Mr. PELLEGRINI. Even with these onerous conditions, can you tell us whether or not, in your opinion, these ships could be financed, the construction of these ships could be financed or would be financed by private investors?

Mr. SANFORD. Yes, there is no question but what they can be. financed because, as I understand it, certain of the applicants already have the necessary commitments for that financing.

Mr. PELLEGRINI. There is a further provision in Public Law 575 that you did not detail, and that is a $5 ceiling per ton.

Mr. SANFORD. That is right.

Mr. PELLEGRINI. On a charter rate?

Mr. SANFORD. It is a pretty slim margin.

Mr. PELLEGRINI. You say that is a slim margin?

Mr. SANFORD. It is a slim margin and I have heard a lot of talk in various sources about windfalls under these contracts. I do not think there is any opportunity for a windfall on a $5 limitation on charter. Mr. PELLEGRINI. So that then, as I understand it, you have as your condition, your $5-charter limit, two-thirds amortization provision, and the purchase provision. But you feel, in spite of those provisions, which are for the benefit of the Government, that these ships can be built.

Mr. SANFORD. I think they can be built. I see no reason why they should not be built.

Mr. PELLEGRINI. Do you think they could be built with 90 or 87%1⁄2 percent, in your opinion?

Mr. SANFORD. All of my information is to the effect that it is not possible to get private financing on the basis of 90-percent mortgageloan insurance.

Mr. PELLEGRINI. Why?

Mr. SANFORD. Because the investment people, the financial people, will simply not take that risk.

Mr. PELLEGRINI. Why will they not take the risk? Is there not enough in the deal?

Mr. SANFORD. You had better ask them. I am not a financier.
Mr. PELLEGRINI. I have no further questions.

The CHAIRMAN. They testified here on the bill that they would not sharpen their pencils on 90 percent, and only naturally if they could get a hundred.

Mr. SANFORD. That is human nature, of course. There have been some very, very definite attempts made on the part of many people to see whether or not it was possible to get 90-percent mortgage-loan insurance on this. So far as I know, none of them have been successful.

Mr. PELLEGRINI. In your opinion, you are not going to be able to get these ships built without 100-percent insurance on the part of the Government; is that correct?

Mr. SANFORD. I do not think so. If that is the case, then the whole program bogs down.

The CHAIRMAN. Thank you, Mr. Sanford. We appreciate it.
Mr. Pettis?

62776-55-4

STATEMENT OF ANDREW A. PETTIS, VICE PRESIDENT, INDUSTRIAL UNION OF MARINE AND SHIPBUILDING WORKERS OF AMERICA, CIO

The CHAIRMAN. Mr. Pettis, you have a statement here which you may read if you wish. It will all be placed in the record if you want to discuss it without reading it. Whatever you wish is all right. Mr. PETTIS. I would like to do this, Senator.

The CHAIRMAN. It is not too long. You can discuss the figures in general.

Mr. PETTIS. I would like to make a few comments on the letter that you sent us.

My name is Andrew A. Pettis, vice president of the Industrial Union of Marine and Shipbuilding Workers of America, affiliated with the Congress of Industrial Organizations.

Our organization, Senator, would like to commend this committee for calling this hearing. We hope that something constructive and fruitful will come out of it because we are very much concerned at the present time with the situation as it now exists in the shipyards in relation to work for the shipyard workers.

There has been a tremendous lag since this program went through in the second session of the 83d Congress. We know that the passenger ships that have been discussed here for the Moore-McCormack Lines and the Grace Lines have been in the works for quite a considerable time. The vessels that these four ships are to replace are away in excess in age of the limits as set by the 1936 act, as was brought out in the testimony that was given previously and on the appropriations. We, of course, do not know except what we have heard about the passenger ships, that the delay is because of design work. We have no position on that.

On the turn-in tankers we had hoped that along with the MSTS tankers they would fill in the interval between the time that these passenger ships would get out and the men would get to work on them.

There is one other program that the committee put through that we are much concerned with, that we though was a wonderful job on the part of the committee, and that is the emergency repair program that has not been mentioned here. As you know originally that was to have been a $45 million program. The authorization went through for $25 million, and $12 million were appropriated. There are now $6 million, as I understand it, in the appropriations presently before the Congress.

The point I wish to make in regard to that is that it is being doled out in dribs and drabs and it is not fulfilling the objective that was made to this committee and to the committee of the House that it was a program necessary to get certain ships ready, ships that were of value mostly to our Navy Department, and ships that were not what we might say PWA ships or any such things. They were necessary and needed.

The CHAIRMAN. The testimony on that appropriation was to the effect, these all being clearly special-purpose ships, that they were needed not only immediately but they were needed also for replacements and standby and we ought to get at the program as soon as possible.

Mr. PETTIS. That is right, sir.

The CHAIRMAN. That is the testimony.

Mr. PETTIS. That is why I bring that point out, that we think it ought to be sped up. We regret that the Administration only asked for $6 million instead of the remainder of the $25 million. We think if the program was that necessary then it was that necessary to get that amount of money.

On the MST tankers I think it would be better, Senator, if I read this statement.

The CHAIRMAN. I would like to point out to the committee that I think these figures are very interesting. There are presently employed 81,880 people in the shipbuilding and ship-repairing industry, as of January. This is a drop of 3,000 since the previous month, and a drop of 25,000 in 1 year.

Mr. PETTIS. That is right, sir.

The CHAIRMAN. Despite the fact that Congress had acted on these programs.

Mr. PETTIS. Yes, sir. We would like to file this statement. I am not going to read it. I would like to say that this is to buttress our point that the shipbuilding industry at the present time, as far as the workers are concerned, is in a very dangerous state.

We have projected these manpower figures in exhibit A to the point of effective war and private shipyard employment. In other words, using very carefully figures that were used in the two prior wars, World Wars I and II, and some figures from the Korean holocaust.

The CHAIRMAN. You say in your statement that you still hold that M-day at the outbreak of any national emergency would require a minimum nucleus and I like that word "nucleus" because they are the skilled people of 140,000 to 150,000 workers in private construction and repair yards, and also point out, and it is very important, that we should not forget that there will be little or no opportunity to prepare for the outbreak of World War III.

From 1939 to the middle of 1941 total private shipyard employment trebled because two years of fighting in Europe gave us a chance to build up the industry.

Mr. PETTIS. I think that is true.

The CHAIRMAN. I think your premise is right that we will not have that chance now, which we should have. In other words, we need time there to build up the shipbuilding industry which became so vital during the war. In this case I doubt if we would.

Mr. PETTIS. That is very true. Of course you know that was based on the 1936 act when they got into operation and started to pick up our merchant fleet that was lagging prior to World War I.

The CHAIRMAN. And at about double the cost, if we had kept it alive all the rest of the time.

• Mr. PETTIS. Very true.

The CHAIRMAN. It ran into billions.

Mr. PETTIS. Yes, sir. Ten or twelve billion dollars, I believe, and a good deal of it was because of the emergency, which was a waste as far as the taxpayers' money is concerned, but necessary because of the emergency that we were involved in.

The CHAIRMAN. The full statement with the exhibits on the general situation will be placed in the record.

(The document referred to above is as follows:)

STATEMENT ON MANPOWER BY INDUSTRIAL UNION OF MARINE AND SHIPBUILDING WORKERS OF AMERICA, CIO

There are presently 81,800 production workers employed in the shipbuilding and ship-repairing industry as of January 1955. This is a drop of over 3,000 workers since the previous month, and a drop of close to 25,000 people in 1 year. The total employment in the privately owned industry as of January 1955 was 95,600 workers. The situation is rapidly approaching the low of 1939 and preKorea. Not since the periods before World War II, just prior to World War I, and just prior to Korea have we been in such a perilous situation as we are in today.

Yard by yard and area by area, we are totally unfit to expand operations in case of emergency. We are rapidly losing our most highly skilled workers. For a minor emergency (such as the Korean situation) the industry will be able to expand sufficiently, but even here we would hit critical shortages in repair facilities and skills. For a major emergency, we are almost totally unprepared. What has happened to employment in the privately owned shipbuilding and repair industry since World War II is very clearly shown by the following table: Employment in privately owned shipyards

Since the end of World War II, this union has been very much concerned with the decimation of skilled workers in the industry. We recognized that wartime employment in the industry was never feasible but at the end of World War II we pointed out that the minimum nucleus required of total employment in this industry in order to expand to mobilization requirements in the event of another emergency was 150,000 employees in the privately owned construction and repair yards. We have today less than two-thirds of such required employment nucleus. The massive advances in technology in vessel construction; the onset of a virtual industrial revolution in techniques in the vessel construction industry during World War II, has carried over to a large extent today, to cause a tremendous advance in labor productivity in this industry.

When one takes increased productivity into account, the nuclear employment requirements for private shipyards in the event of another emergency, decreases some, but not sufficiently to affect requirements. The main necessity for repair employment, at the outbreak of an emergency, and the increased employment required in repair yards at such time, offsets any increases in productivity which have occurred since World War II.

Therefore, we still hold that M-day at the outbreak of any national emergency will require a minimum nucleus of 140,000 to 150,000 workers in private construction and repair yards, and 100,000 workers in naval shipyards.

We must never forget that there will be little or no opportunity to prepare for the outbreak of world war III. From 1939 to the middle of 1941, total private shipyard employment trebled, because 2 years of fighting in Europe gave us the chance to build up the industry. We will not have 2 years the next time. From the beginning of the defense program to Pearl Harbor, private employment quadrupled-going from 97,000 to 366,000.

Attached hereto as exhibit A is a memorandum on the effect of war on private shipyard employment.

By 1941, before World War II, American shipyards had underway the largest shipbuilding program in the history of the Nation. Part of this program was, of course, for the British. During 1941, the lend-lease cargo shipbuilding construction for the British Government, the additional cargo ships for Maritime Administration account, and about 500 naval craft, were authorized in the first 2 quarters alone. By the beginning of 1941, it was estimated by the various governmental agencies that the peak of the program which was at the time

supposed to be reached in 1942, would need over one-half million workers. This, of course, seems ludicrous when we consider that we really needed about 1/4 million workers in World War II. However, statistical analyses cannot foresee an outbreak of armed conflict and in the beginning of 1941 when the requirements were projected, no one contemplated Pearl Harbor.

Today we are being forced by changes of circumstances completely beyond our control to predicate all our estimations upon the unavoidability of armed conflict, with most engagements to be fought overseas. Even with the present reserve fleet in complete ready condition (which it is not); even with the calling in of every vessel under foreign flag owned by American interests (whether they will ever reach port is doubtful); even with the assumption that none of our port facilities will be damaged (which is extremely unlikely), we are still in most port areas, particularly the critical ones, so far below minimum nuclear mobiliza-tion strength that the situation is nightmarish in its possibilities.

For some time since the end of World War II, this union has compiled mobilization requirements for our industry. We do not have access to the material held by the procurement agencies of the Government, nor do we desire to know anything about such data. However, there is sufficient data available for those familiar with the industry to judge how many men would be required in a yard at a time, let us say, of mobilization day minus 3 months, or peak period (which could be taken to be any time from mobilization plus 1 year to mobilization plus 18 months).

It is fairly simple for those of us who have lived with the industry for decades to estimate how much tonnage a particular yard would be required to build in the event of an emergency; how many men would be required to construct such tonnage, and how many men would be needed as a nuclear force. It is also very easy in the case of repair yards to estimate how many men would be required to man the facilities for three-shift operation when all facilities are in use; and how many men would be required as the nuclear force to bring the repair yard up to that complement. Repair yards do not expand as rapidly as construction yards because the workers required have to be wholly trained, skilled, and versatile in their abilities. Further, the amount of employment in any repair yard is completely determined by the facilities available. After a certain amount of employment on any way on ship repair, the point of diminishing returns in very quickly reached.

To illustrate just how serious the situation is, we will examine the situation in a number of ports. Before doing this, however, the basis of prediction must be understood. All our data is based upon following assumptions:

1. The actual level of employment for the day of outbreak of any armed conflict is practically impossible to ascertain unless one knows immediately in advance what form the conflict will take. Not being military experts, this is impossible for us to guess. Consequently we have estimated the minimum nuclear force required at a time 3 months prior to any M-day situation, and we assumed that if this is available in a yard 3 months before M-day, the yard, with a calculated built-up of employment, will be ready for M-day situation.

2. Certain reserve facilities will have to be immediately reactivated at any outbreak of armed conflict. Some of these will be required for repair work. This will mean that the employees of the other private shipyards in the port area will also have to staff the reserve yards. This means that in certain part areas (not all- because certain of the reserve facilities are only used for construction) enough of a nucleus has to be kept in going yards to be able to staff reserve yards. Port of Boston

The port of Boston presently has about 1,700 production workers in private shipbuilding and repair yards. At M-day minus 3 months, the port of Boston should be employing over 10,000 production workers in the private yards alone. This would enable the yards to begin all-out production with the utilization of the reserve facilities after from 1 year to 18 months from the outbreak of the emergency.

Port of New York

The port of New York is presently employing a little over 7,000 production workers in private shipyards. In the event of an emergency, the port of New York, which contains our main repair facilities, would need over 15,000 people to perform the necessary repair work alone; and close to 25,000 people at M-day minus 3 months, if the reserve facilities are to be reactivated. Where these men would come from, we have no idea.