One further detail of evidence on this subject may be appropriately mentioned. Near the beginning of the presentation of defendants' case at the trial, Government counsel were overruled by the court in their objections to testimony by me bearing upon the reasons, from a mechanical and safety standpoint, for Pullman's unwillingness to operate cars that did not measure up to standards of excellence and efficiency which the Pullman Co. considered it owed to the public and to the railroads (record 1687–1693). Government counsel said they did not think the relative merits of product of Budd and Pullman were an issue in the case. But the court, in overruling the objection, said it was not at all sure that defendants would not be entitled to bring in such merits under the issues in the case. These relative merits were subsequently fully brought into issue in the testimony by an officer of the Budd Co., as above set forth in this statement. The same point was raised at the argument when Government counsel stated (record 4971) that the Government had shown an actual instance of exclusion in the case of the Edward G. Budd Co., saying it related to the manufacturing monopoly and was merely an instance where the Government sought to prove the existence of the power to exclude by showing its actual exertion. The court, by Judge Biggs, said that the defendants made a very strong statement that the reason they excluded Budd was because of a condition which existed in the Budd cars. Government counsel said the Government had tendered no issue on the question why Budd was excluded and that the only question in the case was whether they had in fact excluded the Budd Co. The court again said they would not go quite that far with the Government; that if Budd, for example, had made its cars of some inferior substance, so that they were unsafe to put into a train, you wouldn't say that the mere fact that they had been excluded for that reason would be proof of violation of the act, would you?" To this question Government counsel said he must assert that if the defendants excluded the Budd Co. for any reason it constituted a violation. Again the court inquired if the Pullman Co. as a concessionnaire on the railroads were not responsible to the railroads for the furnishing of cars, for example, made of some inferior substance; and again Government counsel insisted that restraint by a monopoly cannot be justified by any argument such as that. The court further inquired whether, if railroads should refuse to handle a car made of a particular material, the railroad itself would be guilty of violation of the Sherman Act; and Government counsel said he could not possibly take any other position, in view of the law, that such exclusion would constitute a violation. This portion of the argument is at record pages 4971 to 4979. The narrow position taken by the Government-as shown in the foregoing colloquy at the argument, when the court had before it the complete evidence on this subject as above previously described-is of importance to the subcommittee. Mr. Berge, through five pages of the printed report of hearings, portrayed to the subcommittee his version of repression of competition and exclusion of the Budd Co. The portions of the evidence and of the argument which I have mentioned completely justify the position taken by the Pullman Co.-that it was unwilling to take into the Pullman pool any cars that demonstrably did not meet the construction and safety necessities of the transportation industry. The foregoing analysis of the record in the antitrust case, together with our reply to the questionnaire, is sufficient to prove that the instances summarized by Mr. Berge before the subcommittee do not represent technological repression. EXHIBIT No. 406 REPLY TO SUBCOMMITTEE QUESTIONNAIRE QUESTION 1 State the present relationship between Pullman-Standard, the Pullman Co., and Pullman, Inc., with reference to (a) ownership of stock and (b) interlocking officers and directors. Answer (a) Pullman, Inc., owns 99.9 percent of the outstanding shares of the Pullman Co. and owns all of the outstanding shares of Pullman-Standard Car Manufac turing Co. (b) Interlocking officers and directors between Pullman, Inc., and the Pullman Co. are: David A. Crawford, president, Pullman, Inc., and the Pullman Co. Louis S. Taylor, executive vice president, Pullmon, Inc.; vice president, the Pullman Co. E. Eugene Adams, vice president of both companies. John F. Lane, secretary and treasurer, Pullman, Inc.; secretary, the Pullman Co. Alexander F. Brevillier, comptroller of both companies. Wilbur E. Wolfe, assistant secretary and assistant treasurer, Pullman, Inc.; assistant secretary, the Pullman Co. Fourteen of the 15 members of the board of directors of Pullman, Inc., are members of the board of the Pullman Co. Louis S. Taylor is a member of the board of Pullman, Inc., only, and Champ Carry is a member of the board of the Pullman Co. only. There are no officers or directors of Pullman-Standard Car Manufacturing Co. who are officers or directors of either Pullman, Inc., or the Pullman Co. Three officers and directors of Pullman-Standard Car Manufacturing Co. are also directors of Pullman Railroad Co., an industrial common carrier owned by Pullman-Standard and serving that company's plant at Pullman, Ill., and other adjacent industries. QUESTION 2 List the interlocking directorates, if any now exist, between Pullman, Inc., the Pullman Co., Pullman Standard, and various American railroads. Answer The following members of the boards of directors of Pullman, Inc., and of the Pullman Co. are directors of railroad companies: Donald R. McLennan, Pennsylvania Railroad Co. John R. Morron, Alton Railroad Co.; Baltimore & Ohio Railroad Co. Harold S. Vanderbilt, Beech Creek Railroad Co.; Boston & Albany Railroad Co.; QUESTION 3 From whom does the Pullman Co. currently purchase its equipment? If more than one company is involved, state how much is purchased from each company. From what company or companies has the Pullman Co. made its purchases in the past? What negotiations are currently under way for the purchase and testing of new equipment from various manufacturers? Answer The Pullman Co. prior to the discontinuance of passenger-car building on account of the war emergency purchased its passenger equipment from PullmanStandard. Prior to 1924 the Pullman Co. built its own cars. In that year its manufacturing business and properties were separately incorporated, and since then it has purchased its cars from the separate company, now Pullman-Standard Car Manufacturing Co. In former years some cars were purchased from the various railroads when the Pullman Co. took over their sleeping-car service. No negotiations are currently under way for the purchase and testing of new passenger cars from various manufacturers. The Pullman Co. is, however, engaged in developmental, experimental, and planning activities with respect to the very latest designs of modern equipment for use when conditions permit the resumption of car building, unless as a result of conditions growing out of the antitrust decree it becomes impossible for Pullman to continue its ownership and management of that part of its business. Prior to the ending of car-building activities due to the war emergency the Pullman Co. had in the previous 7 years developed and placed in service radically new sleeping accommodations, such as the new drawing room and compartment, and substantially revised older designs, such as the section and bedroom, in order to provide greater comfort, convenience, and privacy for the traveling public. The rocmette, an entirely new and novel small-room accommodation, was first introduced in 1937 and met such enthusiastic public reception that approximately 3,000 units of this type of accommodation were constructed and placed in regular service on important trains. During the war concentrated study has been made of all Pullman accommodations in operation and many further improvements based on the results of this study have been developed for incorporation in postwar equipment. Pullman has developed and placed in experimental operation one "duplex roomette" car-a unique design containing 24 small rooms, each room with all of the conveniences of the larger rooms, such as complete privacy, individual control of heating and air conditioning, modern lighting, wash and toilet facilities, a very comfortable seat, and full-sized bed. This car has been operated on several of the principal eastern trains out of Chicago and has met a most favorable public reception. It is intended to furnish this accommodation at little, if any, more than the present charge for a lower berth. Four "coach sleepers" were constructed and placed in experimental operation on important coach trains, each car seating and sleeping from 42 to 45 passengers. This car is designed to provide sleeping-car facilities at greatly reduced cost with daytime seating arrangements comparable with the modern de luxe coach, thereby substantially broadening the Pullman market. Pullman Co. is experimenting extensively with new types of trucks in order to produce smoother, more comfortable riding qualities, particularly over substandard trackage. One recently developed set of such experimental trucks has been in operation for several months and another set is now under construction, incorporating still further innovations looking toward improved riding qualities. Pullman Co. has installed a car set of rotor or disc brakes patterned somewhat after the automotive type which are being subjected to severe service tests with the object of securing quicker and smoother stopping of trains and reduction in maintenance cost of brakes and wheels. Pullman Co. is experimenting in the laboratory and on cars in service with innumerable suggested improvements in lighting, air conditioning, heating, dehydrated windows, and other appurtenances. QUESTION 4 Does this manufacturing company, or do these manufacturing companies, enter into independent contractual relationships with the various railroads? Specify the number of such relationships, terms, railroads, and manufacturing companies involved. Answer This question pertains to Pullman-standard of which I am not an officer or director and with which I have no connection other than as an officer and director of the holding company (Pullman Inc.) which owns all of the stock of its manufacturing subsidiary, Pullman-Standard Car Manufacturing Co. In order to make the answers to all questions as complete as possible I have secured the answer to this question from the Pullman-Standard organization as well as as answers and data pertaining to or including Pullman-Standard in all following questions. Pullman-Standard in building cars for the railroads acts as a contractor and bids upon receipt of inquiry on the cars which the railroad contemplates buying. When it is a successful bidder, a contract is made between the railroad and the car builder for each lot of cars. This applies to either freight- or passenger-car orders. As a rule the railroad sends out specifications with its inquiries and these are the basis of the car builder's bid and the basis of the cars built. There is no permanent contractual relationship between Pullman-Standard and any of the railroads, and the number of contracts executed depends entirely upon the number of orders placed by the railroads in which Pullman-Standard is a successful bidder. The usual terms are cash as cars are delivered. If financing is required by the railroad, this is usually handled as a separate matter frequently between the railroad and banks, but these various financial arrangements do not usully affect the terms of payment in the car-building contract. No other manufacturing companies are involved excepting those who supply the raw materials and the specialty devices specified by the customer. QUESTION 5 What contracts does the Pullman Co. have with the railroads for the operation of sleeping-car equipment? Are these contracts identical? Do any of them contain clauses limiting the opportunity of the railroads to purchase equipment from any manufacturer they choose? Answer The Pullman Co. has 57 operating contracts with railroads in the United States; 2 operating contracts with railroads in Canada, embracing operations partly in Canada and partly in the United States; and 1 operating contract with a railroad in Mexico, embracing operations only in that country. These contracts are not identical. They contain many identical or similar provisions. In form they are on the same general basis. The differences in particular provisions are due to variations in the volume of traffic, the type of equipment covered, and other conditions applicable to and desired by different railroads to meet their requirements as to form and substance of contract provisions. With respect to the last sentence of the above question, the operating contracts between the Pullman Co. and railroad companies provide for the furnishing of sleeping cars and the usual service therein. This point was set forth in the stipulation of facts agreed to by the Government and the defendants in the antitrust suit, wherein it was stated in paragraph 18, page 79: "Pullman Co., in accordance with its charter powers, has always held itself out as a company furnishing complete sleeping-car and parlor-car service for the railroads over whose lines its operates and to the passengers of such railroads. This service as offered and rendered has at all times consisted of furnishing the necessary facilities, supplies, equipment, and other tools, as well as supervision and the personal service of attendants. The Pullman Co. has never held itself out to perform service in sleeping cars owned by others and is not and never has been engaged in such business." Since the operating contracts provide for the furnishing of sleeping cars and service they do not contain provisions relating to the purchase of such cars by railroads for operation by Pullman. In two instances railroads have purchased sleeping cars of particular type from car manufacturers and have requested the Pullman Co. to operate such cars. Supplemental contracts to that effect were made and operations are now being carried out under such contracts. Each of the contracts contains an exclusive right provision with respect to the furnishing of sleeping cars and sleeping-car service over such lines (all or part) of the railroad as are covered by the contract. QUESTION 6 What alternatives other than contracts with the Pullman Co. do the railroads have for the operation of first-class cars and sleeping equipment? Answer For the past 12 years the terms of most contracts between the Pullman Co. and railroads for the furnishing of sleeping cars have been 5 years. Any railroad, during such short contract term, could prepare to operate its own cars, just the same as some railroads are now doing and as many have done in the past. Testimony by railroad officers in the antitrust case showed that the roads for whom they were speaking could operate their own cars and would do so if their contracts with the Pullman Co. were unsatisfactory, and that they contracted with Pullman because in that manner they could fulfill their obligations to furnish sleeping-car service more economically than by furnishing their own service. The decree entered by the district court on May 8, 1944, directs that the sleeping-car business shall be separated from the manufacturing business. Pullman may elect, under the decree, to dispose of its sleeping-car business. If it does so, under direction of the court the railroads may take over the operation, as a whole or separately, thus carrying out the alternative heretofore open to them upon cancelation or termination of their contracts with Pullman. QUESTION 7 State by years your purchases of new passenger cars since 1929. Answer NUMBER OF NEW PULLMAN CARS, BY CLASSES, BUILT DURING 1929 TO 1943, INCLUSIVE When was experimentation on lightweight equipment begun and what moneys have been expended on research for its development? Answer The Pullman interests were actively engaged in the preliminary development of lightweight passenger cars in the early twenties, utilizing in considerable quantities such lightweight aluminum alloys as were then available, and the following is a brief chronological outline of the results of these efforts. 1923. The Pullman Co., in its manufacturing department, built the first lighter-weight cars in 1923 for the Illinois Central suburban service, using aluminum alloys for interior finish and roofs, thereby effecting a saving of over 15,000 pounds for each 2-car unit. 1925.-Pullman-Standard built 130 more lightweight cars for the Illinois Central, practically duplicating the cars built in 1923 and making a saving of approximately 15,000 pounds per 2-car unit due to the liberal use of aluminum. 1927.-Pullman-Standard built 40 lightweight cars for the Chicago and North Western, extending the use of aluminum to the outside sheathing sheets which were riveted to the steel frame, in addition to the use of this material for roofs, ceilings, inside finish, and doors, effecting a saving of approximately 5,700 pounds per car over similar cars employing steel for these features. |