STEEL COMPANIES (SUBPENAS) FRIDAY, SEPTEMBER 14, 1962 U.S. SENATE, COMMITTEE ON THE JUDICIARY, The committee met, pursuant to notice, at 10:22 a.m., in room 2228, New Senate Office Building, Senator James O. Eastland (chairman) presiding. Present: Senators Eastland, Kefauver, Johnston, McClellan, Ervin, Hart, Hruska, Keating, Fong, and Scott. Also present: Thomas B. Collins, counsel of the Committee on the Judiciary. (Present at this point: Senators Eastland (chairman), presiding, Kefauver, McClellan, Ervin, Hart, Wiley, Hruska, Keating, and Fong.) The CHAIRMAN. The committee will come to order. Mr. Patton, do you have anything to add to your testimony of yesterday? STATEMENT OF THOMAS F. PATTON, PRESIDENT, REPUBLIC STEEL CORP.; ACCOMPANIED BY H. C. LUMB, VICE PRESIDENT, DIRECTOR OF LAW AND CORPORATE RELATIONS, AND BRUCE BROMLEY, COUNSEL-Resumed Mr. PATTON. Mr. Chairman, we had concluded our presentation and were in the mist of answering questions, and, at your request, we are back here this morning for such further proceedings as you may desire. The CHAIRMAN. Senator McClellan? Senator MCCLELLAN. I pass for the moment and will let Senator Ervin proceed. I have been occupied with other matters. Senator ERVIN. I will do the same. The CHAIRMAN. Senator Wiley? Senator WILEY. I pass. The CHAIRMAN. Senator Hruska? Senator HRUSKA. Mr. Chairman, I do not know that I have too many questions. There is one thing that has been going through my mind since our hearings the other day, the matter of the several assertions from time to time that we have had similar cost information to that which is being requested here given us in previous hearings like on bread and on drugs and automobiles and in previous steel hearings. 41 Frankly, I have had a search made of the record, and we have not been able to find any such information such as that which is being requested in the hearings here and in the subpena here. There have been such things as total sales and net profit figures giving total consolidated profits, but nothing by way of unit costs upon specific items such as we have here. The type of information generally, for example, from General Motors and Chrysler and Ford is all of that general category. In fact, Chrysler in the excerpt furnished me here furnished information along the idea of one of these pie charts. The CHAIRMAN. Will you wait a minute? I have the following telegrams to be inserted in the record: Telegram dated September 11, 1962, from Jones & Laughlin Steel Corp., Avery C. Adams, chairman of the board; Telegram dated September 12, 1962, from Colorado Fuel & Iron Corp., Leonard C. Rose, president; Telegram dated September 13, 1962, from Inland Steel Co., Joseph L. Block, chairman of the board; and Telegram dated September 14, 1962, from Kaiser Steel Corp., J. L. Ashby, president. (The telegrams referred to are as follows:) Hon. JAMES O. EASTLAND, Chairman, Senate Judiciary Committee, Washington, D.O.: PITTSBURGH, PA., September 11, 1962. As we have previously written Senator Kefauver we believe that publication of our confidential product cost-and-profit data as proposed by the Subcommittee on Antitrust and Monopoly would have serious and adverse effects on Jones & Laughlin Steel Corp. Particularly because of the competitive advantage it would give foreign producers. We hope that your committee will not take any action that would have the effect of authorizing the subcommittee to require that kind of data from us or any other steel company. Hon. JAMES O. EASTLAND, Chairman, Committee on the Judiciary, Washington, D.C.: AVERY C. ADAMS, Jones & Laughlin Steel Corp. NEW YORK, N.Y., September 12, 1962. The Colorado Fuel & Iron Corp. respectfully urges that submission of steel production costs pursuant to the subpenas duces tecum issued by the Subcommittee on Antitrust and Monopoly would be contrary to the national interest. As a company which produces a line of products in which foreign competition is particularly severe, we believe that the compilation of cost data would seriously and immediately injure our shareholders, our employees, and the communities in which they live. Although the Colorado Fuel & Iron Corp. is not one of the four companies which are formally contesting the subpenas, we have a vital stake in the outcome of this matter. We have not joined in formally contesting the subpena which we received, only because we feel that the issue is adequately raised by the test cases of the four companies which are already before you and because it appears that intervention of additional companies would serve merely to complicate procedures and thus to delay a prompt decision on the question. Pending resolution of the test cases, we have not submitted data pursuant to the subpena, but we will be forced to do so if the final decision in the test cases requires compliance. Production costs have always been our most closely guarded trade secrets. To put these costs in the hands of our foreign competitors would give them an unfair advantage. For they would then know just how much to bid in order to take any particular business from American steel mills; they would know which of their facilities to expand or improve because they would know where American steel mills are most vulnerable. Compiling cost data in groups of several companies, as the subcommittee proposes, will not lessen the value of the information in the hands of our foreign competitors. On the contrary, compliation of data by groups of companies will merely simplify the task of foreign steel producers by providing them with a neatly packaged average cost analysis of each major product. This will be particularly harmful because foreign steel companies and their governments take special pains to assure that we have no access to their production costs. It is important to note that the steel products in which foreign competition is most severe are generally the products which require the most man-hours to manufacture. Therefore compliance with the subpenas will adversely affect our ability to sell the very products which provide the most jobs. This will have a serious impact upon employment in communities in the eight States in which our major plants and mines are located. We urgently solicit your favorable consideration of the position of the steel companies in the test cases. (Signed) LEONARD C. ROSE, President. HOWARD HOLTZMANN. Senator JAMES O. EASTLAND, CHICAGO, ILL., September 13, 1962. Chairman, Committee on the Judiciary, U.S. Senate, Senate Office Building, Washington, D.C.: Publication of steel costs would be harmful to competitive position of American steel industry and consequently to employment of steelworkers. It would also be contrary to the concepts of our free economy. Therefore, strongly urge that request of your subcommittee for this information be withdrawn. JOSEPH L. BLOCK, Chairman, Inland Steel Co., Chicago, Ill. OAKLAND, CALIF., September 14, 1962. Hon. JAMES O. EASTLAND, Chairman, Senate Judiciary Committee, We understand that at your hearing on September 12, members of the committee expressed considerable interest as to the impact of foreign competition on the American steel industry, and as to whether disclosure of the cost data required by the subcommittee subpena would confer a competitive advantage on foreign steel producers. Kaiser Steel Corp., which markets its products primarily in the Western States, is experiencing unprecedented competition from foreign sources. A substantial and steadily increasing share of the Western steel market is being taken by foreign steel producers. As indicated in our letter to the subcommittee dated August 10, we think publication of the product cost data requested by the subcommittee, no matter how the data is coded before publication, will give invaluable information to our foreign competitors, and could place us at a further disadvantage in competing with them. KAISER STEEL CORP., Senator HRUSKA. I do not know if the witness has any knowledge of the information given to this subcommittee 5 years ago in the steel hearings or not. Have you, Mr. Patton? Mr. PATTON. Senator Hruska, we have made a little research into this subject, and, with your permission, I will read just very briefly as much as we can find with respect to the three situations you re member or you mention, and I think you will find that they are quite different from the situation confronting us today. With respect to the automobile industry, I would like to call your attention to a statement which appears on page 124 of the report dated November 1, 1958. The CHAIRMAN. What report? Mr. PATTON. The report of the subcommittee, Senator Kefauver's subcommittee, which the subcommittee issued. Senator KEFAUVER. May I ask what report? Mr. PATTON. This is the report issued by your subcommittee dated November 1, 1958, following your investigation of the automobile industry, and I refer to page 124, and I quote from page 124 of that report. It reads as follows: Inasmuch as the companies refuse to supply the subcommittee with breakdowns of their unit costs, no definitive figures on costs can be presented. That is as much as we have been able to find on that. In the report dated June 27, 1961, which the subcommittee issued following its investigation of the drug industry, the subcommittee stated at page 6 of that report, and I quote: Companies which were represented at the subcommittee's hearings were reluctant to disclose production cost data relating to specific products. It has been possible, nevertheless, to utilize other data to arrive at meaningful estimates of such production costs for a number of pharmaceutical products which were discussed in the course of the hearing. So, apparently, there was nothing given there. Now, with respect to the bread situation, of course, may I point out that bread is a local product sold in local markets and is not subject to foreign competition in any way like we are subjected to with respect to steel. The subcommittee's report dated August 27, 1960 Senator HART. If I could interrupt just to protect myself, the assumption you make is not accurate, as Judge Bromley knows, if you live across the river from Canada. Mr. PATTON. I accept that competition, Senator, but I know that it is not like the competition we have in steel. Senator WILEY. That is still an American product. Mr. PATTON. May I just read the subcommittee's report following the bread industry investigation. The report dated August 27, 1960, stated this: It is important to realize that, unlike steel or automobiles, bread is a perishable product sold predominantly in local markets. That is all, sir, we have been able to find on these three specific items. Senator HRUSKA. In each of those instances, however, is this not true: Certainly, it was true in the steel case, with which you are familiar, the hearings of 5 years ago, that whatever information was given was by way of agreement and consent; it was not pursuant to subpenas? Is that correct? Mr. PATTON. That is my understanding, sir. Senator HRUSKA. It is my recollection that that same is true in the bread industry and also in the drug industry, and it was not informa |