The crafts they represent work on all types of rolling equipmentsteam and diesel locomotives, passenger cars and freight cars. The department was set up to handle matters of common interest to all of the crafts on a voluntary cooperative basis. In March 1955, there were 262,426 employees in railroad maintenance of equipment forces. The shortage of freight cars in service on American railroads today is a problem of great importance to the Railway Employees' Department, to all of the mechanical trades organizations, and particularly to the Brotherhood Railway Carmen of America.

This would be true had the shortage been the result of accidental factors or unpredictable circumstances beyond the influence and control of carrier managements, since the quantity and condition of serviceable and unserviceable cars heavily influence the work and employment opportunities of workers in the car departments of the railways. However, the present unsatisfactory condition of the railways' freight-car fleet is no accident, nor is it a result of bad guesses as to needs. It has followed naturally from policies deliberately adopted by railway managements-policies that everyone knew would cause unemployment for these important railway skilled workers and would leave the Nation gravely deficient in its transportation facilities.

Estimates as to the size of our present freight-car shortage will probably vary according to the point of view of the interests making the appraisal. According to a statement by Commissioner Owen D. Clarke of the Interstate Commerce Commission, the Defense Production Administration in 1952 established a numerical goal for the building of 436,000 freight cars to raise car ownership by 194,000 cars by June 30, 1955.

An appropriate program for amortizing most of the cost of the new cars over a 5-year term was set up, thus providing substantial tax offsets to the carriers' investment outlays. Commissioner Clarke stated that only 330,000 cars were actually added during this period. and this number was completely offset by retirements of equipment, so there was no net increase whatever in the cars available.

As a consequence, we now have a critical shortage affecting all sections of the nation, but particularly the great agricultural sections of the Midwest, and the Alleghany district in the East.

I attribute the present condition to three factors:

1. The carriers' failure to provide enough new cars to keep pace with normal replacement needs;

2. The carriers' policy of retiring many cars that could have been rehabilitated and retained in service; and

3. The carriers' haphazard maintenance program has failed to maintain cars adequately to meet all requirements.

I will discuss each of these points in some detail.

I. THE CARRIERS' FAILURE TO PROVIDE ENOUGH NEW CARS TO KEEP PACE WITH NORMAL REPLACEMENT NEEDS

At the close of World War II, it was generally expected that the railways would make substantial capital investments to improve their plant and equipment. Heavy wartime use of equipment and shortages of men and materials for proper maintenance had unquestionably worn down all railway facilities to the point that efficient future operations were sure to become impossible without heavy expenditures for rehabilitation.

The railways thus invested heavily in new diesel locomotives and made tremendous improvements in their roadbeds, tracks, and signaling systems. All of these things had their effect; service was generally improved; loss and damage was reduced; operations generally became more efficient and economical.

In one field, alone, the railways failed to follow through-they held back any programs to rehabilitate and replace their car equipment. The number of freight cars installed during the postwar period was hopelessly inadequate. During the 10-year period 1945 through 1954, class I railways put into service only 627,302 cars. Senator MONRONEY. That was freight cars?

Mr. Fox. Yes.

Senator MONRONEY. Of all types?

Mr. Fox. Gondolas and all the other types that are in service, yes. This number was only slightly more new cars than were put into during the depression years, 1930 to 1941, when the carriers installed 549,029 cars. But the depression years were years of low traffic and low car usage, whereas the years 1945 to 1954 actually were the highest peacetime traffic years in history, and they followed the wartime traffic years of unprecedented car usage and exceptionally low maintenance standards.

In the 9 years following the First World War, from 1921 to 1929, the carriers put into service 1,021,029 new cars, nearly 70 percent more than in the 10 years 1945 to 1954.

In 1929, the carriers owned 2,277,505 freight-carrying cars. During the depression years, this number was substantially reduced, and prior to our entrance into World War II in 1941, the carriers' ownership had declined to only 1,703,304 cars.

At the war's end in 1945, they owned 1,760,297. By the end of March 1955, the number had declined to 1,725,065. Of course, the average capacity of a car today is much greater than it was in past years. However, even when we allow for this factor, the present car facilities of the railways are well below what they had available in other high traffic periods.

In 1929, the aggregate capacity of freight-carrying cars in service totaled 105 million tons. At the end of 1954, aggregate capacity had dropped to 93 million tons.

This record was unnecessary and indefensible in the light of the Nation's needs today. The maintenance of equipment shops of the railways have available plenty of manpower to build cars.

Many railroads have built their own cars efficiently for years. Practically all other carriers could do likewise. These facilities and their skilled workers could have produced enough freight cars to meet any foreseeable requirements.

Furthermore, as I have noted above, this could have been done at very low cost by the carriers as a result of the tax savings available to them under the accelerated amortization programs. This car program was not accomplished because and only because railway management chose not to do it.

I feel that this choice or decision of management was inexcusably bad. It has been bad for the shippers; it has been costly to the employees who have lost job opportunities; and, I feel, it ultimately will prove to have been very costly to the railway stockholders, when the

shortage of equipment results in reduced revenues and reduced net income.

II. THE CARRIERS' POLICY OF RETIRING MANY CARS THAT COULD HAVE BEEN REHABILITATED AND RETAINED IN SERVICE

As I have pointed out above, the number of cars installed during the postwar years was absurdly low. Such a policy could be defensible only if the carriers were making an extraordinary effort to retain and rehabilitate their older cars. But they did not do so.

During the postwar period, the carriers retired 661,453 cars44,000 more than the number of new cars put into service. This policy continued even after it became clear that there was danger of a car shortage. This danger became quite apparent in 1952 and the Defense Production Administration set up a program to increase car ownership. Yet, in 1953 and 1954, the size of the car fleets continued to decline. The carriers installed 99,956 new cars, but they retired 131,981 old cars, thus reducing car ownership by 32,000.

I understand that some carriers have adopted a strange procedure in dealing with their freight car programs. I am told that certain carriers have sold some of their fully depreciated cars to an outside company at scrap metal prices. That company has repaired the cars and then has leased them back to the same railways.

I have no information as to why such a program was adopted. I do not intend to imply that any individual or company secured an improper reward or gain from this transaction. I do say that these railways have adequate shop facilities and personnel and that they could have repaired the cars in their own shops.

The carriers have had a choice of two alternatives in meeting the car shortage problem. They could have installed enough new cars to meet the needs of traffic, or they could have rehabilitated enough of their old cars to prevent a car shortage. They chose to do neither. As a result, we now have a crippling shortage of freight cars.

III. THE CARRIERS' HAPHAZARD MAINTENANCE PROGRAM HAS FAILED TO MAINTAIN CARS ADEQUATELY TO MEET ALL REQUIREMENTS

Most freight car needs are predictable, and there is no reason why maintenance cannot be scheduled so as to make enough cars of each type available when most needed. Railway traffic follows a regular seasonal pattern; because of this, railway officials should be able to predict with reasonable accuracy the periods when equipment will be in heavy use, and plan their maintenance programs accordingly.

Moreover, they have organized shippers advisory boards in each section of the country which make surveys and estimates of traffic by commodity groupings, in advance of each quarter.

Simple commonsense should dictate that, given predictions of car needs, maintenance work would be intelligently planned. In periods preceding heavy traffic periods, maintenance scheduling would be stepped up.

In periods preceding low traffic periods, less maintenance would be scheduled. But, let's look at the record. The year 1953 was one of the most profitable years in railway history, and the carriers had plenty of money to meet all maintenance needs.

In the month of January 1953, class I railways employed 326,375 men in their shop forces. At the end of that month, they reported to the Interstate Commerce Commission 90,661 freight cars in "bad order" roughly 4.6 percent of the total car ownership. This was the situation at the end of January-just before February, the lowest traffic month in the year.

In August 1953, the railway employed only 317,121 men in their shops, and at the end of that month, they reported 95,280 bad order cars 4.9 percent of the total, with the heaviest traffic months approaching.

In September, they reduced their forces to only 314,310 workers, and by the end of that month "bad order" cars had increased to 96,757-5 percent of total ownership-with October, normally the high traffic month of the year, ahead.

By August 1954, in advance of the heavy shipping season in that year, shop employment had declined to 249,120, and bad order cars increased to 124,248, approximately 6.5 percent of the total.

Senator MONRONEY. Could I ask you this? The number of badorder cars are those that are suitable for repair? Mr. Fox. That is correct, Senator.

The basic factors guiding carrier maintenance policies apparently have no relationship whatever to expected equipment needs. They use their current economic position as the determining guide. The Interstate Commerce Commission permits the carriers substantial leeway in their reports of expenditures for maintenance work, and the railways use this leeway to balance out their books for particular periods.

When revenues and net are high, the carriers will spend more to maintain their equipment, whether future needs are great or small. When revenues drop off, they cut down maintenance even when they know the policy will produce a shortage of cars in the months ahead.

This general policy-which has been standard operating procedure for most carriers for many years certainly has made the freight car shortage worse than it otherwise would have been. It has meant that even the inadequate fleet of cars the carriers have has been poorly utilized to the general detriment of the carriers' traffic position and to the Nation's needs.

Senator MONRONEY. Let me get this straight. Your charge is here that instead of looking ahead to how many cars they will need, to how many cars must be reconditioned, they look at their earnings and their tax position on those earnings, and if they are in a bracket where 50 or 75 percent will be consumed in income tax, then they will do more to expensing the repair and maintenance or even the purchase of new cars?

Mr. Fox. That is correct. their maintenance policy.

Fluctuations in business determine

Senator MONRONEY. Would you charge here that the relationship of the number of cars put under renovation and repair and the number of new cars bought is based largely on the tax position and not on the needs for the cars, themselves?

Mr. Fox. That is my analysis of the situation, Senator.

These policies of the carriers have been inefficient and wasteful and have caused severe hardships for the workers. The consequences

of these hopeless carrier policies are clearly evident in the very fact
of today's car shortage.

They have literally lost and wasted millions of man-hours of work
that could have been used to build completely adequate car fleets
and to have kept those cars in good condition for all traffic require-
ments. Class I railways employed 179,701 skilled mechanics in their
maintenance of equipment department in 1945.

After 1945, this number declined continuously year by year. In 1951, briefly, because of emergency needs growing out of the Korean war, the carriers restored employment to approximately the 1945 level. Then in 1952, 1953, and 1954, they laid the workers off again.

According to my calculations, the carriers lost 252,100,000 manhours of skilled shop labor during the 9-year period from 1946 to 1954, inclusive. The carriers, simply by maintaining and using their own highly skilled forces during this period, could have used those hours to meet every need of new car construction and today we would have no car shortage. Now, of course, those hours cannot be regained. The railways and the Nation must suffer the consequences.

The layoffs of railway shop mechanics have been costly in another way. Millions of dollars have been paid to them under the Railroad Unemployment Insurance Act. In the 9-year period 1946-54, $45,983,158.83 was paid out to railroad shop mechanics alone for such benefits.

Unemployment benefits, though essential and very helpful for the unemployed workers, do not take the place of earnings for full-time work on the job. The reduced pay of the many workers affected have unquestionably caused serious hardships for the individuals and their families.

The employees have for many years urged a twofold program upon the carriers which would have prevented, and could now help to meet this situation.

The railway employees' department would have been greatly concerned had the only consequences of the carrier policies of the last decade been to reduce the number of jobs in the mechanical trades' occupations. But we all know now that the behavior of carrier managements has been undisguised folly. The penny-pinching policies which have eliminated so much work for railway workers have also endangered the carriers' own operating solvency and have led the Nation to a situatior that borders disaster.

We need more freight cars today and we need them badly. We need a program that will insure that our present deficit of freightcarrying capacity will be overcome and that it will never recur. Our department has long had a program which will serve these needs.

The following elements will insure a quick and lasting solution to the problems the carriers and the Nation now face:

1. The carriers should increase the building of freight cars in their own shops. They have the facilities; they have the labor; the Government has made possible the use of these resources at little net cost to the railways-through the tax relief available in the accelerated amortization program.

2. The carriers should improve maintenance programs and keep bad order cars at an absolute minimum. This can be achieved through a program of unemployment stabilization, set up through collective bargaining with the railway employees' department.

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