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see how you could act with business efficiency or business wisdom until you first ascertained how much money they are going to use in the manufacture of the rifles.
Gen. CROZIER. That again bases the price that we pay for the services largely on the money invested, whereas the theory of this contract bases the price that they pay for these services largely on the value of the organization.
Mr. Sisson. Now, we have been hearing a good deal about patriotism in business. If they are paid for their plant, and if the Gov. ernment puts in the extra machinery that they may have no use for after the war is over, and they then get 6 per cent interest on the capital they have invested, then, if there is any patriotism in it, they ought not to want an unconscionable profit of 10 per cent on the gross sales, or on the manufacture, which means gross sales in the last analysis. Suppose this was a brick plant and there was $30,000 invested in the brick plant. They might make several million dollars' worth of brick in a plant of that kind, and if they made 10 per cent profit on the gross output of brick they would be making several hundred thousand dollars. Has this contract gone to such an extent that the ascertainment of the value of the plant could not cause the contract to be changed so as to give the Government an opportunity to make a reasonable contract?
Gen. CROZIER. Yes, sir; the contract has gone too far for that. The contract has been executed, and the men have been at work on it now for six weeks, or more. That had to be done in order to prevent the dissipation of the organization, which was the vital thing that we wanted to hold together, because the interests of the Government required that it should be held together.
Mr. Cannon. As I understand it, the contract provides for the ascertainment of how much capital is invested. That is an open question, and you are given time to ascertain it between this and the final settlement with these parties.
Gen. CROZIER. We will ascertain that as soon as possible in order to pay the interest on it.
Mr. CANNON. Precisely; but that factor which you can not tell now is to be ascertained before the transaction is closed.
Gen. CROZIER. Yes, sir.
The CHAIRMAN. General, there has been considerable discussion as to the wisdom of the plan adopted of modifying this rifle so as to utilize our ammunition instead of having it so that the English ammunition could be used, so that our supply might come from a nearer source. I think such statements have been made on the floor of the House. Will you state the reasons that actuated the department in determining on our own ammunition, aside from what you have already said?
Gen. CROZIER. If we had adopted the plan of continuing the manufacture of the Enfield rifle just as it was being made-that is, suited for the use of British ammunition—then we would have either had to throw away or use otherwise all the rifles of our own manufacture, the Springfield model of 1903, which we have on hand, amounting to something over 600,000, and we would also have had to refrain from using in the theater of war all of the very considerable supply of ammunition for the Springfield rifle which we have on hand, or else
we would have had to be confronted by the use of two kinds of ammunition in our own force.
Now, there are some other arguments; one is, that we think that the necessary abandonment, if we are not to have confusion with the Springfield rifle and the Springfield ammunition, would have entailed giving up the use of what
we think is as good a rifle as there is in the world. Some people think it is better than any other rifle in the world, and we think we can say it is at least as good as any. It would also mean the giving up of the use of a kind of ammunition which we think is very considerably superior to the British ammunition. Our cartridge is a very much better cartridge than the British cartridge, and I think the British themselves would not hesitate to say so, and I think it is altogether probable that after the war, and when it can be done, the British will abandon the use of their kind of cartridge and come to our kind of cartridge. They can not do it, of course, during the progress of the war.
Mr. Sisson. General, at what distance is the American rifle reasonably effective?
Gen. CROZIER. It will kill at very much greater distance than it is ever fired at. It is quite reasonably accurate at 1,000 yards, and it can be fired at a greater range than that.
Mr. Sisson. A greater range than 1,000 yards?
Mr. Sisson. With the boys in the country with their squirrel rifles, how far would they hold up before it would begin to drop much?
Gen. CROZIER. Every projectile begins to drop immediately or practically immediately after it gets out of the muzzle of the gun; but the feature which you have in mind I know is that of the flatness of the trajectory, and in the open field the greatest source of inaccuracy of fire is in misjudgment of the range, which has a less effect as the trajectory is flattened. Now, the trajectory of the bullet in this rifle is a very flat trajectory and if aimed at the lower part of a kneeling figure at something like 350 yards, the bullet would not raise above the head of any kneeling man in between the firing point and the 350-yard target.
Mr. SISSON. With the rifle at the shoulder!
Gen. CROZIER. Well, with the man lying down. The Krag-Jorgenson rifle, which we used just before this one, had quite a flat trajectory and was a very good rifle in its day, and fired at 1,000 yards, the highest point of its trajectory, which is somewhere near the middle point, was about 28 feet above a straight line drawn from the muzzle of the rifle to the point aimed at. With the present, rifle, that highest point under those circumstances is about 14 feet.
Mr. CANNON. Are the Enfield rifles which the English have and the Enfield rifles which you are going to make interchangeable!
Gen. CROZIER. No, sir. They are interchangeable in a number of their parts, but not in all of them, and they will not use the same ammunition. The Enfield rifle which we will make will use the same ammunition as our rifle and not the same ammunition as the Enfield rifle made for the British Government.
The CHAIRMAN. General, in this provision you have authority to spend money for the range and for necessary buildings. Now, from
what you have stated, you do not seem to intend to put up buildings. Is this provision in exactly the form as you want it, in view of what you have stated ?
Gen. Crozter. I have said in the course of my testimony that part of the property of the British Government which we want to take over is in buildings, and part of it is in rifle ranges. There is not a very large amount involved in the buildings and the rifle ranges. At the Remington Arms Co. of Delaware plant the buildings of all kinds amount to $156,000. The property that belongs to the British Gorernment is intended to be taken over by ourselves, whether it is buildings or grounds, and then we may have to have an ultimate adjustment with the company or with somebody else. There is stated to be $10,000 worth of land at one of the companies. I think it is used for a rifle range, but we have not yet made and considered a full inventory of the land and buildings, etc., which we expect to get; but we have a list of those of the Remington Arms Co., which is stated to be worth, as I said a moment ago, $156,000. Among other things, there is a restaurant building of which the value is $8,256.46. That is evidently an eating place for the employees, something that the British Government found it necessary to put up at its own expense. There is an employment office and a building which is used as the headquarters of the outer guard, $826.
Then, there are dry kilns for drying stocks of rifles, $55,000; and then there are time booths and a hospital the value of which is $1,609; an oil-storage house; an oil and waste reclaiming house and garage; and watching boxes and fire houses and a shed for the storage of materials and buildings for a 500-yard rifle range. I suppose that is a little house with a velocity instrument in it, or something of that sort; and a rifle range and testing house in the plant valued at $66,000; and a shed for the installation of some machinery for cutting up stock valued at $1,015. The two buildings of some value are the dry kiln, $55,000, and the rifle range testing house in the plant, $66,000.
Mr. SHERLEY. General, does your contract provide for what shall be done at the termination of the contract touching the machinery of the Government or touching the part of the plant which is owned by these companies?
Gen. CROZIER. The machinery at the termination of the contract remains the property of the Government, and we shall have to remove it in a reasonable time or otherwise use it.
Mr. SHERLEY. That is just what I had in mind, whether any provision had been made looking to giving them the right to take the machinery at a certain valuation or giving you the right to take their plant at à certain valuation. It seems to me it is a rather bad situation to permit at the termination of this contract a condition whereby the Government must dismantle the plant unless it can then, under that handicap, make some other arrangement.
Gen. CROZIER. There is no such arrangement now. We have something over a year to adjust our ideas as to what a good arrangement would be. An arrangement like that, as you can see, would be one requiring a good deal of thought and probably a good deal of discussion, and there is not available the attention to be
given to it at the present time on the part of either owner, the Government or the manufacturer.
The CHAIRMAN. General, I understood you to say that one of these concerns was to do about two-thirds of the work and the others one-third between them. Now, is that pretty evenly divided between the other two?
Gen. CROZIER, As I remember, it is fairly evenly divided. It was divided in a manner which was fairly satisfactory to these companies as being about in the proportion of their capacity.
The CHAIRMAN. Now, I want to call your attention to the fact that the Winchester Repeating Arms Co. has a capital stock of $1,000,000 and has no outstanding bonded indebtedness, and for the last 11 years it has paid 55 per cent dividends. For 1916 its earnings were $1,627,778. Gen. CROZIER. That represents what?
The CHAIRMAN. Their earnings for 1916, which is about 160 per cent. Now, if they get 150,000 rifles and it costs us $30 a rifle, and we pay them 10 per cent on the cost, they will be getting a profit of 45 per cent on the total capitalization of the company under this contract.
Gen. CROZIER. May I ask the authority for the statement that they have no debts, Mr. Chairman?
The CHAIRMAN. Moody's Manual. This is information which is always compiled from information furnished by the companies. How is it that you have done business directly with the Remington Arms Co.? That company is owned by the Midvale Steel & Ordnance Co.
Gen. CROZIER. Yes; the stock of it is largely owned by that company or perhaps all of it is; but the Remington Arms Co. iş ą corporation and has its own officers.
The CHAIRMAN. The Midvale Steel & Ordnance Co. took over practically the entire capital stock of the Midyale Steel Co. and the Remington Arms Co. The Remington Co. was purchased for $20,000,000. They are still doing business under the Remington Co.'s organization, are they?
Gen. CROZIER. Yes, sir.
The CHAIRMAN. The authorized capital stock of the Remington Arms Union Metallic Cartridge Co. is $40,000,000 of common and $20,000,000 of 7 per cent preferred, accumulative. The outstanding capital is $30,000,000 of common and $20,000,000 of preferred, and practically the entire capital stock, both common and preferred, is in the hands of Mr. Hartley Dodge, president.
If the Winchester Co. is typical, 10 per cent of the cost gives them on their capital a very extraordinary return figured at $30 a rifle.
General, do you think you need the words, “including the necessary buildings, range, and so forth”?
Gen. CROZIER. I think so. They cover comparatively a small amount of money.
The CHAIRMAN. The words “and so forth” do not help any.
The CHAIRMAN. That would not give you any authority. Would not the words, “including the necessary expenses incidental to the acquisition thereof," cover everything!
Gen. CROZIER. Yes. The difficulty is in foreseeing what we might find in taking this property over. There are buildings and a range and there may be something else.
The CHAIRMAN. You might look over that a little more carefully and suggest some language to cover that.
Gen. CROZIER. I do not think of any better language than what you have suggested, “including the necessary buildings, range, and other expenses incidental to the acquisition thereof."
AGREEMENT FOR THE EXECUTION OF THE RIFLE CONTRACT. Agreement made and concluded this 12th day of July, A. D. 1917, by and between the Remington Arms Co., a corporation organized under the laws of the State of Delaware, by William E. Corey, president, party of the first part (hereinafter called the contractor), and the United States of America, represented by William Crozier, brigadier general, Chief of Ordnance, United States Army (hereinafter referred to as the contracting officer), acting by authority of the Secretary of War, party of the second part:
Whereas the undersigned parties have this day executed a certain contract entitled "A contract for the manufacture of rifles," contemporaneously herewith and upon the express conditions of this agreement: Now, therefore, in consideration of the execution of said contract, said parties do hereby agree and covenant to and with one another as follows:
(A) The specifications, drawings, and sample rifle referred to in said contract having not as yet been finally approved by the Chief of Ordnance, it is stipulated that said specifications, drawings, and sample rifle shall not be attached to said contract until approved by the Chief of Ordnance, and when approved shall form part of said contract as though attached thereto at the time of the execution thereof subject, however, to modifications and revisions as provided for in said contract.
(B) It is further stipulated that, upon such approval by the Chief of Ordnance of the specifications, drawings, and sample rifle, the contractor will use his best endeavors to the end that the deliveries of rifles provided for in article 9 of said contract shall be made in such numbers and at such dates as may be required by the Chief of Ordnance,
(C) It is further stipulated that the specifications and drawings submitted on or about June 1, 1917, and which have heretofore been the basis upon which the contractor has proceeded in the performance of the work covered by said contract, shall, until the specifications, drawings, and sample rifle referred to in paragraph (A) of this agreement be approved by the Chief of Ordnance, govern the manufacture, inspection, and delivery of rifles, and form the basis upon which payments to the contractor shall be made by the United States.
(D) It is further stipulated that the cost of all materials and supplies (but not of machinery) furnished by the United States Government, shall be added to the contractor's approved bills and considered as a part of “ actual cost" for the purpose of determining the basis on which to calculate the 10 per cent of profit and for this purpose only, and is not to be otherwise considered as a part of “ actual cost," as the term is used in articles 12 and 14 or elsewhere in said contract.
(E) It is further stipulated that the "reasonable rate of interest,” provided for under subdivision "C" of article 12 of said contract shall not exceed 6 per cent per annum.
(F) It is further stipulated that the tax clause in paragraph (D) of article 12 of said contract is understood to except and not to apply either to any franchise tax or to any Federal tax on income, capital stock, profits, munitions, or the manufacture thereof.
(G) It is further stipulated that the provision for reimbursement to the contractor by the Government for payments made by the former to the Baldwin Locomotive Works under the lease of the plant (article 13 of said contract) is