Mr. CARLTON. Yes, we haven't lost them. We have about 100 of them that we have kept for many, many years, and as I say, those men will average better than $2,400 a year.

The CHAIRMAN. And what about the less skilled employee, what stability of employment do you offer him?

Mr. CARLTON. Well, it is not as good as it ought to be. It is getting better.

The CHAIRMAN. In what way is it getting better?

Mr. CARLTON. We are the victims of circumstances, as are the manufacturers of automobiles. You can't convince people to buy automobiles in Northern Michigan when the snow is right now, as I understand it, over 3 feet deep just north of us. Consequently, the dealers can't afford the inventory and nobody has a place to put them, and therefore production slumps off in that time of the year.

The automobile manufacturer has done everything within his power, I am positive, to assist this situation. He formerly used to give us very sudden orders to do this and that and he doesn't do that any more. He gives us a contract for a year's business, and that isn't anything that you can do anything with, and then he gives you an order to purchase raw material for a portion of that contract, possibly 100,000 sets of our material. Then you have gotten a start. You can go out and buy some raw material. Then he will give you an order to fabricate maybe half of that, 50,000 sets, and then you really are getting some place. Then it is your own expense. You can go out and fabricate that and you don't know when you are going to ship it, but you can keep your men working during the month of February, for example, when his shipments may fall down, you can keep that production running pretty level, because you fabricate at your own expense. Maybe you semifinish a lot of that material and that helps materially. Then of course I haven't mentioned the diversification that automotive parts plants are trying so hard to do, to get into something entirely outside of this industry. I haven't seen our figures for this year, but I am sure that considerably more, or at least 30 percent of our sales volume in the year 1938 was entirely outside the automotive industry, and we tried to get that into something that doesn't have the same peaks we are in in the automotive industry, and that helps to transfer those men from one job to another. You run into all sorts of difficulty with the union when you do that because they don't want to be transferred.

The CHAIRMAN. This is just developing, then, is it, this effort to stabilize employment?

Mr. CARLTON. It has been worked out for a number of years, and I would say that the very serious effort has been going on about 7 years, until these people are carrying much bigger inventories than they used to carry. It wasn't very many years ago they carried 24hour inventory in some of our customers' plants and today the majority of them are carrying 30 days. That helped us.

The CHAIRMAN. Could you reduce your experience to a rule or a standard that might be helpful to those engaged in other industries who are confronted by similar problems of unstable labor supply?

Mr. CARLTON. Senator, there has been so much thought given to this whole business of stabilization of labor that I know of not one more thing to do. We spend a great deal of time among ourselves as parts makers and with our customers, and I will say that we haven't

one customer that isn't giving us every bit of cooperation that he knows how to give, and if you get an idea and go to him with it he will try it out for you to try to help you cut out these terrible peaks and valleys. But until the public can change its buying habits I don't know what more can be done than we are doing now in this particular industry.

Dr. LUBIN. Mr. Carlton, prior to 1935, new automobile models were shown at the January shows, which meant that your automobile season was limited to about seven or eight months. In 1935 the industry changed its policy and put its new models out earlier and had the November show, thereby in a sense lengthening the automobile season. Has that had any effect upon your ability to keep your people more regularly employed?

Mr. CARLTON. I think it has, Dr. Lubin. There is a very great difference of opinion about that at the moment. You will remember last fall the automobile dealers' association was divided about that thing. Some of the dealers thought it was very bad and some thought it was very good. It possibly is a questionable thing right now, but from the standpoint of the parts manufacturer I think it is a very good practice. I think it tends to stabilize employment in the manufacturing end of the business.

Dr. LUBIN. It makes it possible, does it not, for you to keep your people employed over more months in the year and not have to build up your labor supply to meet a relatively shorter market?

Mr. CARLTON. I think it tends to do that.

Dr. LUBIN. I was interested in what you said about the place of patents in your industry, in reply to a question asked you by Senator King. You said that as far as your own industry was concerned you felt that patents had been a very effective factor.

Now after all, your industry is dependent entirely upon the sale of automobiles, and irrespective of the patent situation in your own industry, if automobiles weren't sold in large numbers, patents or no patents, you people would be in a difficult position. Do you believe that patents have had anything to do with the development of the automobile industry as such, I mean has it been a really significant factor? Would we have had the development we have had of General Motors, of Ford, Chrysler, and so forth, without patents, or without our present patent system?

Mr. CARLTON. I made the statement, which I will try to repeat exactly as I made it. In my opinion our patent system, which I like to call a part of the American incentive system, has been the greatest single factor in the development of the great automobile which we have today, which is being sold at the lowest price that it was ever sold. Now, I make that statement after consulting this parts industry very carefully. I realize that so far as an original parts manufacturer is concerned, his business depends entirely upon the sale of automobiles. Once having signed a contract for a year, then we have to sit down and wait to see how much business comes in and we can't do anything about that, but we can do a lot about that before that year starts. If we can do something in the way of a part that makes that automobile more attractive to you, then we will make you want to buy a new car, and without any fear of our customers resenting it, I can say that I think that the parts fellow has contributed a very great deal to make this automobile what it is today, and when I say that

I am coupling with it the fact that without patents the parts fellow just wouldn't have been there. He couldn't have existed and developed and been what he is today.

Now, I am giving all the credit in the world to the great automobile manufacturer who by almost superhuman manufacturing methods and research and development of his own has done this, but for this industry which I so unofficially represent, I am also taking its share of the credit.

Dr. LUBIN. In other words, you don't think we would have 27,000,000 cars on the road today if it hadn't been for our present patent system?

Mr. CARLTON. No, sir; I do not think so.

Dr. LUBIN. I would like to ask a question as to what happens in your industry when a manufacturer suddenly decides that next year he is going to make his own parts of a certain type. Does it frequently happen that manufacturers who have been purchasing their parts from people in your organization suddenly make up their minds that next year we are not going to buy any more, or only buy a few of them, and we are going to produce those things ourselves?

Mr. CARLTON. Oh, that happens occasionally, I think. However, they have been pretty fair with it, and I believe that in most cases they have had pretty good reason for doing it when they did it. Possibly the manufacturer of the part went to sleep; maybe he didn't continue the development and research that he should have; maybe his prices got out of line; maybe he got into a jam one way or another. And then sometimes it happens that nobody knows why he did it.

Dr. LUBIN. But it is not a frequent practice for the manufacturer suddenly to make up his mind that hereafter he will make the part? Mr. CARLTON. Not frequent; it is very occasionally that it happens. Dr. LUBIN. But it does happen?

Mr. CARLTON. It does happen.

Dr. LUBIN. One hears a lot of rumors, a lot of stories round to the effect that the parts manufacturer who had geared his output to the demands of a given automobile manufacturer, and who because of the orders coming through has put in large amounts of capital, new investment, expanded his plant, and then finally wakes up one morning and has the manufacturer say to him, "I want half a million units this year, but you will have to sell them at X price," a price which the parts manufacturer cannot afford to produce at and make a profit. Does that thing every happen in the industry?

Mr. CARLTON. Oh, of course, purchasing agents will be purchasing agents. They have to go through about so much of that hysteria; but salesmen have to be salesmen, and when it is all boiled down I think that is mostly conversation. Idon't think there is any unfairness about the whole thing, as a rule. If I am selling an article at $1.50 and the purchasing agent says "I am only going to pay $1 for it" and I am simple enough to say, "Well, if that is all you will give I will take it,' then I am a lousy salesman and my company ought to get a new sales manager. If I come out at $1.40 or $1.395, I am pretty lucky.

Dr. LUBIN. But the purchasing agent knows you have invested a large amount of capital in order to meet his demand, and there is no market but his, and you either take it or not. Chances are you have to take it or shut down. It isn't so much a question of being simple, it is a question of being in a position where you can't say "No."

124491-39-pt. 3- -16

I don't know whether that happens or not.

Mr. CARLTON. They have a terrific club in their hands, but they don't wield it. They wave it around a little bit, but when you get all through they put it behind the door and are pretty decent about it. Senator KING. Has your association helped the effect of that club? You are still making parts.

Mr. CARLTON. We would all be out of business if they swung it very hard. We get along just beautifully, as a matter of fact.

The CHAIRMAN. The power exists, but it hasn't been exercised upon the three members.

Mr. CARLTON. It must be they don't want to put us out of business. Senator KING. You are a part of the contract, so you may wave the club over the automobile manufacturers, who don't produce the commodities you are producing, and you might say, "We will not produce this particular rim for less than so many dollars per unit." Mr. CARLTON. We are pretty meek.

Senator KING. You have to find consumers for your products.
Mr. CARLTON. We have a very limited market.

Senator KING. But you produce something like how much$800,000,000 a year?

Mr. CARLTON. That's right.

Senator KING. And the other organization produces two or three hundred million dollars a year?

Mr. CARLTON. That's right.

Senator KING. So that there is over $1,000,000,000 you and your associates produce.

Mr. CARLTON. We don't dare tell them where to go for fear they might go, and we have great respect for their manufacturing ability. The CHAIRMAN. I think the witness's answer that the industry is meek probably stands.

Are there any other questions, Mr. Dienner?

Mr. DIENNER. I have nothing further, Senator.

The CHAIRMAN. We are very much indebted to you, indeed, for this very interesting testimony, sir, and you may now stand excused with the gratitude of the committee.

Mr. CARLTON. Thank you, gentlemen, for your patience.

(The witness, Mr. Carlton, was excused.)

The CHAIRMAN. The committee will stand in recess until 2 o'clock this afternoon.

(Whereupon, at 12:05 p. m., a recess was taken until 2 p. m. of the same day.)

AFTERNOON SESSION

The committee reconvened at 2:20 p. m. on the expiration of the

recess.

The CHAIRMAN. Mr. Dienner, are you ready to proceed?

Mr. DIENNER. Thank you, I am.

The next witness we shall call is Mr. Graham, an independent inventor. Mr. Graham, will you please be sworn?

The CHAIRMAN. Do you solemnly swear the testimony you are about to give in this proceeding shall be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. GRAHAM. I do.

TESTIMONY OF MAURICE H. GRAHAM, MINNEAPOLIS, MINN.

AN INDEPENDENT INVENTOR

Mr. DIENNER. Mr. Graham, will you please state your full name and occupation?

Mr. GRAHAM. Maurice H. Graham. I believe you would qualify me as an independent inventor.

Mr. DIENNER. What was your training which brought you to that state?

Mr. GRAHAM. Well, I went to high school 2 years and then I figured I needed a job more than I did any more school, so I hired out to a telephone company, digging post holes, and I worked at that for about 90 days, and then I became a lineman, and from that I became a trouble shooter, and from there I was in switchboard work. In 1914, when I practically quit the telephone business, I was district superintendent for the plant for the British Columbia Telephone Co. at Vancouver. In 1914, when the war broke out, the telephone company wanted to transfer me to Kamloops, and give me the commercial department as well as the plant department. I didn't like the commercial department so well so I came home. In 1915 I went into the automobile business.

I took up a Ford contract in the little town of Zumbrota, Minn., and I met another fellow that I had known when I was a boy. We bought the Ford agency. I operated that until 1925. I had done fairly well in the automobile business, and in 1925 there was quite a lot of trading, so I sold out the automobile business. I had a desire to get into the manufacturing business. I had always leaned more or less that way, so I took a year and went down to Florida and monkeyed around and came back to Minneapolis in the spring of 1926. I tried out several little penny ante inventions; some of them worked. For instance, a cigarette case I made would eject cigarettes out. I sold 250,000 and it was fairly profitable.

There was a limit to it, it was a kind of once-over and then it was all done.

I also tried out a garage door, an automatic garage door with a weight on it. You would come up to the post and trip the trip, at the post and the door would fly open, and when you got through you would close the door and wind the weight back up. But that wasn't so good. The door opener was all right but the doors would stick. The garages those days were made in such a way that when the wind was in one direction the garage usually leaned in the other direction and the doors were always stuck, so it didn't work so well. Representative REECE. The idea was good but it didn't work.

Mr. GRAHAM. Yes; it was just one of those things. At any rate, I tried some little schemes, some of them would come out, some of them wouldn't, so in August of 1930 I went over to the McGraw Electric Co. which was then known as the Toastmaster Co. under the name of the Waters-Genter Co., and I asked Mr. Waters why he didn't make a toaster that wouldn't burn the toast, that I figured the one he had did burn toast, and he said, "Well, that is a hard job." I said, "Give me a toaster and let me try it."

He did and I fooled with it for a while, and all of a sudden I conceived the idea that a clock was operating on a given time but a