The Retail Lumber and Building Material Code

(Continued lrom Nouember l, 1934,issze)

The decline in the volume of business to be spread over prac:ally the same number of establishments has brought about a ndition of extremelv keen comoetition methods forcins sales tically the has condition extremely competition methods below actual cost and has resulted in a loss of emp ng resulted ln a employment in the industry. The burden of selling below cost or the resultant ioss in many instances w:ls transferied to labor. Wages were cut far below the standard of decency or of a living wage. The cost of doing business is a factor of the volume of business done. A firm doing a large amount of business has a lower unit cost of charges to be added than does the firm that has a smaller volume of trusiness. If all firms were permitted to sell at their actual cost yet at the same time being required to pay the same wages, unfair cilmpe- tition would inevitably result, since the firm that already had a large volume of businiss would maintain that large vblume- of business and could get more business due to its lower cost; whereas, the firm with the smaller volume of business would lose its business to the firm having the greater volume.

In order to equalize the situation so that small firms would not be oppressed by being forced to sell at their actual cost the Modal Method was adopted. This method sets the lowest allowable cost at a point which is applicable to the greatest number within the group to which it is applicable. According to a compilation of figlrres by the National Manufacturers Association for the year 1929 between 60 per cent and 65 per cent of the lumber produCed in the United States was sold to retailers for resale purpoies. The retail lumber distributor is therefore the pertinent outlet for the lumber production in the United States. It is at this point that our industry was greatly handicapped by not being able to supply he GovernqLe.nt with authentic figures covering the cost of doing business. With the result that the Administrition for a trial pe"riod of 90 days, which was later extended to another 90 davs, allowed us in California, as a cost protection method, to use the replacement delivered cost plus 25 per cent and further plus $5.20 per- thousand to arrive at the minimum selling price. The practical application of this system proved without a doubt that the method wjs not sound for the reason that the mark-up on low grade lumber was excessive and upon higher priced material was noi adequate. Nevertheless, I believe that the early operation of this plan put rnany thousands of dollars into the coffers of the retaiters-in California. Naturallv it reiuced the selling prices in some territories where strong Assbciations were in existence but takine conditions as a whole-. the industry was slowly being stabilized and practicatly all customers were paying an equal amount of money for their materials.

Up to this point the Government had been trying to get this gr€at machine into operation and to approve Codes-for* many industries who were desirous of receiving iJsistance. The mattei of enforcement had not been seriously cbnsidered and naturally some of the hors_e_s got _out of the corril and the dealers were crying for blood. We walked around in a daze for many months wondiring just what was going to_ be done about enforcement. Many prophet-"s have prophesied that the Codes would never be enforcei ind'that the Government was only interested in hours and wages and from that point on industry could be damned. The Code office in Northern California worked religiously to develop cases which they hoped some day would be taken into-the courts. We were still walklne around in a daze not knowing where to go for relief. In fact they did_ not. even know in W-ashington just what was going to be don"e and this problem of enforcement io some extenf stiil remains a mystery.

June,27,1934, we were faced with a new Modal Order and a new method of Cost Protection. This time it was changed to a flat per_ centase and the reduction, we felt, was the final blJw that killed'the cat. We felt that the industry could not exist on such a small mark_ go.. losing track of. the. fact' that the percentage approved ;" tfri, division was .several p-oints more than our actuat figdres ,l;";i.;;a. l\4eenrxg that many of the lumbermen did not havJenough interest rn therr own business to see that Wa-shington was supplied with the proper- rep-orts to arrive at an intelligeni mihimum ibrt prot."tlo" price. for their ow_n protection. In talking on this poi,r1- ;i -;J i; clearrv understood that it is not the desire of the Governnlent nor witl ttgy authorize by law any method of piice fi"G 6-th"'il;i u'here rt rs. gotng to create for the majority a profit. Thev are mere-ry.settrng a figure determined as closely as possible to av-erage or Modal costs of doing business which can-re1"ioii.a t" u*'"frJ any prtces above that point- -must be maintained and developed through trad-e Associatioirs which- ar. cnco"iitea tv una,-rii"iirlv doing something_ that has never b.e" kno*" ln tf,e f,istoii d;i;;;, t1;ogaqils lumbermen -to join trade associations to go.rein thirn_ setves, and create a profit so that employees may be *paid a living wage so that purchasing power can be increased and we can again enter the fertile fields of prosperity.

For your information the Federal Government has taken a great interest in Modal prices authorized for the Retail Lumber Industry and I have personally heard a number of Government representatives make the statement that the Government was satisfied with our mode and would not hesitate at any time to take it into the Courts to protect the prices authorized as a minimum cost protection price. Nevertheless, there are many industries who are pointing their fingers at our Modal mark-up and criticizing the Federal Government for giving us 36 per cent or 37 per cent where their industries have not been able to have authorized more than l0 per cent mark-up. While in Washington I had considerable contact with Mr. Stone of the Research and Planning Division, who has charge of the analysis of our industry, as to cost figures and I find Mr. Stone very iair and very sympathetic with our problem and I believe that we can depend upon his whole-heated cooperation and the industry will receive his consideration.

In February of this year our budget was'approved as well as the amount of assessment. When this was accomplished we felt another victory had been gained because the dealers who would not join associations in the past and had always ridden without a ticket would be forced to contribute their equitable share toward expenses of the administration of the Code.--

During the various interpretations made of Codes by various administrators and protests by the small dealers, it developed that the poor business man was being coded to death regarding the payment of assessments. Some Code Authorities became quite selfish and wanted their pound of flesh with the result that the Administration placed a Stay on all budgets and it necessitated all Code Authorities to re-submit budgets and after the careful analj'sis of all the boards in Washington a budget would be approved and when this approval was secured Code Authorities would then be in a position to again legally collect assessments. After much detail and some five rnonths study we managed to receive the approval of our budget again and we are now in a position to collect a sum equal to one half of one per cent on all retail sales retroactive to October 13, 1933. Assessments now are a legal obligation and we are in a position to take the necessary action to collect this money in the courts in case the dealer refuses to respond.

August 7, I journeyed to Washington, D. C. to attend a meeting of the Secretaries and the first thing that hit us irl the eye was an interpretation Order X-48 permitting the manufacturer to sell the Government and Governmental agencies at the same price that they would sell a commercial buyer andlor dealer. With the la'ck of a distribution policy and then this X-48 laying in our lap the secretaries had a lot to talk about. Mr. Ballinger arranged to have our new Deputy Administrator present at this meeting and about twenty-five of the boys spent the day telling this new Administrator what was wrong with NRA and the Retail Lumber Code, also am- plifying what was needed to make it work. We found our new Administrator, Mr. Hecht very sympathetic with our problem and he really voiced a conscientious desire to help us make the Cbde work. In fact he said to Mr. Batlinger, "Whit are the paramount problems needed for successful operation of your Code? -Let's not pay any attention to the minor details but let us find out what is absolutely necessary to bring this Code up to the point where it will develop to what was intended." "Furthermore." Mr. Hecht stated, "I will do everything in my power to assist you in clarifying these matters. When this Code was handed to me the Administrator stated that I would need a barrel of aspirin and asbestos ears."

While this meeting of the Secretaries was in session. Mr. Ballinger, Mr. Carnahan, Mr. Denike from New Jersey, Mr. Rowell from Alabama and mysetf went to Colonel Lynch's office and put the matter up to them cold turkey as to how we felt regarding the Government being placed in a position as chiseler number 1 through the interpretation.of Order X-48, and believe me we got plentv iough, with the result that in two or three weeks our Code, as far aJ it refers to lumber and timber products in less than carload quantities. is now exempted from this Order.

Prior to August the Retail Lumber Code was beine administered in the same Division as the Timber Products Code. With the result that our Code was more or less lying dormant because the manufacturers were having plenty of problems of their own and we aDparently were just drifting with not a lot being done to solve our problem.

It was at this point where Mr. Hecht stepped into the picture. because through a change of policy in the Administration. our Code

(Continued on Page 2Z)