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Quantity Production Methods Certain to Keep American Shipbuilders in First Place in a lifetime, I want to go on record with the statement that we build ships and that we can operate them successfully in competition with the world. That does not mean we can do so as we are now going. But the way and the means are open to us. We must clear our vision and _ start with determination for the goal. Of course we pay higher wages than our competitors, also we charge more for overhead. Both items must be cor- rected. Good and loyal workmen, efficiently directed, and with that all-powerful agency of American ingenuity brought to the task, will soon win for us the lead in shipbuilding as in other in- dustries. However, our shipyards must reduce overhead charges to the basis of quantity production. This is a warmly disputed point but I want to say most emphatically that the question of high wage loses much of its importance in face of an overhead charge equal, and, in many cases, in excess, of the total cost of labor or the total cost of mate- rial, or, in other words, an overhead equivalent to more than 50 per cent of labor and material combined. G = iesine from the experience of COM Costs Must Come Down It is simply preposterous and can be predicated only on the theory that the capital investment is to be cleared so that if mecessary the plants can be abandoned after the government has fin- ished its program of construction. Now, as.to labor. There are many abuses to be checked and corrected and the men themselves must help to bring this about if they hope to find steacy employment in shipbuilding. Beyond dispute, there has been a shocking amount of so-called “soldiering” on tke job. No doubt the cost plus system is responsible for a great deal of the ineffi- ciency and poor work done during the war period. We are face to face with a serious situation. Unless our shipyards and ship workers can make a per ton price com- parable with our foreign competitors, how can the shipping board ask congress to extend or confirm authorizations tliat were made in a time of danger and as a war necessity? Now that the emer- gency has passed we must return 1) sound business principles and certainly Address delivered at meeting of American Manufac- turers’ Export association, New York, March Te ey 1 ee World Competition—Operating Success Assured By J. H. Rosseter Director of Operations, Emergency Fleet Corporation the government cannot go on_ building -at a cost higher than our competitors. I repeat, with firm conviction based on experience, that American shipyards, efficiently operated and with a reason- able charge “for overhead can build in competition with the world. If they will agree to this we can urge on con- gress sound arguments for the extension of the necessary authority to be made effective by appropriation. Then we will have the ships we need to compete suc- cessfully in world’s trades. If we are to compete successfully in world’s trades the right-sort and the right-price ship must come first. As to operations, we have heard much of high seamen’s wages. It is true our wages are higher than foreigners. lor my part I would not change the wage of our seamen, because good wages and living conditions will attract our young men to the sea. Without a seafaring class we can never be great or self- reliant in maritime business or affairs. Needless to say we must have good service for good wages. Also we must avoid the evil of overtime at sea, which has unhappily grown to be an abuse and a menace. A generous scale of wages, if it be stable and not disturbed by the uncertain and destructive element of overtime, does not figure as large as many people believe. You might be sur- prised to learn that it is barely more than 7 per cent of the total operating expenses under conditions prevailing at this time. And-I- want to make clear that 7 per cent does not express the difference between the American and foreign scale but the sum total of wages. Thus you see it is not threatening. There are other and more serious el2- ments of the problem. Of these the first cost, or investment, looms large. For instance. a 10,000-ton steamer costs to build in America, as at present, $1,750,000 against a foreign cost we will generously say of $1,250,000 or a differ- ence of $500,000. On this difference must be figured not only a fair rate of interest but also depreciation with 12 years or at the utmost 15 years as the reasonable expectation on value of the ship’s life. Also insurance must be fig- ured. Together these three items can be reasonably stated as amounting to 16 per cent on $500,000, an annual change of $80,000 or $6500 per month. Against this the pay roll on such a ship totals $3981 monthly at the Ameri- can scale of wages for a complemert 173 of 43 all told. Let me emphasize that interest, insurance and depreciation as above, is calculated on the difference in price of foreign and of American con- struction. Thus you can see how im- portant it is to reduce our constructive costs to the same or lower prices than foreigners, Again, ships under the American flag are discriminated against in rules of measurement and other stupid regula- . tions, but these undoubtedly can and will be changed. On the other side of the picture we have some advantages in the matter of operating expenses. The single item of oil fuel represents a saving in operation sufficient to offset the entire wage cost. However, to hold this advantage our ships must be assured of oil bunkers at reasonable prices and also be assured of facilities to replenish bunkers on ali foreign trade routes. The difference in value of oil fuel for ships as compared with land installation, is beyond reason- able comparison and if there be any uncertainty about the supply of oil we should do whatever is necessary to con- serve it for our ships. War The importance of having our own merchant marine has been little under- stood or appreciated. In prewar days there was a general impression through- out the country that shipping was of interest only to a small class of shipping men or people living on the beach. The last few years has served to change the general impression in that respect. ‘he war brought a realization that we must have our own ships to carry our goods and to bring us the necessary raw mate- rials, and now that war has passed we are still facing a quite serious situation because we have not sufficient tonnage for our national requirements. Every day, for weeks and ‘months past, I have had insistent demands for ships and notwithstanding that we have new ton- nage coming at the rate of 15,000 tons per day, I find myself utterly unable to take care of the situation. It is to he regretfully stated at this time we have applications for more than a million Changes General Impressions cargo tons which we have had to place on a deferred list while struggling with the most urgent or preferential lists. The war department still requires a large number of our ships, at this mo- ment more than 2,000,000 tons, for both (Concluded on page 185)