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 Coutpiits
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 iTATioN IF Ti::~ ccttci- "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 : 0 .-, .,, :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 Industry, '■'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
[■iACHIE: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)
Pouno-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: Alninistration 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: Meeting'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 BIACr i'LAJTLTACTirRIlM& 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 0 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.) (per 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
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(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 Histories, 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, Tentative Outlines and Summaries of
Studies in Process, the materials are fully described) .
Industry 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 Practice 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.
Labor 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 Studies
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.
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