While going through a box of my late mother's things, I came across a bundle of papers, folded neatly in three as for an envelope. Upon opening the bundle, I realized that I had come across a little gem - the text of a speech made by my great uncle, Thomas J. Graham, to the Senate Banking and Currency Committee in 1945.
Tom was the child of impoverished immigrants, one of nine. Somehow he managed to get enough education in high school to go into the tire business, and eventually became a mamber of the NAITD (National Association of Independent Tire Dealers, I think).
In 1945, as the war drew to a close and the peacetime economy appeared on the horizon, independent businesses all over America were facing the beginning of a series of challenges - challenges that have led to the generification of America and the ascendency of the Wal-Marts over the remains of local independent merchants.
As I read the text, however, I realized that it was not only history. The past, indeed, is prologue. The parallels of the events referred to in this speech to events taking place around us now are breathtaking. So without further ado, dear friends, let me share with you my uncle's remarks:
Mr. Chairman, and members of the committee:
It has been my privilege to appear before your honorable body; Senator Murray's Small Business Committee and the Senate Banking and Currency Committe, speaking in behalf of the Independent Tire Dealers of America.
Now; publicly and for the record, I want to say that had not the Honorable Wright Patman, Chairman, ably assisted by the Honorable Walter Ploeser of Missouri and the other members of the House Small Business Committee, steped in and taken over in the black days after Pearl Harbor, not only we independent tire dealers but small business as a group would have been faced with a complete blackout.
At a time when men like Leon Henderson were predicting that there would not be an ounce of rubber for civilian use, Mr. Patman called in men like George J. Burger, who for years has represented the independent tire dealers, and whose knowledge of the conditions in the tire industry was unsurpassed, to work with his committee and with Mr. Donald Nelson of the War Production Board. When, through the efforts of your committee Mr. Nelson assured the country that sufficient rubber would be allocated for essential automobile transportation, we knew that in some degree our existence as retailers would be made easier.
Your committee did not stop there, but in January, 1942, they held public hearings on our plight and shortly thereafter, in February, 1942, adopted a resolution, the entire committee concurring, which in substance asked the President of the United States of America to issue a proclamation directing that the sale and servicing of tires be handled through independent dealers.
The actions of this committee saved from elimination some two to three hundred thousand Independent tire dealers, car dealers, filling station operators that the master minds of the O.P.A. at that time had slated for oblivion. Even more important; the essential tire users of the nation did get tires and tire servicing.
To intelligently appraise the future we must carefully scrutnize the past. The record of the tire manufacturers in their dealings with their dealers, as brought into the open for public view by Congressional investigations, is a record of couble dealing that reeks to the high Heavens. If the future is to be judged by the past, the independent tire dealers of America are headed for oblivion.
You men are undoubtedly familiar with the history of the tire business. You have watched the old time tire dealer in your neighborhood put up a hopeless fight in the face of unsurmountable odds, only to be wiped out of business and suffer the loss of his life's earnings.
These men were your neighbors. They were the backbone of the community. They contributed to all community undertakings; They helped maintain the schools, the churches, the local merchants. They spent their own money to build a public acceptance for the product of their manufacturer. They MADE the big rubber companies.
Were the big rubber companies grateful? Let's look at the record.
After years of struggle the independent dealer had worked up a business that would show a return on his investment: what happened?
The big manufacturers, not being content to take their legitimate profit from the manufacturing end of their business went into the retail field and opened massive stores in direct competition to their own dealers; dealers who had spent their life's blood in building up their product in their community. That, gentlemen, was gratitude.
Then came the periods of the price wars. That they might the more quickly undermine the independent dealers and bring their business into their company-owned stores, where it would be under their control, the most devastating price wars in history were foisted on their dealer.
The tires that he had bought to resell at a profit were left standing on his shelves while the company stores sold the same kind of tires to his customers at less than he had paid for them. Thousands of dealers were forced out of business and into bankruptcy. Many others were forced to sell their busines to their suppliers at whatever price they were willing to pay.
The more hardy ones are still in there fighting. Sixty thousand Independent Free Americans fighting for their families and the families of their five to six hundred thousand employees.
You have it in your power to preserve for them their heritage. Were these 60,000 dealers to be forced out of business it would entail a financial loss that is incalculable. It would throw many thousands of skilled men out of employment. The loss in taxes to local, state and national governments would be staggering.
Far be it from me to take up your time reciting the ills of the tire industry. Senate Print No. 3 printed by Senator Murray's Small Business Committee is filled with documentary evidence presented by 117 Independent tire dealers who journeyed to Washington from 42 states. This evidence proves beyond shadow of a doubt that unless steps are taken to protect his business, the independent tire dealer will be unable to carry on.
Why is the independent unable to compete with his supplier? They both compete for the same customer. They both sell the same kind and grade of tire. But there the similarity ends.
The dealer buys his tires outright and must sell them at a profit to stay in business. The company store has his tires consigned to him and they remain the property of the factory until sold. They have no investment in their tire inventory.
It is a matter of record that most company owned stores operate at a loss. How, you ask, can they continually operate at a loss and stay in business? They are there to get volume; to move tonnage from the factory. The factory figures a profit on the aggregate monetary return from the time the tire leaves the factory until it is sold to the consumer.
As an example: A truck tire that has a list price of $100.00 costs roughly $35.00 to build. this tire is sold to a large dealer for about $60.00. The factory makes a profit of $25.00. Most of these tires today are distributed to the dealer through the company owned store. Now: if that company owned store instead of selling to the dealer for $60.00 sells instead to that dealer's customer for $60.00 the factory has made just as much profit as if they sold to the dealer. That, gentlemen, is just what they have been doing; the company store in his competition with the dealer holds the trump cards and they are past masters at playing their ace in the hole.
Is it any wonder the independent dealer is fighting for his very existence in the face of almost certain financial ruin? Not so many years ago the dealers sold 100% of all tires, today they sell about 48%. All the so-called national account business that formerly was sold by the dealer is now old direct on factory contracts. Most of the good sized accounts have been taken away from the dealer by the simple method of underselling him. The factory takes the cream, the dealer fights with the company controlled store for his share of the crumbs.
After going through the pre-Pearl Harbor price wars, with the factories selling tires at 6 tens, 7 tens, 8 tens, 9 tens and yes, even ten tens off list price, and loading customers up with tires for months ahead, I shudder when I look ahead. During a normal year about eight million heavy service truck tires were produced. In 1944 about 14 million and the Firk rubber Company in "Fisk Times" 3/19/45 predicts that 28,000,000 heavy duty tires per year will (be) produced late in 1945 or early 1946 when the new plants in the course of construction are fully manned.
Three and a half times as many truck tires as before the war. With four big rubber companies fighting for this volume, where oh where, will the independent tire dealer fit into that picture? If ten tens off was the bottom before the war, what will be the bottom with 28,000,000 truck tires to be sold?
Unless the Congress of the United States comes to the aid of the independent tire dealer, he is doomed.
But a few years ago, there were upwards of 300 tire manufacturers. Today there are about 26. Do not these few words speak volumes in favor of legislation to curb this monopolistic tendency?
Allow me to present for the record pages 296 and 297 of HR 294, January 23, 1942, covering taxes paid by the dealer versus taxes paid by the company controlled store. I will not take your time to read it, but briefly its contents show that dealers pay excise taxes when they buy tires and thereby invest about 10% in government taxes, whereas the company controlled store receives his tires on consignment; they remain the property of the manufacturer and the taxes are not paid until the tires are sold. The manufacturer therefore has a 10% edge in investment on both the independent dealer and the smaller manufacturers who do not operate company stores.
I am not here asking for any financial assistance as I believe that small business if left alone will be able to weather the storm, provided, however, that our laws are administered fairly by those federal agencies, such as the Federal Trade Commission, the Department of Justice, the Internal Revenue Department and the Office of Price Administration.
The unfair practices of the major tire companies prior to Pearl Harbor created a very bad financial condition for not only the independent dealer, but also the small tire manufacturers. This was due to their apparently organized price wars; the opening of their own retail stores, private deals with oil companies and mass distributors and in 1939 the major rubber companies put on one of the most deceiving and misleading advertising campaigns in thie history of advertising. This was in connnection with what they called their "50% off" sales. The stench was so bad that every Better Business Bureau of the nation stepped in and condemned it. Many city authorities took action against the Big Three and a year later, after the damage had been done to all independent tire dealers, the Federal Trade Commission issued a "cease and desist order." This FTC order affords relief in the future, however we have these same conditions facing us again when tires get plentiful.
We believe this committee should check into the enforecment of the Robinson-Patman law as administered by the FTC, if this department of the government insisted on compliance with this law, it would tend to stop some of the practices now contributing to the financial difficulties of the independent tire dealers.
Might I say a word to the small businessmen present at this hearing? Whether you are sympathetic or not to the tire dealers problem: their problem is your problem.
The big rubber companies are not content to ruin their own dealers, they are spending millions to go into competition with YOU in YOUR business.
RETAILING, a home-furnishing newspaper (Fairchild publication) of New York City began a series of articles in the February 8 issue, asking such questions as :
How much post-war competition can the home furnishings retailers expect from the big tire and rubber chains?
The rumor that these companies plan extensive department stores after the war?
Is it true that they plan to extend their merchandise assortment into all types of home goods?
Will home goods sold in the tire chain stores provide "cut-throat" competition to furniture and deparment stores?
Will they stress private or national brand merchandise?
Surely home furnishing stores are very much interested in the planning of the rubber companies and oil companies. Not only they, but the leading department stores should also be very much interested.
Just a few days ago, April 20th, the New York Times ran a startling statement that the chains and mail order houses would be used as distributors by the General Electic company for many of their products. The article reads as follows:
(unfortunately, the article did not make its way into the packet with the speech)
Big business has a place in our American way of life. That place definitely is not in the local retail trades. Most jobs come from small business. When small business fails, our economy fails. Small business is entitled to and should receive the protection of Contress.
Congressman Wright Patman, Chairman of your committee, on April 18th delivered a scathing indictment of this method of doing business on the floor of contress. This is recorded in pages 3582 and 3583 and fills two full pages. Among other things, Congressman Patman said: "I view with alarm and concern their expansion into local retail trade. The chief danger, however, lies in the variety of merchandise the manufacturer-owned retail stores sell. One authority in the trade expressed his view that therese big rubber manufacturers stores handle six thousand items."
Mr. Patman, after listing many articles handled in these stores continued:
"From this list it will be observed that many types of merchants, including wall paper, electrical supplies, paints, books, rugs, furniture, tires, luggage, chinaware, plumbing supplies and sporting goods will be effected."
Allow me to present this speech for the record.
Finally, gentlemen, I come to my closing statement. In the 77th, 78th and 79th Congress, a bill has been introduced called the Rubber Tires Bill. Its sponsors are the Honorable Wright Patman, Senator James E. Murray, Senator Allen J. Ellender and Senator Robert F. Wagner. Its main purpose is to take the tire manufacturere out of the retail field; that is, owning and operating his own stores in direct competition with his own and other independent dealers. It would provide that oil companies could not direct to its independent filling stations the kind of tires they can sell. In other words, the bill would provide for real free enterprise.
We respectfully ask that you get behind your Chairman and help him get this bill through the Banking and Currency Committee and out on the floor for a vote.
Mr. Chairman and members of the Committee: You could not have picked a more appropriate time to look into the problems of our industry. Your commitee has never failed us when we have made an honest appeal for help. I ask you in the name of the tire dealers of Illinois whom I am representing here today to give the matters I have covered your immediate attention to the end that appropriate relief may be forthcoming to the Independent Tire Dealer.
Thank you.
Now the bill was perhaps controversial, there were those who saw it as an unfair attack upon chain stores, but the message of the speech was clear - without government regulation, small independent businesses (job creators?) would be driven to the ground by those with more economic muscle - the top 1% of their day. I've not been able yet to determine whether the bill passed. My uncle remained a lifelong republican, but one in the Eisenhower mold, perhaps the only family member not to vote for JFK.
Oh - and the note that was tucked inside the copy that he so long ago sent to my mother?
Somehow, I'm thinking they didn't manage to tie him up. I hope he forgives Mom for hanging onto it.