
fifteen years ago most of the automnhile tires were red or white and 
irere good, for only ahout five thousand miles. Now, due to the use of 
carhon hlack which a.dds materially to the toijighness of the product, 
tires are practically alD hlack ajid are. good for ahout fifte-^n thousand 
miles. In 1929 ahout t-'O poiinds of carhon hlack ^^ere \i.sed in each tire 
or casing. (****), 

(*) Mineral Resources of the United States - 19?9, Part II. 

(**) Transcript of Hearing Nov^mher 16, 1933, Page 8. 

(***) Mineral Resources of the United States - 19?9, Part II. 

(****) Mineral Resources of the United States - 1929, Part II. 



9855 



The third ira-'Tortpnt us^ of r.^.T'i-^rr) "bT-^C'- 
paints, varnishes, and lacnuers. It is also 
the mantLfecture of such TDrod'icts as shoe ar.d 
records, artifical stones, cr3^^ons, carton p 
hons. (*). 



is PS a coloring assent in 
a vpl'iPhl^s ingredient in 
stove r.olishes, phonogra-^h 
:--'-'i' ■^Tl^ t"^e"rriter rih- 



T'he follo'-ins trhr.e sho^^s the -"rcentree of total domestic deli- 
veries consumed, d;^ each of the atove uses for th^ years 1928-1934. (■**) 

1928 1929 1930 1031 1932 1933 1934 



Ruhh'-r 


70^^. 


72^a 


77^. 


83)^ 


81^ 


Printing Ink 


13fo 


14'' 


11^^ 


lot 


11;^ 


Paint, Varnish and 












Lacquer 


10^. 


9fo 


7f^ 


4i 


5^^. 


Miscellaneous 


7^ 


5<r^ 


5^ 


3^. 


Zfo 



The United States hn,s o, virtual mono-ooly on the TDroducti^^n of 
carhon "black although one nlant is "believed to have he^n recently con- 
structed in Rumania and one in Jaoan. Our exports of the -oroduct stea- 
dily increased u-o to 1934 as shoTOi h;'- the follo^'ing trhle of total sales 
and iier cent exn^rted. (***). 





1928 


1929 


1930 


1931 


1932 


193? 


1934 


Total Sales (millions 


281 


284 


252 


258 


262 


375 


313 


of Ihs.) 
















Percent E:.53orted 


28:^5 


32l 


33^0 


37^ 


3G5i 


4lf. 


39^0 



Carhon hlack me^ts some slight com-oetition from such -oroducts as 
zinc oxide, hone hlac^:, and larrp hlacl^. For exam-nle, carhon hlack has 
largelv disislaced zinx oxide in the ruhher industr?/ heca.use it is "bet- 
ter adapted as a filler and "'.^'^c^use it -oroduces a tougher product. 
Furthermore the prices of conoeting iiroducts have generally "be^n higher; 
in 1931, the -orice of "tone hlack i^as 3,9 cents Toer ^-.ound, lam-o "black 
9,4 cents, and i,inc oxide 6,2 cents,, com-oared i^ith a. orice of 3.07 for 
car"bon hlack. (****). (The Koven"b^r 11, 1935, issue of the Oil, Paint, 
a,nd Drug Re-norter, rei-iorts the foll'^-'.ting -orices oer noirnd for carloa.d 
lots: "bone "black 8 cents, freight allowed; lam-o hla.ck 8 cents, f.^."b. 
Hew York; zinc oxide 5 cents, deliv'^red; car'bon "black, to Gulf States 
4.45 cents delivered, - to Ohio, I'ichignn, etc. 5.05 cents delivered.) 

It should t'= notrd here that car"bon "black as defined "by the code 
has some comi^etition from therraa.tomic, or retort, ca.r"bon hlaci". The 



(*) Mineral Resources of the United States - 1929 Part II 

(**) Bureau of Mines Bulletins 

(***) Bureau of Mines Bulletins- 

(****) Bureau of Mines Bulletin - 1931, -oage 34. 



9855 



Bur'^PU of Mines Bu?-lPtin (*) st^-t-^s th?t th=ire is oonradf^ratle conrje- 
tition tet'^^en retort "black pnd chpnn'^1 "bTac^k in tha EuVoBr Industry. 
One is led to iDelieve th?)t "considfTatle co'Toetition" is an exag^arated 
statp-ient, horrev^r, in view of the fnct thpt cha.nnel tlack represented 
9lfo of total rjroducti'-n in 1931 and 93fb ir 1932. (**). Further, "chan- 
nel" "blac!- is only one of the "contact" "blacks; the roller -^rocesn is 
res-oonsi"ble for nearly all the "black used for r,rintin^ ink. This fur- 
ther reduces the rjercentages -Drodixced "b^'- the retort or thermatcnic 
nethod. It an-oears, therefore, that the retort method is still in its 
infrnc^/ and was not sufficiently coni-netitive in 1933 to warrant any 
great effort to "bring its users under the Code, Further the contact 
"black producers clain that thernptonic or retort lil^c^' is not a true 
car"bon "black. 

Naturrl gas, the ra-r naterial of the Cnr"bon Blac^- lianufrcturing 
Industry, is of t^^o trnties, - gas T7hich is found alone rrith no other 
matter present, general"!;'^ desi.gnrted as "natural" gas, and gas which is 
"oresent in oil wells and which is o'btain^'d as a "b-"---oroduct of the reco- 
very of crude oil, gen'=rn"i ly known as "cr^singhead" g^s. (The two terns 
are used herein in contr-idistinction to each ot:ier.) 

It has already \}'=.^^n indicated that much of the instahi] ity of the 
carhon "black industry is fie resi.^lt nf f Dixctuations in its ra^/^ material 
sumlies. This is due not only to new discoveries and de-nletion of 
resources, but also to restrictive state le.'^isTation, ^hich makes the 
amount of gas nvaila"ble de--end"nt ""rrgely u-oon the activities of "oi-oe 
line and gasoline concerns. G-as cons'=rvn.tion nrograns renuire that the 
consumption of a ootentially valuable fuel "be nlaced under control and 
most of the gas -nroduciiig states hav°, "by statute, either entirely -nro- 
hi"bited the use of natural gas for the manufacture of CRr"bon "black, (*** 
or Tjrohi'bited its use except -^-hen the hep.t therei:':' contained is fully 
utilized for other riar-if-cturing or domestic -nuro-^ses, (****; or pro- 
hi"bited its use excet '^here the gasoline content of the natural gas 
is first extracted, (^'i=***) i-rith certain conditions si^ch as the o"btain- 
ing of nerm.its, limitation on amount of gas to be so ^ised, the a'bsence 
of -oresent or •oossi"b''e future markets wherein the natural gas would "be 
more fully utilized "b"^ domestic or industrial users. 

The statutes r'rohi"biting the use of natural gas for the -oroduction 
of carbon black when there is a present or i30ssible future domestic or 



(*) Bureau of Mines Bulletin - 1931, -oage 54. 

(*•*) Bureau of Mines Bulletin, - 193P.-1933, t^. 546. 

(***) State of Arkansas - Act 350 of 192^^. 

(****) State of South ]3akota, Act of March 6, 1929, Cha.iDter 202 and 
State of Wyoming, Act of Fphruaiy 24, 1919, Chapter 125. 

(*****) State of Louisiana - Act 91 of 1922 and Act 252 of 1924 

State of Hew l^xico - Bulletin IB, Kew Mexico State Land Office 
1931 State of Tex-s - A-^ticl- 6008, S3 #92 Chanter 100, 1933. 



9855 



incustripl p/.-'xt for tli, •:■, -^-r^ ■">". coo-'sc i:\r,^rjlc± to conserve a 
val-ur.L)le rr.iturrl resoiu'co for it- >r'b beiicficirl u^e, TJic use of ,i,as 
for the cxtrr.ci:ion oi c, rt.;- '^j.r.c'- ip iui ._:^'±rc :el'' 'vn.Gtcful -jroccGS, 
The average p:^icc of miiAro.! rs^ r.z:.C ir. c'.c t'O' •:, <^tic 'lar'rct is nmch 
higher tl:rn t'l' t of j;:r:.s ?olc r-o c r'oon 1'1'c'I-: /I'Mits. To v/hich consu'vior 
it is '"old fc- o:^C? dw :hc loc"':..^:. ni in,^ .3 --ell in relation to i^ipe 
lir.es or tliici:": ;-io:oiilated co -ui^.itios. GoriSCc:-a'":ntl3- , the carhon 'blach 
pla.at? arc loc tci near ^-a--; i.7ci.s or g.-.isoiinc r^iinorics in remote and. 
s"oarscl}- sot'sled areas. Fncn pivj.f; liner :to l;ro^'.ght into such areas, 
the r\s is cinsisnod to them and the c^rhir. olacl^ plants move Oxl to new 
anc. relative J.;;- unc'evclorjed arcr.s fro;,-, vfhich there is not outlet :^o a 
domestic ■ -.r^xt (*1) Cnsinchcad , ."^ a-\G -■.. relatively high -gasoline 
content. Tnat ru:nai:s afCer the //a^oli-.-.e content is extracted is Imovm 
as "rcsicue" ri " . Pipe line com -,nj.cs hrvc refused to "buy this .as he- 
cause it contains hydrogen sulphide -.-hich .;lveG of. an obnoxious o'^'or, 
(**) Conseouently, the rcsirnii. r.G nuist either be Dlorm into the o,ir or used 
for the pr-^d-action of caro a i-lach. (in so :e c-ocs ;ncre is another al- 
ternative 31 ret-arnin:, Tne :,..r i^ito tnc f;r:'-una to repnessure the oil well. 
This will proha^l;- be ,.;ore i,.a)ort"nt ni tnc future th-n it h?.s been in 
the vast.) li'ic ■ r,sol.^ne refiner i'vi -usl-, nref^r- to' sell his residue 
,pas for yal■^tever nc en ,-'et ■^et.icr i.h u'l •vnrt.e ib, -"':■ d cnat circuunstance 
lir.,s served to drive the price of reoiduo jp, .s to an extremclv lov level, as 
shov.'n by the follovdng prices in. Texas "oer thousand cubic feet of ;";as : 
1937, 0.14; 1928, 3.5<y; ldr29, 1.7^^; 1950, i.O^' 19ol, 1.7j^; 1932, 1.3(^; 
1933, 1.7;;; (***) This low price nati-irally encourapcd the establi?h-'ent of 
new cja-bo-n lI- ch plants -ith co-nsequent i-.xrv.-0L in roduction. In adel- 
tion, tills c r.'-iti^n c^-ca^ed : te;-^tation for _;'-ol:i:e refiners to 
construct carbo"n eir.el: -plonts v-nen they vfere •uui-'ble to find a -nar]-:et 
for their resiaue .'"p-.s in estblishec' carbon bl:^ch plants. A.t the present 
time, however, thc-:-e ?- - c-~n-s to be only o-ne oil co-apany, the Ma^inolia 
Petrolo-ui-n Co;:ipany, v/hich enar:2,cd in the ijrodvcction of carbon b''lac-:. 

The use of no tan-, -1 ---.:■ ,::■ -••,:.;:-,: It c" m even pre -iter pressure towdrds 
increased production tdan . a.- n .. use of casint-^'heoi. ip.s. As sta'ced ' 
above the , pjsoline content Cj. t-a lp,t-:er is relatively high, the average 
in the Ten- s Foniianalc being frorA onx to t^-Jo ■ "'lions -oer thovisand 
cubic f .- c t oi g-.a, v/hilc tho .overnpe for aot-aral ^^^'s is only abo-ut .3 
of a gallon of g- so'line -oor thousand cubic feet g-is. (****) I'cny 
owners a-n;-. le-seholders of larpe natural g.--s reserves, having no adeq-'aa.te 
mar"':cts, f..ndit i;a ediately - a-ofitable to prod-ace gas and extract the 



(*) Corbj-n. Bl--c!: - Its han-ofn.cture , properties & Uses - Biu-eau of 

Idin^s, ld";i. ■ 
(1) While the whole industry rclda.-i ennlo- ed over 1300 men, it must 

often build houses 3:1.' sui'v-'ly v."-t.r etc. for its limitedi. labor 

force in such nore or lesf r-„aote pl-;vCes. 

(**) Vol. -',, dc ort of Rese rch a-.:d Plan; ing Division, v-o. 15-15. 
' ITE^ files. 

(***) S-urop-u of Mines BulletinG on ilatural Gas. 

(****) Volume A, p. 39. Letter froT.. Association. ITRA files. 

9853 



:-asoline content t'lereof, T :e rofit-'jilit?- cr even t^ie feasibility 
of this Goiirse, however, oftej: >;oor,ds ou t.iB abilit:/ of the gasoline 
extrE.ctir;".. riant to C'ain some incouie froi:; the residue ■:_,a.p. It is not 
necessary always tlia.t a /.arhet ue foiand for the entire residue, Dnt if 
the revenue of the rasoline 'olant can 'oe rcipplemented hv the s'lle of a 
paEit of tne residue gas, its o^nRrations can "be piit on n profitable basis, (*) 
The ability to •.larket a v.-,;^t of tne residue ^as for cp.rhon black -pvjr]?osec 
nay therefore deterrdne whether or not a ^lant of this t^n^e is built at 
all. 

It can be seen froiii the above, tlia.t a tremendous outside pressure 
to "'rO'. lice is co/.tinuously bein.j exerted on the carbon black inanufa,ctur— 
ing inc.ur-try. In 1D33, this pressure was a-i,j;iehted. by a' ch'.r,:;;;e in tho 
con-.erva.tion policy of the State of Texas, Previa'is to t/ia.t year, carbon 
blach '-iroduccrs ;iad been limited to the ase of residue c singdiead ^as 
but by a statute (**) ppssed in 1953 tliey were allov'ec; to use residue 
natural, or dry, ^as as v^ell. This r.-ia: have been a f :ctor in the increase 
in production wnicn occurrc' in 193;. an: 1?3-1-. 

The -ollorvin:- fij^a^v-es J or ■^■roduction : re IhLrnished by the Bureau of 
nines (***): 

Production ho, o.." S:'les Stocks 
Year (Million lbs.) Pla.its (hillioa lbs.) (-.s o:. Dec,r<l) Prices 
(Pillion lbs.) (pe r lb.) 

Go 261 50) $,05 (Av.'J5-»29 

71 284 132) 

69 252 259 ,039 

53 253 230 ,030 

5C 262 253 ,027 

50 373 152 ,027 

50 313 173 .035 

'X the industry's low period was during the years 1928 
through 1330. ?ro.h^ci:ion ¥;as in e-cess oi sales, stocks were increasing, 
and "M-ices were declining. During t'^d^ -.leriod a general migration from 
Louisiana to x'exa.s was occurring, wac". ■ ccount for this exiDansion 
in o-aer; t ions, Louisiana "'as t.ie lea ia a 'Ion black producing state 
throip'^h 19r;£, but in 1929 lexa.s took- t .c Lr - , production in the ;:ianlTandle 
incr-asin: iror.: ?-i-,900,000 lbs, in 1928 to 139,100,000 Ids. in 1929 and 
in the rest of the state from 100,300,000 lbs. in 1928 to 228,10G,?00 lbs. 
in 1929, (****) 

(*) Vcluaie A, p. 39 ~ Lt vter froi.i Association. ilPJi files. 

(**) State of Texas, Art. oOOo, S_. , #-92, Chapter 100. 

(***) Bureau of nines laalletin - Carbon Black. 

(****) Vol. II, Rc-iort il Research and Planniiig hivision, ITHA. files 



9855 



l-:23 


249 


1923 


356 


1930 


330 


1931 


231 


i:32 


243 


1933 


269 


1934 


329 


It a-p-[ 


,:ears • 



After 1931 production ree-^s ..o 'iicive slowed do\7n, .and increased 
saleo reduced t.ac T.ccuj::ulr.ted stoc'is. Priccr- contir.i.ied to fall however, 
and the niirher of ;^Tl3,nts \ip.s redvcu''' u/ -vi::it. On].y after the code 
was in operation, v;as t::ere ■. 0:i?,.i;;;e. Pi-odLiction rose in 1934, and 
althou,'_:h sales declined and stochs E,i;airi "ce :,",n to nouiit, prices rose to 
their Iiighest level in foru- years. 

There ap-oear to have been t-zo cliief reasons for tl.e Industry'"s 
desire in 1933 for control of capacitv ano 'iroduction: one Y-ra.v- the 
threat to -rices from the he v;^ stoclrs (*) miilt up duriiig the depression 
and the other was the change in I'^'ZZ i:: the conservation policy of the 
State of Texas, v/hich w?„s exiTected to encourage -the expansion of the 
industry there. 

'The approved Code contained :. provision (**) for the control of 
inventories to the effect t^.:?i,t each neirher^ rithout infringing obligations 
existing on hovemocr SS, 1933, lor the pv-rcliase of gas, should regulate 
his production so that i ':. shoulc not exceed curre-it deliveries. It 
further ]-'rovided th/. t if. eny ner'-her fhouJ.d find, at the end of any period 
of six calendar months, that his stoch's of c-rfon blach had increased 
(except through purcliase of 'black or UiiavoiLable ■■]vrcha;re of grs) he 
should take neasurcs to reduce his stochs hy the ■ same araount during the 
next six calendar nonths; tut if rny meiaher increased his inventories "by 
fulfilling existing obligations for bhe p-'orcliase of gas the other mem- 
hers should not he reouired to restrict their inventories helow a per- 
ceritat^;e oi incres.se eo^ual to t/f.t of su.ch memher. The Article as origin- 
ally proposed hy the Industry did not include this proviso, hut one memher, 
the Imperial Oil and Gas Prod-acts Company, protested this (**=*) and v/as 
successful in lia.ving the Article in question thus a..iended. The chief 
basis of this company's protest v;as ohat tlie larger corrrranies had con- 
tracts ior the purchase ■ of gas, Y/hile most of tne small members did not. 
The restriction a/.ainst increases In stoch's -./ould thus affect only the 
small raem.bei-s v/hile one large ones could build up huge stocks to their 
considerable advantage. 

Little information concerning the achninistration of tliis provision 
viras available within the A'mlnistratio.i, but upon request the former 
secretary of the Code Authority- v/rote the following letter, dated "Novem- 
ber, 19, 1935 to H. S, Drixt'y, outlinin-; the activities of the Code Author- 
ity in tliat regard: 

(*) See figures cited iiimediately above from Bureau of Mines Bulletins. 
(**) Approved Code Ho. 259, Article IV, Section 1, 
(***) Volune E, page 29, ITBA files. 



9855 



-27- 

"Tlic belief v.iicli seeris cip-'arent to lae xror.: your 
letter oi' October 30th, t;i.,t trie -n-ovisionc ox t>.e Code 
for the Carbon Ilach ;:;:.iiu;>cturiii^ In^^-istry governing 
the control of i .ventory arc the cont.'ol of capacity 
laid doivn ri:-',ic s'ecilicatio-.is to be literally observed, 
.is a mistahe:-: one. The Code Authority viev/ed them rather 
as indastry ■■■■.-inciples accepted and self-imposed by all 
'oroducers aviJ relied on each member of th.e industry to use 
them as a guide to his operations. This reliance v/as not 
mis-olaced and it rras , therefore, never necessar;"" d^ai-ing the 
tine the Coce i^as in force to officially enforce the pro- 
visions. 

"In this industry no other interyiretatior. of the 
--ihrase 'In case at the end of a,ny period of six calendar 
months...' could have stood ir'> th^ui that tlie six months 
period v;as r. niovir.j;; one. The statistica.l position at an^/' 
given dr,te is i.mortant in this industry as it relates to 
.trends over ex..ended periods. The Code Authority there- 
fore re:,e.rded t:.ie inveicov-y v.-nv^- ion from tne standpoint 
of tendencies. Since to i liv 1 ,/./..l members of the in- 
dustry on t/.eir o\^n iaitij.tiye t .. j1: care to see that large 
accijmula.tions did not tai:e place., being aided in doing so 
by a relatively free movement of goods, the Code Authority 
never found, it necessary to t ke action on the inventory pro- 
visions. On one occasion it seei:ied to me personally that 
a tendency of accumulation v/as begivming and I took it uoon 
myself, simply in an advisory capacity c.s_ Secretary of the 
Code i.uthority, to focus the attention of all members of the 
indtistry thereon. Any action was unnecessa.ry, for i,='ithin a 
short time- the tc.dency reversed itself from natural causes, 

"As to v.'iether or not tne 'resence of tne new capa.city 
i-)rovision in the Code lia.d a deterrent elfect on capacity 
increases v?hic'i m.ignt otherwise '.lave been iiade, only an in- 
conclusive rns'.'er can be 'jiven. All the members of our 
ind'u.stry were conscientiously cooperative and each re^:a.rdcd 
tlie Code as tne expression of his ovm individi;£i,l will, as 
well as the credo of the industry, Tliat a,ttitude doubtless 
persua.ded r-.ch nenber to self-reg-ulation and 3;ilaced a check 
on individua.l ambitions, thus saving the Code Authority 
the necessity of invoking the capacity provision. There 
were twD or three rumors txia.t strangers to the industry 
v/ere considering or even contemplating entering into the 
field and erecting nev capacity. In e ach co,sc I mailed a 
copy of. the Code to the interested part and called atten- 
tion to the capacity provision. In no case did I liave any 
reply, and in no case was the capacity built, Wliether or 
not the Code provision deterred the prospective entrant 
into the carbon black business is indeterminable. It is 
j-ast as likely t.ia.t the rumor of intention to ouild v;as 
not well foniidod, 

"As to prices in the industry today, they seem to rema.in 
on the v-hole as they wore thiru 1934. The enclosed statistical 



report will g-ive you tnn riositio/. of production, sales 
and stoc^ts a? of October 31pt. 

"I re^iret th ,t I am unr.ljlc to answer the q.uestions 
posed in yo\ir letter of Octouor noth any more definitely 
tlia,n I have done pbove. You vail xriders.tand, I £im sure, 
t]ia,t this is not due to nu;^ unvdllin{TiT.ess to do so. It 
arises out of the fact that the Carlion Black Industry is 
a small one, T/hich f,:.vored its achieving that happy state 
of cooperation which made control and regulation throUii;h 
an iraposed authority -iDractically unnecessary". 

A further article of the code (*) "irovided tliat the ca.pacity of 
the industry should not "be increased except v.'ith the a;v;iroval of the 
Code Authority and the Administrator, /iccordin;? to the files of the 
f.eiiuty Administrator, no cases or applications arose Uiulcr this piro- 
vision althou^^^h several inquiries concerning it vrere received. The 
former A." ministration h'emher of the Code Authority, horrever, has ad- 
vised tlu-.t one case did come before the Code iaithority. In that in- 
stance it appears tlmt the J, h, Huoer Com-jany had closed dovm its 
plant in Louisiana. a,nd \7as purchasing its reqiiirenents of hlacl: from 
the United Carhon Comricny, The latter company refused to renew the 
contract uoon its termination and the J. I.;. Iluher Compa,ny stated tliat 
unless some otner conrpany ^Tould sup'ply its reouirements , it '"/ould re- 
m.ove tne Louisiana plant to xe:cas and start production. The Code Author- 
ity claimed tlia.t su-ch action would constitute an increase in capacity 
a,nd tliat, therefore, its peradssion and a-oroval of the Administrator 
was required. The question ->/as referred for settlement to the Aojnin- 
istra.tion .omoer, vdio rulec, th t the relocation of the Louisiana plant 
would not constitute a capacity i;icrease. Unfortunately, it is not 
Irnovm v/hetner tne plaint ra.s rioved or v;_.other sone other com.pa,n;/ a/a-eed to 
fill the require.nents oi the J. ;". Huoer Conroany. In vie;.' of the lacl: 
01 "ressure for new capacity there is ^^rouiid for question of the indus- 
try's exoressed fear of large nev/ "buildings in Texas. • 

There a'pears to liave been more success uiider the code, - judging 
"by the sumj'iiarjr statistics a<.Doye - in "b:-"inging prices un tiian in heap- 
ing ;jroduction and s:ochs dorrn, 'Thile the complete data necessary to 
estahlish the story behind this develo;jment is lacking, one or tv/o 
points on special conditions in the In. .^istry which "nave not j^et been 
brought up may at least serve as clues to be follov/ed in any further 
i nv e s t i ga t i on , 

It ap;)ears, for instance, that for --ractical purposes, a unified 
control has existed for sone time. The Cp.hot Conpauiies, the ColuiTidain 
Carbon Company, and the Unit.ed Carbon Comjjany, y/ith their subsidiaries, 
account for over 75'p of the total ; production of the Industry, and it is 
t^ie opinion of the former Acministra.tion I.ember tK^t the Cabot concern 
is a large stockholder in the two last mentioned firms. It should be 
noted th5.t tlie Code Authority was unusriiilly democratic, and included a 



(*) Approved Code Uo. 269, Article IV, Section 2. 



9855 



representative of every firr: i.. t:ie I.''>JEtry, 

It is also interesting to note in this cornection tne statement of 
the AcLministration 'iemljer that tLider the price filing provision of the 
Code (*), the seme prices were filed "by all memtsrs of the Industry. 

S'xirther, the tasin;; pcint systei;i ir-.der which the Industry o--ierates, 
and o/uout vaich there a.-veT^rs to oe little precise information, night 
well repay more ciireful invostigation. 

Another interesting development, Avhic/i rna.^' affect the control of 
capacity, is the "oossitility of patent control. It is said tiie^t the 
development 'by the Godfrey L. Ca.liot Coni;>any of the r^ethod of reducing 
carbon lilac]: to -pellets for b-Alk shipnent will greatly reduce costs. 
It is possible, tlierefore, that a restrictive licensing of the use of 
this uevelopinent vdll set up a virtual monopoly in the Carhon Elaclr 
Manufacturing industry, somewnat similar to tliat clainiod to exist in 
the Glass Container Industry, in -^^hich the Owens-Illinois Glass Cor]3or- 
ation is said to hold the great niajorit:,' of necessary patents. 

An imroortont tody of inforn-iation might "be developed 'b'j an in- 
vestigation of the activities of the export association of the Industry, 
Carbon Black Exports, Inc., is a cor;-.oration formed \>y the Industry 
under the Webo-Pomerane Act. Information on this corporation is in the 
files of the Federal Trade Comr-iission hut is confidential and access 
thereto coulu not -he liad. It is possible that this information would shed 
addition; 1 light on the general -condition of tne Industry by showing 
the t^pe of allocation practiced vdth regard to foreign shipments, 

A,gain, the large increase in capitaliza.tion which has occurred in 
tne Industry might bo investigated. Invested ca-6ital in the Industry 
jumoed fi^om $24,555,000 in 1928 to $31,465,000 in 1923 and to $37,238,000 
in 1930, Prom 1930 to 1933 this fignore increased steadily to $39,957,000. (*^ 
It is possible th^t the increase was due merely to a general 'recapital- 
ization within the Industry, Another erplanation may have been the ac- 
quisition of O'-'-nership nr long term leases in c'^.s nroperties, altho-ogh 
it is thought th^t the ;;reat majority of producers do not control their 
gas supplies except throu,gh contracts with the ^-asoline extraction plants. 
Investigation might show, oi course, that the Teicas ex'pansion n.lone 
explained the capitalize- ion situation. 



(*) Approved Code ITo. ,^69, Article V 

(**) Volume II, Application for Code. ".'5A files 



9855 



psr 'thons?.-!' 


. cubic 


fe 


^t) 




Lonlsiana 






Texas 


2.4: 








3.1 


2.4 








2.5 


2.3 








1.7 


2.3 








2.0 


2.8 








1.7 


2.6 








1.3 


2.6 








1.7 


2.5 








1.4 



-30- 

Finally tlje enti-e co£;o- ric? ^"•'■■- :.--.bio;-f hi v v-l;' De i-ivestigated. 
One of tlK; c'Mises of i-^f- 1 'Lili b ■' i:: t c i,,; j.rt:-;- :■- o ,r= to Imve iDeen 
the difference in rn-ices oet-;ee;-. t'le t' 'o iriucr.al _ :i.s -irodncting e.reas , 
Louisiina and Texas. 

Price of '..Iptu-ra,! Gas 

(Cents 

Year 

1327 
1928 
1S29 
1930 
1931 
^ 1932 
1933 
1934 



Prices for cij-ton ola.ck, however, are the sar.ie in these two sts.tes, 
and It seems evident therefore that either production costs other than 
.thtit of i^as, or '-irofits, in Loinsia.na and Texas, must differ vddely. (*) 
ITo detailed cost infonviatio: . a-uears to be availaols. The followin,-^ 
e-tatement (**) -.u^lished in 1922, contained tne only infonx.tion on 
costs which the writer coi^ld discover: 

"The cost 01 oper-\tio;-; not includin.':; cost of -.".as, 
varies fron 92;c to ?52.00 "oer hundred -munds of carton 
hlr'ch "oroduced. This "c;ihe2 unto account ].ahor, sacking 
and re-s^c!;ing, e ■ rech-.tion, su^^ilies and rci-alrs. Tlie 
Irbor costs -re notahly lo^v tccurse nost of the work is" 
"erfoniied autoiTij.tically hy .ir-cTiiiic-^y. 

"The cost of i/.s ranir:es from 1.5';:'- to 6.5^/5 pe--" thou- 
sand cubic feet of gas, p.nd is the Irr^ est c:r'ense and 
t:-e '-ost i.i:^.certain fa.ctor in' tne carbon black industrj'. 
I'iost of the companies charge 10; - ""er year to depreciation 
■■^.lfchoUt:;h ono company char^jes off 12.85a-. This ligiire r.ssuraes 
to cover the hasan-d in tne supplj' of .';a,s. Depreciation of 
machine r:" is sui-pri singly small," 

'/Thile ti'.o abov^: throws some light on the subject, it is not of a 
sufficiently recent date nor in such form as to be of ;^ny {,reat vaKie, 
According to a st.atem.ent of t]ie Bureau of hincs in 1932, however, a 
price of tnree cents (3;0 per "ound is bolcw the cost of production. (***) 



(*) Under this Code this differential in gas y-'rices ",7as at least partly 
co.iToensated for by providing -; •minimua '-age for common labor in 
Iiouisianti, of 40 cents j-^er h^ur 'z compared ^-'itVi minimum T;ages in 
other sections of the co-a.itry wTach were set at 50 o.nd 55 cents ;"er 
hour , 
(**) Carbon BJack - Its Hanufacture , Properties and Uses. Bureau of :ines-1922, 
(***)Vol. II, Report of Ilosearch and Planning Division. URA files. 

9855 



^31- 

While tiiat st,^,teraent mi£;ht "be true as re-'^.ards some producers, it ap-oears 
eoually ccrtpin tii:-.-: ot^ier o-^er-.tors rii£:ht be Jiblp to realize a profit 
•-,t tii^at price. Tao .-cner-al str.tei'eat can pro'oa"bly "be riade , hovever, 
tiiat a price of St^ :;)er po-op.d avjproacliGS the avera e cost. It might be 
noted tlir.t since carbon bjack is not a large element in the finished 
products c" v/hich it is a part, small variations in its price liave 
little efi'uct on tno ultimate consuiier. 

To sun up, the Co.rbon Black InrVastry anpcars to be subject to a 
more or less chronic instability, which was -'.ccentiaated 'by the effects 
of the depression, ITliatevcr informal control thie three dominant firms 
in the industry mp.y have exercised nnd whatever prerogatives the in- 
dustry may h-,ve enjoyed r:ider the '. \7ebb-Poi^-erenc Act, additionv.l con- 
trol r/as a'-parently th.o'acht ecessary under the Code, The fact th-'t the 
stock situ:,tion '-ic not trrrozove i'.i l'r34, -vnc. th'.t the production fi;;ure 
for that year v/as ve"';;; r.uch i.^creroed, ■■., yje-.rs to indicate that the 
Code T/as not as effective with respect to production cor.trol r,s it might 
have been. It is, ncvei'theless , interesti:-£ to note the atteiirpt to 
relate productio-'. to '..cmnvid through stock control, -nd to divorce it 
from the ■'a:ist'bla rnd disrirotin.;:; raw ri'^terlal situation.. The accept- 
ability of ezistinij- demand as :: gau^je for aroduction crnnot of course 
be fully determined uatil soiAc rnalysisof t]ie cost-ririce situation 
indicated auove can be made. 

-0- 



;.^ o| 



o o 

rH to 

o o 



0"^ o 






o r- 

o o-> 






o o 
o o 



o o 
o o 



o o 



to r— 

CVI.zf 

o o 



o o o o 



o 


U3 


I^CO 










^ 


VOVJD 


O I 


I o 


O O 



r? ^ 



o o 

o o 

CM rf^i 

o o 



O O 

d d 



iH 


Q 


lO 


O 




TA 






O 




O.l 








t3 to 


CJ 


r-{ 


rH 


O! 


O O 



9S55 



-33- 

TABLE II 

End of Ye:ir Inventories - Eleven Corr-^anies 



1931 5 1933 2 1933 1931 



101,115 


36.0 


61,715 


93,360 


35. 3 


03,373 


54,597 


14,0 


4,79? 


37,391 


7.0 


3 ..,333 



13.5 13.5.351 ,37.9 133, .-ll 36.5 

35.3 109,405 3.3,5 135,710 22.0 

1.4 14,033 3,9 ^0,470 3.3 

9 , " 39 , .•.'^6 12,3 4- 8 , 240 7,8 

;,035 19.5 45,433 14,0 55,054 11,3 70,3^7 11.4 

,,312 9.3 33,359 16.9 5,351 1,2 11,194 1.8 

11,545 2.3 116,734 18,9 

80 .03 3,307 2,6 20,533 "-.2 3,633 ,59 

5,773 ,9^ 

3o,lS0 10.9 73,321 14,9 37, "37 6,1 

709 .15 3,709 .44 



333,060 100 330,376 100 434,359 100 615,073 100 | 



Source: 7orl-: Sheets liy C. W, Henderson 



T.CjLE III. 



A-o-:iro::i:iate rter r-ent of C'-orcity at TTliicli Eleven I-Iills 
G^oercited, IGLa - 1934. 



Forest City 



19" I 



ile',7 ■"'.ochf 


3rds 


7Z'^} 


34l 


Old Hoc:--f 


2rds 


so', 


74^ 


Tot?l 




77} 


34-:^ 


Nelson 




65' 


S5'- 


*Powell - net 


67"; 


45^- ; 


gross 




15s 


lor-^ 


rurhara 




4&' 


55:' 


Grantville 


' 


^rl 


96f^ 


Georgia 




i&'", 


•la^. 


Balls ton-St 


Lll'7ater 


9^ 


161 


Seneca 




5-' 


35l 


Perkins 




3:'. 


•301 


3ibl3 




- 


■■"95'' 


Birdslioro 




- 


Z3< 



1935 

nol 

75 : 

lOOl 
551 

.75f. 
171 

9'V.' 
11^. 

24^^ 

501 

5l 

39^' 

43'" 



1954 

39-^j 
35l 
93^ 
60'-' 



753 
14l 
-..■3 } 
30l 
lOl 
57l 
37' 



* Tiiis coLTiany liad 601 macliines retired^ "C-ross" canacitY includes tliese 
Calculftion nade froa figures in C. 17. Henderson's vjot-z slieets. 



9855 



--CMlr 



L^^ O C G^>J3 ^- LO, K"! 0~\ H 
O r— r-H V3 r^VD VD CM i^D 



I 



,::i- iH OJ OJ O '-D CVI LT, K> CJ C\J cr\ 
O" Vj:J VO I — O r-\ rH "vO O iH 0^ C/D 

r^ tD K^ r^^ a~\ OM^ O oj oj vo 

, r^ O 0>^ rHaiiHrHOJOrHj- 
iH'vDVXJCVIJ-OJrHLnCViHOJ 



^^10 r 
^X) r 



I o LTM^. CO Lr\>^o 1^- o^ Lr^ r^^js 

O"-. i-l O^ C\J CO OJ to r^ iH O r-H 



^ vo vo r^, tr^vOj c\j cvj OJ u^ r^ 
,-1 cj to '-^ >^o ^ r^ O rH t^ oi 

O rH V.O K--, r— r^ t^ r-i ^ ITM— 



I 





ov-> r-: I-- to Lo.V'^^ OJ crio oj 
13 ^■- vo <a o* r ; vo o! ' h h 

M OJ H rH 


to C\J 


ro t~- K-- o"^. J- i-H o-^l^\o LTM^ 

^- O"-. 0~^ O L'^ J- rH ir^. O V£) WJ 

(H xT ^t Lr^ rH ix^ r—^ ru rH r^ 




CO H ^ '0^ OJ C rH O O O CA 
t-- to (J> 0.: rH to rH t— OJ lr^ 1^ 

ir\ r— rH LTM^, OJ r^ 



a,' rH ^ U) O^ I 

r-1 O O'-i -H VO , 



O G^o-, L'.^r••M-^ I 
.^:- Lr> OA o o to 
r-~, C7i to Ai- >- OJ 



r-'. LO o-i K-, tjQ r--^. OJ I 

Lr> r- OJ ^ OJ H rH 



9855 



b b In' C Cj O <D 

:-"-; Ph n c. <Lt> ;-q w Pn 



•H -H 

n n 



-36- 



I 



I 



r'AV-O M to --J- ^f H r-i o-\^ !^-\ 




' 


t~~ OA r— 01 VO (^.jr-r I-— OJ I-- ^^ 
r-t i-H i-i rH 


8 

rH 




O '0 J- U3 r'-> iVO <^D CO O^VjD CTv 
M 1- bo vc ^- I-- ra o:-. K■^ OJ ^ 
bo 'rH r-- o 1-^ I-- K^ r- u.-> to to 


o 




vo r-~,^-x;. ^1 ,zt Ln WD r— '^'V' vx) ,:t'.- 

h- LO, K^ CJ M rH V£) [^, 0^,-t J" 
IX^'^.O (X" J- OJ r-i J- C\J OJ 


I-— 

rH 




to to J LC^-O OJ I-- r^>.X:. U3 '^O 

h- rH 0-. 0^ to J- to !~^, ^^ O^ rH 
H CM M 


8 

rH 


. 


r^vo rH o H cTi r-vD c\j ^ to 
cvj ry o o"v J- V.O to bo iH r— .— : 
r^- , ^'■^^ u;-\ H to r- r^^f- ^'^ o 






l^^ r--AVD r--^, I— lt-, r^ to >^i ^ to 
iH LOv OJ r " -, c/^,^:- o OJ iir\ r~\ ic. 
■vO ;— r^-^^- OJ rH r--^-, rH r-^ 


rH 


" 


O^ Lr> LC. rH 1 ^' O-v LO. CT-i C■^ r— OJ 

to ^- T^^ O H V.O rH * O^ rH 
r-t CM rH iH 


o 
o 

rH 




Lf -i^-o vjD r— r- OJ o^ to o u^ r^ 

^- \ -'^O VD LO O H CO O O to 

to r-— ai iH r— m r— r— oi o ^^ 


OJ 




Ka ro^- ^ rH ^- iH rH CA^ CT> 
t-: C!^,:j- 0' J-^-D M^.O ^\1 rH r^, 

u;>- r- CM Lf^ ro 'CM ro . 


to 

CO 


' 


r^to 
'■ri to o^ ! :■■ G-'. ir-, r— ir-, o; 

rH rA O r-^ cA^ ^ ' * ' ' 

01 CO rH M 


O 

O 

rH 




cr. r- OJ ^t- o->^ mt^ u-^ 1 i 

OJ r— to H to H O tx: to 

ir-.vD l^^ OJ OJ to ,-t vo oj 


to 




o rH cvj i--^ r-- to r■-^ r-'-. t^ 
'-XI r— to L!.-> Lc^ i-i. OJ H 

L^^ h- OJ ^v 0.1 rH rH 


to 

Oj" 




-P (D 

•H rH O 

•H fii O W O 
-P i^ rH B !> -H -p k5 rt ,-o 
O O rH f.' -P '<-.'■ W O -H 0} 
0) CQ (D ^C ri r-i r-l (D ^J ,0 'cJ 


^ 





9S55 # 



(U O -H -H 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 

THE DIVISION OF REVIEW 

THE WORK OF THE DIVISION OF REVIEW 

Executive Order No. 7075, dated June 15, 1935, established the Division of Reviev of the 
National Recovery Administration. The pertinent part of the Executive Order reads thus: 

The Division of Review shall assemble, analyze, and report upon the statistical 
information and records of experience of the operations of the various trades and 
industries heretofore subject to codes of fair competition, shall study the ef- 
fects of such codes upon trade, industrial and labor conditions in general, and 
other related matters, shall make available for the protection and promotion of 
the public interest an adequate review of the effects of the Administration of 
Title I of the National Industrial Recovery Act, and the principles and policies 
put into effect thereunder, and shall otherwise aid the President in carrying out 
his functions under the said Title. I hereby appoint Leon C. Marshall, Director of 
the Division of Review, 

The study sections set up in the Division of Review covered these areas: industry 
studies, foreign trade studies, labor studies, trade practice studies, statistical studies, 
legal studies, administration studies, miscellaneous studies, and the writing of code his- 
tories. The materials which were produced by these sections are indicated below. 

Except for the Code Histories, all items mentioned below are scheduled to be in mimeo- 
graphed form by April 1, 1936. 

THE CODE HISTORIES 

The Code Histories are documented accounts of the formation and administration of the 
codes. They contain the definition of the industry and the principal products thereof; the 
classes of members in the industry; the history of code formation including an account of the 
sponsoring organizations, the conferences, negotiations and hearings which were held, and 
the activities in connection with obtaining approval of the code; the history of the ad- 
ministration of the code, covering the organization and operation of the code authority, 
the difficulties encountered in administration, the extent of compliance or non-compliance, 
end the general success or lack of success of the code; and an analysis of the operation of 
code provisions dealing with wages, hours, trade practices, and other provisions. These 
and other matters are canvassed not only in terms of the materials to be found in the files, 
but also in terms of the experiences of the deputies and others concerned with code formation 
and administration. 

The Code Histories, (including histories of certain NRA units or agencies) are not 
mimeographed. They are to be turned over to the Department of Commerce in typewritten form. 
All told, approximately eight hundred and fifty (850) histories v/ill be completed. This 
number includes all of the approved codes and some of the unapproved codes. (In Work Mate- 
rials No_^ 18, Contents of Code His tories, will be found the outline which governed the 
preparation of Code Histories.) 



(In the case of all approved codes and also in the case of some codes not carried to 
final approval, there are in NRA files further materials on industries. Particularly worthy 
of mention are the Volumes I, II and III which constitute the material officially submitted 
to the President in support of the recommendation for approval of each code. These volumes 
9768—1 . 



-ii - 

set forth the origination of the codes, the sponsoring group, the evidence advanced to sup- 
port the proposal, the report of the Division of Research and Planninf on the industry, the 
recommendations of the various Advisory Boards, certain types of official correspondfcnce, 
the transcript of the formal hearing, and other pertinent matter. There is also much offi- 
cial information relating to amendments, interpretations, exemptions, and other rulings. The 
materials mentioned in this paragraph were of course not a part of the work of the Division 
of Review. ) 

THE WORK MATERIALS SERIES 

In the work of the Division of Review a considerable number of studies and compilations 
of ...ata (other than those noted below in the Evidence Studies Series and the Statistical 
Material Series) have been made. These are listed below, grouped according to the char- 
acter of the material. (In Work Materials No . 17 , Tentativ e Ou tlines and Sum maries of 
Studies in P rocess , the materials are fully described) . 

I ndustry Studies 

Automobile Industry, An Economic Survey of 

Bituminous Coal Industry under Free Competition and Code Regulation, Eonomic Survey of 

Electrical Manufacturing Industry, The 

Fertilizer Industry, The 

Fishery Industry and the Fishery Codes 

Fishermen and Fishing Craft, Earnings of 

Foreign Trade under the National Industrial Recovery Act 

Part A - Competitive Position of the United States in International Trade 1927-29 through 

1934. 
Part B - Section 3 (e) of NIRA and its administration. 
Part C - Imports and Importing under NRA Codes. 
Part D - Exports and Exporting under NRA Codes. 

Forest Products Industries, Foreign Trade Study of the 

Iron and Steel Industry, The 

Knitting Industries, The 

Leather and Shoe Industries, The 

Lumber and Timber Products Industry, Economic Problems of the 

Men's Clothing Industry, The 

Millinery Industry, The 

Motion Picture Industry, The 

Migration of Industry, The: The Shift of Twenty-Five Needle Trades From New York State, 
1926 to 1934 

National Labor Income by Months, 1929-35 

Paper Industry, The 

Production, Prices, Employment and Payrolls in Industry, Agriculture and Railway Trans- 
portation, January 1923, to date 

Retail Trades Study, The 

Rubber Industry Study, The 

Textile Industry in the United Kingdom, France, Germany, Italy, and Japan 

Textile Yarns and Fabrics 

Tobacco Industry, The 

Wholesale Trades Study, The 

Women's Neckwear and Scarf Industry, Financial and Labor Data on 

9768—2 



Is xmio? 



Women's Apparel Industry, Some Aspects of the 

Trade P ractic e Studies 

Commodities, Information Concerning: A Study of NRA and Related Experiences in Control 

Distribution, Manufacturers' Control of: Trade Practice Provisions in Selected NRA Codes 

Distributive Relations in the Asbestos Industry 

Design Piracy: The Problem and Its Treatment Under NRA Codes 

Electrical Mfg. Industry: Price Filing Study 

Fertilizer Industry: Price Filing Study 

Geographical Price Relations Under Codes of Fair Competition, Control of 

Minimum Price Regulation Under Codes of Fair Competition 

Multiple Basing Point System in the Lime Industry: Operation of the 

Price Control in the Coffee Industry 

Price Filing Under NRA Codes 

Production Control in the Ice Industry 

Production Control, Case Studies in 

Resale Price Maintenance Legislation in the United States 

Retail Price Cutting, Restriction of, with special Emphasis on The Drug Industry. 

Trade Practice Rules of The Federal Trade Commission (1914-1936); A classification for 

comparision with Trade Practice Provisions of NRA Codes. 

Labo r Studies 

Cap and Cloth Hat Industry, Commission Report on Wage Differentials in 

Earnings in Selected Manufacturing Industries, by States, 1933-35 

Employment, Payrolls, Hours, and Wages in 115 Selected Code Industries 1933-35 

Fur Manufacturing, Commission Report on Wages and Hours in 

Hours and Wages in American Industry 

Labor Program Under the National Industrial Recovery Act, The 

Part A. Introduction 

Part B. Control of Hours and Reemployment 

Part C. Control of Wages 

Part D. Control of Other Conditions of Employment 

Part E. Section 7(a) of the Recovery Act 
f.;aterials in the Field of Industrial Relations 
PRA Census of Employment, June, October, 1933 
Puerto Rico Needlework, Homeworkers Survey 

Administrative Studies 

Administrative and Legal Aspects of Stays, Exemptions and Exceptions, Code Amendments, Con- 
ditional Orders of Approval 

Administrative Interpretations of NRA Codes 

Administrative Law and Procedure under the NIRA 

Agreements Under Sections 4(a) and 7(b) of the NIRA 

Approved Codes in Industry Groups, Classification of 

Basic Code, the — (Administrative Order X-Sl) 

Code Authorities and Their part in the Administration of the NIRA 
Part A. Introduction 
Part B. Nature, Composition and Organization of Code Authorities 

9768—3 . 



- iv - 

Part C. Activities of the Code Authorities 

Part D. Code Authority Finances 

Part E. Summary and Evaluation 
Code CoKpliance Activities of the NRA 
Code Making Program of the NRA in the Territories, The 
Code Provisions and Related Subjects, Policy Statements Concerning 
Content of NIRA Administrative Legislation 

Part A. Executive and Administrative Orders 

Part B. Labor Provisions in the Codes 

Part C. Trade Practice Provisions in the Codes 

Part D. Administrative Provisions in the Codes 

Part E. Agreements under Sections 4(a) and 7(b) 

Part F. A Type Case: The Cotton Textile Code 
Labels Under NRA, A Study of 

Model Code and Model Provisions for Codes, Development of 

National Recovery Administration, The: A Review of its Organization and Activities 
NRA Insignia 

President's Reemployment Agreement, The 

President's Reemployment Agreement, Substitutions in Connection with the 
Prison Labor Problem under NRA and the Prison Compact, The 
Problems of Administration in the Overlapping of Code Definitions of Industries and Trades, 

Multiple Code Coverage, Classifying Individual Members of Industries and Trades 
Relationship of NRA to Government Contracts and Contracts Involving the Use of Government 

Funds 
Relationship of NRA with States and Municipalities 
Sheltsred Workshops Under NRA 
Uncodified Industries: A Study of Factors Limiting the Code Making Program 

Lep:.al Studie s 

Anti-Trust Laws and Unfair Competition 

Collective Bargaining Agreements, the Right of Individual Employees to Enforce 

Commerce Clause, Federal Regulation of the Employer-Employee Relationship Under the 

Delegation of Power, Certain Phases of the Principle of, with Reference to Federal Industrial 
Regulatory Legislation 

Enforcement, Extra-Judicial Methods of 

federal Regulation through the Joint Employment of the Power of Taxation and the Spending 
Power 

Government Contract Provisions as a Means of Establishing Proper Economic Standards, Legal 
Memorandum on Possibility of 

Industrial Relations in Australia, Regulation of 

Intrastate Activities Which so Affect Interstate Commerce as to Bring them Under the Com- 
merce Clause, Cases on 

Legislative Possibilities of the State Constitutions 

Post Office and Post Road Power — Can it be Used as a Means of Federal Industrial Regula- 
tion? 

State Recovery Legislation in Aid of Federal Recovery Legislation History and Analysis 

Tariff Rates to Secure Proper Standards of Wages and Hours, the Possibility of Variation in 

Trade Practices and the Anti-Trust Laws 

Treaty Making Power of the United States 

War Power, Can it be Used as a Means of Federal Regulation of Child Labor? 

9768—4. 



THE EVIDENCE STUDIES SERIES 

The Evidence Studies were originally undertaken to gather material for pending court 
cases. After the Schechter decision the project was continued in order to assemble data for 
use in connection with the studies of the Division of Review. The data are particularly 
concerned with the nature, size and operations of the industry; and with the relation of the 
industry to interstate commerce. The industries covered by the Evidence Studies account for 
more than one-half of the total number of workers under codes. The list of those studies 
follows: 



Automobile Manufacturing Industry 
Automotive Parts and Equipment Industry 
Baking Industry 

Boot and Shoe Manufacturing Industry 
Bottled Soft Drink Industry 
Builders' Supplies Industry 
Canning Industry 
Chemical Manufacturing Industry 
Cigar Manufacturing Industry 
Coat and Suit Industry 
Construction Industry 
Cotton Garment Industry 
Dress Manufacturing Industry 
Electrical Contracting Industry 
Electrical Manufacturing Industry 
Fabricated Metal Products Mfg. and Metal Fin- 
ishing and Metal Coating Industry 
Fishery Industry 
Furniture Manufacturing Industry 
General Contractors Industry 
Graphic Arts Industry 
Gray Iron Foundry Industry 
Hosiery Industry 

Infant's and Children's Wear Industry 
Iron and Steel Industry 



Leather Industry 

Lumber and Timber Products Industry 
Mason Contractors Industry 
Men's Clothing Industry 
Motion Picture Industry 
Motor Vehicle Retailing Trade 
Needlework Industry of Puerto Rico 
Painting and Paperhanging Industry 
Photo Engraving Industry 
Plumbing Contracting Industry 
Retail Lumber Industry 
Retail Trade Industry 
Retail Tire and Battery Trade Industry 
Rubber Manufacturing Industry 
Rubber Tire Manufacturing Industry 
Shipbuilding Industry 
Silk Textile Industry 
Structural Clay Products Industry 
Throwing Industry 
Trucking Industry 
Waste Materials Industry 
Wholesale and Retail Food Industry 
Wholesale Fresh Fruit and Vegetable Indus- 
try 
y^ool Textile Industry 



THE STATISTICAL MATERIALS SERIES 



This series is supplementary to the Evidence Studies Series. The reports include data 
on establishments, firms, employment, payrolls, wages, hours, production capacities, ship- 
ments, sales, consumption, stocks, prices, material costs, failures, exports and imports. 
They also include notes on the principal qaalifications that should be observed in using the 
data, the technical methods employed, and the applicability of the material to the study of 
the industries concerned. The following numbers appear in the series: 
9768—5. 



Asphalt Shingle and Roofing Industry Fertilizer Industry 

Business Furniture F .neral "upfly Industry 

Candy Manufacturing; Industry Glass Container Industry 

Carpet and Rug Industry Ice Kan..facturinj' Industry 

Cement Industry Knitted Outerwear Industry 

Cleaning and Dyeing Trade Paint, Varnish, ana Lacquer, Mfg. Industry 

Coffee Industry Plumbing Fixtures Industry 

Copper and Brass Mill Products Industry Rayon and Synthetic Yarn Producing Industry 

Cotton Textile Industry Salt Producing Industry 

Electrical Manufacturing Industry 

THE COVERAGE 

The original, and approved, plan of the Division of Review contemplated resources suf- 
ficient (a) to prepare some 1200 histories of codes and NRA units or agencies, (b) to con- 
solidate and index the NRA files containing some 40,000,000 pieces, (c) to engage in ex- 
tensive field work, (d) to secure much aid from established statistical agencies of govern- 
ment, (e) to assemble a considerable number of experts in various fields, (f) to conduct 
approximately 25% more studies than are listed above, and (g) to prepare a comprehensive 
summary report. 

Because of reductions made in personnel and in use of outside experts, limitation of 
access to field work and research agencies, and lack of jurisdiction over files, the pro- 
jected plan was necessarily curtailed. The most serious curtailments were the omission of 
the comprehensive summary report; the dropping of certain studies and the reduction in the 
coverage of other studies; and the abandonment of the consolidation and indexing of the 
files, Fortunately, there is reason to hope that the files may yet be carec" for under other 
auspices. 

Notwithstanding these limitations, if the files are ultimately consolidated and in- 
dexed the exploration of the NRA materials will have been sufficient to make them accessible 
and highly useful. They constitute the largest and richest single body of information 
concerning the problems and operations of industry ever assembled in any nation. 

L. C. Marshall, 
Director, Division of Review. 
9768—6.