vestment in machine tools which has been made in the past by the U.S. Government, and additionally what the Government presently owns, makes the action of the Government that much more of our concern, if and when those machines are placed on the market, how they are placed on the market, and what is done with them.

And I think, perhaps, our counsel might like to make a try at this one. Bill?

Mr. BRASHARES. I think, just a few small points.

Your implication is correct. We are quite uncertain as to whether the Government is moving ahead on the phaseout plan. They have talked about it for several years, as you know and as your committee has heard them testify.

However, in the past year the matter seems to have gone back to the drawingboard in the context of a full mobilization study. So, when Admiral Reich talks about a phaseout, I think he is talking about some distant date when they will reach some conclusions.

Assistant Secretary Shillito talked several weeks ago about increasing the pressure on contractors to submit phaseout plans. And if this in fact happens, it could speed up things.

In terms of the metrication situation, as Mr. Darrone points out, what the Government does with this huge inventory of $10 billion to $20 billion in machine tools will be critical as to the nature of the impact on small business, the impact on these residual values, what small business can sell its old equipment for, and so forth.

Another danger is, of course, that the metrication would give the Government a new excuse to go out and start spending many more billions of dollars to refurbish its machine-tool inventory. It would be dumping the old stuff on the market and going out and spending much more than it has in the past on the claim that they have to have it ready.

So, this is a real danger area.

Not only is there the question of whether they are going to move as fast as they have said they would but are they going to use this as a reason to get even further in the quagmire that we have been talking about all these years.

Mr. DARRONE. Mr. Chairman, I believe that an early indication of the direction that the Government will take, will be very helpful to our decision as to how we buy new equipment. The reduction in residual value is of considerable concern to many of our members. In fact, the placement of orders for new equipment becomes a concern as to whether we should become immediately involved in the purchase of dual functioning equipment or whether we should go directly to metric. And if we do go to metric, should we replace our present equipment now before we lose the value in a larger market when everybody dumps at one time?

In this latter instance, it has been estimated that we could expect to lose as much as a third of the residual value of our equipment if confronted with a system of metrication agreed to by all parties, with Government already embarked upon a program to identify it throughout the United States.

Mr. ADDABBO. Mr. Darrone, I understand that the Defense Department is purchasing or researching two major pieces of equipment, the personnel carrier and some other pieces of equipment, along the metric

computation. Do you have any information, or have you heard anything along those lines in the tool and die world?

Mr. DARRONE. I am sorry. I personally am not well acquainted with this particular program. However, the Government has, in the past, initiated programs which were metric oriented, and it is quite possible that some of the impetus and motivation to become metricated-I am speaking for our industry-might result from a Government procurement program which was entirely metricated.

Mr. ADDABBO. In the past, when the final specifications on some of the programs were issued, were they issued as actual computations or were they converted to American standards?

Mr. DARRONE. I am not sure of the actual dimensioning procedure. Mr. ADDABBO. Mr. Darrone, can you possibly advise us, or would you care to make any constructive statements for us, as to what the Small Business Administration might do to help the small business firms in this particular line?

Mr. DARRONE. Might I say this, Mr. Chairman, that up until now at least, the impact of the Small Business Administration on our industry has not been dramatic. I think we do, however, recognize the potential and its good intentions. Very possibly, with business hurting for capital funding at the moment, if we are faced with an early metrication program, with no major period of improved economy between, and with a program of nonrestrictive loans and I say "nonrestrictive," because generally speaking I think this is one of the problems we have with loans from the SBA-with nonrestrictive loans which would provide funds for the conversion, the SBA might be of great help.

Mr. ADDABBO. Thank you, Mr. Darrone.

Mr. Bergland?

Mr. BERGLAND. Thank you, Mr. Chairman.

Mr. Darrone, if the country were to adopt the metric system as a policy, would your industry be obliged, by the nature of the business in which you are engaged, to maintain a dual standard for some time?

I am thinking particularly about the need for replacement parts for the American automobile which will run 20 years. And we have other equipment in the United States which is in service now which will be used for a good long time. Will you be required, therefore, to maintain or develop a metric-oriented section within your shop and retain the standard dimensions as well to service this replacement market?

Mr. DARRONE. I am sure we will.

Mr. BERGLAND. This would mean that a conversion would take maybe 50 years to essentially complete, wouldn't it?

Mr. DARRONE. I think, as far as total conversion is concerned, we just can't see that time in the future when there will no longer be any English equipment to be serviced. However, if we can convert readily today from the English system to the metric system, undoubtedly tomorrow we can convert back, if necessary, by whatever dual dimensioning is required on drawings, and resolving special screw thread problems as required.

Mr. BERGLAND. This would mean, then, that you would not only have the cost of converting some of your tools to the metric standards but you could have your additional expense of maintaining a complete set of business apparatus that would service the English standards?

Mr. DARRONE. Insofar as it may then be available, I do not see that it would be an extra expense. However, maintaining it and inventorying it and making sure that it is continually within the accuracy requirements of a quality assurance program might well be a continuing expense, yes, sir.

Mr. BERGLAND. Then, I suppose, Mr. Darrone, that if the country adopts the metric system, you will be available as a competent authority and source of information in this field and can advise this committee as to the problems that your industry is encountering as the transition progresses?

Mr. DARRONE. Mr. Bergland, I do not expect that I shall ever be an authority, but I will be happy to help where I can.

Mr. BERGLAND. I beg to differ with you. I am impressed by your competence.

Thank you, Mr. Chairman.

Mr. ADDABBO. Thank you very much, Mr. Bergland.

Counsel?

Mr. FINN. Mr. Darrone, you made reference to suggestions that assistance might come in the form of tax relief, additional writeoffs or reinstituting the investment tax credit.

Do you have in mind, as was suggested earlier, that these be limited in some way, both to small business and only as an incentive for metrication? Or should large business in your view also be eligible for this kind of help?

Mr. DARRONE. I think it is particularly significant—and I speak now for the investment credit-to small industry, and I believe it would be helpful currently whether or not metrication becomes effective now or later. But I am sure that it will become more necessary or at least a big assist if and when we have to change over to new equipment.

Mr. FINN. What I am trying to get at is that a lot of associations have urged a limited reinstatement of the investment tax credit with an income limitation directed toward small business generally. This, obviously, could assist people with metrication as well as with other problems. Do you prefer that, rather than some kind of an incentive Îimited to the problem of metrication?

Mr. DARRONE. I am not sure I can speak for everyone, and I would like to limit my comments, I think, to our own industry.

If you will accept them on that basis, I think our industry could very well be served.

And I am not sure whether or not it-investment credit-would be postponed indefinitely if it were to apply to all industry. I would like to see it put back into effect for our industry, or our size of industry, for small business, as soon as possible.

Mr. BRASHARES. I think it might be added that there is a very, very strong case to be made for reinstatement of the credit for all industry. There was a need for modernization in the early 1960's when the Kennedy administration brought in the credit, and there is more need in existence today than ever. But the question of coverage and the question of revenue implications today make it a political judgment as to whether it is possible to get a credit covering all industry. And for that reason, I think it is important to consider the particular needs of small business, and that is what we are focusing on. There are particular needs that make it more important for small business.

When there are profits when there is taxable income, of course, the ability to write off this portion of the new purchase is critical to small business. This is, in effect, the downpayment on new equipment for a small business. And it is a critical financing tool. And that is why it is so essential now and in the context of metrication.

Mr. FINN. That is all I have, Mr. Chairman.

Mr. ADDABBO. Thank you, Mr. Finn.

Mr. Robinson?

Mr. ROBINSON. Mr. Darrone, I am interested in what you say about the impact on the members of your industry, the small business members of your industry, resulting from the DOD policy in connection with their Government-owned equipment which they provide to their contractors. Does your statement indicate that if your industry were aware of the DOĎ plan, if they knew right now just when they are going to phase out and which equipment they are going to dispose of and gave you a timetable so to speak, that the people in your industry would be better informed in connection with refurbishing or requiring new equipment; is that what you are talking about?

Mr. DARRONE. I think it is very necessary that we have all of the facts when we are approaching this problem.

Mr. ROBINSON. This would be true whether the new equipment that you would require would be metric or the conventional English type?

Mr. DARRONE. It is true today; we need the facts today in order to know where we stand.

Mr. ROBINSON. With an increase in the use of the metric system actually occurring today, and the metric conversion on the horizon, do you feel that this situation accents the problems that exist today or which have existed in your industry?

Mr. DARRONE. I think it aggravates it considerably, yes, because, today, what we sell is still marketable-I mean the equipment that we sell as second-hand equipment is marketable in this country. I think it loses its value-I mentioned a third of its value-immediately upon the recognition that we no longer are going to be making that kind of equipment; we are going to be making metricated equipment to metric standards.

Mr. ROBINSON. The equipment owned by the Government becomes obsolete because new equipment comes in. Is the Government acquiring the new equipment to replace the obsolete so far as you know? Mr. DARRONE. I do not know.

Mr. ROBINSON. Government inventories do not seem to decrease, even though they told us in the committee that this was their plan. The total inventories on hand seem to be increasing rather than decreasing, which would indicate that they are acquiring additional equipment at a faster rate than they are selling it.

Mr. DARRONE. The sales to the Government still account for a very large proportion of the machine tools sold in this country on a continuing basis.

Mr. ROBINSON. Do you think that there is anything the Department of Defense can do in connection with the studies of metrication to accelerate the use by their suppliers of the system, or do you think they are going to follow industry and wait until industry takes the lead on this?

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What I am saying is: The Department of Defense usually consults with industry, does it not, as to the type of equipment that is available and what can be provided?

Mr. DARRONE. Bill, could you take a crack at that?

I am not aware that they have ever contacted the tool and die industry to find out whatever was available prior to the purchase of additional equipment.

Mr. BRASHARES. I do not think so. I think the tool and die industry is basically a subcontracting industry. The Department would be more likely to maintain liaison with the original equipment manufacturers, the machine tool builders, and so on, and I assume that they will maintain this contact and determine exactly how fast they can afford to change in their specifications to metric.

Mr. ROBINSON. As subcontractors, then, you would be affected by their decisions. If they should go to metrication in their new procurements, then this would affect you as a subcontractor, would it not? Mr. DARRONE. I think a machine tool is purchased to provide a certain facility. If the product that the Government wants produced is to metric standards, then the prime contractor will be required to produce it to the metric standards. If he is not equipped to produce it to metric standards, then he and the Government, I assume, will provide themselves, or each other, whichever way it happens to be in that particular contract, with equipment to do the job.

The subcontractor emphasis will also be on metric. But I do not believe the Government will go out and purchase metric equipment just to have metric equipment, unless they have a product requiring it.

Mr. ADDABBO. The previous witness indicated that he had equipment which was adaptable to both metric and English.

Is this typical in your industry, or is this an exception?

Mr. DARRONE. I believe one of the previous witnesses mentioned that he produces equipment which will provide either a metric standard product or an English standard product. We can do likewise. The equipment itself, to do it either way or both, will be available. And there are certain conversion kits available today which will provide a dual facility. Some are relatively inexpensive, but not particularly accurate for a precision machining activity.

Mr. ROBINSON. Is this conversion equipment also available to the Government for the use of the large Government-owned equipment? Mr. DARRONE. Yes, at a cost of, as I mentioned before, perhaps $1,000 per lead screw and nut and dial, plus the time it takes to put it in. And I presume this latter could be a sizable amount.

Mr. ROBINSON. So, as we move toward metrication, this would not necessarily accelerate the Government phaseout program and the disposal of their equipment, would it?

Although we may be moving closer and closer toward greater, increased use of metrication, will there necessarily be an impact on the Government policy in leasing Government-owned equipment to its contractors?

Mr. DARRONE. That is a hard question, Mr. Robinson.

I do not think the Government, itself, operates a great many of these special machines or these standard machine tools. There are probably many of them either in storage or in prime contractors' facilities. These machines will have to be converted, provided the products re