Table F-4.—Elgin National Watch Co.-Data on capital stock, dividends, and surplus, 1940-47 TABLE F-5.-Hamilton Watch Co.-Data on capital stock, dividends, and surplus, TABLE F-6.-Bulova Watch Co.-Selected financial data, 1940-48 Source of data: Moody's Industrials, 1940, p. 442; 1941, p. 337; 1942, p. 434; 1943, p. 162; 1944, p. 145; 1945, p. 943; 1946, p. 186; 1947, p. 726; 1948, p. 168; July 3, 1948, p. 2831. TABLE F-7.-Gruen Watch Co.-Selected financial data, 1940-47 750,000 571, 675 375,000 46, 521, 775 Source of data, Moody's Industrials: 1940, p. 1642; 1941, p. 985; 1942, p. 1168; 1943, p. 265; 1944, p. 1173 1945, p. 2319; 1946, p. 224; 1947, p. 792. 1940. 1941 1942. 1943. 1944. 1945. 1946. 1947 1948. TABLE F-8.-Elgin National Watch Co.-Selected financial data, 1940-48 Source of data: Moody's Industrials, 1940, p. 604; 1941, p. 451; 1942, p. 485; 1943, p. 563; 1944, p. 237; 1945, p. 727, 1946, p. 589; 1947, p. 339; 1948, p. 633; Nov. 13, 1948, p. 2283. 1 Sales data reported in volume Two Years Following. Not stated. To Oct. 9, 1948, only. TABLE F-9.-Hamilton Watch Co.-Selected financial data, 1940-48 Source of data, Moody's Industrials: 1940, p. 624; 1941, p. 1469; 1942, p. 911; 1943, p. 305; 1944, p. 270; 1945, p. 347; 1946, p. 476; 1947, p. 387; 1948, p. 891; Nov. 6, 1948, p. 2315. TABLE F-10.-Waltham Watch Co.-Selected financial data, 1940-48 Source of data, Moody's Industrials: 1940, p. 1277; 1941, p. 1058; 1943, p. 1871; 1944, p. 1517; 1945, p. 2321; 1946, p. 2822; 1948, p. 1292. Mr. CENERAZZO. Thank you, sir. At this point we set forth the summary conclusions drawn from those tables which show graphically, and emphatically, the tremendous advantage gained by the Swiss importing group during the war years. Using 100 as the base figure for sales, net worth and net income in 1940, we find: The sales figures exclude Gruen and the net-worth figures exclude Longines and Benrus, as we do not have this information on those companies. Now, one of the standard arguments for tariff reduction is that consumers should be able to buy goods at the lowest possible price. That is supposed to be one of the functions of competition. Someone will say, therefore, that even though the American jeweled-watch companies are hurt, the American consumers are helped by the Swiss agreement because it means that they can buy watches cheaper. This, however, is not so. If you make a careful investigation, we believe you will find that the differential which favors the Swiss watch importers has not been used by them to bring lower prices to the American consumer. No, indeed. The Swiss importers have used their financial advantage, not to benefit American consumers with lower prices, but rather to drive into the ears of every American family the brand names of Swiss watches. Listen to the radio before any popular program and you will hear the time signals. Many times every day you and tens of millions of Americans hear the name of Swiss watches coming at you over the radio. The Swiss importing companies, such as Bulova, are able to do this because they can put into radio advertising part of the huge gross profits that result from their cost differential. The American jeweled-watch companies, even though two of them have been able to maintain a profit which has been less than they made prewar, make so little profit that they cannot possibly compete with the large advertising budgets of the Swiss watch importers. At this time I would like to give you a contrast. According to a statement just issued in one of the jewelry magazines, the Benrus Watch Co. has an advertising budget of $1,600,000. Waltham had an advertisting budget of $600,000 last year. If the Waltham Co. were to have taken all of its profit and put it with that $600,000-as a matter of fact it didn't have any profit; it had a deficit-it could not have matched the Benrus Watch Co. advertising, which was $1,600,000 during the year. As a result, the Swiss have not only cornered four-fifths of the American market, but are using the advantage given them by the trade agreement to capture the rest of it, through tremendous advertising campaigns that will gradually make everyone think that the only fine watches that exist are Bulova and Benrus and Longines and Gruen, when we know that the finest watches in the world include Elgin, Hamilton, and Waltham. Now it is argued that in the face of the cost differential and the tremendous Swiss advertising campaign, two of the American jeweledwatch companies, Hamilton and Elgin, are nevertheless successful. It is true that by skillful and aggressive management and the full cooperation of labor, these two companies have had good years since they reconverted. But we are asking you to remember that these were boom years, and to look to the future. If you will examine the tables submitted herewith, you will see that both Elgin and Hamilton. in 1947 had a net income which was less than 10 percent of their net worth. The ratio of net income to net worth is an accepted standard of the profitability of an enterprise. In the same year, the four Swiss companies had ratios that ranged from 18 to 57 percent of their net worth. All the figures indicate beyond a doubt that the Swiss importing companies have become enormously profitable enterprises and that their position grows stronger every day. Elgin and Hamilton, on the other hand, had net profits in 1947 which were less than their net profits before the war, and the third company, Waltham, had deficits beginning in 1946 that finally forced it into reorganization at the end of 1948. Your investigation will, of course, include the question of why Waltham failed. Much has been said about mismanagement prior to April of 1948 and undoubtedly that was a considerable factor in Waltham's failure. But you cannot overlook the other factors about which I have been speaking. If Waltham is successfully reorganized this winter, where will it get the money, where will it get the profits which it needs to beat the competition represented by the Swiss watch importers' great advertising campaigns? Remember, too, that if those advertising campaigns begin to show diminishing returns, the Swiss watch importers can always cut prices and still make a profit. Not only Waltham but the other American companies are being squeezed, squeezed harder and harder. I am advised, and believe that you will find that the break-even point for Elgin and Hamilton is now 80 percent. Even though their profit today is less than it was prewar, if there should be a slight recession and their sales fell off only 20 percent, they would both be in the red. And their sales might fall off even without a recession, as the Swiss importer advertising becomes steadily more effective, or as the low-cost Swiss producers temporarily cut prices in order to run our companies out of business. I might mention that the effect of Swiss importer price cutting would not really benefit the American consumer for any length of time, but would result in a monopoly condition with the whole market belonging to the Swiss-and then, of course, the importers could charge whatever prices they liked for Swiss watches. Your committee will want to investigate, I think, among other things, the relationship between the various Swiss watch importers. I doubt if you will find much competition, as between them. It would appear that they are all working together to put the American producers at an impossible disadvantage. Someone will ask one final question: Why should the American jeweled-watch industry be saved? What does it matter, except to a small group of workers and investors? There are two answers to that one. First, of course, it matters very deeply to the communities where for many decades the American jeweled-watch industry has operated. Waltham Watch Co. has been down for 7 weeks now, and the whole city of Waltham is hard hit. There are about 8,000 workers in the American jeweled-watch industry, many of them highly skilled workers, as fine a type of American citizen as we have. But wholly aside from the individual fortunes of these 8,000 watch workers, their families and communities, there is another reason. An overwhelming reason why the American jeweled-watch industry must be saved. That reason is stated authoritatively, and better than I can state it, in the letter of Rear Admiral Denebrink of December 17, 1948, on behalf of the Munitions Board, to the Chairman of the RFC, a copy of which I am submitting herewith. * Let me read to you now the last words of that letter: * the maintenance of at least a minimum level of operation by the Waltham, Hamilton, and Elgin Watch Cos. is vital to the defense of the United States and should be preserved. And I would like to be able to put a copy of that letter in the record. The CHAIRMAN. You may put the whole letter in. (The letter referred to is as follows:) UNITED STATES MUNITIONS BOARD, DEAR MR. HISE: Reference is made to Mr. Carpenter's letter to you of November 18 regarding the importance of the Waltham Watch Co. in the field of national defense. In Mr. Carpenter's last paragraph he mentioned that the highly skilled labor employed by the Waltham Watch Co. is a valuable, intangible resource for national defense. Mr. Carpenter has asked me to write to you to give additional information as to this important factor. The information given has been reported to us and is believed to be reliable. There are now 8,000 people in the American jeweled-watch industry, 40 percent of these people require from 2 to 10 years to train. Of this 40 percent, at least 1,000 require 5 to 10 years to train. Sixty percent of the 8,000 people are women, 40 percent are men. These figures establish the fact that there is a large nucleus of personnel now in the industry that would be almost impossible to replace in a mobilization period. The Waltham, Hamilton, and Elgin Watch Cos. were employed to 100 percent of their capacity in Government work from December 1941 to August 1945. During this period they manufactured jewel bearings, chronometers, fire-control watches, time fuzes, aircraft instruments, and other essential products. Most of these items could not then nor could they now be produced by other domestic watch companies. It is considered that maintenance of at least a minimum level of operation by the Waltham, Hamilton, and Elgin Watch Cos. is vital to the defense of the United States and should be preserved. Sincerely yours, F. C. DENEBRINK, Rear Admiral, United States Navy, Director of Procurement, Manpower and Utilities. Mr. CENERAZzo. Gentlemen, it is vital that the American jeweledwatch industry continue in operation. Under present conditions we believe that it cannot continue in successful operation long. We have |