The CHAIRMAN. Could that be done with sleeping cars by the railroads themselves without having a completely different operating company?

Mr. FLETCHER. I was just going to say, Senator, that in the condition that confronts the railroads now-and I speak only for myself, because I have no authority to say just what is in contemplation-I think that the railroads, it is obvious, might solve this in one of three ways. Each railroad might buy from the Pullman Co. the cars now in use and take over the employees of a certain number of cars, which their experience would indicate would be sufficient for their normal traffic. That is one way it might be done.

Then, they might be pooled by giving to the car service section of the Association of American Railroads, let us say, the right to shift those cars from place to place, and the road that uses the cars of another road would pay a fixed amount, somewhat as the freight cars are distributed. Another way is to organize a subsidiary company, stock of which would be owned by all the railroads, and that would be an arrangement somewhat like the Railway Express Agency, which is owned by the railroads. They could take these sleeping cars and distribute them as they were needed.

Another way would be for the railroads to pay the present Pullman Palace Car Co.-I believe that is the right name. There are three of those Pullman companies, the Pullman Manufacturing Co., the Pullman Sleeping Car Co., and an over-all holding company called Pullman, Inc., which owns the stock at the present time of those two subsidiary companies. I am inclined to think that one of the first two of those contingencies I have suggested will probably be adopted.

Of course, if each railroad buys its own cars and then gives the authority to the car service section of the association to distribute those sleeping cars, somewhat in the same way that freight cars are handled, we might have some question arise as to the legality of that arrangement, which might be worked out with the Department of Justice or possibly with the Congress.

The CHAIRMAN. There has been no question raised with respect to the legality of freight-car service?

Mr. FLETCHER. That is right.

The CHAIRMAN. The only difference I can see would be that in one you furnish a porter and a car, and in the other you just furnish a car. Mr. FLETCHER. There is this practical difference, Senator. Theoretically, there might be not so very much difference, but in a practical matter you load a freight car with freight in New York to go to San Francisco. It goes through with its lading and is handled by three or four railroads in the course of the transportation. There is not so much occasion for the use of Pullman cars in that way at the present time.

Therefore, that would possibly make a distinction.

Now, it would not be different at all, however, from the use of passenger cars in this war emergency. The railroads have found it necessary to borrow ordinary passenger cars, day coaches, we commonly say, one railroad from another, and there is a way that can be done and the amount of the compensation paid by the using road to the owning road has been fixed by agreement. This will have to be handled by agreement among the railroads. Otherwise, service is going to suffer.

The CHAIRMAN. Because the secret of successful transportation is interchangeability?

Mr. FLETCHER. True.

The CHAIRMAN. That is why we have a standard gage track in the United States.

Mr. FLETCHER. Very true.

The CHAIRMAN. That has been one of the handicaps in the war in the East. The Russians have a broad gage track and the Germans use a standard gage. When the Russians advance they have to widen

the gage.

Mr. FLETCHER. I can remember when the railroads in America were in that state. There are still some in Colorado. There was a broad and a narrow gage system.

The CHAIRMAN. We had a pegleg railroad in Pennsylvania which only had one track.

Mr. FLETCHER. I was born and raised on the line of the C. N. O. and T. P., and they had the broad gage, and one of the things I well remember as a little boy is standing on the side of the railroad and watching them change the gage from broad gage to standard gage. It was all done in 1 day; 235 miles of railroad. It was a great event in that part of the country.

But the Pullman Co., of course, has been given the option by the Court, as you recall, to elect whether it will continue in the sleeping car or manufacturing end of the business, and it has elected to continue in the manufacturing end. The Court will be so advised officially on the 5th of October, the date which was set by the decree as the time for the declaration to that effect.

At the same time the Pullman Co. will be required to advise the Court in a general way, at least, as to what its plans are for disposing of the sleeping-car end of the business. Just how that will be worked out will depend on the decision of the railroads, of course, which has yet, so far as I know, not been finally concluded.

I don't think, if I may say so without offense, that that litigation will help the public a bit. I think it was an unfortunate thing that it was ever instituted. I think from an economic point of view it has been an unhappy result. I don't believe the public will be any benefited, either in the lowering of rates, in the improvement of the service. Anyhow, I am not here to discuss that. That is a matter of opinion, I suppose.

The CHAIRMAN. There has been one bad feature. The Pullman Co. has carried on a line of advertising showing cheapness of Pullman rates when, as a matter of fact, the rates were greatly in excess of those advertised, because there had to be an additional surcharge charged by the railroad for each passenger hauled in a sleeper.

Mr. FLETCHER. But I don't think that is going to be avoided by the ownership of the equipment by the railroads.

The CHAIRMAN. The expense will not be avoided, but the actual rates will be much better known. The average layman traveling on the road will know exactly what the rates are then.

Mr. FLETCHER. Those rates are all filed with the Interstate Commerce Commission.

The CHAIRMAN. But what ordinary citizen reads the reports of the Interstate Commerce Commission? All he knows is that he walks up to the window and pays his fare.

Mr. FLETCHER. So he does as to all rates-freight and passenger. I just mention that is one of our problems now.

The CHAIRMAN. I am not taking sides at all.

Mr. FLETCHER. It is too late for any of us to take sides. The decree is entered and made final. Neither side appealed.

We have also filed as a separate document, a reply to the extensive questionnaire submitted by the subcommittee, and to this I call attention. Anyone reading the narrative statement and also the replies to the questionnaire will find a good deal of repetition, a result which could not very well be avoided in view of the type of questions submitted. Every effort has been made to answer the questions fully and candidly. Some of them were difficult to answer categorically by reason of an evident misapprehension of the true situation on the part of the framer of the questions. This misapprehension we have endeavored to correct in our general statement and to a certain extent in our reply to the questions.

It would seem to be appropriate to offer some brief explanation as to the history, organization, and functioning of the Association of American Railroads, with special reference to its relation to the member roads, and its obligations in the matter of research.

The association was organized in 1934, beginning its work on October 12 of that year. It is not incorporated. In other words, it is a voluntary association, to which belong practically all the class I railroads of the United States, Canada, and Mexico. Its members operate 96 percent of the railroad mileage of North America and handle about 99 percent of the traffic moving by rail. Prior to its organization there was a number of national railroad organizations, all of which combined to form the present association, which, however, has taken on additional functions and obligations.

Among the organizations that were thus combined may be mentioned the American Railway Association, which was established under that name in 1891, 53 years ago. That association was concerned, among other things, with establishing and enforcing uniform rules and standards for the interchange of freight cars, so that cars of merchandise might move freely over any railroad to their destinations, in such a way as to allow commerce to move without delay or interruption to every part of the continent. The association was primarily an operating organization, dealing with rules for interchange of cars, demurrage matters, car hire, safety standards, and the like. This association was also responsible for the organization of shippers' advisory boards, to which belong most of the important shippers of the country, through whose functioning the railroads have been able to anticipate requirements, thereby reducing car shortages to a minimum.

These shippers' advisory boards were organized in the twenties, after the other World War. Following the First World War, or, to be a little more accurate, the World War, for I believe we don't want to call this one the Second World War.

The CHAIRMAN. I insist on calling it Act II.

Mr. FLETCHER. I don't know what the right name is. The railroads found themselves in the position where they felt that they owed the obligation to the country to improve their service, and one of the difficulties that confronted them was to anticipate the needs of the country and the shippers in the various parts of the country. How many cars. would you need for grain at a certain time? How many for coal at a

certain time? How many for fruit and vegetables? Particularly, you see, the handling of seasonal traffic. Therefore, there were organized throughout the country these shippers' advisory boards. There are 13 of them, I believe.

Each has a defined territory. Shippers compose the membership of those boards and meet semiannually. They canvass the whole situation and they advise the railroads as to what will probably be needed in the way of cars for particular commodities at particular times. That has enabled the railroads in this war emergency to handle the traffic with much more success than they have ever done before, and they have been a very useful-I think indispensable-agency whereby freight traffic has been greatly improved.

Another organization which preceded the present association was the Association of Railway Executives, which furnished a convenient medium for the responsible executive heads of the railroads to come together to discuss important questions of policy as they affected railroad operation in all of its phases. This particular organization maintained an office in Washington with a limited force, which undertook the task, among other things, of appearing before committees of Congress, such as this, to advocate or oppose proposed legislation of interest to the industry.

When I first came to Washington, in 1933, I was counsel to the Association of Railway Executives and also counsel for the American Railway Association. They were merged into the present organization.

A third organization was the Bureau of Railway Economics, established in 1910 for the collection, analysis, and dissemination of information, statistical and otherwise, bearing upon railroad problems. I may mention also the Railway Accounting Officers Association and the Railway Treasury Officers Association, the functions of which are indicated by their titles. There also existed two organizations, the Eastern and Western Railroad Associations, created to handle patent matters of the greatest interest to the industry. These two organizations were brought under the supervision of the Association of American Railroads. The Freight Container Bureau and the Bureau of Explosives have also been absorbed at one time or another into the central organization.

We have, then, one national association, the organization and functioning of which are indicated in a short and simple plan, a printed copy of which I should like to file with this committee. If you will permit me to make this a part of the record, I will hand it to the reporter.

The CHAIRMAN. Yes.

Mr. FLETCHER. It is a simple document, but it does define the type of organization, the purpose of the association, and the methods of procedure.

(The document, entitled "Plan of Organization, Association of American Railroads," was marked "Exhibit No. 392" and appears on p. 1898.)

The CHAIRMAN. May I ask you a question? You mentioned the shippers' advisory boards. What efforts have been made by the railroads to encourage stock-piling in slack periods? A lot of things can be stock-piled to avoid peak and valley loads. For instance, you always have a terrific burden of coal freight in cold weather, which is the hardest time to handle coal. If you could induce the distributor

of coal to stock-pile it in the summer months you would be able to spread that coal haulage through the entire year.

Mr. FLETCHER. Nothing could be more advantageous to the railroads from a purely selfish point of view than to get them educated to the idea of distributing the movement of the coal, using that as an example, throughout the year. You readily understand that if the man who needs coal for domestic purposes waits until cold weather is upon him before he buys the coal it presents a problem in furnishing equipment by the railroads for the purpose of moving the coal and, as you say, it is more expensive to haul in the wintertime than in the summertime, so every motive and inducement in the world exists for the railroads to encourage the creation of stock piles so that the movement may be regular throughout the year. They have preached that doctrine to the consumers right along. Of course, we are helpless in the matter except to give advice and to urge them to do so. I have heard suggestions made that we might make a more favorable rate in the summertime and encourage that.

The CHAIRMAN. I have thought of that.

Mr. FLETCHER. I discussed the matter with the Interstate Commerce Commission.

The CHAIRMAN. In the coal fields themselves it was customary, before the war, for coal companies to make a lower price on coal during the summer months, not a great difference, but a small difference, to encourage consumers to fill up their bins during the summer months when haulage is easier. But I am thinking of a lot of things other than coal.

Mr. FLETCHER. The chief difficulty is in persuading people who buy the products to spend their money for it before they actually need it. That is a characteristic of human nature, the weakness of everybody. I don't buy a suit of clothes until I have to.

As I started to say, there has been some discussion of making a dif ferential in the freight rate as between winter and summer movement. I don't think that is possible. I don't think that could be justified on the rate-making principles.

It has a number of departments, all fully described in our written statement. Suffice it to say here that a few of its most important activities relate to the interchange of cars; that is, the car-service section, one of the most important departments of the association, which is busily engaged in seeing that cars move where they are needed and are not abused, and that they are returned after the use has been had of them to their owners, and it deals with the question of repairs of cars when they are off their own lines and with many questions of that kind. By far the greatest number of employees of the association are in that department.

It also deals with research in the field of civil and mechanical engineering, handling of explosives and the like. I have no doubt that Mr. Buford will amplify my brief statement as to work of the allimportant operations and maintenance department, of which he is the competent head.

I cannot refrain from paying tribute to the work of this department during the war period. Its effective cooperation with the Army, the Navy, the Air Corps, and the Office of Defense Transportation has been outstanding, and has won and freely received the warmest encomiums from those who are directly responsible for carrying on the war.