The Senate Report on General Motors

...In 1926, at a time when DuPont controlled a fourth of GM's common stock, the chemical company sold 9 per cent of its total sales to the auto company, a classic example of log-rolling in industry...

...For the past three years, when the Defense Department made public these awards, GM ran far ahead of its competitors in research grants...

...He took a shower that was produced by GM hot water...

...He had breakfast on bacon kept in a GM refrigerator, cooked on a GM stove...

...In one case, the General Accounting Office testified that, on an airplane contract, GM made a profit of 18.7 percent on 528 planes...

...The cost of such items as bad debts and poor collections is nonexistent...

...With such contracts the manufacturer is in a better position to so organize his productive facilities to keep his plant in operation at its most efficient rate and at the lowest possible cost...

...Picturing a young Army captain, Dixon said: "We will say he awakened this morning and he had been sleeping between sheets that were washed, dried and ironed by GM equipment...

...By comparison, in late September 1956 Ford announced price increases of 2.9 per cent...

...The peacetime applications and uses of scientific knowledge will be enormous...

...The effect of such enormous concentration in the auto industry on the whole economy was explained by the Committee chairman, Senator Estes Kefauver (D.-Tenn...

...The Size and Shape of GM: The world's largest corporation, with 1957 sales of $11 billion, selling half the new cars today, is the result of corporate cannibalism which began soon after the turn of the century, the intervention of DuPont, expansion into a variety of lines, and heavy Government patronage...

...Moreover, there is reason to believe that, during an economic downswing, the adverse effect of a price increase is even greater...

...If he were sent to another city, he might travel in a plane with a GM motor in it...

...The full effect of price increases is now for the first time in several years coming home to the auto buyer...

...The Republic Steel loan was at 3 per cent with no maturity date...

...During the period of short supply from 1946 until 1954, GM used its giant buying power to its advantage and to the detriment of its competitors...

...In 1949, GM made loans of capital to Pittsburgh Coke & Chemical Company, which added 35 coke ovens to meet GM's requirement under a contract, with GM constructing the 35 coke ovens...

...It also leased a 720-ton blast furnace from the Wheeling Steel Corp...

...The Committee's actual recommendation-that the Justice Department investigate the industry to find out whether to try to break up the GM empire-is mild in comparison to the profusion of facts developed by the investigation...

...As compared to its target of 20 percent, GM's actual rate of return after taxes on net worth during the period 1948-58 averaged 25 per cent...

...They can buy or not buy...

...It has also been shown that price reductions are capable of stimulating auto sales...

...The Committee traced a number of investigations which indicated that GM was not above getting anything the traffic would bear from defense contracts...

...This is the first time in the history of a free enterprise economy where a company raised the price of their products in order to become competitive...

...Not only are procurement officials of the Government under less of a compulsion to buy at the lowest possible price, but they are often inadequately trained...

...In the preceding four years price increases were more or less camouflaged by more liberal financing terms, principally the extension of the maturity period...

...The method used by GM to set its auto prices is basically that of a public utility...

...For example, in 1920, when auto sales were dropping and inflation was growing, Henry Ford boldly cut prices...

...Defense Contracts: During World War II and most of the time since, GM has been the No...

...The Government contracting official may be under greater pressure to exchange price for time than his counterpart in industry...

...The report also points out: "GM requires its dealers to use GM parts...

...He even had a cigarette lighter on the car produced by GM...

...This position "has been a great source of power to GM...

...The big initial spurt of GM began after DuPont put up $50 million in 1918 and 1919 and took over fiscal control...

...Today, however, if the Big Three [GM, Ford, Chrysler] raise their prices unduly or put on the market models which do not attract consumers, or if there is an extended work stoppage because of a labor dispute, there is little alternative to which consumers can turn...

...But now, according to the consensus of the trade, the maturity period can no longer be extended...

...The Committee report said further: "The General Accounting Office stated that it had been informed by the Department of the Navy that GM's historical rate of profit has been 11.11 per cent on cost...

...Obviously the companies in whose laboratories this research work has been carried on will be its chief beneficiaries not only because of their direct acquaintanceship and knowledge of the research but also because of patents...

...Ford waited a week, then revised its prices upward...

...In the first place, GM sets the pattern for a business which directly and indirectly employs one out of every 7 American workers, whose price policies have an enormous effect on the cost of living, and whose wrong guesses can set off an alarming chain of unemployment...

...If he rode a bicycle, it was equipped with a brake made by GM...

...As GM and other large companies became more integrated, this avenue of activity for independents has gradually become narrowed...

...A further factor increasing the attractiveness of military contracts is the trend away from competitive bidding and toward negotiated awards...

...Because prices in the auto industry are set by GM...

...To buyers whose chief interest is the amount of the monthly payment, the price increase was to a very considerable extent offset by the increase in the number of months in which to make payments...

...His home was heated by a GM furnace...

...it overcharges the Federal Government, eats up small suppliers, practices wholesale usury, and sets prices with little, if any concern, for the general welfare...

...GM's large-scale invasion of the parts field has had far-reaching consequences in limiting the available market for outsiders...

...So any further increase can be immediately reflected in the average monthly payment...

...You made up that by the very substantial amounts you earned in other operations...

...GM is free to secure the maximum attainable return.' The report points out that prices were once a valuable weapon of competition and economic stimulation...

...It made loans to the Jones & Laughlin Steel Company and Republic Steel in the amount of $28 million and $40 million respectively...

...Senator Kefauver at one point said to a GM executive: "Didn't you get into a fight in the truck industry with other competitors, and for a while you operated your truck industry at a loss...

...Unit costs are projected on the basis of forecast volume by an elaborate statistical procedure...

...If he happens to be ordered to sea, he would use an entirely different set of GM motor equipment, because they make diesels and motors that go into these gigantic ships...

...GM possesses much of the economic power of a public utility, but is free from governmental oversight The utility is limited in its pricing policy to the recovery of its cost and a fair return on its capital...

...Generally speaking, studies show that with every 10 per cent increase in price, sales tend to fall by 12 to 15 per cent...

...Two weeks later, GM raised prices on the new Chevrolet 6.1 per cent...

...Auto union chief Walter Reuther commented: "As soon as GM announced higher prices, Ford revised their prices upward in line with GM...

...its cost formulations and pricing practices are subject to governmental supervision for the protection of the public...

...Curtice: 'That is true.' Senator Kefauver: 'That cuts down what you have to buy from somebody else...

...As a result of its favorable supply situation, GM was able to take the lead in the enormously expanding auto industry after the war...

...The market which he lost was filled by one or the other of his many competitors...

...A well-practiced howl of outrage at this picture was released by one Republican member of the Committee, Illinois' Everett McKinley Dirksen, whose probable role as the new Senate minority leader is now being contested by such GOP liberals as George Aiken of Vermont and Clifford Case of New Jersey...

...During the day he inspected a cannon made by GM and, if it was in a tank, that, too, was made by them...

...1 recipient of prime contract awards...

...The zealousness of military purchasing officials is certainly not heightened by the practice of military officialdom leaving the service to accept high paid positions in private industry...

...In setting prices, GM seeks a target goal of 20 per cent of return on net worth after taxes at a pre-determined level of production...

...They raised their prices to be competitive-why...

...If he goes to a movie, he will enjoy air conditioning also made by GM...

...Auto Financing: GM's finance agency is, of course, the General Motors Acceptance Corporation, which, the report says, charges approximately 11.2 per cent a year...

...GM has been adamant on this point, and has insisted on applying this profit margin across the board on all costs, including subcontracting.'" GM also has benefited from research contracts...

...these become the instrument for the fixing of prices...

...And, when, during the 1950 coal strike, Chrysler closed and Ford and Packard were shutting down, GM appeared to be in a fortunate spot so far as coal and supplies were concerned...

...There are no financial risks involved...

...Control over Raw Material Suppliers: "Without alleging that GM has attempted to monopolize raw materials in the sense of cornering them, the auto manufacturing company may have misused its power by either attempting to monopolize new production, through its financial plans and devices, or by coercion of suppliers to whom it held out the bait of its large market...

...GM, according to the report, can stagger the economy by its missteps...

...But a distinction should be noted: The public utility is a regulated monopoly...

...It quoted the Navy: 'For several years GM has applied this rate of profit, and all attempts to reduce this rate have been of no avail...

...The typical private buyer is probably more interested in keeping costs down than the Government...

...Some of the hardest hitting sections of the report are: Pricing: "The level of automobile prices has come to be largely deter mined by the pricing methods and policies of GM...

...The GAO in an account of a Navy contract for diesel engines and parts claimed that GM prices were "substantially higher than reasonable...

...The many-headed shape of the giant is indicated in an ironic comment by Committee Counsel Paul Rand Dixon...

...The car is his own now, but the purchase was financed by one of its subsidiaries and he was insured by another one...

...When Harlow Curtice, president of GM, protested that the 'majority of those items are for our own consumption,' Senator Kefauver asked: 'But when you produce them yourself, of course, you do not buy them from somebody else?' Mr...

...The Smaller War Plants Corporation, protesting the way these contracts were thrown to great companies, wrote in 1946: "In the long run the concentration of economic power may be greatly strengthened as a result of this centralization of research...

...He boarded a train pulled by a GM diesel and was transported down to the ordnance depot by a GM bus...

...the mere fact that his equipment and labor are kept busy during these periods has a salutary effect upon unit costs over the entire year...

...He got in an auto made by GM...

...The report suggests that this wide variety enables GM to absorb losses in one department by the cushion from other production...

...The Jones & Laughlin agreement 'bound GM to perform acts highly advantageous to it.' GM also agreed to take an extra 240,000 tons of steel a year from Jones & Laughlin as long as it was operating at full capacity...

...GM's invasion of conglomerate fields and the production by GM of component parts have cut deeply into small and independent businesses...

...The report says: "In the early days of the industry, auto components were purchased in the open market and created a thriving source of business for a multitude of independent suppliers...

...He said: "Years ago, if an auto producer made a mistake-priced his car too high or came out with a design which did not appeal to buyers-the results, while fatal to him, were not necessarily injurious to the industry as a whole, and certainly not to the entire economy...

...If he makes use only of existent facilities, the large contract helps to keep his plant going during normal slack periods...

...By Harlan Fisk The Senate Report on General Motors Justice Department asked to probe industrial colossus Washington Ahuge, blind, unchained, multi-headed monster-that is the picture drawn of General Motors by the Senate Anti-Trust Committee in its report on administered prices in the auto industry...

...For example, in 1957, GM had awards valued at $56.6 million, Ghrysler at $17.8 million and Ford at $1.3 million...