For Just \(/hat Are \(/e Waitins?

By Sam T. Hayward, Vice President, Hayward Lumber & lnvestment Present Outlook

Co., Los Angeles, Calif., on "The of the Retail Lumber Businessl'.

There are some 20O to 1000 lumber yards in California waiting for the return to normalcy. I should say hanging on, some even hanging on by their eyelids, waiting, hoping and longing for those good tirnes to return, the normal of I92O to 1929. I am convinced we will never get back to this so-called normal. The normal o{ tomorrorv will be more comparable to the normal of 1910 to 1915. We are down to pre-war levels. Prices are pre-war, margin of profit is less than pre-war and volume of sales per lumber yard is down to pre-war while salaries and overhead expenses are almost double pre-war level. There are too many lumber yards and competition much too keen for us to expect a return of the bonanza years of 1920 to Pn.

I have been asked my opinion regarding the outlook and I want to offer rvhat I believe are constructive suggestions. I feel we face a serious situation which merits serious consideration and drastic remedies. The first thing to do is realize that we all are rvaiting for a bonanza period which isn't going to come. Why isn't it going to come? Briefly, because in the period since the war w,e have had thrust on us the trade of the world with little competition and have had increasing commodity prices, both of rvhich have stimulated business activity like shots in the arm. 'We now face keen competition from all European porvers for the trade of the rvorld. Next rve must realize there are too many lumber yards and must either change the number or make our business fit these changed conditions.

Lumber yards are like gas stations: there is one on every corner and our business in many ways is comparable to theirs. Suppose a few large gas stations would start a price war for the purpose of decreasing the number of gas stations in Los Angeles, contending they had facilities for selling three times the gas they are now selling and a plant and equipment and overhead rvhich made a larger volume of sales a necessity. Suppose every gas station had a salesmen out begging gas consumers to give his station their trade, begging them to let him give a lump sum bid on their month's requirement, assuring them he could save them money thereby. Suppose too he should say, "I can't cut the price of gasoline, but we sell tires as well; give me your list of your month's requirements, let us figure on it and the lump sum bid will include our tires at less than their cost to us in order to get your business." Suppose that the gas station manager stayed in his private office, with a bookkeeper to keep his books and plenty of assistants to do the actual waiting on customers, had a salesman or salesmen out in the field and sold everything at cost.

We lumbermen of Los Angeles and vicinity are behaving just as ridiculously. We face the necessity of cutting overheads and plants to fit the reduced volume of business. We face the necessity of some kind of cooperative plan which will enable us to get a fair margin oi profit. Without such a plan and the support of all of us, we are sunk. Wholesalers who are selling at the same price wholesale and retail must realize that their wholesale business will soon be permanently destroyed. Retailers must real- ize they face a .readjustment in their business, that they must decrease their overhead, and must give some sort of price structure their support without deviation or trickery, regardless of how low their volume becomes. We are all in the same boat. We need a workable plan of cooperation which is headed not by a secretary who is kicked around at rvill by each firm in turn, but a Czar who kicks us on the shins till it hurts if we don't behave.

We need a Will Hayes, or do we? We n,eed a Moses to lead us out of the wilderness ? No, I think not. What rve need is brains to follow a Moses should he appear. I knorv of half a dozen men who could play Moses if we were in a mood to follow, and h'e wouldn't have to have a fat movie contract to play the part either. It is about time lumbermen were asking why something was not. being done. You need have no doubt that a group of the bigger fellorvs are having meetings right along, €ven now. As soon as they get together on some workable plan which is strong and effective the rest of us will follow. Isn't it time we were asking rvhat they are accomplishing, who is holding out? Resonsibility for present chaotic conditions should be pinned right where it belongs.

Now regarding constructive suggestions, I believe that the lumber yard which could not make 15 to 20 per cent on invested capital in the bonanza years of I9Z9 and prior will ner.er rnake interest on capital hereafter. Such a yard should be closed up, regardless of the cost and even if the plant must lie vacant and idle. In small outlying communities your competitors will gladly assume some of the burden, possibly taking over your merchandise or even doing more. This last year we have sold two and closed up two other yards, rather than operate them at a heavy loss. In ten instances we have either helped buy out our competitors or sold to them when it became apparent there were too many yards to survive. In every case it has proven to be a sound busin,ess move on the part of both buyer and seller. How many towns in California have more yards than the community needs? Personal pride, selfish conceit and unfriendliness prevent such consolidations. At any point where we are located where there are too many yards rve will flip a dollar to see who stays and rvho goes out. It is good business sense, has paid us in the past and will pay us now. I never saw a case where a yard rvas eliminated where it failed to benefit both the one getting out and the ones staying. The only other alternative is to readjust our business to fit present volume, cut overhead, adopt a "live and let live" policy with our competitors, quit thinking that the good times of 1929, 1928, etc., are just around the corner, and run our business as the gas station is run. A gas station is not run by a high salaried manager who sits at his desk directing a salesman to coax prospective customers to let them figure his bill of requirements. Wait on your trade yourself instead of trying to steal your competitor's business.

I am not conceited enough to consider myself a good prophet. I doubt if the average lumb.erman will make 3 per cent on his invested capital in the next three years. However, don't listen to me as I am a poor prophet. If I could see into the future my money possibly would have been in the bank or building-loan companies at the end ol 1929 instead of lumber yards. Speaking of banks, money in a California bank is far safer than in an account which reads like this :

John Doe, Contractor Material furnished at cost ($........)

Past reputation, good

Financial responsibility, nil

Lien right, N.G.

Is behind first trust deed (mavbe a second as well).

In the past we have assumed a mortgage to make good our lien. We don't do it now. We won't do it in the future. Even the dumbest of us learn something occasionally. Our banks are worthy of our confidence and those of us who claim to be business men should not forget it.

Now take a pencil and paper. Estimate what you rvill lose in the next three years. Now estimate what you will cash out of your business (possibly with competitors help), figure it at 7 per cent for three years. Add estimated loss for three years to this interest and judge for yourself whether the goodwill of your yard as a going concern is worth this amount of cash money. I still contend that what the lumber industry needs is not a Moses to lead us out of the wilderness. What rve need is Brains enough to follow a Moses if he should appear. If rve did have, Moses would appear. We lumbermen are conceited individualists, tearing ourselves to pieces instead of cooperating for the survival of the specie.

B. C. Waterborne Lumber Exports

Total'ivaterborne lumber exports from Vancouver Island and lower B. C. mainland during the first eleven months of 1931 totaled 563,107,000 board feet compared with 668,343,000 feet the same period of 1930, state reports from Consuls Nelson P. Meeks at Vancouver and Robert M. Newcomb at Victoria, made public by the Lumber Division of the Department of Commerce. Waterborne exports for the ten-month period rvere likervise at 16 per cent under the 1930 period.

Total November waterborne lumber exports amounted to 39,159,000 {eet compared with 43,224,WO feet in November 1930, a decline o{ 9 per cent.

Total waterborne exports to the principal markets during the eleven-month period of 1931 as compared rvith the same period of 1930, declined as follorvs : to the United Kingdom and Continent about 32 per cent; to the United States about 24 per cent; and to the Orient about 4 per cent. Similar declines for the lO-month period compared rvith the 1930 period were respectively 33. 17 and l0 per cent.

B. C. lumber mills are reported to have operated in November at 37 per cent of their normal capacities and this represents a slight increase over the previous month rvhen some mills were closed owing to labor disputes. Log production during November was about 30 per cent of normal capacity and unsold stocks of logs in the hands of associated loggers, which represents about 70 per cent of total un,ssld logs in B. C., of fir, cedar and hemlock at the close of November amounted to 52,000,00O feet compared r,vith 114,000,000 feet at the sam,e time in 1930.

Saw logs scaled in B. C. during November 1931 totaled 109,036,000 feet compared with i59.236.000 in November 1930,'while for the eleven-month period totaled 1,618,871,000 during 1931 and 2,1&,462,@0 during 1930.

Shingle mills in B. C. increased production from 41.7 per cent in October to 53.7 per cent in November.

lYENDTING - NATHAN

sell you Mixed Cars with any other of Old Growth Yellow Fir.

Main Office: San Francisco l l0 Market St.

A. L. Hoover, Agt. Los Angeles Standard Oil Blde.