vehicles. I think another comparable situation would be the financing of ready-mix highway vehicles which transport concrete. Mr. MISCH. These conditions made the more Mr. McCULLOCH. Mr. Chairman, I would like to state further. It has been suggested by counsel, since this question was touched on by Judge Loevinger, that Judge Loevinger's testimony should be read into the record at this point. Counsel may read that brief paragraph. Mr. CRABTREE. Judge Loevinger was asked this question, at page 256 of the transcript for June 8. I asked the question as a matter of fact. Mr. CRABTREE. Now, then, that leads up to my next question. In the event this bill becomes law, suppose a company such as Caterpillar Tractor Co. decides it wants to manufacture trucks but it can only successfully go into the truck manufacturing business in the event it can organize and run a finance subsidiary. Would this company be able to go into the truck business? Judge LOEVINGER. Not on your postulate, but I see no grounds for your postulate It seems to me that the assumption that it could go into this business only if it could organize a financing company is completely contrary to everything that we know. (The Caterpillar Tractor Co. letter follows:) Representative WILLIAM M. MCCULLOCH, Washington, D.C. CATERPILLAR TRACTOR CO., Peoria, Ill., June 23, 1961. IFAR MR. MCCULLOCH: As you know, the Antitrust Subcommittee of the House Committee on the Judiciary, of which you are a member, is presently conducting hearings on H.R. 71. This bill would make it unlawful for any corporation (including its subsidiaries) engaged in the manufacture and sale of motor vehicles to own or maintain any facilities for financing the sale at wholesale or retzal of motor vehicles manufactured by it. The term "motor vehicle" is defined to include passenger cars, trucks, buses, and station wagons. Caterpillar Tractor Co., which manufactures earthmoving equipment, does not at the present time manufacture and sell any products that would come within the scope of this bill. However, heavy-duty off-highway trucks, which are literally within the bill's coverage, would constitute a logical addition to our Line and could prove to be attractive to us in the future. Such trucks would represent a very natural evolution in our business of manufacturing and selling estruction machinery. For this reason we have a direct interest in H.R. 71 as now worded. Trucks of the heavy-duty off-highway type are used for mining and construc*on purposes and are never used on the public roads. They are quite different in nature and function from passenger cars, buses, and station wagons, as well as from on-highway trucks. The latter are a part of the transportation industry-the off-highway truck is not. In view of the nature and purpose of H.R. 71 we are confident that it was intended to cover only on-highway trucks. However, the bill speaks simply of Trucks," without qualification, and thus if enacted in its present form would że ude off-highway trucks as well. It would accordingly bar Caterpillar Tractor Co for its finance subsidiary, Caterpillar Credit Corp.) from financing at whole* or retail off-highway trucks sold for mining and construction purposes. Caterpillar is one of the Nation's largest exporters. In the sale of products In foreign markets the extension of credit is often a determining factor in makme the sale. Competition abroad is intense and we find that credit must be extended to purchasers at times for as much as 5 years. Some of the notes received as a result of extension of credit on foreign sales can be sold to banks in the United States and the Export-Import Bank, but much of this paper will not be taken by such financing institutions and must be carried by Caterpillar. If we should extend our line of products to off-highway trucks, H.R. 71 would it our ability to sell such trucks in foreign markets, with a resulting reduct in C.S. exports. 898 I order Tndesirable results would also be produced in domestic mergers. Many banks and publie sier folore companies will not grant cred: We DeLes 3 any inTeLLory. They believe that this type of funging, wind is emanaky son is Windestie funding, represents more of a credit risk time that I asse The same is true in the financing of certain retki suits. for our dealers in some areas to carry az adequate inventing of our products, thawing must be supplied by me or our fave subsidiary, and sami ftandig anuras 2.80 Deeded by our dealers in order to evucinde verkum recul sales We therefore urge that if HR 71 is to be enacted it be modded so that It w... exsude off-tighway tracks from its evverige. actomy Laled by inserting "on-highway" immediately before the wad This. We meme can be in the defuition of the term "motor retide" Cocoespendly, the following letters were received:) H. EVASTEL CELLER Chairman of the Committee on the Judiciary, DEAR KIPKIALSTATIVE CELLER: We wish to a knowledge car resist of par vlegram and to express our appreciation for this opportunity to set fürch our views with respect to till HR 71 which is in bearing before the Committee on the Judiciary. In the event that you and the other members of the comminee are not fully acquainted with the White Motor Co. I would like to briedy sZLARK OUT activities. Our company is the oldest independent manufacturer of mycortraks in the United States. Through our White, Autocar. Diamond T. and Re diviKolk, we man facture and sell a complete line of specialized heavy-duty trucks by industry standards. the trucks that we manufacture are classifed in the groes velice TEZLI GUZOy of 19.001 pounds and over. On the basis of sues for the year 1990, we ranked fourth within this segment of the industry, behind International Harvester Co., General Motors Corp., and the Ford Motor Co. in that order. owned subsidiary, which manufactures and sells various types of farm equip In addition, our company also operates Oliver Corp., a wholly Lent. At the present time. 13.254 people are employed by our organization. Although we are engaged in financing customer purchases of all of the types of equipment that we manufacture, the proposed legislation, if adopted. would pre vent us from financing the sale of motortrucks which, with allied parts and service, represents the major portion of the total sales of our company. During 19%, the sales of motortrucks alone amounted to $184 million, or 65 percent of our total consolidated sales of $282 million, and during the past year we found it necessary to directly finance $64 million, or 35 percent of the total new trucks sold by our company. Our tricks are merchandised through direct factory outlets which are located in principal cities throughout the United States and through an independent distributor and dealer organization operating in locations where we do not maintain direct factory outlets. During 1960, our direct factory outlets accounted for approximately 58 percent, and our distributor and dealer organization accounted for 42 percent of the new trucks sold by our company. Although we do not presently operate a finance company, we have for a number of years offered our customers a program of direct retail financing through our factory branch outlets. Under our present arrangement, all installment paper covering retail financing transactions is taken into our own portfolio and in June and December of each year we arrange a sale of this paper to a group of eight banks who participate on a fixed percentage basis. In addition to the complete servicing of these accounts, including all collections, we are also required to repurchase from the banks any contract which becomes delinquent for a period in excess of 90 days. In effect, therefore, our present arrangement involves the full recourse of the White Motor Co. and at December 31, 1960, approximately $72 million was outstanding under this arrangement and was so noted in our annual report as a contingent liability of our company. In view of the fact that we have in the past lacked the facilities to extend a full program of direct financing accommodations to our distributor and dealer organization, we entered into a contract in 1945 with a finance company to pro vide financing accommodations at both the retail and wholesale level for our distributor and dealer organization. Under this contract, the distributor or dealer must assume primary liability and our company must assume a secondary ilability in the event of default by the customer. At December 31, 1960, this arrangement resulted in an additional $26 million in contingent liability to our company. Our present method of financing retail sales through our factory outlets, as outlined above, was instituted in 1949 to meet a critical need of the trucking Industry and we at White believe that the type of financial assistance that our company and other companies in our industry have been able to render the truking industry in the past is even more critically needed today and in the immediate years ahead. There are a number of compelling reasons to support this statement and I would like to set forth the more important ones for your consideration. First. The financing of truck purchases bears little relationship to the financing of passenger cars. Unlike passenger cars, which are often purchased for pleasure purposes only, trucks are designed, manufactured, and sold to produce revenue. Trucks are normally sold to business concerns rather than to individuals and their purchase represents a substantially greater initial outlay. The type of heavy-duty truck equipment that we manufacture today ranges in price from $5000 to $40,000. The average selling price of a White truck in 1960 amounted to $9,700 per unit which is substantially above the average price of a passenger car. Even more important, however, is the fact that individual transactions often involve the sale of several trucks in substantial amounts and it is now common practice within our industry for the manufacturer to finance the purchase of large fleets of trucks by individual customers in amounts approaching or exceeding $1 million. Second. Local banks in several areas of the country and finance companies have been reluctant to finance truck and allied transportation equipment without obtaining the guaranty of the manufacturer. The fact that we must guarantee all installment paper that our company sells to the banks and we must assume a secondary liability on finance company transactions for our distributors and dealers certainly confirms this statement. Although a few of the Nation's larger common carriers have achieved the financial stability which has permitted them to obtain credit lines at favorable rates at certain banks, a large number of truck operators must rely upon the manufacturer to finance their equipment. Third. Our Company considers the financing of truck equipment as a necessary adjunct to its sales program rather than as a separate and distinct part of our business. We derive our income from the sale of trucks which depends in large measure upon our ability to finance these trucks for our customers. Any income that we may derive from our financing operations is therefore a secondary consideration. On the basis of our relationship with finance companies over the years, we know that by their very nature they are unable to offer interest rates or terms that are comparable to those that we are in a position to offer. In addition, by combining our financing and credit operations with the normal business functions of our factory branch outlets, we believe that we are able to conduct our program at a lower cost than finance companies. Our distributor and dealer organizations have in recent years encountered increased resistance on the part of their customers to accept finance company rates. This resistance has contributed materially to a reduction in the percentage of distributor and dealer sales to our total sales during the past few years as well as an increase in the demand by these distributors and dealers for direct factory financing of a large number of their transactions. The trucking industry, and particularly the common carrier whose freight rates are subject to the control of the Interstate Commerce Commission, must obtain financing accommodations that embody a reasonable rate and terms which recognize the customer's paying ability as well as the depreciation schedules on this equipment which are allowed by the Internal Revenue Department. Fourth. Our business is based on our ability to offer our customers not only a truck which is designed and manufactured to meet the specific application for which it is to be used, but also to offer a specialized service with respect to the maintenance of this equipment. Through the close personal interest and contact that we are able to achieve by providing these functions, we are in a better posithe than a local bank or finance company to understand and meet the unique financial problems of the truck operator. Fish. During the past 799z mr ammay his coa serious consideration to the earaatianment if a fnates company vici VoIČ De operated as a wholly owned minentiary if he Tile for T The aurrean Lay that we must now assume, inder z nedot of inaneng "is me peases, will continue to Increase as we experience utama si mr business. This large contingent last.nly not ir redz standing and may well restrict U 150.57 5 train additumal inds za inanes me exuding business. The proposed jeg # 1 Lenazi vili premer Jr company from obtaining the utvintages dat we WILD CALive In de establishment of such an Str. Te tacerely believe that the passu f 25 IC wld result not only in higher interest rates to tie najcity if zus gerities who must finance their triek equipment przñases te world £SPA DUIT PLses prevent the purchase of track equipment by many operaties vir LTE ZEISBET able, from a credit mandpoint to qualify the State Mmpany le bank inanang A development of this catre wild inglestvicably adversely afes in sues and, in turn, our estined powth as an independent with imiret nagural within an industry in we dresy empete ininst Internacia Burvester Corp, General Mosora Corp. and the Ford Motor Co. Serena I: 3 or opiate that be HR T castrates a plete departure from the normal legieative processes in that it represents a direct discrimination aza net one industry, namely the mannfarers of motie vehicles The bill, in amang sepiades the continued financing by ont biestry at a time when similar venues are being offered by virtually every toscess in every other industry erunter to a sperating in the United States. Let me y la modinsion that our company weald be seriously affected if the pose egaation were passed with at some astrance that the organizations semused to tzance moust vehicles would be ecmpelled to fer our customers samwe kut rates equal to or better than those presently obtainable from our bura The tearings have been closed. I am taking the liberty of sending a copy MA & #atement to each member of the subcommittee. Also, I respectfully 19 want that tola Letter, which expresses our views on bill H.R. 71, be included la the sma May 1 azas express my appreciation to you and the members of the committee for ha nyarality to present our position with respect to this proposed legis J. P. DRAGIN, Executive Vice President, Finance and Administration. INTERNATIONAL HARVESTER Co., Hon. LUEL CELLER, Chairman, Antitrust Subcommittee of the Judiciary Committee, MY DEAR CONGRESSMAN: We have followed with interest and concern reports of the bearings before the Antitrust Subcommittee of the Judiciary Committee of the House on House bill 71, which, if enacted into law, would require divestiture of ownership by automotive manufacturers of their interests in finance subsidiaries and force them to refrain in the future from financing their sales. International Harvester Co. has a wholly owned subsidiary, International Harvester Credit Corp., which through the purchase of wholesale and retail paper generated through the sale of products manufactured and sold by International Harvester Co., finances wholesale and retail sales of construction equipment, farm equipment, and motor trucks. Although House bill 71, if enacted, world not affect the financing of construction equipment and farm equipment, nevertheless the bill would cause serious problems through its application to motor truck financing. It is our impression from consideration of several of the statements made to the Antitrust Subcommittee in opposition to this legislation that its dangers and disadvantages have been well documented. However, we do wish by this letter to indicate our opposition to the legislation and ask that this letter be made a part of the record of the hearings. In our view this legislation results from a desire either (1) to remedy real or fancied competitive abuses on the part of one or more automotive manufacturing companies or their financing subsidiaries or the exercise by them of monopoly powers, or (2) to assure certain independent finance companies a segment of the financing business they do not now have. If the purpose of the bill is the first one, it is manifestly unfair to adopt such sweeping legisation as H.R. 71, making it applicable to all automotive manufacturers, whether or not guilty of competitive abuses. If the purpose of this legislation is the second one, it is the type of legislation which in our view is not in the interest of the public. Finance companies, independent or otherwise, are no more entitled to freedom from competition or to stabilization of rates and prices than competitors generally. Also, in connection with the sweeping nature of H.R. 71, we should like to call attention to the fact that much of the business in the motor truck field acquired by International Harvester Credit Corp. relates to heavy duty trucks. Banks and independent finance companies have provided a service to our dealers in the financing of retail contracts covering light duty motor trucks. The same situation is not true with reference to heavy duty trucks. Independent finance companies and banks are generally not interested in handling this type of financing. Also, most banks and independent finance companies are not interested in providing wholesale floor plan financing to dealers on heavy duty motor trucks. Much longer floor plan terms are required on equipment of this type than is ordinarily necessary on automobiles on which there is a relatively faster turnover. If H.R. 71 becomes law, it may remove from the heavy duty truck user an important source of financing which may not be provided by independent finance companies. Likewise, it may remove from the dealer the opportunity to obtain the proper type of floor planning for heavy duty motor trucks. Furthermore, the application of H.R. 71 to these types of financing seems to have little relationship to the purposes sought to be accomplished by the bill. The financing of time sales has become just as integral a part of the automotive business as is the manufacture of engines or any other component of the product. The fact that an automotive manufacturer is free to produce components, whether or not he elects to do so, enables him to buy at a lower price than he might be able to do if this freedom were denied to him. Similarly, the right of these manufacturers to engage in the business of financing time sales bas unquestionably held down the cost to the consumer of this financing. International Harvester Credit Corp. would never have been organized had all of our dealers and users of our products had available satisfactory financing services. The sources of financing our dealers use are their choice without infence from International Harvester Co. or International Harvester Credit Corp. We neither encourage nor discourage their selection of a source of financIng. We believe that if financing services are not available to some of our dealers and users of our products, or are available only on unsatisfactory conditions or at unsatisfactory rates, we should be permitted to see that such services are provided and that only the strongest showing of public interest should lead to the enactment of legislation prohibiting us from doing so. Very truly yours, WILLIAM R. ODELL, Vice President, Finance. Mr. MEADER. Mr. Chairman, I would like to ask two questions of Mr. Misch, if I may. Mr. Misch, does the Chrysler Corp. have an employees credit union? I do not mean does the corporation maintain it, but do the Chrysler employees have a credit union? Mr. MISCH. I think there are several credit unions; yes, sir. Mr. MEADER. In your opinion, under H.R. 71, would they be forced to get out of the business of financing with regard to their members? Mr. Misch. I cannot Mr. MEADER. Your counsel might answer the question. I call your attention on page 2, section 2, of H.R. 71, which reads: It shall be unlawful for any corporation, its subsidiaries, officers or employees, engaged in the manufacture and sale in interstate and foreign commerce of motor vehicles, or any person or corporation which acts for or is under control |