Senator VANDENBERG. It is reality?

Mr. KENNEDY. Very definitely.

Senator VANDENBERG. Then, Mr. Chairman, I hope the committee will go into that subject before it attempts to go into the other one. The CHAIRMAN. You need not worry about that; there will be plenty said about it.

Have you any further questions?
Senator VANDENBERG. NO.

The CHAIRMAN. Senator Gibson?
Senator GIBSON. No; thank you.
The CHAIRMAN. Senator Guffey?
Senator GUFFEY. No; thank you.
The CHAIRMAN. Senator Radcliffe?
Senator RADCLIFFE. No.

The CHAIRMAN. Senator Clark?
Senator CLARK. No; thank you.
The CHAIRMAN. Senator Davis?

Senator DAVIS. I believe not; thank you.
The CHAIRMAN. Senator Sheppard?

Senator SHEPPARD. NO.

The CHAIRMAN. Senator Nye?
Senator NYE. No; thank you.

The CHAIRMAN. Senator Pepper?
Senator PEPPER. No; thank you.

sir.

The CHAIRMAN. May I ask a question: Do you make a definite recommendation that the Bureau of Marine Inspection be transferred to the Maritime Authority?

Mr. KENNEDY. No, sir; I think it is rather presumptuous upon our part to make a suggestion to take a bureau away from a department of a Cabinet officer. I think that should be within the discretion of the committee and the Congress.

The CHAIRMAN. I might say that a subcommittee of this Committee on Commerce-a subcommittee on safety at sea-is inclined to make that very recommendation; and before these hearings are ended I think we shall ask the Department of Commerce to come here and give their views regarding that.

Mr. KENNEDY. Yes, sir.

The CHAIRMAN. But you did give arguments to indicate the desirability of some adjustment?

Mr. KENNEDY. Yes; that there is a conflict between us.

Senator CLARK. Mr. Kennedy, perhaps you gave this explanation before I came in, late. But I should like to ask you what is the justification for putting aviation under the Maritime Commission?

Mr. KENNEDY. Senator, I presented quite an argument here, regarding that.

Senator CLARK. Then I should be very glad to read that, in the record.

The CHAIRMAN. I think you will find in the record a very extended argument on that subject.

Senator SHEPPARD. As I understand it, Mr. Kennedy, the Commission is directed by the act of 1936 to go into the question of air commerce over the seas?

Mr. KENNEDY. Yes, sir; and to make a study, and to make recommendations for legislation.

The CHAIRMAN. I was very much impressed, Mr. Kennedy, by what you had to say about building abroad. I am frank to say that when I first heard the rumor that that was to be recommended, it went a little bit crosswise with me.

Mr. KENNEDY. Yes, sir.

The CHAIRMAN. Possibly, because I have some shipbuilders in my territory, of course.

However, you gave very convincing arguments; and I want to ask you this question, since you did not state this particular point: You spoke of the three bids for construction of a sister ship to the Manhattan?

Mr. KENNEDY. Yes, sir.

The CHAIRMAN. You stated the amounts of the rejected bids; you did not state the amount of the accepted bid.

Mr. KENNEDY. I have that here, sir. It is approximately $15.750,000. That is on an adjusted price. The comparable price with the prices that were given here, would be $17,500,000, as against $21,308,000 and $21,947,000. Those latter were the two nearest bids. The CHAIRMAN. And you gave the figures as regards the ships built in the Netherlands?

Mr. KENNEDY. As $10,500,000.

The CHAIRMAN. Suppose you had had a bona fide bid from the concern located in the Netherlands, of the amount you have just named: Would you, with your philosophy, have felt that you should accept that, or would you have felt that the comparable American bid was sufficiently near it to justify it?

Mr. KENNEDY. I think in this case the bid of the Newport News Co. was a bid we could very properly accept.

The CHAIRMAN. I suppose it is a rare instance when you find actually building in an American or foreign yard, a ship comparable to what you hope to build?

Mr. KENNEDY. I think it is only from a very strange coincidence. And, of course, this ship was started in 1934. And by the time you readjust currencies and allow for increases in wages and decreases. in certain parts of the country, you have at best a scientific guess. But I wanted to make that clear; because if Congress feels it is a very definite idea, it is not so.

The CHAIRMAN. Is it your judgment that if we should give you the authority suggested, then the Maritime Commission would actually proceed to accept bids from abroad?

Mr. KENNEDY. I think that if there were an actual chance to accept foreign bids, everybody would begin sharpening pencils, very generally. Because when you consider the amount of subsidy to be granted to United States Lines for the operation of the ship, they were very close to the point where they could not have put any more capital into that particular ship and have had it pay, at all; it would have been a losing proposition from the day they took it on, if they had had to put any more capital into the ship.

So that automatically, whether they desire to build the ship or whether we desire to give them a construction differential that might have brought it up to about $17,500,000, the company itself would not have been able to spend any more money and then operate the ship successfully.

The CHAIRMAN. Suppose we were to give you this authority: Would there have to be any special inducement in the way of an advance fee, to induce the foreign builder to present a bid? Or would he actually be willing to take his chance?

Mr. KENNEDY. I think if he felt there was a reasonable chance of his getting the bid, provided he was 100 percent less than the American company, then there might be some real attempts to make some bids. But if they thought we were just trying to get the bids in order to compare them with American bids and in order to make our work less difficult, then I doubt verv much if there would be any attempt to figure it out. Because after all, it is an expense to take the plans and prepare a bid.

The CHAIRMAN. Of course the foreign builder would have in the back of his head, all the time, the decision or knowledge or conviction that his bid would be rejected if you had any ample excuse to accept the American bid?

Mr. KENNEDY. In other words, if the bid was not more than 100 percent differential, or else in the other proposals we felt there was collusion, then very definitely that would be the case.

The CHAIRMAN. Are there other questions?

(No response.)

The CHAIRMAN. Mr. Kennedy, are there other members of the Commission who will testify?

Mr. KENNEDY. Well, Mr. Chairman, anyone whom you wish to appear is available. I merely have a staff here to answer any questions directed to the Commission.

The CHAIRMAN. But you are speaking for the Commission?
Mr. KENNEDY. Yes.

The CHAIRMAN. You spoke about one member of the Commission being in opposition. Is he in opposition to all of it?

Mr. KENNEDY. No; he is only in opposition to the plan of putting them into effect now. And that is Commissioner Moran, who was on the committee that passed this legislation in the House. He feels we should take a longer period of time before we do anything about it. But it seems to me that time is moving rather rapidly; and you cannot build a ship by just pushing it down the ways. We are trying to get it done very quickly.

But he is in sympathy with the ideas.

The CHAIRMAN. Mr. Kennedy, if I understand you, it is your contention that under the law as it is now written, and with the powers that you now possess, it is unlikely that you could build any considerable number or any appreciable number of ships?

Mr. KENNEDY. I would say that is very definitely true, based on all the discussions we have had with private owners. I would say that we could not give the assurance to the committee, today, that we could build a half dozen ships.

The CHAIRMAN. On the other hand, I assume it to be your conviction that if we give you this added legislation, then there is a reasonable hope than you may proceed in the building of ships?

Mr. KENNEDY. Otherwise they could not get a permanent operating subsidy, unless they give some assurance that they are going into the construction of ships in an orderly replacement program. If there is not, then you will find no subsidy, and you will note it very quickly.

The CHAIRMAN. In that connection, I think you stated in effect that unless we have the labor arrangement made, or some provision made for the settlement or adjustment of labor disputes, it would not be worth while to build any ships?

Mr. KENNEDY. I quite agree with that; I see no sense in spending the Government's money and then having them in the precarious state that we have today.

The CHAIRMAN. We are going to follow this up, of course; but this is just for the sake of the preliminary hearing.

There has been during the past year or two very considerable interference with the operation of American ships? Am I correct? Mr. KENNEDY. Yes, sir.

The CHAIRMAN. And with such power as you now possess or as now exists, you feel it is hopeless to attempt to deal effectively with those disputes?

Mr. KENNEDY. We have no powers at all, under the Maritime Act, except to fix wages, maintain scales, and improve maritime condiditions. We have no power beyond that.

The CHAIRMAN. Let me go beyond that, Mr. Kennedy: Does that power exist anywhere?

Mr. KENNEDY. No, sir.

The CHAIRMAN. Therefore, if we are going to have an effective and efficient American merchant marine, then beyond and in addition to the economic features proposed by the legislation there must be some way to have the labor disputes settled so that these ships may operate? Mr. KENNEDY. Yes, sir.

The CHAIRMAN, Are there any other questions?

Senator PEPPER. Mr. Chairman, I suppose all of us desire a general labor policy which will be generally satisfactory.

Mr. KENNEDY. That is right.

Senator PEPPER. In other words, we hope there will be labor conditions which will be satisfactory to honest laboring men, and that there will be orderliness in the rendition of labor which will be satisfactory to honest shipping men.

Mr. KENNEDY. That is right. As far as we are concerned, the only thing, as I say, that we have had to do is that we have already established the minimum wages, which have gone out.

We found conditions on most of these ships really very bad, and justification for complaints from all the seamen. We felt so badly that we have taken each ship and have gotten a committee of three, going on board of every one of the subsidized vessels and making suggestions of what could be changed. But when you consider that under the act 85 percent of those subsidized vessels have merely 5 more years during which they can be operated under the subsidy, it becomes apparent that you cannot do all you would like to do, because of the age of the boats.

But with regard to the new ships, their plans have been submitted to the people in charge of the labor unions, to see whether they meet all the requirements for the comfort of the sailors and all the people working on the ships.

The CHAIRMAN. Mr. Kennedy, I understand that you have followed the recommendations of this committee as regards construction of the new ships?

Mr. KENNEDY. That is right.

The CHAIRMAN. And in so doing you have provided not only for safety, but also for the comfort of the crew?

Mr. KENNEDY. That is right. And they have all been passed, by everybody considering them.

The CHAIRMAN. Further as regards your recommendations for labor, you do not propose anything revolutionary, as I understand; you admit the right to strike and the ordinary rights of labor? Mr. KENNEDY. That is right, sir.

The CHAIRMAN. But you are seeking some method merely of dealing with the problem so that there will not be serious interference with the operation of the ships while the disputes are being settled? Mr. KENNEDY. That is right; that is all.

The CHAIRMAN. Are there any other questions?

Senator GUFFEY. Do you think the labor troubles on the ships are not entirely due to labor, but also in part to the operators? Mr. KENNEDY. That is right.

The CHAIRMAN. And do your recommendations include suggestions of steps that the employer may take in handling his labor?

Mr. KENNEDY. We feel that with the recommendations of this proposed legislation, that will be eliminated, as it has been in railroads. The CHAIRMAN. I think everyone feels that the objection is that there is not a recommendation of the collective bargaining agreements. Mr. KENNEDY. But I think every effort is being made to meet reasonable demands.

The CHAIRMAN. To quote from some speech at a dinner which, I understand, you attended last night, your recommendations would require that the employer "take at least one foot out of the trough”? Is that right?

Mr. KENNEDY. Yes, sir.

Senator GIBSON. Does your recommendation including fixing the minimum wage scale?

Mr. KENNEDY. That is right.

Senator GIBSON. What has been the reaction of labor to that wage scale?

Mr. KENNEDY. We have not had any complaints. They are still trying to work out an agreement on the east coast. Because the scale we put into effect was approximately that agreed upon between the operators and unions of the west coast. The east-coast men now are in process of trying to arrange agreements with the operators in the East. But we only fixed the minimum; and it is from there on that they are considering it. And we so stated, definitely. Of course that only relates to the subsidized ships.

The CHAIRMAN. Thank you, Mr. Kennedy.

The CHAIRMAN. Is the Navy representative here this morning?
Commander V. R. MURPHY. Yes, sir.

Senator CLARK. Mr. Chairman, before he presents his statement, may I say that I have no objection to proceeding with the statements to be given by the representatives of the Navy, but it seems to me that Commissioner Moran should appear before the committee to state his views on the matter.

The CHAIRMAN. Is Commissioner Moran here?

(No response.)

The CHAIRMAN. He seems not to be here. Of course, we shall hear him later.