We urge that it be kept in operation without interruption pending sale to private industry-for a limited period, of course.

I want to thank you for giving me this opportunity to present our views on this very important legislation. We are at your service if we can be of further assistance to you.

The CHAIRMAN. Thank you very much, Mr. Spencer.

Now, Mr. Spencer, we have a few questions that we are going to propound to you and the other witnesses, just like we have done with the previous ones.

Mr. Blandford, please read question No. 1 to Mr. Spencer.
Mr. BLANDFORD. Yes, sir.

Assuming the most favorable conditions, what do you estimate to be the maximum capacity, or assigned annual capacity of GR-S rubber, expressed in long tons which you could produce annually in the copolymer plant which you propose to buy?

Mr. SPENCER. 114,800 long tons in both plants.

Mr. BLANDFORD. That is net?

Mr. SPENCER. Yes.

Mr. BLANDFORD. 2. How many long tons of GR-S did this facility produce in 1954?

Mr. SPENCER. 67,096.

Mr. BLANDFORD. What has been its average production over the last. 4 fiscal years? That is, for these two facilities?

Mr. SPENCER. 103,500.

Mr. BLANDFORD. 103,500?

Mr. SPENCER. Right. (Figure corrected to 93,500 after adjournment.)

Mr. BLANDFORD. Is it correct to assume that you could operate at maximum capacity for any extended period of time without doing irrevocable damage to the facility?

Mr. SPENCER. Our experience has shown that operations at maximum capacity can be sustained for an extended period.

Mr. BLANDFORD. What do you consider to be an extended period? Mr. SPENCER. Just what your question asked. It might be 1 year, it might be 2 years.

Mr. BLANDFORD. Would you say 2 years' maximum?

Mr. SPENCER. I would say 2 years.

Mr. BLANDFORD. Assuming you get the facilities, how many long tons of GR-S rubber do you plan to produce annually?

Mr. SPENCER. We plan to produce up to capacity, if the demand justifies capacity operations. In other words, all we can use or sell. Mr. BLANDFORD. Section 21 (h) of the act defines the terms "smallbusiness enterprise" as an enterprise independently owned and operated which is not dominant in its field of operation, due regard being given to the number of its employees and dollar volume of business. Do you agree that this would exclude a subsidiary company of a purchaser of a copolymer facility from participating in the share of GR-S to be made available to small business?

Mr. SPENCER. Yes.

Mr. BLANDFORD. What percentage of your planned production, expressed in long tons, do you intend to make available to small business on a continuing basis?

Mr. SPENCER. Not less than 11,500 long tons.

Mr. BLANDFORD. Not less than 11,500.

The CHAIRMAN. What percent would that be?

Mr. SPENCER. That is not less than 10 percent, sir, as covered in the contract.

Mr. BLANDFORD. 11,500.

In the sales contract covering this facility you assume an obligation to make available a percentage of your production to small business users. Do you consider this obligation to be a legal obligation which is enforceable in the courts by small-business users or on their behalf? Mr. SPENCER. Yes, we consider this obligation binding equally with all other terms of the contract, including the national security clause. Mr. BLANDFORD. Assuming the approval of all of the proposed sales, have you made any tentative or firm agreements with the Shell Chemical Co. to purchase a portion of its GR-S production? If so, state the terms and the amount of GR-S involved.

Mr. SPENCER. Goodyear is now in the process of negotiating an agreement to purchase a portion of its Los Angeles plant's requirement for the month of May 1955. Terms, 23 cents per pound, net GR-S, f. o. b. producing plant. Quantity, approximately 1,000 long tons. Duration of firm order, a portion of the next succeeding month's requirements only.

Mr. BLANDFORD. In other words, you want a firm contract for 1,000 long tons for May, with the same right to purchase the same amount in June?

Mr. SPENCER. Yes, sir, but no commitment beyond 1 month.
Mr. BLANDFORD. How about Phillips? The same question.

Mr. SPENCER. None.

Mr. BLANDFORD. No agreement with Phillips. Do you have any firm plans for the expansion of the capacity of the copolymer facility or facilities which you propose to purchase?

Mr. SPENCER. Yes. As I testified, we have already ordered equipment against our own account and plan on further expansion-and plans on further expansion which even are now partially engineered and will be undertaken just as soon as the requirement justifies such expansion.

Mr. BLANDFORD. To what extent would that increase your capacity? Mr. SPENCER. As a first step, perhaps 10,000 tons.

Mr. BLANDFORD. That is combined in the two plants?

Mr. SPENCER. Yes, sir.

Mr. BLANDFORD. Át what price do you propose to sell inventory GR-S?

Mr. SPENCER. At the same price as that which we purchase it from the Government.

Mr. BLANDFORD. Cost from Government.

Mr. SPENCER. Yes, sir.

Mr. BLANDFORD. And GR-S hereafter manufactured in your own facilities?

Mr. SPENCER. No prices have been quoted to date but it is our intention to establish the same prices per pound as the Government is presently charging.

Mr. BLANDFORD. 23 cents a pound.

Mr. SPENCER. (Nods.)

Mr. BLANDFORD. F. o. b.

Mr. SPENCER. We haven't decided the freight yet, but it will be a break-even freight proposition.

Mr. BLANDFORD. Well, 23 cents, at least plant price?

Mr. SPENCER. That is right. We would make or lose no money on freight, we hope.

Mr. BLANDFORD. What effect would a decrease in the supply of natural rubber, or an increase in the price of natural rubber, have on your planned selling price of GR-S?

Mr. SPENCER. We view the investment in synthetic rubber facilities as an investment to insure the uninterrupted availability of supply of this basic raw material. We anticipate that our investments will stand on its own feet. We anticipate that the price of synthetic rubber either up or down will depend upon its costs rather than the supply and price fluctuations of the natural rubber market.

Mr. BLANDFORD. In other words, your answer is that the pricing of GR-S will be determined by raw material costs and will have no relationship to the price of natural rubber?

Mr. SPENCER. Just as I stated.

Mr. BLANDFORD. Have I correctly paraphrased it?
Mr. SPENCER. Yes, I would say so.

Mr. BLANDFORD. Thank you.

The CHAIRMAN. Thank you very much, Mr. Spencer.

Now, the next and the last witness for those purchasing copolymer plants is the Texas-United States Chemical, owned equally by the Texas Co. and United States Rubber.

Mr. GEE. Mr. Chairman, I have no prepared statement. I only received your questions this morning.

The CHAIRMAN. Now, just give

Mr. GEE. The

The CHAIRMAN. One minute. Give your name and your position in the Texas-United States Chemical. Who are you?

Mr. GEE. My name is William P. Gee. I am president of TexasUnited States Chemical Co.

The CHAIRMAN. All right, Mr. Gee. Now, if you haven't any prepared statement

Mr. GEE. I have no statement, Mr. Chairman, as I say. I would like to reserve the right to file a confirmation of my answers to your questions, if I may.

The CHAIRMAN. All right. We will see what your answers are, then we will see about the confirmation.

You have no prepared statement that you desire to submit first?
Mr. GEE. Yes, sir.

The CHAIRMAN. All right. Go ahead.

Mr. GEE. Glad to have your questions.

Mr. BLANDFORD. All right. Now, assuming

and

The CHAIRMAN. Wait one minute, Mr. Blandford. He has no prepared statement he desires to put in now?

Mr. SMART. No.

Mr. BLANDFORD. No.

The CHAIRMAN. He is merely ready to answer the questions.

Now, tell us what copolymer plant and where it is located that you bought.

Mr. GEE. This is the copolymer plant known as Plancor 983 (A), located at Port Neches, Tex.

The CHAIRMAN. All right.

Now, you have bought it with the Texas Co. and the United States Rubber Co.?

Mr. GEE. It is a jointly owned, equally owned company, between the Texas Co. and United States Rubber Co.

The CHAIRMAN. And in addition to that, the United States Rubber Co. has bought one up in Connecticut?

Mr. GEE. That is what I understand.

The CHAIRMAN. Yes, sir.

All right. Now, go ahead. Mr. Gee, and answer the questions, please, sir. Read the questions to Mr. Gee, and you can elaborate as you go along.

Mr. BLANDFORD. Assuming the most favorable conditions, what do you estimate to be the maximum capacity, or assigned annual capacity of GR-S rubber, expressed in long tons, which you could produce annually in the copolymer plant which you propose to buy?

Mr. GEE. The assigned annual capacity of this plant is 88,000 long tons annually.

Mr. BLANDFORD. Do you agree with that assigned annual capacity? Mr. GEE. Yes, we do.

Mr. BLANDFORD. How many long tons of GR-S did this facility produce in 1954?

Mr. GEE. I am advised by FFC that it was 47,628 long tons in 1954. Mr. BLANDFORD. And its average production over the past 4 fiscal years?

Mr. GEE. 58,547.

?

Mr. BLANDFORD. Is it correct to assume that you could operate at maximum capacity for any extended period of time without doing irrevocable damage to the facility?

Mr. GEE. Yes, sir. We see no harm in operating the plant at its assigned capacity, if we could sell the product.

Mr. BLANDFORD. Assuming you get the facility, how many long tons of GR-S rubber do you plan to produce annually?

Mr. GEE. We have made forecasts of what our operating schedule will be at least for the next year, that is, starting in May. We figure for the first year of operation we will operate at the rate of about 87.000 long tons annually.

Mr. BLANDFORD. Thereafter to increase? Is that the inference? Mr. GEE. Yes, sir.

Mr. BLANDFORD. Depending on market conditions?

Mr. GEE. It depends on the market, yes, sir.

The CHAIRMAN. Your next question.

Mr. BLANDFORD. Section 21 (h) of the act defines the term "smallbusiness enterprise" as an enterprise independently owned and operated which is not dominant in its field of operation, due regard being given to the number of its employees and dollar volume of business. Do you agree that this would exclude a subsidiary company of a purchaser of a copolymer facility from participating in the share of GR-S to be made available to small business?

Mr. GEE. Yes; we certainly do.

Mr. BLANDFORD. What percentage of your planned production, expressed in long tons, do you intend to make available to small business on a continuing basis?

Mr. GEE. I would like to read the commitment we have made, Mr. Chairman:

The purchaser will make available for sale to small business enterprises and users other than United States Rubber Co. up to 20 percent of the GR-S rubber produced at the facility, upon the terms and conditions prevailing in the open market.

As I said a moment ago, our forecast production for the first year of operation will be 87,000 long tons. Therefore, 20 percent would be 17,400 long tons.

The CHAIRMAN. Then we will mark this company up at 17,400 tons, is that correct?

Mr. GEE. Yes, sir.

The CHAIRMAN. All right.

Mr. BLANDFORD. In the sales contract covering this facility you assume an obligation to make available a percentage of your production to small business users. Do you consider this obligation to be a legal obligation which is enforceable in the courts by small business users, or on their behalf?

Mr. GEE. While I can't render a legal opinion, as the chief executive officer of this company, I certainly consider it a commitment, a legal

commitment.

Mr. BLANDFORD. A legal obligation on your part?

Mr. GEE. Yes, sir; a binding commitment.

Mr. BLANDFORD. Assuming the approval of all of the proposed sales, have you made any tentative or firm agreements with the Shell Chemical Co. to purchase a portion of its GR-S production? If so, state the terms and the amount of GR-S involved.

Mr. GEE. No, sir; no arrangement.

Mr. BLANDFORD. The same thing with Phillips?
Mr. GEE. Yes, sir.

Mr. BLANDFORD. No commitments with Phillips?

Mr. GEE. No commitments.

Mr. BLANDFORD. Do you have any firm plans for the expansion of the capacity of the copolymer facility or facilities which you propose to purchase?

Mr. GEE. While we have no firm commitment to expand at the present time, we have on our own behalf ordered equipment to increase the type, the number of types of rubbers that we will produce.

Mr. BLANDFORD. In other words, you are putting in new polymers in the plant?

Mr. GEE. That is correct.

Mr. BLANDFORD. Will that increase its production?

Mr. GEE. I don't think so.

Mr. BLANDFORD. It will just increase the diversification?

Mr. GEE. Yes, increase the diversification.

Mr. BLANDFORD. At what price do you propose to sell inventory GR-S?

Mr. GEE. At cost.

Mr. BLANDFORD. And GR-S hereafter manufactured in your own plant?

Mr. GEE. We intend to be competitive. We made no quotations as yet. We intend to meet competition.