Mr. KERIGAN. That is right, the Andria Doria went down, and the automobile is still down there.

Mr. SMITH. Mr. Burton?

Mr. BURTON. How many of these 17,000-plus small businesses that you do business with, Mr. Kerigan, would you care to characterize as captive shops? I asked you this question in a different way before; that is, how many of these people do you keep working full time? Some people call them captive shops, But how many would you say of the 17,000 would you say would be

Mr. KERIGAN. My guess would be that it would be a very small number that might give us their full capacity.

Let me say first of all that we have never gone into a shop and asked them to give us their full capacity, because there is a risk there, too. If the shop were to burn down or go on strike, we would be in considerable difficulty. So we prefer not to put all of our work in one shop. Mr. BURTON. Now, I think this is an important point in view of what has preceded this hearing and what will come after. You have not had one complaint from any of your suppliers?

Mr. KERIGAN. No, sir.

Mr. BURTON. About numerically controlled equipment?

Mr. KERIGAN. No, sir.

Mr. BURTON. That is all, Mr. Chairman.

Mr. SMITH. Mr. Dingell?

Mr. DINGELL. No questions, Mr. Chairman.

Mr. SMITH. Just one thing. This is not really on the point of these hearings, but the leadtime is about 3 years?

Mr. KERIGAN. Roughly, from the artist's conception, working through the clays, and the presentations and the rejections by our priority planning committee in bringing up a new one and so forth and lifting the information from the clay so we can use it in the engineering.

Mr. SMITH. This may possibly answer one question I have had. A number of other people have said to me:

How is it that we had all these safety hearings and everything and the '69 models come out and the biggest companies got about the biggest blind spot if you look to your right in back?

I suppose that was planned 3 years ago?

Mr. KERIGAN. I do not think we ever planned a blind spot. They bother me as much as they bother you when I see a car with a blind spot.

Mr. SMITH. I mean as you try to change lanes or look back, there is the biggest area back there that you can hide a truck. It came in a matter of time after all the talk about safety, and it kind of puzzles

me.

Mr. KERIGAN. With the average size car, you should not have any problem. My greatest problem is with these foreign cars, that I find one down underneath me in back, hidden from the total car. Now, so far as the blind spots are concerned, no one has asked us to really dig into blind spots. We do that ourselves as a matter of practice.

Mr. SMITH. It is kind of interesting, because the 1960 Fords and 1960 Chryslers had almost no blindspot. I am afraid now you come along with the biggest blindspot ever.

Mr. KERIGAN. I am afraid to ask you what kind of car you are driving. I might suggest a change.

Mr. SMITH. Except for station wagons, I think they are about all the same.

Mr. POTVIN. Mr. Kerigan, first of all, you testified that you do not import skin dies from Europe or Asia. It is my understanding, in fact, that you prefer to have these right in the Detroit area so you can have really daily communication?

Mr. KERIGAN. Right; yes, sir.

Mr. POTVIN. What about other dies? Do you have any objection to their being in shops 2,000 or 3,000 miles away?

Mr. KERIGAN. No; we would have no objection. In many cases, but once again, I have to get back to the fact that you have to look at this total die industry in terms of a pyramid. This pyramid, there is capacity at the top for the big parts. As you work your way down, the next strata could handle door dies. Then you work your way down to some of the smaller internal dies. At the broad base, are fellows, and there are thousands of them, who can manufacture a variety of things. In the case of large outer skins, that is very limited capacity in the industry. That capacity is limited to possibly-and I am talking about major panels-maybe 20 to 25 shops. I believe I am high when I say that, that it might be closer to 15. But generously speaking, it could not be over 25 shops.

Mr. POTVIN. That is the arena where the numerical machine is most important?

Mr. KERIGAN. That is correct.

Mr. PorVIN. Now, you used, in addition to the word "security" which you wish to be noted on page 4, the word "insured," which I think is a rather key word in this entire matter.

Mr. KERIGAN. Yes, sir.

Mr. POTVIN. I have several brief questions I would like to ask on this question of the insurance factor of the in-house capability, sir. One, has the capacity of the independent tool and die shops ever been fully used and found inadequate?

Mr. KERIGAN. Will you repeat?

Mr. POTVIN. Yes, sir.

In the context of your use of the word "insurance." has the capacity of the independent tool and die shops ever been fully used and found inadequate?

Mr. KERIGAN. Yes, sir; back once again to the case of the large dies. Mr. POTVIN. So that you would say "Yes," but only on outer dies? Mr. KERIGAN. Well, some of the inner dies, of course, are pretty difficult dies to manufacture, too. There is limited capacity in some of the interior parts.

Mr. POTVIN. Now, when you say that they were found inadequate, I must assume from that that you found a delay in getting tooling. Mr. KERIGAN. Well, there is another factor that I think should be discussed. That is the matter that over a 5-year period, there has only been 4 months in 5 years where the die shops that supply us have not been on an overtime basis, and I am talking 48, 53, to 58 hours of overtime.

Mr. POTVIN. So your total absorption of capacity would be another yardstick you would use to determine inadequacy?

Mr. KERIGAN. That is right, and the amount of in-house capacity that that we have to have to supplement.

Mr. POTVIN. The point I was leading up to, sir, is this: If you have encountered delays, to what extent have those resulted in whole or in part from last-minute engineering changes by the manufacturer; Chrysler in this case?

Mr. KERIGAN. Engineering changes are a way of life in our industry. Some of these delays, of course, are caused by engineering changes. But the die shops love engineering changes. That is a very popular part of their operation. I have never heard one turn one down yet.

Mr. POTVIN. That type of delay would be equally applicable to inhouse or independent capacity, would it not?

Mr. KERIGAN. That is right.

Mr. POTVIN. Have your in-house facilities ever gotten behind in a job and caused production delays?

Mr. KERIGAN. Not to my knowledge; no, sir.

Mr. BURTON. That is why he still has his job.

Mr. KERIGAN. That is right. They may be looking for someone else,

I am sure.

Mr. POTVIN. Finally, Mr. Kerigan, I think as we look ahead to the changes technology may produce in your industry and the interplay with the independent tool and die industry, the dialog might be framed in these terms: There are those in the independent sector who fear that you are going to have the primary capability in-house and will use the independent as a buffer, as you put it, the insurance factor. Their question, I think, to you, sir, at this podium would be, if it. really is an insurance factor to have in-house capacity, should you not hold it in reserve rather than hold the independents in reserve, place the business first outside and keep the in-house capacity idle for insurance reserve?

Mr. KERIGAN. Well, our in-house capacity is actually-represents only-in a sense, a percentage of our total business every year. As an example, in the year coming up, it appears that 60 percent of our business will be outside and 40 percent inside. So we are actually going to drop 10 percent in the year coming up because we have a pretty sizable program. So actually they get the benefit of all increases in the programs, and, as you can see in the report here, over a 6-year period they have gone from $40 million to over $122 million in purchase, so they have certainly taken their share of this.

Mr. WERTHEIMER. Mr. Chairman, could I raise a question at this point?

Mr. SMITH. Yes.

Mr. WERTHEIMER. How important would you say is the cost factor in determining the size of your in-house capacity-the cost factor that is, of doing it in-house as opposed to doing it outside?

Mr. KERIGAN. I think the best way to describe this is that we are, of course, a highly competitive business and we operate as a corporation on the basis of profit centers. I am given a certain allocation of funds in a project to bring out a new model, and we, as a practice, estimate the cost of all the dies, both inside and out, so that we can be sure that we are checking the purchasing department, and in turn, on the

in-house tools, the same group of people are checking to make sure that we are manufacturing all of them at what is, you might say, a competitive price. So we do not keep anything in-house because we estimate we can do it cheaper. If it can be done less expensively, we will put it on the outside.

Mr. WERTHEIMER. You would say, then, that the cost factor is probably the most significant factor.

Mr. KERIGAN. Right.

Mr. SMITH. Thank you very much, Mr. Kerigan. That was very helpful.

Mr. Riley?

Mr. BURTON. Mr. Chairman, could we discuss procedure here for just a second?

I have looked over Mr. Riley's statement, and I have some questions that I would like to ask him. I am willing to let him go through his statement first if that is your wish. But if we are coming back at 2 o'clock, I am caught in a bind, because I have a longstanding appointment to testify before a Senate committee on the Central Utah project at 2 o'clock. If the Senate is running according to form, they are going to be late and I probably could not get back until 3 o'clock, but I would like to have an opportunity to be helpful to the subcommittee and ask these questions. So how shall we proceed?

Mr. SMITH. I had intended to have Mr. Riley proceed, until we got stopped, with his statement. If you have read his statement, if it is all right with Mr. Riley, you could go ahead and ask him some questions

now.

Mr. BURTON. You are going to reconvene the committee at 2 o'clock? As you know, we only have two minority Members on the subcommittee and our other colleague couldn't be here today.

Mr. SMITH. Mr. Riley can go ahead. I have not read his statement, frankly.

Mr. BURTON. Why not go ahead. Maybe we can get through the questions.

TESTIMONY OF FRANK 0. RILEY, VICE PRESIDENT, MANUFACTURING STAFF, GENERAL MOTORS CORP., DETROIT, MICH.

Mr. RILEY. Good morning, Mr. Chairman, and members of the House Small Business Subcommittee on Special Small Business Problems.

My name is Frank O. Riley. I am a vice president of General Motors Corp. in charge of the manufacturing staff. I am here in response to your invitation to me to present information by General Motors on its own tooling operations as well as work performed for our divisions by outside tool and die shops.

At the outset, I would like to say that General Motors-and indeed, the whole automotive industry-has a vital stake in a sound and healthy tool and diemaking industry. Over the years, this industry has been contributing substantially to the strength of the American economy. We, in General Motors, are proud of our role as both a participant and customer in the tool and diemaking industry, as it is a keystone in the free business enterprise system of the Nation. The tool

and diemaking capabilities of independent job shops have contributed importantly to national security in times of emergency. Likewise, the utilization of General Motors toolmaking capacity in the production of aircraft and ordnance requirements, plus machine tools, in times of national emergency is well known.

Thus, both from our own standpoint, as well as that of the Nation, General Motors wants the tool and die industry to maintain a strong position. However, there is another important consideration which General Motors must take into account in its relation with the independent shops. This is our obligation to our own employees.

As a matter of good relations with the unions which represent our employees, General Motors has an obvious interest and obligation to maintain stability in the work schedules of skilled tradesmen on our payrolls. There would be serious labor relations consequences if it were necessary to place large numbers of our employees on layoff in order to assign a specific amount of die-construction work to outside shops. We have assured the unions which represent our employees that it is our intent and desire to use our own skilled trades employees to do the kind of work that they have customarily done in our plants in the past, to the extent that it is practicable and economical to do so. Therefore, we must continue to do tool and die work in our own plants. However, we have neither the equipment nor the personnel to do all of our own work. As a result, we have had and will continue to have a real need for the independent operator.

With this basic background, I would like to discuss some specifics of the relationship between the tool and die industry and General Motors. It is our understanding from the testimony before your subcommittee last month that your basic concern in connection with the automobile industry is the die construction portion of tooling. Therefore, our presentation today deals mainly with special tools for use in sheet metal requirements.

Special tools are those tools which are designed to make a special part of a car and are peculiar to the manufacture of that part. Examples of this include dies for metal stampings such as hoods, fenders and body panels; forging dies for Pitman arms, crankshafts and camshafts; dies for casting zinc and aluminum parts. Since special tools are required for the production of parts of specific new models and products, their utility generally ceases with the discontinuance of the model cycle and service requirements. That is, special tools are specifically designed to produce a particular part and if there is a subsequent change in the shape, size, or composition of the part, a different special tool must be developed. The basic machine which powers the tool may be used for more than a single model cycle.

We can give you a picture of General Motors historical and current relationships with outside shops by presenting charts analyzing our die-construction workloads and employment.

One chart traces the General Motors passenger car die-construction workloads from the 1961 through 1970 model years, showing the trend in workloads handled inhouse and by outside job shops. Another chart compares our skilled tool and die employment with our total U.S. manufacturing employment from 1954 through 1947. (The chart initially referred to follows:)