cal control techniques are being used. The machine tools required for numerical control profiling are indeed expensive, but anyone who suggests that our industry cannot or will not make such expenditures has failed to note the tremendous expenditures we have made in other areas for the most modern equipment when promising markets appeared.

I think the problem is that our companies simply have no confidence that the automotive market will be there even if they do find a way to finance this new equipment. They have seen the rapid increase in purchases of this equipment by the automotive manufacturers and they have apparently been given no assurances by the automotive manufacturers that this work will be subcontracted to the independent shops if they do obtain the same facilities.

If the automotive industry prefers to have its tooling done by the independent shops and the only problem is modernization of the independent shops, then all we have is a communications problem. Indeed, if this is the desire of the automotive companies, it would not be unreasonable to suggest that they finance the numerical control equipment to be used by the contract shops, perhaps by leasing it to them at an arm's length price. In this way the manufacturers would be making an investment they can well afford and at the same time they would avoid the waste of tooling capacity that can only be used on a periodic basis.

Since the contract shops would be able to seek work from other industries to utilize this equipment the natural result would be substantial cost savings for the automobile manufacturers and a continuing market for the contract shops to serve.

In the independent tool and die industry we are well accustomed to the feast and famine cycles. In the bad years we see many businesses fail and in the good periods we see many new businesses start up, and this is to be expected. Despite the cyclical nature of the industry we have managed to keep alive this important independent capacity and make it grow.

The problems we are discussing today, however, are not of a cyclical nature. They involve long-term trends which could permanently disable our industry. Therefore we seek your help and we earnestly seek the help of the automobile manufacturers to reach solutions that will serve the national interest as well as the interests of our customers and ourselves.

Mr. SMITH. Mr. Novotny, you mentioned that the automakers might actually provide the new equipment for your shops for the new body die techniques. How would that work? Would this be on a contract basis?

Mr. NOVOTNY. This may seem like a radical statement, Mr. Chairman, but as you know, this equipment that they are speaking of is very expensive. We have the other facilities. We have the personnel. We have the skill. The only thing that we lack to get this into our shops is capital.

Now I can see where they could lease this equipment to us in the big body shops, and they could get the return of their financing of this through the leases, and we could keep it busy because we are in other industries other than just the automotive industry, and they would

only be paying for the use of this machine while it is being used for their tooling.

Now this could possibly be done by the automotive having a meeting with the large body shops in the Detroit, Cleveland, and Midwestern areas, and sitting down and making a plan of some sort in this way, and there is another possibility. They could possibly provide it as a lease purchase deal to us, so much of the moneys going toward the purchase of it after so many years. Or they could possibly set up a reasonable financing schedule for us and we pay them back with a reasonable amount of interest.

Mr. SMITH. How many weeks of the year would machines be working on automotive contracts?

Mr. NOVOTNY. I would say approximately 25 weeks, 25 to 30 weeks. Mr. SMITH. Is there any benefit to independents merging?

Mr. NOVOTNY. Well, as Mr. Bredenbeck stated here earlier, we are a hardy lot, a very proud lot, and we like to do things on our own, I feel, and I do not believe that this would help the situation that we are confronted with, if we do merge.

Mr. SMITH. Do the people who contract for this work like to deal with bigger companies better than smaller shops, or does it make any difference?

Mr. NOVOTNY. I do not believe it makes any difference, Mr. Chair

man.

Mr. SMITH. Mr. Horton?

Mr. HORTON. I do not have any questions. I just want to thank the gentlemen for being with us and giving us the benefit of your experience, for pointing up the problem that you face in this competition, and also for pointing out the inequities of the competition. I think you have very well posed the problem and stated to us what the difficulties are, and at the same time you indicated and justified the work that you do. The gentleman on the end, Mr. Haupt, pointed out the fact that you are able to respond, and gave us this valuable information of this survey that you made in the Detroit area, which I think will be very helpful and very useful to the subcommittee. Mr. SMITH. We recently had called to our attention an acquisition in the Dayton area, Celestial Tool. You are from Dayton?

Mr. JONES. Yes.

Mr. SMITH. You are not involved in it though?

Mr. JONES. We have gotten down to 250 employees now, partially because of him.

Mr. SMITH. Maybe you had better explain for the record a little more about what has happened.

Mr. JONES. He was a small die company, about 18 people and 4,000 square feet of space, and last fall Continental Can bought him, immediately bought a 35,000-square-foot building for him, started a high bay addition, ordered I think several million dollars' worth of new equipment, publicized the fact that they were going to possibly 300 employees in 2 years, and since then he has been out getting his employees. Right now he has a blank check, so to speak. He is not a profit center either, because he cannot be making a profit.

He knows our people, he takes all of our apprentices, our boring mill men, because of this blank check that he has suddenly gotten.

Mr. SMITH. Did you do any work for Continental before the acquisition?

Mr. JONES. No. They are not in Dayton. I mean his company is in Dayton, but

Mr. SMITH. This has had an effect then on other independents?

Mr. JONES. Oh, yes. It is a tremendous effect, because the word is out he is going to 300 people, so you sort of lose control over what stays with you even, because they know they can always get a job over there.

Mr. SMITH. If there are no further questions I want to thank you gentlemen. The whole array of witnesses have been very good today and have been very impressive.

We will adjourn until 10 a.m. tomorrow morning.

(Whereupon, at 4:10 p.m., May 20, 1969, the subcommittee recessed, to reconvene at 10 a.m., Wednesday, May 21.)

PROBLEMS FACING THE TOOL AND DIE INDUSTRY

WEDNESDAY, MAY 21, 1969

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON SPECIAL SMALL BUSINESS PROBLEMS

OF THE SELECT COMMITTEE ON SMALL BUSINESS,
Washington, D.C

The subcommittee met, pursuant to recess, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. Neal Smith (chairman of the subcommittee) presiding.

Present: Representatives Smith, Addabbo, Hungate, Horton, and Burton.

Also present: Gregg Potvin, general counsel; T. J. Oden, subcommittee counsel; Myrtle Ruth Foutch, clerk; and Fred M. Wetheimer, minority counsel.

Mr. SMITH. The meeting will come to order.

We are going to try to get started because we cannot be here this afternoon. It is very difficult, but we are going to try to finish by

12:15.

The first witness is John C. Lasko.

TESTIMONY OF JOHN C. LASCO, PRESIDENT, REPUBLIC DIE & TOOL CO. DETROIT, MICH., PRESENTED BY JOHN FEIKENS, COUNSEL Mr. FEIKENS. My name is John Feikens. I am Mr. Lasco's counsel. With your permission, I would like very much to read Mr. Lasco's statement only because he had an unfortunate accident some years ago and, as a residual, reading is difficult, but if at the end of the completion of my statement questions are put to Mr. Lasco, he will be more than happy to answer them.

Mr. SMITH. That will be fine. You may proceed.

Mr. FEIKENS. Can we do so on that basis?

Mr. SMITH. Yes, go ahead.

Mr. FEIKENS. Therefore you will understand if this is in the first person, Mr. Congressman, why it reads this way:

At the outset, if you will permit me, I would like to identify my company and my interest in this matter. I am President of Republic Die & Tool Company. It is the largest independent die shop in the Detroit, Michigan, area. It presently has approximately 400 employees, and it does an annual sales volume of approximately $10 million.

I appreciate the opportunity to appear before this Committee of the Congress and to present my views. I hope that in some measure I may assist in contributing to a solution of a different problem.