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ultimately go into effect, be permanently suspended, or some changes may be made. What is important to me in appearing before this subcommittee is to point out that at least under the present ratemaking wuctions of the law all of the facts can or should come before the Commission. There are no restrictions against the Commission givproper consideration to all pertinent data. As a shipper with a pronounced interest in the direct and indirect effects of changes in transportation rates, I would be deeply concerned with any changes in the Prement rules of ratemaking which could serve in any way to deny information to the Commission or which could result in my being made completely dependent on one form of transportation.

With the widespread hardship that would result, it would seem likely that this is surely not in accord with what the Congress seeks to accomplish with this new law. I speak not only for my own company but for more than 150 other California lumber manufacturers. This same situation could easily be duplicated in other parts of the country if the railroads, using their fantastically complicated and confusing accounting figures as support, should set out to destroy competing forms of transportation or to juggle the economy of one area or another to suit its own purposes. I should like to remind the committee that this is exactly why the Interstate Commerce Act was passed in the first place—to control just this sort of thing.

I am sure that all businessmen like myself will appreciate what Congress is trying to do with regard to improving the health of the Nation's transportation system, but as a shipper and primarily as a businessman, it is difficult for me to see how the railroads, if they are in financial difficulty, can possibly help themselves by dissipating what revenues they do have in competitive rate wars.

I have just heard testimony given before the Senate Committee on Interstate and Foreign Commerce by the National Industrial Traffic League, a shipper organization supporting the new ratemaking provisions as proposed. I can forcefully advise you that there are many shippers like our lumbermen in California who would take violent issue with their views, and, therefore, as a final remark, I would like to recommend to the committee that the ratemaking section of the present law be left untampered with. I respectfully recommend also that you get more views from other shippers, particularly small ones, and from the public who may be seriously hurt by any changes in the rules of ratemaking which would weaken the present powers of the Commission.

Thank you for this opportunity to give you my story.
Mr. ROBERTS. Thank you, Mr. Hansen.

I might tell you that the gentleman who is a member of the full committee-he is not a member of the subcommittee Mr. Moss, had contacted the staff and had given the staff a copy of your letter dated April 23, 1958, together with the articles which appeared in the press, and if you would like, without objection, I would be glad to make a copy of this letter a part of the record.

Mr. HANSEN. Yes, sir; I would like to very much. It was that letter and letters of other lumbermen like me that alerted our members of our congressional delegation to what was taking place, and asking them for advice and assistance, if possible.

(The letter referred to follows:)


Fortuna, Calif., April 23, 1958. Congressman JoHN E. Moss, Jr.,

House Office Building, Washington, D. C.

DEAR CongressMAN Moss: I am writing to call to your attention a most orate situation with which the lumber industry of California is presently aced. The Southern Pacific Railroad Co. has recently announced and has filed with the Federal Interstate Commerce Commission intention to reduce freight rates on lumber forest products from Oregon into California market points. These reductions are extremely heavy and would immediately permit shippers of lumber from Oregon to deliver lumber into Los Angeles for approximately $7.50. per thousand board-feet cheaper than the present price. Included in the Southern Pacific proposal are reductions in freight rate for the California mills, and in our own case we would be afforded reduction of approximately $2 per thousand board-feet. Because of the disparity in the two reductions, we would be immediately thrown into the position of sustaining a reduction in our net return of approximately $5.50 per thousand board-feet. The result of this situation, in view of the present “buyer's market” on lumber, would be virtual disaster for our company and for most of the manufacturers of lumber in California. The objective of the Southern Pacific Co. in these moves is to completely crush all other forms of transportation which carry forest products. With the adoption of these revised freight rates, lumber trucks and coastal steamers would be immediately knocked out and we would become, overnight, dependent completely on one form of transportation. This would not be good for several reasons, but particularly due to the fact that in our own area the Southern Pacific Co.'s subsidiary the Northwestern Pacific is frequently out of service for long periods of time during the winter. Another objective of the Southern Pacific Co. is to induce Oregon lumber manufacturers who presently ship most of their lumber into the East to ship into California. With these drastically reduced freight rates, the Oregon producers would be induced to do this and the result would be the flooding of the California market with Oregon lumber. After two desperately bad years the lumber industry is in no position to stand such a shock. The effect of this move would be to cost the California lumber manufacturing industry $15 million to $20 million annually. Obviously a lot of unemployment would result and economic disaster would beset northern Cailfornia. The entire industry has united in a most amazing display of indignation. Presently, an organization has been hastily formed consisting of lumber shippers from five major areas of northern California: Eureka, Ukiah, Yreka, Redding, and the Sierra area. This organization has, for the time being, taken the name of California Forest Products Shippers. We are organizing to fight the railroad by petitioning the Federal ICC for a suspension. We enclose herewith several newspaper clippings which further describe this situation. We feel that this urgent situation demands your attention and we sincerely beg your assistance. Yours sincerely, H. R. HANSEN, Jr., President.

(The newspaper clippings referred to have been placed in the committee files.)

Mr. Roberts. I might say that the chairman would like to thank you for your appearance, and we are glad to have this information.

Mr. Hale, do you have any questions?

Mr. HALE. No.

Mr. Hansen, I think your statement is extremely enlightening,

and it is from an orphan point of view. At least we have not heard any similar statement in the present hearings.

I suppose, with respect to the cut in freight rates, the idea was to generate a heavier volume of traffic so that the railroads could make more money on the lower rate than on the higher. Was that the idea? Mr. HANSEN. The railroads told us that that was their purpose. However, we lumbermen advised them that since we were lumbermen and not railroad men, we could hardly tell them how to run their business, but it was our observation from where we sat that they were making a serious mistake, that they were not going to get the extra volume which they thought they were. However, as often is the case, the information gathering was faulty. The people who go out and get the information are not as thorough or not as able to get at the facts as they might be, and we think that the railroad management was seriously misinformed. They seemed to be reluctant to accept this advice when we met with them prior to the time the tariff was published. We think that there were some other objectives in the thing also. That was one of them. Mr. HALE. I suppose the Oregon lumber companies were as much pleased by this rate as your people were displeased; were they not? Mr. HANSEN. That is quite true. The 8. lumber companies were going to get a nice plum. But I don't think it is right for somebody to gain weight by draining another fellow’s blood, and I think if the Oregon lumber companies had thought it over they might realize what is sauce for the goose is Sauce for the gander. It might have happened to them, too. bl i HALE. Maybe the Oregon people think you are draining their OOOl. Mr. HANSEN. Maybe it is a matter for a little conjecture, but the point is, the Oregon mills did not depend for their livelihood on these new freight rates going into effect. It did not mean everything to them. It meant everything to the California mills that these new rates not go into effect, and what I would like to impress upon the committee and what I would like to recommend that the entire Coness bear in mind carefully when they are considering this legislation is that they be very careful about this part of Senator Smather's report that cites the fact that the railroads are urging enactment of legislation that would restrict substantially the authority of the Interstate Commerce Commission in this field. They were refering to competitive ratemaking. I think that would be a very serious error for the Congress to make, and I think just the fact that I happened to find out about these hearings almost by accidentis significant. We shippers are all too busy making our lumber, or our steel, or whatever the thing may be, and, of course, actually it is not only manufacturers of big things like steel and automobiles who are concerned. People who make alarm clocks and bedsprings and everythin else have a stake in this thing, and I don’t think the Congress shoul get going too fast on it. I think there is no question about it—something has to be done for the transportation industry, and the railroads are in a lot of trouble. A lot of us have our own ideas as to why they are. Frankly, their management, I think, could take a good looking at.

If I ran my lumber business the way a lot of them run their railroads, I would be broke tomorrow. There are only a handful of good men who run the railroads, and the good men usually are suppressed by the ones who don’t know what they are doing. We have a branch railroad that serves us. It is owned by the Southern Pacific. It happens to be run by a yery good man. We have a lot of respect for him. But the railroad is still owned by the Southern Pacific Co., and his authority is limited after all because he has to take his orders from San Francisco. He does a good job as an operating man, and we all respect him. But there are people further up in that organization whom we can’t say we feel the same way about. There is not a friendly feeling generally between shippers, at least of our size—most of us in the lumber industry are not very big—and the railroads in general. There is between us and our little branch line railroad up there because the people are cooperative. They try to do a good job for us, but when we deal at the higher echelons, generally we get a lot of trouble—talk and not very much satisfaction—and we are pretty bitter about it. Mr. HALE. You like the short-line railroads better than the longline railroads. Mr. HANSEN. No, sir. I did not mean to convey that impression. My mill is located in the northern part of California. It is served by this little branch line that is owned by the Southern Pacific. It is the only rail service there is up there. Mr. HALE. I was particularly interested in what you said about wooden screen doors and window screen frames because we have a concern in my hometown which makes doors and screen frames. I myself have noticed that screen doors now seem largely to be made from aluminum, which must be considerably more expensive than the wood, is it not? Mr. HANSEN. There are technical features like the possible longer life and so forth, but principally there is a matter of first cost. They are perhaps a little more expensive than wood, but not so much more that the buying public isn't willing to pay it. The point is, our competitive position has been seriously hampered by the fact that our rail freight rates have gone up and up and up until they reached 30 percent in those successive increases I have mentioned. But that is only in the last 7 years. In the last 10 years they have gone up over 50 percent. Mr. HALE. W. about freight rates on aluminum doors? Are they lower? Mr. HANSEN. I don’t think they are. I think probably there have been some advances in those rates, too. I don't know of any rate on any major item or o probably hasn’t been raised. But a freight rate change on lumber coming from as far as the west coast to the big markets in the Middle West would be a little more significant than a freight rate change on aluminum which starts from a manufacturer closer to the market. A freight rate hurts the lumber industry a lot more than it might some other industry. Mr. HALE. Do you suggest that the switch from wood to aluminum results from some freight rate discrimination in favor of aluminum ? Mr. HANSEN. No; I won't suggest that. I am just suggesting that


the railroads have done a miserable job of management and they have a spineless attitude dealing with their unions. Everytime we read in the paper about another wage increase being given to the railway unions, we groan because we know it is going to be passed right on, and it is going to be part of our expense. We are plenty bitter about

Of course, that is partly true with what is wrong with the whole economy. That is why the Italians and Germans are taking away automobile business, and a lot of things are happening because apparently we don't expect a day's work for the payroll dollar any more. There seems to be a trend in that direction. So the railroads certainly are not alone. But they seem to have been more remiss in that respect than many other big industries in granting undue wage increases and permitting featherbedding and all sort of rediculous situations which cost me money as a shipper.

I could cite you examples of things that happen on the Northwestern Pacific, the branch line I talked about, which is owned by the Southern Pacific, where we don't get switched sometimes or we are switched late down in a remote place where we load logs because the crew has run out of time, as they put it, and they have to go clear back to a place where they can put on another crew.

That isn't the fault of the people running the railroad in that area. That has been handed down from a lot farther up. They don't have anything to say about it, but it is just an example of the type of ridiculous situation that the railroads have to put up with because somebody way up sometime ago gave in to a lot of that stuff.

Mr. HALE. Do you think railroad management is more supine about the demands of railway labor than the automobile manufacturers about the demands of their labor?

Mr. HANSEN. Yes, sir, I do; although I can't say that the automobile manufacturers have been particularly strong in resisting increases in their costs. They probably have been more so than the railroads.

Mr. Hale. You raise some very interesting questions. I do not think we can settle them all this afternoon.

Mr. HANSEN. I don't think the matter of wages and labor costs can be settled, and I am sure that is a pretty general subject.

I would merely like to point out that it may be possible that the Congress might like to get at the basic reason why the railroads are in trouble. One of the basic reasons I would like to submit is this labor situation.

Congress, with this kind of legislation, obviously can't do anything about that. But in giving a lot of sympathy to the railroads and a lot of concern over the problems of the railroads, I think that some of the basic reasons for their problems ought to be looked at, and before we give them blanket authority to make their own rates and make up the rules of the game in a discriminatory manner and perhaps at the expense of other forms of transportation or at the expense of a shipper like myself and other shippers like the lumberman, I think the Congress ought to take a good, careful look at it. That is why I say this ratemaking provision, as set forth in this legislation, has a lot of very undersirable features, and I don't think the Congress has been fully aware of that.

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