Volume 272, June 12 – June 14, 1940

DIARY Book 272 June 12 - 14, 1940 - A - Book Page Allison Engineering Company Division General Motors Corporation Federal Bureau of Investigation report acknowledged - 6/12/40 272 45-A,45-V Further Federal Bureau of Investigation report 369 Aluminum Company of America See War Conditions: Airplanes (Plant Expansion) - B - Bank of America Reconstruction Finance Corporation lends 827 million; $21} million invested in San Francisco Bridge bonds - Bell tells 9:30 group - 6/13/40 192 Delano memorandum - 6/14/40 413 Business Conditions Economic Developments: Noble (Commerce Department) report- 6/13/40 207 - C - Coast Guard Vibration in HMJr's Lockheed plane studied by experts - 11-A Personnel 6/12/40 Board: Proposed Executive Order - 6/12/40 11-C a) White House informs HMJr order was signed June 14, 1940: See Book 273, page 304 Currie, Lauchlin Lack of cooperation on part of Treasury reported in letter to White - 6/13/40 238 - E - Electric Power See War Conditions - F - Finland See War Conditions Ford Motor Company See War Conditions: Airplanes (Plant Expansion) Freight Shipments Haas memorandum - 6/13/40 215 - G - Germany See War Conditions Gold See War Conditions: Vatican Great Britain See War Conditions: United Kingdom Regraded Unclassified - I- Book Page Italy See War Conditions - J - Japan See War Conditions - L - Leffingwell, Russell Offers services during emergency - 6/13/40 272 220 Leroy-Beaulieu, Marc (Lieutenant) American Embassy, Berlin, asks check on injury and present wheresbouts - 6/14/40 308 - M - McReynolds, William H. Defense Appointment: Congressman Taber's comment "most incompetent man who has ever come before us representing a department" - 6/12/40 13 - N - - Naval Observers See War Conditions Navy See Mar Conditions - 0 - Obsolescence See War Conditions: Airplanes (Plant Expansion) - P - Plant Expansion See War Conditions: Airplanes Purchasing (Coordination of United States and Allied) See War Conditions: Airplanes (Plant Expension) " " " : Purchasing (Coordination of United States end Allied) Regraded Unclassified - R - - Book Page Republic Aviation Corporation See Kar Conditions: Airplanes Revenue Revision Estimates of expected yield of pending bill provided for Currie by Colm (Commerce) and transmitted by FDR to HMJr - - 6/13/40 272 236 Tax-exempt Securities: HMJr's statement of Treasury position before Senate Finance Committee - 6/12/40 69 - S - Shipbuilding See War Conditions: Navy Statements by H/Jr Before Senate Finance Committee on tex-exempt securities - 6/12/40 69 - T - Taxation See Revenue Revision - U - United Kingdom See Wor Conditions > I I Vaticen See war Conditions Vinson-Trammell Act See also War Conditions: Nevy (Shipbuilding) Depreciation deductions under the Income tax law and Vinson-Trammell Act discussed by Foley, Kades, Adams (Air Reduction Company), Forsyth (Solvay Process Company), and Eaton - all of Advisory Commission of Council of National Defense - 6/25/40: See Book 275, page 142 - W - war Conditions Agriculture: "Significant Foreign Developments": Memorandum for Cabinet meeting - 6/13/40 200 Regraded Unclassified - % - (Continued) Book Page War Conditions (Continued) Airplanes: Bombers: Northrup: Schedule of delivery of 93 as worked out by British Purchasing Mission - 6/13/40 372 99,110 a) Kennedy informed 153 b) A-17's and A-17A's: Comperison by Chief of Staff 111 c) Exchange of the 93 4-17A's for 20 Dougles A-20A's (attack planes) approved by Ros Department and Douglas - 6/14/40 340 Christian Science Monitor's European mensger cables "Rush planes дох" - 6/14/20 335 Engines: Allison Ingineering Company Division, General nature Corporation: Federal Bureou of Investigation report schoowledged - 6/12/40 45-A,45-V Further Federal Bureeu of Investigation report 367 Rolls Royce: Plans and specifications located In Canada and arrengements for transportation to United States made by Purvis - 6/12/40 1,4,8 B) Contract to be between British and United States Government 12-A b) Plans to arrive in washington June 13, 1920, 78 c) Woodring agrees to accept consignment direct from Railnay Express office in Machington; INJr asks to be consulted before litensing negotiations between British and United States Governments Are completed - 6/13/40 78-4,105,167 (See also Book 273, leges 168 and 190) 1) Coast Guard officer na: Secret Service officer to be present: Olley 2120 Invited - 6/13/40 160,181 a) Knudsen told H.Jr Ls Annoyed 167 b) Inventory by Coast Guard officer Kossler: See Book 273, pare is 2) Xnudgen tole of Goodring's acceptance 175 Kennedy asked to set imailate in oreation 88 to when Holls Royce Uniffin engine conse into production - 6/12/40 Regraded Unclassified - W - (Continued) Book Page Nar Conditions (Continued) Airplanes (Continued): Plant Expansion: Knudsen and HMr discuss plan by which Allies would not have to pay for all expension necessary for their program - 6/13/40 272 122,124, 126,162 a) Knudsen favors; found Jones arbitrary in discussion along this line b) Plans for Ford, Aluminum Company of America, Wright Aeronautical Corporation, et cetera, discussed c) HMJr talks to Purvis 136,140,156 d) Knudsen's plan for plant expansion explained to Purvis - 6/14/40 248 1) Conference; present: HMJr, Young, Nelson, Purvis, Foley, Kades, and Knudsen - 6/14/40 246,311 2) Foley's rough draft of agreement putting Knudsen plan into effect 289,291,295 (Revised form: See Book 273, page 217) a) Woodring's acceptance of agreement: See Book 273, page 1 3) HMJr tells Treasury group he will give Knudsen benefit of doubt and say that he has not understood conferences to date and action agreed upon - 6/19/40: See Book 274, pege 23 e) Obsolescence: HWr and Treasury group discuss question - 6/19/40: See Book 274, page 69 1) Viner memorandum: Foley resume - 6/20/40: See Book 274, page 171 f) Conference in Knudsen's office; present: Knudsen, Nelson, Biggers, Foley, and Kades - 6/24/40: See Book 275, page 133 a) Proposed agreement between Defense Finance Corporation (to be created by Reconstruction Finance Corporation under Senator Glass' bill now pending in Senate) and any aviation engine company g) Second conference of above group together with representatives of Wright Aeronautical Corporation - 6/24/40: See Book 275, page 135 1) Biggers' summary of steps agreed upon: See Book 275, page 136 h) Understanding reached by Knudsen, Biggers, Jones, and representatives of Wright Aeronautical Corporation: Foley memorandum - 6/25/40: See Book 275, page 233 1) Summary of dreft agreement 2) Purvis resume of understanding - 6/25/40: See Book 275, page 339 - W - (Continued) Book Page War Conditions (Continued) Airplanes (Continued): Progress report: Deliveries, May 1 - June 8 272 114 Republic Aviation Corporation: Progress report shows production capacity will be partially idle in near future unless new orders are placed - 6/13/40 118 Electric Power: Federal Power Commission consulted by FDR concerning adequate supply for defense needs - 6/14/40 362 Exchange market resume - 6/12/40, et cetera 86,225,411 Finland: Payment on debt discussed by Procope and HMJr - 6/12/40 90 Germany: Freezing of Assets in United States: Leroy-Beaulieu makes inquiries concerning possible plans - 6/13/40 221 Federal Bureau of Investigation report on situation 394 Italy: Stock Prices Charts: Discontinuance recommended - 6/12/40 83 Japan: Federal Bureau of Investigation report on purchase of avistion gasoline - 6/14/40 390 Naval Observers: Compton's letter giving further details of proposed plan permitting United States observers in British fleet - 6/14/40 334 Navy: Naval Shipbuilding: H.R. 9822 - To expedite Naval shipbuilding: FDR's memorandum to Mar and Navy concerning issuance of regulations requiring approval of Treasury Secretary on all certifications before contracts are executed after bill is passed - 6/14/40 304 a) Conference on proposed Treasury letter to Secretary of Nevy or War - 6/20/40: See Book 274, pages 265 and 278 b) Admiral Furlong's testimony reported to FDR - 6/20/40: See Book 274, pages 167 and 280 c) Treasury cooperation outlined in letters to Secretaries of Mar end Navy; copies to FDR and McReynolds - 6/24/40: See Book 275, page 123 1) McReynolds acknowledges - 6/24/40: See Book 275, page 141 Obsolescence: See war Conditions: Airplanes (Plant Expension) Plant Expansion: See War Conditions: Airplanes (Plant Expansion) Purchasing: Coordination of United States and Allied: See War Conditions: Airplanes (Plant Expansion) Purchasing Mission: Conference on general needs; present: HAJr, Young, Foley, Nelson, Coz, Woodring, Compton, Marshall, Moses, Brooks, Stark, Towers, Furlong, Spear, and Burns - 6/12/40 13 a) List of items pending, including new items for which application is being made 46 b) Airplanes on order for United States Services for which priorities are desired 48 c) Purvis told results of conference 58 Regraded Unclassified - W - (Continued) Book Page War Conditions (Continued) Securities Markets (High-Grade): Current Developments: Hass memorandum - 6/13/40 272 227 United Kingdom: Military Situation: Reports from London transmitted by Butler and Lothian - 6/12-13-14/40 97-A,F,J; 404-A,E Vatican: Gold account with Federal Reserve Bank of New York again discussed with Knoke, Livesey, Cochran, et cetera - 6/13/40 223 Yugoslavia: Yugoslav National Mortgage Bank: Possibility of branch in New York discussed by Pinsent and Cochran - 6/14/40 344 a) HMJr authorizes Bell to consult Banking Commissioner White of New York; Bell feels Treasury should not become too much involved b) H&Jr tells Bell to tell White there may be branch bank in New York - 6/17/40: See Book 273, page 76 Wright Aeronautical Corporation See her Conditions: Airplanes (Plant Expansion) - Y - Yugoslavia See War Conditions ogradod June 12, 1940 12:50 p.m. Present: Mr. Purvis Mr. Young Mrs. Klotz HM,Jr: I am simply delighted because I talked to Joe Kennedy this morning and I got from him that this thing was in Montreal with some mysterious courier. Mr. Purvis: I got it for you. Really amusing! I might 88 well tell you now. In the first place, I got a telegram from Lord Beaverbrook two days ago saying I have appointed your friend, Maurice Wilson as coordinator for Aircraft in Canada. Maurice Wilson is excellent. He's one of our fastest workers. So when you told me you wanted those planes, I suddenly thought of the new coordinator in Canada and I telephoned Wilson. All I can say 1s they are on the way to you by express. HM,Jr: Where were they? Mr. Purvis: He had heard from Lord Beaverbrook the day before, but they were not addressed to you until I got them. They were addressed to Olley. But they are on the way to you. HM,Jr: That's funny. Joe Kennedy told me there was a special courier who would deliver the letter with these to the President of the United States. Not to me, but to the President. He said they would be delivered personally to the President. Mr. Purvis: They are on the way. I am sorry if I have short-circuited HM,Jr: No. The President and I are one. Regraded Unclassified 2 -2- Mr. Purvis: I know you are. They are on the way addressed to you. Maurice Wilson has them on the way to you. They weigh a ton and a half. HM,Jr: Marvelous! They can go in this room. Mr. Purvis: I also telephoned Olley. He was very frank with me. My belief 1s that Olley 18 per- fectly correct, but he has run into (Note: The Secretary interrupted to dictate for the record the following: What I told Mr. Purvis on the phone last night was that I was afraid that Olley had gone behind my back and was trying to get the planes direct and Mead told me that Olley had been told by the British Government that it was between Governments. I told that to Mr. Purvis because it upset me.) (Following this statement of the Secretary's, Mr. Purvis asked that his further remarks be off the record.) HM,Jr: (Dictating) I want to send this cable to Ambassador Kennedy. "I would greatly appreciate if you would see Lord Beaverbrook as soon as possible and inform him that Arthur Purvis and I would very much like to know when the Rolls Royce Griffin engine really comes into production and the present status of the tests. Secure for me as much information as possible about the Griffin engine as naturally in the interests of our own Government and the Allies we do not want to have the Ford Company start production of the Merlin 20 engine if it will be shortly superseded by a better engine. . You see, the thing I ran into this morning, Kennedy tells me to make the price. "They leave it to you 8.8 to the license.' So I told them : what I told Ford, $450,000. ? I was making it tops. I told Kennedy it would be much better if we set aside a lump sum appropriation which would permit the United Regraded Unclassified 3 -3- a lump sum appropriation which would permit the United States Government to license anybody that we wanted. Mr. Purvis: That would probably be the way. I don't know how they go with engines. If you want any information on that kind of thing, I will get it. HM,Jr: I understand from Mead that it's around $200.00. I wanted to be fair with Rolls Royce and made it $250.00. They left it to me. Mead said $200.00 and I said $250.00. Mr. Purvis: One can always reduce rather than go up. HM,Jr: Inasmuch as the English Government had put it up to me, I wanted to err on the fat side rather than the lean. Mr. Purvis: It's not .... HM,Jr: You see, in the cable Lord Beaverbrook left it to me, which 18 very difficult. Mr. Purvis: Which 18 very difficult, very sporting and almost clever. HM,Jr: Well, you know what's happening. I am having the Army and Navy at 3 o'clock. You will be in the offing by 3:15. I am very much amused. They are already releasing stuff on the ticker. The Army has released 93. Also equipment for the con- struction, full speed, of smokeless powder. They have released all that. That Pearson and Allen story did not do any harm. I wonder where they got it! 000=000 Regraded Unclassified 4 June 12, 1940. MEMORANDUM FOR THE SECRETARY: Mr. Purvis called me at 10:15 this morning and gave me the following information: "Regarding the Rolls Royce plans, I have managed to find them through the help of my friend, Maurice Wilson, Chairman of the Royal Bank of Canada, who has just been appointed by Lord Beaverbrook as air-craft coordinator for Canada to cooperate with me, Maurice Wilson has this morning shipped the plans by fastest express route (they weigh a ton or so) directly addressed to Secretary Morgenthau at the Treasury. "Maurice Wilson is a quick actor and this thing will be dons. I have therefore told Lord Lothian not to worry any more about it." D.E.M. 5 June 12, 1940 My dear Admiral Noyes: Will you please transmit for me the following message to Ambassador Kennedy via most secret naval code: QUOTE - I would greatly appreciate if you would see Lord Beaverbrook as soon ae possible and inform him that Arthur Purvis and I would very much like to know when the Rolls Royce Griffin engine really comes into production and the present status of the tosts, Secure for me as such information as possible about the Griffin engine as naturally in the interests of our own government and the Allies we would not want to have the Ford Company start production of the Merlin 20 engine if it will be shortly superseded by a better engine. - UNQUOTE Yours sincerely, Jr. Rear Admiral Leigh Noyes, U.S.N., Director of Naval Communications, Room 2622, Navy Building, Washington, D.C. Sent over by Secret Service Regraded Unclassified or 6 June 12, 1940 My dear Admiral Noyes: Will you please transmit for me the following message to Ambassador Kennedy via most secret naval code: QUOTE - I would greatly appreciate if you would see Lord Beaverbrook as soon as possible and inform him that Arthur Purvis and I would very much like to know when the Rolls Royce Griffin engine really comes into production and the present status of the tests. Secure for me as such information as possible about the Griffin engine as naturally in the interests of our own government and the Allies we would not want to have the Ford Company start production of the Merlin 20 engine if it will be shortly superseded by a better engine. - UNQUOTE Yours sincerely, H-H. Margenthan, Jr. Rear Admiral Leigh Noyes, U.S.N., Director of Naval Communications, Room 2622, Navy Building, Washington, D.C. Via Secret Service Regraded Unclassified 7 June 12, 1940 My dear Admiral Noyes: will you please transmit for me the following message to Ambassador Kennedy via most secret naval code: QUOTE - I would greatly appreciate if you would see Lord Beaverbrook as soon as possible and inform him that Arthur Purvis and I would very much like to know when the Rolls Royoe Griffin engine really comes into production and the present status of the tests. Secure for me as much information as possible about the Griffin engine as naturally in the interests of our own government and the Allies we would not want to have the Ford Company start production of the Merlin 20 engine if it will be shortly superseded by a better engine. - UNQUOTE Yours sincerely, H. Margenthau, In Rear Admiral Leigh Noyes, U.S.N., Director of Naval Communications, Room 2622, Navy Building, Washington, D.C. Via Secret Service Regraded Unclassified a THE ROYAL BANK OF CANADA Head Office MORRIS W. WILSON resident & Managing Director MONTREAL June 12, 1940. Dear Mr. Morgenthau: I beg to advise you that in accordance with my telephone conversation with Mr. Arthur B. Purvis this morning, and a previous telephone conversation with London, I have to-day sent you by Canadian National Express, prepaid, in bond, five boxes con- taining plans and blue-prints. Yours very truly, moonlar British Ministry of Aircraft Production Agent, Hon. Henry Morgenthau, Jr., Secretary of Treasury, Washington, D. C. 5 war department WASHINGTON June 12, 1940 My dear Mr. Secretary: Receipt is acknowledged of your letter of June 10, enclosing for my information B. photostatic copy of a memo- randum of June 6, addressed to you by the President, re- lieving you of the responsibility of clearing contracts for air craft and engines as required in the President's memo- randum of May 24, 1940. In accordance with the President's instructions the purchases referred to will hereafter be cleared through Commissioner Knudsen of The Advisory Commission To The Council of National Defense. Your reference to the able assistance rendered by General Brett is appreciated and I desire also to express my appreciation of the cooperation rendered by you personally and your assistants to this department in connection with the clearing of these contracts. Sincerely, Many Marking HARRY H. WOODRING, Secretary of War. The Honorable The Secretary of the Treasury. Regraded Unclassified June 12, 1940 My dear Mr. Secretary: Receipt is acknowledged of your letter of June 10, enclosing for Ky information a photostatic copy of a - randum of June 6, addressed to you by the President, re- lieving you of the responsibility of clearing contracts for air craft and enginee as required in the President's - randus of May 24, 1940. In accordance with the President's instructions the purchases referred to will hereafter be cleared through Commissioner Knwdeen of The Advisory Commission To The Council of National Defense. Your reference to the able assistance rendered by General Brett is appreciated and I desire also to express By appreciation of the cooperation rendered by you personally and your assistants to this department in connection with the clearing of these contracts. Sincerely, HARRY H WOODRING HARRY H. WOODRING, Secretary of War. The Honorable The Secretary of the Treasury. Regraded Unclassified 13 DEPARTMENT OF THE NAVY OFFICE OF THE SECRETARY WASHINGTON JUN 12 1940 My dear Mr. Secretary: Receipt is acknowledged of your letter of May 30, 1940, expressing your appreciation for the courtesy in permitting Captain Edmund D. Almy, U. S. Navy, Commander Elmer R. Henning, U. 8. Navy, and Oliver S. Warhus, Engineer, to participate in the machine tool conference held in your office on May 27, 1940. The Navy Department is pleased to know that the information presented by these gentlemen will be of value in the development of your program. Copies of your letter are being filed with the officers' records, and they are being informed accordingly. Sincerely yours, Phis Anyw Activg The Honorable, The Secretary of the Treasury. _1-A THE COMMANDANT OF THE UNITED STATES COAST GUARD WASHINGTON 12 June 1940. MEMORANDUM FOR - Assistant Secretary Gaston Lieutenant MoKay has advised me that the Secretary commented on what he believed to be excessive vibration in the new Coast Guard Lockheed plane R50-1, V-188. Lieutenant Commander Kossler, Lieutenant Harding and Mr. Cocklin, all of the Coast Guard Aviation Engineer- ing Section, have made a flight in this plane to investi- gate this reported ob jectionable vibration. The report of these officers is as follows: "The consensus of opinion was that the vibration was not unusuel in this type and size of plane, and is inherent in the propeller and engine installation. It is more than in the R30-1 which is a lighter plane with less engine power. While the vibration cannot be eliminated it is possible that the noticeable effect can be reduced by mounting the Secretary's cheir and desk on a thick rubber mat. The Lockheed Company is being contacted for their opinion, upon receipt of which an effort will be made to improve the condition as far as possible." You may be sure that every effort will be made to elimin- ate such of this undesirable vibration as may be practicable. R. R. WAESCHE. 6/13/40 11-B Sent from Mr. Harris' office and this copy given to me by Lt. McKay for our files. ck X Thompson t 7almy 7 Regraded Unclassified June 12, 1940. Through the Bureau of the Budget Through the Attorney General Through the Division of the Federal Register My dear Mr. President: There is respectfully submitted to you herewith for your signature, if it meets with your approval, a proposed Executive irder authorizing and directing the Secretary of the Treasury to convene annually 8. Coast Guard Personnel Board in accordance with the provisions of section 2 of the Act of January 12, 1938 (U.S.C., Sup. V, title 14, 500. 1750). 0.8 amended by the Act of June 6, 1940 (Publie No. 556, 76th Congress). This proposed Executive Order, if approved, will supersede executive Order Do. 7922, dated June 30, 1938. which was designed for a similar purpose prior to the anendment of the Act of January 12, 1938. by the Act of June 6. 1940. Lowever, 0.8 the amendatory Aot increases the rinimum number of the members of the Personnel Board from three to five, fixes the minimum rank of such members and changes the procedure of the Board, e. now Executive Order is necessary to resolve all doubte with respect to the legality of any Person el Board which ay be hereafter convened+ Approval of the Executive rder is, therefore, recommended. Faithfully yours. /a/ R. Morgenthau, Jr., Secretary of tie Pressury. The President, The White louse. ASHamb ce 10 Thompson CO to Foley Regraded Unclassified D EXECUTIVE ORDER DIRECTING THE SECRETARY OF THE TREASURY TO ASSEMBLE ANNUALLY A COAST GUARD PERSONNEL BOARD by virtue of and pursuant to the authority vested in no by section 2 of the Act of Jamery 12, 1938, 52 Stat. 4 (U.S.C., Sup. V, title 24. 140. 1750). as anended by the Act of June 6, 1940 (Public No. 556, 76th Congress), I hereby authorise and direct the Secretary of the Treasury to assemble annually a Coast Guard Personnel Board, as provided in said section. Executive Order No. 7922. dated June 30. 1938, is hereby revolved. THE WHITE HOUSE, June . 1940- Regraded Unclassified 12 TREASURY DEPARTMENT WASHINGTON June 12, 1940. MEMORANDUM FOR THE SECRETARY: The 180 bombs from Yorktown arrived at Montreal at 9 o'clock this morning and will be in Halifax tomorrow night. The 570 bombs from Hawthorne will be picked up at Thorne this morning and we have requested Mr. Pelley's office to give us the same kind of service on them, which he has promised to do. When Regraded Unclassified 12-A SECRET WASHINGTON D.C. 12 JUNE 1940 FOR THE HONORABLE SECRETARY OF TREASURY FROM MR. KENNEDY PLANS IN MONTREAL AT THE ROYAL BANK OF CANADA HAVE BEEN ORDERED BY TELEGRAPH TO BE DELIVERED AT ONCE TO THE PRESIDENT IN WASHINGTON. I ATTENDED A MEETING OF THE AIRCRAFT PRODUCTION COMMITTEE WHO CALLED IN IVES OF ROLLS ROYCE AND READ HIM A TELEGRAM THEY WERE SENDING TO THEIR REPRESENTATIVE IN CANADA STATING THAT THE ROLLS ROYCE PLANS WERE TO BE DELIVERED TO THE UNITED STATES GOVERNMENT AND ANY CLAIM THAT THE ROLLS ROYCE COMPANYMADE WOULD BE A MATTER FOR ADJUSTMENT BETWEEN THE BRITISH AND UNITED STATES GOVERNMENTS. BEAVERBROOK IS OF THE OPINION AND HIS ENTIRE STAFF AGREE THAT TO ATTEMPT TO COME TO TERMS NOW WITH THE ROLLS ROYCE COMPANY WOULD LEAD TO ENDLESS NEGOTIATIONS AND YOU WOULD NEVER GET THE ENGINES STARTED. HE IS AUTHORIZED TO ADOPT THIS ABOVE PROCEDURE UNDER THE DEFENCE ACT HERE. THIRTY HE IS CABLING ACCEPTANCE OF THE PROPOSITION TO BUY THERET THREE HUNDRED ROLLS ROYCE ENGINES FROM FORD AND HE ASKED ME TO INQUIRE WHAT WAS BEING DONE ON THE AIRCRAFT THAT WAS TO BE TRADED IN AND SENT TO ENGLAND HE HAS HEARD NOTHINGDEFINITE ON THIS MATTER IF THIS IS NOT CLEAR PLEASE ADVISE TOR CODEROOM 2040 Regraded Unclassified- 13 June 12, 1940 2:45 p.m. RE ALLIED PURCHASING PROGRAM Present: Mr. Young Mr. Foley Mr. Nelson Mr. Cox Mr. Woodring Mr. Compton General Marshall General Moses Major Brooks Admiral Stark Admiral Towers Admiral Furlong Admiral Spear Mrs. Klotz Colonel Burns H.M.Jr: I have got to do some home work. Young: There isn't much home work. H.M.Jr: You mean there is an answer here? Young: From the Army. H.M.Jr: McReynolds 1s going to feel fine about this. "Taber said those interested in national defense were 'very much disappointed' to see an announcement 'evidently from the White House that Harry Hopkins and William H. McReynolds are to be the key men in the defense program.' McReynolds, he added, has been repeatedly characterized by those who have had contact with him as the most incompetent man who has ever come before us representing a department." 14 - 2 - Poor old Mac. I don't know whether he can take it. When he was over here, you see, I always protected him. I don't know who 18 going to protect him now. Young: Would you like the Army original or the original? H.M.Jr: What 16 the difference? Young: This one 1s cleaner. H.M.Jr: I will take this one. Young: That 18 the authentic document. H.M.Jr: How does one do this? "Field Guns and Ammunition, 500 seventy-five millimeter gune with one million two hundred fifty thousand shelle." They have got that, haven't they? Nelson: They didn't get the shells, though. Young: They got 150 rounds per gun, which makes, including the ones they got before, 1,200 rounds. H.M.Jr: How much is that in toto? Young: A million five hundred thousand. They got 150 rounds per gun. Nelson: For 500 guns. H.M.Jr: What 1s 150 times 500? Young: Seventy-five thousand. H.M.Jr: It 1s not enough, 18 it? Young: There he was going on the theory that on the other guns -- H.M.Jr: But that he has got nothing to do with the memorandum the President of the United States signed which said, "Release appropriate." Regraded Unclassified 13 - 3 - Young: I will tell you, I took it up with Major Smith and Major Brooks and did my best to pin Major Smith down as to his definition of appropriateness, and I made quite a row about it over there. H.M.Jr: Well, under this thing, do they give anything at all? How did this thing come into my hands? Young: I gave it to you, from Major Brooks. He brought it over personally. H.M.Jr: Is it from General Marshall? Young: He brought it and it is the official reply to these questions. H.M.Jr: Well, 1a it from General Marshall? Young: Yes, I would certainly say BO. That was the way it was originally sent over. H.M.Jr: Major Brooks? Young: Via Major Brooks. H.M.Jr: And also via Captain Young? Young: With the approval of Colonel Cox. H.M.Jr: June 12, 1940. Let me just see this & minute. "Small Arms and Ammunition. Spare Manufacturing Equipment." I love this thing on the ticker. Airplane items and then the Navy last. It is beautiful. Now, all I am working on 1s these three sheets, 1s that right? Young: Yes. Now, there is one other request that they wanted unofficially and which they didn't feel like asking for outright. This other thing was one of the fifty dive bombers crashed. H.M.Jr: And they want another one? Young: And they want one of the other five. Regraded Unclassified 16 - 4. H.M.Jr: No. Young: Now, they have five extra at Buffalo. H.M.Jr: Ch. Young: Ready to go. H.M.Jr: Oh. Young: In case something happened before they got to Buffalo, 80 they would make sure they would have 50 end they wanted one of the other five. I didn't have the nerve to put it up to Admiral Stark last night. H.M.Jr: It 18 picayune. There is such R. thing 88 being too small. Young: That 1s what I thought about it. H.M.Jr: That 18 picayune stuff. Young: It seemed to me it was. H.M.Jr: Who asked you that? Young: Purvis. H.M.Jr: That 1e getting too small. Now, have they got the copy of these three sheets? What are you furnishing them this afternoon? Young: I got copies of those three sheets and copies of the Army's reply. H.M.Jr: But these three sheets, is everybody going to have one of these this afternoon? Young: Yes. I have A number of copies here. H.M.Jr: All right. (Mr. Woodring, Mr. Compton, Colonel Burns, Admiral Spear, Admiral Furlong, and Mre. Klotz entered the conference.) Regraded Unclassified 17 - 5 - H.M.Jr: Phil, has Secretary Woodring got one of these sheets we are working on? Young: I have one right here. H.M.Jr: And one to Mr. Compton. Woodring: Marshall 1s expected back any minute. He 1e flying back in. He was supposed to be here at two thirty. He will come over right away. H.M.Jr: I see. Well, I wonder if Admiral Stark -- Furlong: Admiral Stark 1s coming. Compton: He 1s on the way over. He was Just following me over in the car and bringing Admiral Towers with him on this aircraft. H.M.Jr: Oh. Do you want to start before Marshall comes? Woodring: Well, it is BO indeterminate as to what time he will get in. H.M.Jr: Well, let's start and then we can see what - maybe we can agree on something. On this sheet which I have here - Phil, give Mrs. Klotz one. Young: All right. Woodring: Say, Colonel Burns, sit over here by me, won't you? H.M.Jr: Does this represent General Marshall's opinion? Burne: Yes, this is what Major Brooks worked out for you last night. H.M.Jr: "Field Guns and Ammunition: Five hundred 75 millimeter guns with 1,250,000 shells." The 500 guns, I believe, were settled yesterday, weren't they? Burns: Yes. 18 - 6 - Woodring: A letter signed and gone. H.M.Jr: That is part of the U. 8. Steel contract. Then I have been reliably informed with that went 75,000 rounds of ammunition. Now, what is the chance of their getting more of the ammunition to go with the seventy-fives? Burne: Well, that has been checked with the general staff, who did not feel that it was justified in making any further releases. (Admiral Stark and Admiral Towers entered the conference.) H.M.Jr: The answer 18, you don't think they have got any more shells. Burns: They have more, yes, sir. of course, they are short now on their requirements. My understanding 1s that when these additional shells are granted, that they will have released twelve hundred rounds for each gun that 18 released. H.M.Jr: Phil, you are my mathematician. Young: Twelve hundred rounds for each gun. That 1s the ammunition and the guns including what was purchased prior to this 500? Burns: That is right. H.M.Jr: You mean taking the 500 -- Young: The original purchase was 395 guns and 8. million rounds of ammunition, 1s that right, and this new purchase 18 500 guns and 150 rounds per gun, 75,000 rounds. Burns: Yes. Young: Rounding out to approximately twelve hundred rounds per gun, total. H.M.Jr: Have they said anything today particularly about ammunition? Are they pressed for that particularly? Regraded Unclassified 19 - 7 - Nelson: No, sir, when we out this down yesterday they had figured out a comolement that they thought they ought to have. The more of that they can get, the better off they are pleased. It 18 a very short item. Young: This million two hundred fifty thousand estimated for 500 guns was on the same proportion as the previous sale of a million rounds for 395 guns. H.M.Jr: Supposing we Dass this and come back. Now, "Any number of 3" anti-aircraft or 37 millimeter anti-tank gune (either from stock or from priorities)." What is the situation on that? Woodring: I will not be able to answer these things. That 18 Marshall's job. H.M.Jr: Would you rather I would skip to the Navy? Woodring: I think it would be better until he comes. H.M.Jr: All right. Woodring: Definitely. H.K.Jr: They told me that he would be in - I under- stood him to say something around two o'clock and that is why I said it at three, you see. Woodring: Well, the last I checked he was supposed to land at two thirty, and he hadn't. H.M.Jr: Supposing I shift and go to Navy. Here he 18. (General Marshall entered the conference.) H.M.Jr: I wonder if the General has one - well, you have got one, Burns. Burns: Yes, sir, he has got the same thing here. Marshall: That is what I have been doing, going over this before I came. Regraded Unclassified 20 - 8 - H.M.Jr: All we did, I was talking about the extra 500 you BO graciously released yesterday and about a million and B. quarter rounds, and at the moment I have passed that because I Just don't know how badly they need it. Now, "Any number of 3" anti-aircraft or 37 millimeter anti-tank gune." Is there any chance of getting those? Marshall: None whatever. H.M.Jr: No chance on those at all? Marshall: Our situation there 1s very tragic. It would just be suicide. H.M.Jr: You feel it would be suicide on more shells for the 75 millimeters? Marshall: Yes. H.M.Jr: Really? Marshall: Yes, sir. I think our hazard there 1a terrific. If we go beyond the point we have, the consummation of shells being as great as it is, and our present situation. in heavy gun powder, you see we have no recovery there. We have 80 little chance of recovery there. It isn't like heavy things. I don't think you can do that without imperiling our own situation. H.M.Jr: Now, on the small arms and ammunition, five hundred thousand of the Lee Enfield rifles and ammunition for them. What are the chances on that? Marshall: You might release the five hundred thousand rifles, but you are taking a hazard there. You are teking quite & hazard. On the ammunition, I do not think we can possibly release any more without directly imperiling our own defense. H.M.Jr: But you could release some more Enfields? Regraded Unclassified 21 - 9 - Marshall: We could release some more Enfields. I would rather not release five hundred thousand. H.M.Jr: I think that 18 too large. I don't know how many we gave them before. Young: Five hundred thousand. H.M.Jr: And they are asking for another five hundred thousand now. Marahall: Yes, but those rifles, you must understand, are no good to them whatever unless they have the ammunition and we cannot give them the ammunition. H.M.Jr: That 1e the tight situation. Marshell: Very tight and a very serious situation. H.M.Jr: And the rifles are no good without the ammunition? Marshall: Not a bit. H.M.Jr: Nelson, you have been working on ammunition, that ball ammunition, haven't you? Have you got anything? Nelson: Haven't found any solution for it at all, sir. They are working now with Remington to try to get additional facilities thrown in as fast as they can on the 30's. Marshall: But you have got A problem of powder, and even if you have the facilities - if we had any powder, we could run un to eight hundred thousand rounds R day of one kind or another, but you have got to have the things where we can make 1t. H.M.Jr: Are you short on the bowder? Marshall: Yes, sir. Burns: This 1s small arms powder. It is different than cannon powder. H.M.Jr! Is anything being done to -- Regraded Unclassified 22 - 10 - Marshall: We are asking for thirty million dollars for B. powder plant. H.M.Jr: You have got to wait for that? Marshall: Yes, sir, we have got to wait for it. We can't place an order over and above the money that is now in the 1941 augmented budget, not the recent Presidential message. We cen't place an order for twenty-two months. That 1a very serious. H.M.Jr: Has the Navy got any -- could they help out with the ammunition for the Enfield rifles? Furlong: We don't use that rifle. We could get 35,000 Springfield rifles, if they are interested in those. H.M.Jr: They will take anything. Got any ammunition to go with them? Furlong: I don't know of any ammunition. I will look into that. Marshall: I think -- Burns: They get their ammunition from part of the Army. Compton: We get all our small arms from the Army. H.M.Jr: You have got 35,000 Springfield, did you say? Furlong: Springfield. U. 8. Springfield rifles, 35,000 of them. H.M.Jr: Have you got any ammunition to go with it? Furlong: I would have to look into that. I think not, but I will look into it. Woodring: Would they have ammunition over there that would fit the -- Burns: Yes, it is the same ammunition. Regraded Unclassified 23 - 11 - Furlong: Same as the Enfield. Burns: That 1s right. Woodring: I meant over in England or France. Marshall: Oh no. Theirs 1s 303 and ours 1s 30. H.M.Jr: Could I have an answer tomorrow morning? Compton: Oh yes, we will get an answer right away. Furlong: Yes. H.M.Jr: Not doing 80 well today. "Five thousand Thompson sub-machine guns or any part thereof with one million rounds of ammunition (from Army or Navy)." You don't have Thompsons, do you? Burns: Yes, sir. Marshall: We have a few of them. We have got a shortage of 1,200 right now. H.M.Jr: You got eleven back. Marshall: We needed those. Woodring: What became of the Thompson machine guns everybody was trying to peddle around here that the Chase National had & mortgage on in New York? That should be looked into. H.M.Jr: Have they got a mortgage on some? Woodring: Yes. They tried to sell them. H.M.Jr: Nelson -- Woodring: The lobbyist in Washington was around trying to sell them here a year ago. Nelson: Yes, sir, I will look into that. H.M.Jr: Did we get any sub-machine guns for the Navy? Spear: We offered 426. That was all we had. 24 - 12 - H.M. Did we take them? Spear: Not yet, sir. There has been & complication on the transport, I believe. Young: No legal release from the Army yet. Spear: They are A recent requirement. We are ready to transfer them, but the difficulties -- (General Moses entered the conference.) Stark: I think it 1s a pretty good plan for us to hold onto that 26 anyway. Spear: You just offered what was released. Furlong: I said we had 426. H.M.Jr: Is that legal thing - can't that be - is that impossible to jump over that? If this bill passes, will that help any? Foley: That will take care of it. H.M.Jr: That will take care of it? Foley: Yes. Furlong: These were bought since 1919. They will have to be declared surplus. Compton: That could be done administratively. Furlong: Yes. H.M.Jr: What? Compton: We can declare them surplus administratively. We need no law for that. So we can cover that AB soon as we get the law which will permit us to sell these gune which were purchased subsequent to 1919. H.M.Jr: So the minute it Dasses the House -- Compton: We can do administratively everything else. Regraded Unclassified - 13 - 25 Woodring: Why can't you transfer them to the Army like you did the others? Spear: The Army can't get rid of them. Compton: You can't get rid of them on account of that 1919 thing. H.M.Jr: So as soon as that passes, you transfer them to the Army? Compton: We can't give you 426. We can give you about 400 because we have had to send some over to Paris already. H.M.Jr: Four hundred, say. Compton: Four hundred, about four hundred. Stark: In that neighborhood. Furlong: That 1s right. Stark: Close to it. H.M.Jr: Now, here is something, I think - I have seen it on the ticker. I gather it has already been announced. "Spare Manufacturing Equipment: For nitrocellulose powder manufacture, for ammonia oxidation, for small arms manu- facture." I gather you are going to be able to do that, aren't you? Burns: We are quite sure we can and we are working on it right now, with as high pressure as we can put on it. H.M.Jr: When do you think you will come through with that? Burns: Well, I don't know. Almost any hour, I would say. We ought to have it worked out by tomorrow. H.M.Jr: But that 1s possible, all of that? Burns: of course, you appreciate that that isn't 80 pressing because what we have got to 26 - 14 - do 18 arrange with the DuPont Company and arrange with the Vinchester Arms Company and they are creating their plant now and they won't really need this machinery for some little time to come. H.M.Jr: It is pressing in this way, that when they heard last night that they were getting these additional 500 seventy-five millimeters, I don't know why, but nothing, they said, that we had done up to date made the hit that that second 500 did. Burns: I understand that. H.M.Jr: So I think anything that we can tell them every day or two, anything, carrying out what the President has in mind -- I mean, to tell them, "Well now, this 18 clear," and then in & day or two something else 1s clear, and that 1s what he is anxious to do, give them a little encouragement, 80 if you could, even though -- Burne: We are pressing it 88 hard as we can. I am quite sure that it ie going to be worked out satisfactorily. H.M.Jr: Thank you. "Nitrocellulose Powder: Any further quantity of nitrocellulose powder." Burns: Well, they have drained the well about as dry as they can drain it on that powder. H.M.Jr: Bure? Burns: That is my understanding. Moses: We have two and 8 half million pounds on that from these 155 guns and charges. Marshall: I didn't understand. Moses: Two million five hundred thousand pounds, a hundred thousand charges for the 155 millimeter guns. They are already in Regraded Unclassified 27 - 15 - charges, been loaded. Marshall: What about them? Moses: We can release them. Marshal 1: That has not yet been released? Moses: Yes, not yet been released. H.M.Jr: He ought to get promoted. Two and a half million you can give us? Moses: Yes, sir. Burns: I thought you were asking for more than two and a half million, Mr. Secretary. H.M.Jr: I have Just got my hand out. I will take anything. Marshall: He says he can release a hundred thousand charges, meaning, a8 I take it, two million five hundred thousand pounds. Moses: That 1a right. H.M.Jr: Is that all right with you? Woodring: Yes. H.M.Jr: Can we consider that done, then? Woodring: Sure. H.M.Jr: This -- Marshall: That 18 all right, is 1t? Moses: Yes, sir. That 18 all right. I went into that early this morning. H.M.Jr: Can we consider that sold? Marshall: Yes, sir. Moses: You can put that in as deteriorated, not surplus. 28 - 16 - H.M.Jr: That 18 the first thing I have gotten today. Thank you, General. Now, who do we -- Woodring: You have got the Enfields, some of them. H.M.Jr: Not yet, have I? Woodring: Some. Marshall: But he needs ammunition. H.M.Jr: This 16, I think -- Furlong: How about those four hundred, do you want those? H.M.Jr: Four hundred what? Furlong: Thompson sub-machine guns- H.M.Jr: I thought I had those. Furlong: But I haven't given any orders about them yet. H.M.Jr: Sure, I'd love to have them, crazy to get them and some ammunition with them. Furlong: Yes. H.M.Jr: Good. That is two things we have got. Furlong: They are no use unless they have the ammunition. H.M.Jr: That 1s what the President said about those fifty bombers. Now, airplanes. "Ninety-three Northrup Bombers with equipment and the following bombs: 30 pound, 83,700; 100 pound, 58,590." Marshal: On the planes themselves, I think they are - they were all stripped of armor, you 886. They were using them for training. The armor and radio equipment has been out back and the planes have been tested and they were all to be - they have been flown Regraded Unclassified 23 - 17 - into the East already and they were to be ready to turn over, serviced, and in shape for business on Friday morning, the last one of them. The issue there 18 one of bombs. H.M.Jr: Well, oardon me, General. This hasn't been cleared. I don't understand that Secretary Woodring has ever cleared it. Woodring: Ninety-three? H.M.Jr: Yes. Woodring: Signed day before yesterday, I think it was, wasn't it? H.M.Jr: I don't know that. Woodring: The five hundred were signed yesterday. Marshall: Where the problem is about the cuestion of bombs, we have found out since that conversation we had the other night that they have an identical rack to the Navy and then also that the Navy had 8. certain number of truly obsolete bomba, of which the thirty pound they could transfer over to us 5,343 and of the hundred pound they could transfer to us 565. Now, during my absence yesterday morning or this morning, I don't know which, there WAB a certain number, 6,000 thirty pound bombe of the Army and 3,000 of the one hundred nound bombs of the Army were out into release. So far 88 I am personally concerned, I think that 1e a grave mistake. H.M.Jer You mean too little? Marshall: To release any. The deficiency 1s BO complete there with us and the length of time in getting anything else 18 so great it is very much like B. father that pledges his all to some friend and leaves the family destitute. I don't see how we can do it. H.M.Jr: Now, about this order for thirty pound bombs and hundred pound bombs and 500 and 1,000 that was given yesterday to U. 8. Steel -- Regraded Unclassified 30 - 18 - Marshall: Yes, but when do we get them? H.M.Jr: That, I don't know. Your assistants could tell you. Burns: It would take better than a year. Marshall: So far as I am concerned, I think that 16 a very grave mistake. H.M.Jr: Well, there 1s no use trying -- Marshall: With our interest - considering our interest, I don't see how we dare do that. of course, it would be a national tragedy if we got caught. H.M.Jr: Then there would be no use turning over the -- Marshall: But we have got some bombs that can go with them for immediate use. There are 5,343 of one kind alone. Furlong: Navy bombs. Marshall: We dug out obsolete Navy bombs. H.M.Jr: In the thirty pounders? Marshall: Five thousand three hundred forty-three. It shows there on the right hand margin. That, added - they added six thousand Army bombs to that. Five thousand three hundred forty- three Navy that are obsolete and 565 of the hundred. That makes almost 6,000 bombs with 93 planes. H.M.Jr: How much are they offering? Young: Six thousand in thirty bound bombs. Marshall: There was an Army contribution there. They figured it was 6,000 of the 30 pound and 3,000 of the 100 pound. That 18 what I say is a grave mistake to release. H.M.Jr: I am sorry, General. You will have to go with me once more. I have here 11,343 thirty pound bombs. 31 - 19 - Marshall: Yes. Now, the explanatory notes 1a the 5,343, that 16 all right. They are obsolete bombs. But they have added 6,000 Army bomba to that in my absence here. I don't know how that came about. That I don't think should be done. The same thing has occurred here. There are 565 hundred pound bombs that we can turn over to them but they have added to that 3,000 of our homos, I don't think that should be done. H.M.Jr: Do you feel very strongly about that? Marshall: Very strongly. I think it 18 a very serious thing. There 18 no explanation under Heaven with the limited supply we have of those bombs if anything happens. When we do that, you are saying that we are not going to be in any trouble for R year. H.M.Jr: I can't say that. Marshall: None of us can say that, end I think it would be a national tragedy if we got involved in that. However much we want to do it, our deficiency 1s BO serious that it's going to be a national thing if we get mobilized. H.M.Jr: You don't mind my again asking - it seeme unbelievable to me that 1t should take a year. Marshall: I have found out some of the things about it. In the first place, the law requires us to go to the lowest bidder, that has been the requirement. We went to the Bethlehem plant. Their machinery was not on a solid enough foundation for these bombs, and it has been breaking the oil lines and doing other things BO that they have been stopped and stopped again trying to carry it out. It WAB World War machinery and it is all centered in one plant. That got us into our first serious delay in connection with the thing and they are etill struggling with it, H.M.Jr: The noint I am making, General, this contract - I believe it was signed yesterday with U. S. Steel - which includes hundred nound bomba and Regraded Unclassified 32 - 20 - hundred pound bombs, that was signed yesterday. How long before U. 8. Steel Corporation can give it to us? Burns: A year was my impression, but I don't think you could get bombs from the U. S. Steel corporation in a loaded state in less than A year. H.M.Jr: Let's do it this way. In view of what General Marshall says, we will accept the 5,343 Navy bombs, the 565 Army, and then I am going to ask you gentlemen to survey the situation with U.S. Steel, that 18 fair, isn't it? Marshall: Yes, sir. That 1s all right. H.M.Jr: Is that all right? Marshall: Yes, sir. H.M.Jr: In view of what General Marshall said - General Marshall has told me - I have never once pressed you, have I? Not when you and I were together. Is that right? Marshall: That 18 right. H.M.Jr: You and I have never differed once, have we? Foley: Insofar as the public bidding statute 18 concerned, you can put an upset date for delivery there, can't you, General? H.M.Jr: This 18 an old contract. Right? The Bethlehem contract is an old contract. Burns: Yes, sir. The one he 1s talking about 1e an old contract. H.M.Jr: That is my understanding. I just want to go back once more. May I go back once more, Harry? Do I understand the contract for the 93 bombers has been finished? Woodring: That 18 my understanding. Marshall: Yes. Regraded Unclassified 33 - 21 - H.M.Jr: Do you know, General Moses? Moses: Yes, sir. Marshall: They got involved between two plants. The plant that they wanted to take it in didn't want to take it. H.M.Jr: But what I am getting at, because General Watson has asked me, we don't have to bother the President with this, 1s that right? He has asked me two or three times in view of your memorandum. Woodring: It would be just a question of putting it out between the Steel Company and United States. H.M.Jr: Your memorandum of Saturday - it 1e right here. Woodring: Yes. H.M.Jr: I told General Watson I thought you and I could work out something without bothering the President. Woodring: Well, let me see that. Moses: These bombs are already on their way. (Major Brooks entered the conference.) H.M.Jr: But we don't have to bother him with the bombers or the bombs? Woodring: No. Marshall: The contract for the 93 planes 1e being drawn right now, and they are trying to get Douglas to sign it. H.M.Jr: Phil, get the Major a chair, will you, please? Marshall: North American wouldn't go through with it and we turned to Douglas and are trying to get him to sign it right now, 80 insofar AB our process of releasing -- Regraded Unclassified 34 - 22 - K.M.Jr: But we don't have to bother the White House on the bombers. lie don't have to talk to them about bombe, but I AM not Noing To prese you today. Okay? Karshallt Yes. 1.1.Jr: Now the next thing, "Ex Priorities: 500 North American Harvard Trainers for Cannda." I take it they want oriorities a ain. Brooks: They wented our priorities over our trainers, We are short trainers now, And the British Government had guaranteed North American an extra million dollars to speed un on their deliveries. When they speeded un on their deliveries, the British backed out, I under- stand, on the contract and now they are negotisting to see if they can't take care of it. I find from ir. Helson -I'S "11 right on that now. Nelson: Well, they are on the way to being all right, Mr. Secretary. There Was e misunderstanding Wetween Sir Henry Self and North American. Sir Menry Self thought he was buying an additional 125 planes. North American thought they were accepting the money just to speed un production. Now, in my office they arrived at an understanding. North American agreed to take 50 more planes instead of 125, 60 they will have it all straightened out this morning. Some of those 500. at least 50 of them, Are arrenged, if they can get priority on the engine, which they think they can ENT. Now they are going to negotiate for more tomorrow after they talk it over with the Army. B.L.Jr: Well, does that wash out this request for 500 -- Nelson: No, sir, it does not wash out the request for the 500. It washes out definitely only 50 0: the 500. H.K.Jr: Is there any chance, General, to give them any priority on the North American? Regraded Unclassified 35 - 23 - Marshall: We have 1,883 planes available for training 4,351 pilote. H.M.Jr: Would you say that again? Marshall: We have now 1,883 planes available for training 4,351 pilots and student pilots. To turn over any of these planes AB they become available on Procurement schedule would aggravate a serious deficiency and may seriously jeopardize the national defense. I Am reading from the date they dug out of the Air Corps in relation to this particular issue. We are behind on planes for the ordinary training of pilots, just as we are behind on planes in the squadrons with the training of those that have graduated and if we take away those planes, we just simply out a check on the development of this air force of ours un to the augmented state provided for on July lst of 1939. Now, whether or not we can afford to risk such A delay, that 1s a question of national policy. I do not think we can. H.M.Jr: I don't either. Marshall: Especially AB we are going into & tremendously increased program. Where this is 2,400 bilots in two years - and we are going into 7,000 pilots a year -- H.M.Jr: I agree with you. Marchall: Anything you do makes it worse and worse, progressively 80. H.K.Jr: Now, the four Allison engines which they have been crying about. Marshall: Well, we have turned over one. As it BAYS there, the Allison repairs are behind the schedule and additional engines will be furnished as soon as they can be produced, but until they turn them out we haven't the engine. H.M.Jr: And the six Pratt & Whitney, none will be in existence for several months. Regraded Unclassified 36 - 24 - Marshall: Yes. We have promised the engines when they are turned out, but they haven't turned them out. H.M.Jr: They turned out four last week and five the week before. Marshall: You mean that the Allies did not get? H.M.Jr: No, the total production of Allison -- Marshall: Of double Wasps? H.M.Jr: Called "C". They made four engines last week and the week before they made five, I mean produced. Marshall: What about that, Brooks? Brooks: Those all go to the Allies, and we don't get any. H.M.Jr: What is the "0" or "F" engine they want? Marshall: We are receiving none. Brooks: No. Young: I don't know. H.M.Jr: You had better find out. There is a "0" engine and an "F" engine. The "0" engine 18 1,050 horse power and the "F" engine 1s 1,150. Right? Towers: Approximately. H.M.Jr: Supposedly, and I think what they are orying about is the "C" engine to go into their ships at Curtiss, the P-40. Young: I will find out. H.M.Jr: And the six Pratt & Whitney engines, there are none in existence. Brooks: No, and will not be for several months. H.M.Jr: Don't bother, Phil. You can find out later. 37 25 I I Now, this is for the Navy. If the Army wants to offer anything, I will be glad to take it, Harry. Woodring: Well, what about the 80 planes, 18 that the same situation? Marshall: I AM trying to check. They have changed the designation. There are two types of planes, 93 A-17-A's and then 83 of another type. Woodring: That 80 was -- Young: It is the A-17. Marshall: They haven't recuested any of those, have they? H.M.Jr: We haven't officially told them about that. We said we hoped to get it. We haven't told them officially. Woodring: I should think it would be the easiest thing we could give. I don't know about the bombs on them. Marshall: There are no bombs for it. H.M.Jr: How about the bombs? Marshall: We have none. We have nothing on the bomb end. This, I think, cleans house on the Navy obsolete -- Thompson: You have got all ours that we have, Mr. Secretary. H.M.Jr: Then the thing 1s to ask the Allies whether they want those 80 ships bombless. Woodring: The only difference 1e that the 93 we are giving has the retractable landing gear and the 80 hasn't. H.M.Jr: The question is, can they use those 80 ships without any bombs. Stark: General, those 5,300 bombs, 30 pounders, are the same AB your types. You are sure you don't need those? Regraded Unclassified 38 - 26 - Woodring: What 1a 1s? Stark: The 5,300 30 pound bombs. Marshall: We certainly could use those, but I am not making a claim on the transfer of what you call a surplus bomb of yours. In view of the dire need, I am not trying to short circuit that. H.M.Jr: Now, Admiral, don't take this out of my mouth now that I've got it. Stark: I just want to make sure it is an Army bomb and the same thing they are keeping, and I think they should have first call on them if they feel they need them. Marshall: Yours are B. much older bomb than ours. H.M.Jr: He passed this with his eyes open. His eyes were open. Don't help him. He doesn't need any magnifying glass. I have got one here. Stark: Well, to keep the records straight -- H.M.Jr: Well, he gave us those. Are you satisfied? Is it all right? You made your gesture. Stark: Oh yes, it is all right 88 far B.B we are concerned. Compton: We will have to get them replaced, but we can get them replaced, I think, in time. H.M.Jr: I would be curious to Bee how long it takes the Navy to get them replaced. Furlong: Colonel Burns 18 getting them replaced for the Navy. Burns: That 18 part of the contract that is being negotiated right now. Furlong: That 18 the thousand we are talking about. Burns: That 18 right. H.M.Jr: You mean with U. 8. Steel? Regraded Unclassified 39 - 27 - Furlong: Yes, sir. H.N.Jr: All right. Compton: Our Navy planes, Mr. Secretary -- H.M.Jr: I am surprised At you, Admiral. Compton: Our Navy planes without bombs are Just 88 useless AB the Army planes without bombs. H.M.Jr: I was singing your praises over at the White House and everytning. Stark: We are replacing them with thousand pound bombs. We are not replacing the thirty pounders. H.M.Jr: I helped you get those in that list. I called up Stettinius and spoke to you and spoke to Colonel Burne and everybody else. Stark: I was very grateful. H.M.Jr: They stuck them in. How many did you get? I told them to give you 150% of what you gave up. Stark: One thousand. Furlong: They were Just giving us penny for penny. Burns: We have got five million dollars worth of bombs in that U. S. Steel appropriation. H.M.Jr: You can get more bombs than that if you want more than a thousand. Stark: It 18 a dive bomb. I imagine that is being worked out. Burns: That 1s being worked out in the contract today. Stark: It 18 satisfactory. H.M.Jr: Now, I hate to - 48 destroyers. I know what the answer 1e. Regraded Unclassified 40 - 28 - Compton: The only trouble there 18 that & naval war has got to be fought with what ships we have. They are not replacable. You can replace bombs. We can't replace destroyers in two years, three years. H.M.Jr: I know it. I didn't make up the list. "Equipment (Torpedoes, War Heade, Depth Bombs, Gune and Ammunition) for the priority granted on twenty motor torpedo boats." How about that? Comoton: We are prepared to give you the torpedoes for those 20 - British type toroedo boats. We can give you not only enough to equip the boats with 8. ready supply, but some reserve supply. Stark: A total of 80. Compton: Eighty torpedoes for 20 boats. H.M.Jr: Okay. Anything else? 11 Stark: The guns and ammunition, Mr. Secretary, have already been released to them on another release. That is in production, isn't it, Furlong? Furlong: In other words, some time ago we gave our priorities for Colt guns to the British. The Army and Navy together released priorities to the Allies 80 that they have to get them themselves from Colt for these boats. H.M.Jr: How about that last request, "Any number of boats similar in type to the motor torpedo boats for which A priority of 20 has already been granted (E.G. Moscuito Boats) "? Have you got anything else? They are really quite in earnest about that. Spear: Mr. Secretary, I have repeated several times that Mr. Ballantyne has cabled the Admiralty permission to take these twenty boats and yet there 1e no official request before the Navy, at least, for these boats. H.M.Jr: Okay. Purvis 1s down the hall waiting until this meeting 1e over. I will tell him. Regraded Unclassified - 29 - Counton: You understand, Mr. Secretary, the 20 bonts aren't completed yet. H.E.Jr: They start in June, don't they? Conuton: Those start in July and they will 80 right through until September and October. H.M.Jr: But they will take anything else that floats that can help them defend the channel. Have you got anything else? Counton: That 18 all we have. H.M.Jr: Nothing else? Compton: Well, we have some experimental boats that were under the competitive design. There again we have got to develop A tactionl use for these boats. We really ought to keep at least - of the 24 boate from the Electric Boat Company, we ought to keep eight because the tactical - I know, four 1s the decision. We are committed to that and you can't develop a tactical use for A submarine chaser, for instance, without three boats. You have got to get a three point f1x before you find out where a submarine 18, and the development of tactical uses for these boats and the training of the personnel 1s a long time proposition, and we are making ouite a sacrifice when we only keep two. Well, we are keeping two of each type, you see, Mr. Secretary. Of those 24 boats, you have motor torpedo boats and submarine chasers. Each type of boat has a different tactical mission and with two of them it 1s going to be almost impossible to develon tactical use, but we are committed to that, but that is about as far as we can go, I think. H.X.Jr: I FUB sincere when I say I appreciate what you gentlemen are doing. I know we are scraping bottom. I guees that 18 all, Harry, unless there 18 something you want to say. Compton, anything you want to offer? Compton: That is all I have, Xn Secretary. Regraded Unclassified 12 - 30 - H.M.Jr: General Marshall? Furlong: oh, I will tell you -- Stark: I have got something to offer. It may be pure rumor, but it would make anybody mad if it isn't. Just 8.8 I opened the door to leave, an absolutely unconfirmed United Press reporter said a revolution had broken out in Italy. H.M.Jr: Too good to be true. Well, something has happened, because -- Stark: Well, it wouldn't be surprising. We had talked that situation over. That may be totally false, but that is the only thing I have got to offer. H.M.Jr: Admiral, something has happened, because the New York stock market went up 5* points today and there is no reason for it. Somebody has got some good news somewhere. There 18 some news somewhere that out that market up 54 points. Woodring: If they just do what I have been advocating for a week - I am not a military strategist - but if they just take what they have got in planes in England and France and bomb Hell out of Turin and Florence and Rome and Milan, you would have a revolution there and those Italiane would run clear to the Adriatic, they never would stop. H.M.Jr: On the ticker they said they were bombing Turin. Woodring: Well, that wasn't very effective, was it? Compton: It didn't last long. H.M.Jr: Well, I can't tell you how much I appreciate your patience. Furlong: You wanted to know. I have got some more guns here if you want them. H.M.Jr: Thank you all, gentlemen. Regraded Unclassified 43 - 31 - Furlong: I have some other things here if you want them. H.M.Jr: That is enough. Put up your Army and go. Compton: We have got some more guns. H.M.Jr: That 18 all right. Furlong: It's not very much, but he might be interested in those things. H.M.Jr: He will take anything. Go ahead. Furlong: We have 500 Smith & Wesson 38 calibre revolvers. H.M.Jr: We will take them. Furlong: Yes, and we can give you some ammunition for them. H.M.Jr: Wonderful. Young: How much? (Mr. Woodring, General Marshall, Admiral Towers, Colonel Burns, Major Brooks and General Moses left the conference.) Furlong: I will have to send that over, but we can give you plenty of ammunition for them. Now, we have some 3', 23 old fashioned field guns. I don't know whether they would want them. H.M.Jr: Three inch -- Furlong: Twenty-three calibre. Old landing force guns. I don't think it would be worth putting them on the ship. Compton: Wouldn't that be good for an anti-tank situation, behind the barricade in the streets of Paris? Furlong: I don't think there 1s any ammunition. H.M.Jr: There is no ammunition. What else have you got? Regraded Unclassified - 32 - 44 Furlong: Well, there is a thing I would like to speak of and that 1s the Dutch wanted some old guns for the Dutch East Indies. H.M.Jr: Yes. Furlong: And I don't know whether we ought to give them to them or not. We have some old guns, 4" and 3". H.M.Jr: Could that go to this committee of Admiral Spear and Colonel Burns and Mr. Nelson and let them chew on it? Nelson: That is where it should come and we will take it up with the State Department. Furlong: I told them to go to that committee. H.M.Jr: Let them go to that committee. Furlong: I have already told them to go to that committee. H.M.Jr: Let them emasculate it. Anything else? Furlong: No, that 1s all. Stark: Are you dry now? Furlong: Well, I don't know. I look at this thing differently from some people. I would like to see those people do all the fighting over there and give them everything. H.K.Jr: You and me both. I have said that for A year and a half, but I was kind of lonesome A year and a half ago. I will never forget that I keep repeating what Captain Kraus - how he saved my life a year and a half ago. Furlong: Those rifles, I don't know whether they can use the Springfield rifles or not, but we have got that -- Compton: They are A. darned good rifle. That 18 the rifle we used in the World War. H.M.Jr: Have you got ammunition with it? Regraded Unclassified 45 - 33 - Compton: It must be obtainable in the country. Furlong: I am going to look into that ammunition part. H.M.Jr: Any other good ideas? Stark: Keep cheerful, that 18 all. H.M.Jr: Well, we are cheerful around here, definitely. Thank you all. 45-A June 12, 1940 the mr. Doctor My dear Mr. Hoover: given 9/19/90 This will acknowledge receipt of your letter of June 6th giving further informati with respect to funds turned over by the German Consulate General in New York to the Industrial Trust Company of Philadelphia, and your letter of June 7th reporting fully on conditions at the Allison plant. I appreciate your courtesy in furnishing no with this material. Yours sincerely, (Signed) H..Morgenthau. ST Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, Washington, D.C. Regraded Unclassified 45-B June 12, 1940 My dear Mr. Noover: This will acknowledge receipt of your letter of June 6th giving further information with respect to funds turned over by the German Consulate General in New York to the Industrial Trust Company of Philadelphia, and your letter of June 7th reporting fully on conditions at the Allison plant. I appreciate your courtesy in furnishing no with this material. Yours sincerely, (Signed) H. Morgesthau, Jr. Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, Washington, D.C. Regraded Unclassified 45-C June 12, 1940 My dear Mr. Noover: This will acknowledge reseipt of your letter of June 6th giving further information with respect to funds turned over by the German Consulate General in New York to the Industrial Trust Company of Philadelphia, and your letter of June 7th reporting fully on conditions at the Allison plant. I appreciate your courtesy in furnishing me with this material. Yours sincerely, (Signed) E. Morgestion Jr. Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, Washington, D.C. Regraded Unclassified JOHN EDGAR HOOVER DIRECTOR Federal Bureau of Investigation United States Department of Bustice Bashington, D. PERSONAL AND CONFIDENTIAL June 7, 1940 The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Reference is made to your telephonic conversation with me of May 27, 1940, relative to conditions in the Allison Engi- neering Company Division, General Motors Corporation, Speedway City, Indiana. I have instructed that an appropriate investigation be conducted concerning this matter, in connection with which in- formation has been obtained that the Allison Engineering Company is now producing one of the special air-cooled motors a. day, this representing the maximum of production to date. Officials of the Allison Engineering Company have indicated, according to available information, that recent expansion developments be- came necessary to meet the greatly increased demands of the United States Army Air Corps and that increased production of the motor has been impaired to date by the necessity of ex- pansion with regard to plant facilities, tools, machinery, et cetera. The Allison Engineering Company Division, General Motors Corporation, consists at this time of three plants, all located in Speedway City, Indiana, and designated by the company as Plants 1, 2, and 3. Plant 1 was the only one in existence at the time the company was purchased by the General Motors Corpo- ration during 1929. It is engaged solely in the production of bearings, about eight per cent of which are used by the com- pany in the production of airplane motors, the remainder being sold to outside purchasers. Plant 2 was constructed by the General Motors Corporation in 1936, and an addition thereto was constructed during 1938. Plant 2 formerly housed the main offices of the company, as well as facilities for the pro- duction, development, and testing of airplane motors. Since the recent completion of Plant 3, however, Plant 2 is used only in connection with developing and testing now motors and The Honorable The Secretary of the Treasury Page 2 for the purpose of housing the engineering and experimental do- partments. Plant 3, recently completed, presently houses all facilities for producing the airplane motors manufactured by the company, and also the main offices of the company. At the present time, 1,750 men are employed in Plant 3, operating on three shifts a day with the exception of the assembly de- partment, which is now operating only two shifts a day due to Lack of space and facilities for immediate expansion. New employees are now being hired at Plant 3 at the rate of approximately twenty-five a day. Mr. Otto T. Kreusser, General Manager of the Allison Engineering Company, has indicated that he expects production to be increased within the next several weeks to a maximum of two complete airplane motors a day. It is further indicated that following the completion of new facilities now under con- struction, production will gradually be increased to a contem- plated naximum of twenty complete motors a day. It is stated that the new facilities referred to will probably be completed on or before July, 1940, and the above mentioned maximum of twenty motors a day should be reached on or before November 1, 1940. The special air-cooled motor being developed by the Allison Engineering Company at this time is composed of two thousand individual parts. A number of the parts are constructed by the Allison Engineering Company itself and some parts are constructed by other divisions of the General Motors Corpo- ration. Those parts constructed by the Allison Engineering Company are presently being produced in sufficient quantity to permit the production of five complete motors a day. The Cadillac Division of General Motors now has one thousand men employed in the construction of parts for Allison motors and, in addition thereto, the A-C Division of General Motors has four hundred men employed in the production of parts for this engine. The Aluminum Casting Division of General Motors has 1,250 men presently engaged in producing parts for Allison motors. Regraded Unclassified The Honorable The Secretary of the Treasury Page 3 From information which I have obtained to date, it seems that all necessary parts are now being produced in sufficient quantity to permit the completion of a larger number of motors a day, although the assembly department 1a assembling only one complete motor each day, as indicated above. I have obtained information that Mr. Kreusser and other officials have indicated this situation is caused by lack of adequato Cacilities for the assembly department. It is reported that new portions of Plant 3 presently under construction consist of B. very large addition to be used exclusively for increased assembly department facilities. Additions are also being created for a number of torque rooms for use in testing each individual motor following final assembly. Officials of the company have stated that until the assembly portion of the plant is completed and all of the necessary additional equip- ment installed, production cannot be stepped up to the esti- mated maximum of twenty motors & day. According to information which I have receiVed, Mr. Kreusser, on May 28, 1940, was overheard to make a statement to the effect that "they have been putting on the pressure," it being deduced from this statement and the context of the accompanying conversation that he was referring to Governmental authorities. Mr. Kreusser, upon this occasion, stated that Governmental authorities, whom he did not name, have demanded that the Allison Engineering Company develop and produce an exporimental motor within a six-month period and then in- mediately deliver one thousand of such motors. Mr. Kreusser has complained that demands of this kind cannot be complied with, inasmuch as the shops and machinery have to be especial- ly tooled for the new types of work necessitated in pro- ducing the new motors. The experimental motor mentioned by Mr. Kreusser apparently relates to an entirely new engine, containing numerous improvements over the engines presently being produced and complying in every respect with new Army specifications. Mr. Kreusser has indicated that the Allison Engineering Company has been ungaged for some time in ex- perimenting with and developing the new motor. Regraded Unclassified 45-G The Honorable The Secretary of the Treasury Page 4 I have ascertained that Mr. Ronald K. Evans, Vice President of the General Motors Corporation and apparently responsible directly to Mr. William S. Knudsen, President thereof, acts as Mr. Kreusser's immediate superior. It is reported that Mr. Evans spends at least one or two days each week at the Allison plants, it being indicated that he visited Plant 1 and conferred with Mr. Kreusser on May 28, 1940. Available information indicates that Mr. Evans is about fifty years of age and is married, having one daughter, Catherine. His wife's name is Gladys Evans. Mr. Evans has been connected with the General Motors Corporation for seventeen years, thirteen of which were spent in Europe. Available information further indicates that Mr. Evans pro- ceeded to the United States from Wresbaden, Germany, during October, 1936, having previously been connected with the Adam Opel A. G., Russelshiem, Germany, a subsidiary of the General Motors Corporation and manufacturers of Opel care and Blitz trucks. Mr. Evans now resides at 31615 Evergreen Road, Birmingham, Michigan. He owns a thirty-acre farm, purchased in 1936 for $30,000 cash and presently valued at approximately $70,000. He also owns a larger farm, consisting of approximately three hundred and twenty acres, located north of Birmingham, Michigan. Mr. Evans formerly served as Vice President of the Diesel Division of the General Motors Corporation, being in charge of export activities. According to available information, Mr. Evans is apparently connected in some capacity at the present time with the Guaranty Trust Company, 140 Broadway, New York City. Additional information concerning this individual will be furnished you subsequently. Mr. Otto T. Kreusser, General Manager of the Alli- son Engineering Company Division, General Motors Corporation, Speedway City, Indians, was born in 1897 in New York City. He served as an engineer with the United States Army during the World War, being stationed at Dayton, Ohio. Mr. Kreusser has been employed by the General Motors Corporation for & period of seventeen years, having spent approximately ten years of this period at the General Motors Proving Grounds, Regraded Unclassified H The Honorable The Secretary of the Treasury Page 5 Milford, Michigan. He was, for about two years, connected with the Fisher Body Company, a subsidiary of the General Motors Corporation. Mr. Kreusser was apparently loaned for several years by the General Motors Corporation to the Museum of Science and Industries, Chicago, Illinois, following which he served in the research department of General Motors, having occupied the position of General Manager of the Allison Engi- neering Company since December, 1937. Mr. Kreusser has, upon a number of occasions, expressed apprehension lest sabotage efforts at the Allison Engineering Company alow down and hinder production efforts. Mr. Kreusser has also expressed himself as being interested in plant protection problems and in countersabotage and counterespionage efforts in connection with the operations of the Allison Engineering Company. Mr. Ronald Hazen is Chief Engineer and Superintendent of the engineering department of the Allison Engineering Com- pany. He was born on October 3, 1897, in North Dakota, and was graduated from the University of Michigan. He began service with the General Motors Corporation in 1923, being employed in the research department, where hearved until the early part of 1926, at which time he became an instructor with the Curtiss-Wright Corporation and remained until 1927. He then returned to the General Motors Corporation and has been employed thereby since the last mentioned date, having been transferred to the Allison Engineering Company Division as Chief Engineer during 1933. Mr. Hazen is reported to possess the close confidence of Mr. Kreusser and acts as second in command to Mr. Kreusser. Mr. Hazen's brother, one Charles Hazen, is Managing Editor of the Shreveport, Louisiana, Times, and the latter individual is reported to possess the implicit confidence of his publisher, Colonel Dring, of Shreveport. The office of the Federal Bureau of Investigation at Indianapolis, Indiana, has performed a large amount of in- vestigative work at the Allison plants in connection with complaints indicating possible involvement of sabotage and espionage activities. Regraded Unclassified I The Honorable The Secretary of the Treasury Page 6 Only several weeks ago it was discovered that 5,500 gallons of oil, stored in a new underground tank at the alli- son plants, contained contaminante, An analysis of these contaminants reflected the presence of metal filings. How- ever, it has been determined that the oil in question had not been tested before being stored in the tank, which was new and previously unused, available information indicating that filings and deposits from pipe leads to the new and unused tank caused this contamination. It became necessary to pump all of the oil out of this tank for return to the refinery. It has also been discovered that two underground tanks filled with 78 octane gasoline recently became contaminated, although new and unused tanks, fittings, and pipe leads may have been responsible in the latter instance also. Information has been obtained that in testing motors at the Allison Engineering Company, varying amounts of deposits of carborundum have been discovered in the lubricating oil, this apparently being due to the fact that carborundum mixed with liquid is used in grinding down by hand and smoothing the finished surfaces of crank cases, no gaskets being used between these parts. The carborundum in question was 30 fine it ap- parently did not actually damage the motors; however, a process has been instituted whereby the motors are washed following hand grinding of the crank cases, in order to re- move traces of carborundum. In addition to the above, arrange- ments are being effected whereby carborundum will be issued in salt shakers instead of in large five-pound cans, so that a close and detailed check can be maintained of the amount of this material used by the individual employees in the crank case smoothing process. Previous investigation was conducted with regard to a large cloth found lodged in the lubrication system of an aircraft motor undergoing its final acceptance test at the Allison Engineering Company before delivery to the United States Army Air Corps. A quantity of metal chips was also found in the lubrication system of this motor, which had damaged the main bearings. Subsequent to the last mentioned Regraded Unclassified 45-J The Honorable The Secretary of the Treasury Page 7 occasion, a quantity of metal chips was found in the lubrication system of the dynamometer stand on which motors were being tested, these acts indicating possible involvement of sabotage activities. While it has not been possible to date to deter- mine definitely the true causes of the three last mentioned irregularities, considerable investigation has been conducted with regard to the possibility that the defects in question may have been caused by employees through malicious motives or carelessness. A number of fires have occurred recently in Plant 3 of the Allison Engineering Company, most of which caused no particular damage, although one conflagration caused injury to the extent of approximately $3,000. It has been determined that these fires apparently were caused by sparks, emanating from grinding operations within the new plant, igniting an accumulation of magnesium and aluminum dust located in the vicinity of the grinding machines. Efforts have been expended to perfect arrangements for the purpose of preventing such fires from these causes in the future and, in addition thereto, the results of special tests conducted by the Technical Laboratory of the Federal Bureau of Investigation, indicating that sand, carbon dioxide, and possibly carbon tetrachloride may best be utilized to readily extinguish such flames as might ordinarily occur in this manner, have been furnished to officials of the Allison Engineering Company. Investigative afforts are being continued with re- gard to conditions at the Allison Engineering Company, for the purpose of definitely determining the true causes in con- nection with suspicious occurrences. In this regard, Mr. Kreusser has recently requested an investigation concerning certain suspicious activities on the part of an individual presently employed in the specifications room of the Allison Engineering Company. Due to the extreme importance of the Allison Engineering Company in connection with the national de- fense, I instructed that & plant survey be conducted with regard to this company and its production facilities during Regraded Unclassified The Honorable The Secretary of the Treasury Page 8 November, 1939, this being one of the earliest plant surveys conducted by the Federal Bureau of Investigation in its current program of surveying plants maintained on the Army and Navy allocated facilities lists to insure utilization of adequate protective measures against espionage and sabotage activities. I am pleased to transmit herewith, for your informa- tion, a copy of the report of Special Agent C. A. Hardison, dated November 27, 1939, at Indianapolis, Indiana, reflecting the results of the survey of Plants 1 and 2 of the Allison Engineering Company at Speedway City, Indiana. It will be noted that Plant 3, which is, of course, at the present time one of the most important of the three plants, had not been completed at the time of the above survey, for which reason & supplementary plant survey has since been conducted with regard to Plant 3, and I will, within the immediate future, furnish a copy of a report reflecting the results of the supplementary survey, for your information. I am also transmitting herewith, for your information, a copy of the letter which I furnished to Mr. Otto T. Kreusser on December 26, 1939, outlining recommendations and suggestions with regard to certain protective measures to be undertaken by the Allison Engineering Company in order to insure adequate protection against espionage and sabotage activities. It will be noted that during the plant survey of the facilities of the Allison Engineering Company, it was discovered that in the east portion of the plant area was located B. large warehouse utilized for storing great quantities of oil and clear gasoline used in motor tests. Adjacent to the warehouse was located a considerable quantity of oil-soaked metal shavings, constituting an accumulation approximately ton feet high and covering an area approximately ten feet by ten feet. Large quantities of oil had drained from these shavings and collected in pools on the ground surrounding the warehouse. A lighted match, cigarette butt, or something of the kind, carelessly or deliberately thrown into these pools of oil, might vary readily have resulted in a fire, causing destruction of the Regraded Unclassified The Honorable The Secretary of the Treasury Page 9 warehouse and the fuel stored therein. Inasmuch as the test building, housing facilities for testing airplane motors, was located only twenty feet from the storage warehouse in question, an explosion of the fuel storage tanks in the ware- house probably would have resulted in complete destruction of this portion of the plant. Apparently the practice of dumping the metal shavings immediately adjacent to the warehouse in the above fashion had been practiced for a period of months. Of course, appropriate recommendations were issued in order to remedy the above situation, and I am informed by the Special Agent in Charge of my Indianapolis office that proper adjustments in this connection have been effected. As indicated above, I shall be pleased to furnish you additional information within the immediate future con- cerning the results of investigative efforts in connection with the Allison Engineering Company. Sincerely yours, 1.25 John Director Edgar Hoover Moover Inclosure Regraded Unclassified JOHN EDGAR HOOVER 45-M DIRECTOR Federal Sureau of Investigation United States Department of Justice Regraded Unclassified Washington, a. C. PERSONAL AND CONFIDENTIAL June 7, 1940 The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Reference is made to your telephonic conversation with no of May 27, 1940, relative to conditions in the Allison Engl- nearing Company Division, General Motors Corporation, Speedway City, Indiana, I have instructed that an appropriate investigation be conducted concerning this matter, in connection with which in- formation has been obtained that the Allison Engineering Company is now producing one of the special air-cooled motors & day, this representing the marimum of production to date. Officials of the Allison Engineering Company have indicated, according to available information, that recent expansion developments be- came necessary to neet the greatly increased demands of the United States Army Air Corps and that increased production of the motor has been impaired to date by the necessity of 02- pansion with regard to plant facilities, tools, machinery, et cetera. The Allison Engineering Company Division, General Motore Corporation, consists at this time of three plants, all located in Speedway City, Indians, and designated by the company as Plants 1, 2, and 3. Plant 1 was the only one in existence at the time the company was purchased by the General Motors Corpo- ration during 1929. It is engaged solely in the production of bearings, about eight per cent of which are used by the com- party in the production of airplane motors, the remainder being sold to outside purchasers. Plant 2 was constructed by the General Motors Corporation in 1936, and an addition thereto was constructed during 1938. Plant 2 formerly housed the main offices of the company, as well as facilities for the pro- dustion, development, and testing of airplane motors. Since the recent completion of Plant 3, however, Plant 2 is used only in connection with developing and testing new motors and -N The Honorable The Secretary of the Treasury Page 2 for the purpose of housing the engineering and experimental de- partnents. Plant 3, recently completed, presently houses all facilities for producing the airplane notors manufactured by the company, and also the main offices of the company. At the present time, 1,750 nen are employed La 71ant 3, operating on three shifts n. day with the exception of the assembly de- partnent, which is now operating only two shifts a day due to lack of space and facilities for immediate expansion. New employees are now being hired at Plant 3 at the rate of approximately twenty-five a day. Mr. Otto T. Erwnssor, General Lanager of the Allison Engineering Company, has Indicated that he expects production to be increased within the next several weeks to a maximum of two complete airplane actors a day. It is further indicated that following the completion of now facilities now under con- struction, production will gradually be increased to a conten- plated maximum of twenty complete motors a day. It is stated that the new facilities referred to will probably be completed on or before July, 1940, and the above mentioned maximum of twenty notors A day should be reached on or before November 1, 1940. The special air-cooled motor being developed by the Allison Engineering Company at this time is composed of two thousand individual parts. À mimber of the parts are constructed by the Allison Engineering Company itself and eone parte are constructed by other divisions of the General Motors Corpo- ration. These parts constructed by the Allison Engineering Company are presently being produced in sufficient quantity to permit the production of five complete notors & day. The Cadillac Division of General lictors now has one thousand sen employed in the construction of parts for Allison notors and, in addition thereto, the A-C Division of General Motors has four hundred can employed in the production of parts for this engine. The Alumdrews Canting Division of General Motors has 1,250 JHIN presently engaged in producing parts for Allison motors. Regraded Unclassified o The Romorable The Secretary of the Treasury Page 3 Prom information which I have obtained to date, it Bowld that all necessary parts are non boing produced in sufficient quantity to permit the completion of & larger number of motors a day, although the assembly department is assembling only one complete motor each day, AB indicated above. I have obtained information that Mr. Kreusser and other officials have indicated this situation is consed by lack of adequate facilition for the assembly department. It is reported that now portions of Plant 3 presently under construction consist of a very large addition to be used exclusively for increased assenbly department facilities. Additions are also being created for A number of torque rooms for 1188 in testing each individual notor following final assechly. officials of the company have stated that until the excently portion of the plant in completed and all of the necessary additional resuip- ount, installed, production carnot be stepped 40 to the esti- nated wedness of twenty notors a day. According to information which 1 have received, Hr. Krouseer, en May 28, 1940, was overheard to naice a statement to the dffect that "they have been putting on the preseure," 1. toing deduced from this statement and the context of the accompanying conversation that no was referring to Governmental authorities. Mr. Krousar, upon this occasion, stated that Governmental authorities, whom he did not name, have demanded that the Allison Engineering Company develop and produce an experimental motor within a six-conth pariod and then 100- mediately deliver one thousand of such motors. Mr. \rousser has complained that demands of this Idna cannot be complied with, Inassaich as the shops and machinery have to be especial- ly tooled for the new types of work ascessitated in pro- during the time motors. The experimental motor mentioned by kr. Krounsor apparently relates to an entirely new engine, containing numerous improvements over the engines presently being produced and complying in every respect with new Army specifications. Mr. Krenseer has indicated that the Allison Engineering Company has been engaged for somo time in as perinenting with and developing the new notar. Regraded Unclassified Regraded Unclassified The Sungrable The Secretary of the Treasury Page 4 I have assertained that Mr. Ronald I. Evens, Visa President of the General Motors Corporation and apparantly responsible directly to Mr. William 3. Krudeen, President thereof, acts as Mr. Kraisser's imediate superior. It is reported that Mr. Ivans spends at least one or to days each week at the Allison plants, it beding indicated that he visited Plant 1 and conferred with Mr. Kreuser on May 28, 1940. Available information indicates that Mr. Isvane is about fifty years of age and is married, having one daughter, Catherine. His wife's name is Thedys Brans, Mr. imm has been connected with the General Notors Corporation for seventeen years, thirteen of which ware spent in Europe, Available information further indicates that Mr. Items pro- coeded to the United States from Kresbadon, Germany, during October, 1936, having previously been connected with the Adam Opal A. G., Ansoelshiem, Germany, a subsidiary of the General Motors Corporation and manufacturers of Opal care and Blits trucks. Mr. Ilvans now resides at 31615 Dragreen Boad, Birmingham, Richigan. Be owns a thirty-acre farm, purchased in 1936 for $30,000 cash and presently valued at approximately $70,000. He also own a larger farm, sonsisting of approximately three handred and twenty acres, located north of Birmingham, Michigan. Mr. Svans formarly served as Vice President of the Diesel Division of the General Motors Corporation, being in charge of export activities. According to available information, Mr. Evans is apparently connected in game capacity at the present time with the Quaranty Trust Company, 140 Broadway, New York City. Additional information concerning this individual will be furnished you subsequently. Mr. Otto T. Kreasser, Omeral Manager of the Alli- con Engineering Company Division, General Motors Corporation, Speedway City, Indiana, was born in 1897 in New York City. He served as an engineer with the United States Arwy during the World War, being stationed at Dayton, Ohio. Mr. Kreaseer has been employed by the General Motors Corporation for a period of seventeen years, having spent approximately ten years of this period at the General Motors Proving Grounds, The Renorable The Secretary of the Treasury Page 5 Wilford, Michigan. He was, for about two years, connected with the Fisher Body Company, 4 subsidiary of the General Motore Corporation. Mr. Kreusser nos apparently loaned for several years by the General Motors Corporation to the of Science and Industries, Chicago, Illinois, following which he served in the research department of General Motors, having occupied the position of General Manager of the Allison Engi- neering Company since December, 1937. Mr. Kreusser has, upon a number of occasions, expressed apprehension lest sabotage efforts at the Allison Engineering Company slow down and hinder production efforts. Mr. Kreusser has also expressed himself as being interested in plant protection problems and in countersabotage and counterespionage efforts in connection with the operations of the Allison Engineering Company. Mr. Ronald liazen is Chief Engineer and Superintendent of the engineering department of the Allison Engineering Com- pany. He was born on October 3, 1897, in North Dakota, and was graduated from the University of Michigan. He began service with the General Motors Corporation in 1923, being employed in the research department, where howerved until the early part of 1926, at which time no because an instructor with the Curtiss-Wright Corporation and remained until 1927. He then returned to the General Motors Corporation and has been employed thereby eines the last mentioned date, having been transferred to the Allison Engineering Company Division as Chief engineer during 1933. Mr. lissen is reported to possess the close confidence of Mr. Kreuser and nots at second in comand to Mr. Kreusser. Mr. Hasen's brother, one Charles Hasen, is Managing Editor of the Shreveport, Louisiana, Times, and the latter individual is reported to possess the implicit confidence of his publisher, Colonal Dwing, of Shreveport. The office of the Federal Bureau of Investigation at Indianapolis, Indians, has performed a large amount of in- vestigative work at the Allison plants in connection with complaints indicating possible involvement of embotage and expionage activities. Regraded Unclassified R The Honorable The Secretary of the Treasury PAge 6 only several weeks ago it was discovered that 5,500 gallons of oil, stored in a DEW underground tank at the All1- son plants, contained contaminants. An analysis of those conteminants reflected the presence of motal filings. How ever, it has been determined that the oil in juestion had not been tested before being stored in the tank, which was new and previously unused, available information indicating that filings and deposite from pipe leads to the case and unused tank caused this contamination. It became necessary to pump all of the oil out of this tank for return to the refinery. It has also been discovered that two underground tanks filled with 78 octans gasoline recently became contaminated, although new and unused tanks, fittings, and pips leads may have been responsible in the latter instance also. Information has been obtained that in testing motors at the Allison Engineering Company, varying amounts of deposite of parborundum have been discovered in the lubricating ail, this apparently being due to the fact that carborundua mixed with liquid is used in grinding down by hand and ancothing the finished surfaces of crank mass, no gaskets being used between these parts. The carborundus in question was so fine it ap- parently did not actually damage the motors; however, a process has bown instituted shareby the notors are washed following hand grinding of the crank cases, in order to re- DIVE traces of carborundum. In addition to the above, arrange- mate are being effected whereby earborundwa will be issued in malt abakers instead of in large five-pound cans, so that a closs and detailed check can be maintained of the amount of this anterial used by the individual employees in the crank case smoothing process. Previous investigation vas conducted with regard Lo a. large aloth found lodged in the lubrication system of AD aircraft motor undergoing its final acceptance test or the Allison Engineering Company before delivery to the United States Army Air Corps. A quantity of metal chips was also found in the lubrication system of this notor, which had damaged the main bearings. Subsequent to the last nantioned Regraded Unclassified s The Menurable The secretary of the Treasury l'age 7 occasion, a quantity of metal chips was found in the lubrication system of the dynamometer stand on which motors 1470 being tested, these ects indicating possible involvement of sabotage activities. Thile it has not been possible to date to deter- nine definitely the true causes of the three last ment-ioned irregularities, considerable investigation has been conducted with regard to the possibility that the defects in question my have been caused by employees through malicious notives of carelessness. A number of fires have occurred recently in Plant 3 of the Allison Ingineering Company, nost of which caused DO particular damage, although one conflagration caused Injury to the extent of approximately 63,000. it has been determined that these fires apparently were caused by sparks, manating from grinding oparations within the new plant, igniting an accumulation of magnesium and alunima dust located in the vicinity of the grinding machines. Afforts have been expended to perfect arrangments for the purpose of preventing such fires from these GALLSON in the future and, in addition thereto, the results of special tests conducted w the Technical Laboratory of the Federal Bureau of Investigation, indicating that sand, carbon dioxide, and possibly carbon tetrachloride may best be utilized to readily actinguish such flass as aight ordinarily occur in this namer, have been furnished to officials of the Allison Engineering Company. Investigative efforts are baing continued with No- gard to conditions at the Allison Engineering Company, for the purpose of definitely determining the true causes in can nection with suspicious occurrenes. In this regard, Mr. Kreunser has recently requested an investigation concerning certain suspicious activities on the part of an individual presently employed in the specifications room of the Allison Engineering Company. Due to the extress importance of the Allison Magineering Company in connection with the national de- fense, I instructed that a plant survey be conducted with regard to this company and its production facilities during Regraded Unclassified 15-T Regraded Unclassified The Nonorable The Secretary of the Treasury Page 8 Movember, 1939, this being one of the earliest plant surveys conducted by the Federal Bareau of Investigation in its current program of surveying plants maintained on the Aray and Savy allocated facilities lists to insure utilization of adoquate protective issures against espionage and sabotage activities, I an pleased to transmit herewith, for your informa- tion, a copy of the report of Special Agent C. A. Hardison, dated liovember 27, 1939, at Indianapolis, Indiana, reflecting the results of the survey of Plants 1 and 2 of the Allison ingineering Company at Speedway City, Indiana. It will be noted that Plant 3, which is, of course, at the present time 000 of the most important of the three plants, had not been completed at the time of the above survey, for which reason a supplementary plant survey has since boen conducted with regard to Plant 3, and I will, within the imadiate future, furnish a copy of a report reflecting the results of the supplementary survey, for your information. I as also transmitting herewith, for your information, a copy of the letter which I furnished to Mr. Otto T. Krenseer on December 26, 1939, outlining recommendations and suggestions with regard to certain protective neasures to be undertaken by the Allison Singineering Company in order to insure adequate protection against espionage and sabotage activities. It will be noted that during the plant survey of the facilities of the Allison Ingineering Company, it was discovered that in the sest portion of the plant area was located & large warehouse utilized for storing great quantities of oil and clear gasoline used in motor tests. Adjacent to the warehouse wes losated 8 considerable quantity of oil-soaked metal shavings, constituting an accumulation approximately ten feet high and sovering an an approximately to feet by ten feet. Large quantities of oil had drained from these shavings and collected in pools on the ground surrounding the warehouse. A. lighted match, sigarette butt, of something of the kind, carelessly or deliberately thrown into these pools of oil, night very readily have resulted in a fire, causing destruction of the 45 - U The Honorable The Secretary of the Treasury Page 9 warehouse and the fuel stored therein. Inasemeh as the test building, housing facilities for testing airplane motors, was located only twenty feet from the storage warehouse in question, an explosion of the fuel storage tanks in the ware- house probably would have resulted in complete destruction of this portion of the plant. Apparently the practice of dumping the metal shavings immediately adjacent to the warehouse in the above fashion had been practiced for a period of nonths. of course, appropriate recommendations were issued in order to renedy the above situation, and I an informed by the Special Agent in Charge of my Indianapolis office that proper adjustments in this connection have been effected. As indicated above, I shall be pleased to furnish you additional information within the immediate future con- cerning the results of investigative efforts in connection with the Allison Engineering Company. Sincerely yours, John Edgar Hoover Director Inclosure Regraded Unclassified 45-V V FEDERAL BUREAU OF INVESTIGATION Form No. 1 THIS CASE ORIGINATED AT Indianapolis, Indiana FILE NO. 99-1 REPORT MADE AT DATE WHEN MADE PERIOD FOR REPORT MADE BY WHICH MADE Indianapolis, Indiana 11-27-39 11/8/13-19/39 C. A. HARDISON BJ- CHARACTER OF CASE TITLE ALLISON ENGINEERING COMPANY DIVISION; GENERAL MOTORS CORPORATION, PLANT PROTECTION SPEEDWAY CITY, INDIANA SYNOPSIS OF FACTS: Survey of Allison Engineering Company Division, General Motors Corporation, Speedway City, Indiana, made November thirteenth to eighteenth inclusive, 1939. - P - Details: AT SPEEDWAY CITY, INDIANA The Allison Engineering Company Division, General Motors Corporation, was surveyed by agent from November 13 to November 18, inclusive, 1939. The Allison Engineering Company was founded in 1917 by JAMES ALLISON, a millionaire residing in Indianapolis, Indiana. He is now deceased but, while living, his hobby was that of developing high-speed motore for automobiles and airplanes. He was actively interested in the Indianapolis Speedway. The Allison Engineering Company was operated by JAMES ALLISON until 1929 at little or no profit. He developed the high-speed airplane motor which is now being produced by the company. During the late World Mar Liberty simplane motors were assembled at the Allison Engineering Company and after the war about 5,000 of these motore were reconditionsd there. The General Motors Corporation took over the Allison Engineering Company in 1929 and is now the sole owner thereof, together with the patent rights obtained. The official title of the company is now: "Allison Engineering Company Division, General Motors Corporation." There are three plants, all located in Speedway City, Indiana, and designated by the company as plants one, time two and three. Plant one was the only one in existence at the APPROVED AND SPECIAL AGENT DO NOT WHITE IN THESE # PACES FORWARDED: IN CHARGE COPIES OF THIS REPORT Bm 5 Bureau (Inclosures) (Registered Mail) 2 Indianapolis CA. PRISTING OFFICE 7-9014 Regraded Unclassified 45-W the company was purchased by the General Motors Corporation. It is now engaged solely in the production of bearings, about eight per cent of which are used by the company in production of the air- plane motors, the remainder being sold to outside sources. Plant two was constructed by the General Motors Corporation in 1936 and an addition thereto was built in 1938. At present plant two is the main plant, housing the main offices of the company and also the production as well as the development and testing of new motors goes on there. Plant three is in the process of construction. Upon completion, all production will be in plant three, as well as the general offices. Plant two will then be used only for conducting tests and developing new motors and to house the engineering depart- nent. Production in plant three will start on a very limited basis on December 1, 1939, and it is anticipated that this plant will be in full service on about March 1, 1940. Detailed descriptions of the three plants appear elsewhere in this report and although a partial survey was made of plant three, it is believed impossible at this time to make a. complete survey as production 1s not going on there and it was still in the process of construction. It is being recommended that plant three be surveyed about March 1, 1940. Plant officials have advised that the General Motors Corporation has spared no expense in making plant three a model plant, both from the stand- point of preventing sabetage and espionage and also from the stand- point of production. It is believed that the survey of plant three, when it goes into production, might produce many ideas of value for use in future surveys. The principal officers of the Allison Engineering Company Division, General Motors Corporation are OTTO T. kreusser, General Hanager, RONALD HAZEN, Chief Engineer, CARL REYNOLDS, Chief Drafteman, JOHN D. WKLCH, Comptroller, BERT L. KRUZAN, Production Superintendent, J. LLOYD ALLEN, Plant Engineer, WILLIAM E. MoCOY, Superintendent of Fabrication, HOBART L. WILSON, Material Supervisor, JOSEPH K. GRUBB, Superintendent Inspection Department, RAY G. KREMBR, Personnel Director, and JOHN DALTON, Chief, Patrol Service. The official to be contacted in connection with plant protection 1s Mr. RAY 0. kremer, Personnel Director and under whose direct supervision the patrol service comes. JOHN DALTON, Chief, Patrol Service, is the person directly responsible for the guarding of the three plants. It may be stated that the above listed officials are all in charge of the operations in all three plants. Actually they consider the Allison Engineering Company Division 6.8 B. single plant of the General Motors Corporation; however, for their own purposes they have sub-divided the Allison Engineering Company into plants one, two and three with the supervisory structure over all three plants. plans motors. The only exception to this is that plant one 16 engaged of The company is engaged primarily in the production of high-speed air- which are used in the high-speed airplane motors, the remainder the being solely in the production of bearings, approximately eight per cent sold commercially. The only articles being manufactured for - 2 - Regraded Unclassified 45-X Government are the high-speed airplane motors. On November 8, 1939, a conference was held by Special Agent in Charge B. E. SACKETT at his office, attended by various plant officials of the plants to be surveyed in the State of Indiana, including Mr. RAY KREMER, Personnel Director of the Allison Engineering Division, General Motors Corporation. Mr. KREMER expressed a. desire to have his plant surveyed. On November 8, 1939, a. telegram WELD received from Special Agent in Charge J. S. BUGAS, Detroit, Michigan, advising that C. E. MITCHELL, General Motors Corporation executive, Detroit, Michigan, desired that the Allison Engineering Company Division of that corpora- tion be surveyed. Mr. RAY KREMER was contacted by agent on November 13, 1939, at which time the survey was started. During the entire survey agent was accompanied by Chief of Patrol Service JOHN DALTON, who was suggested by Mr. KREMER. During the survey information pertaining to official plant personnel was obtained from OTTO T. kneusser, con- cerning employees, from Mr. RAY KREMER, concerning the handling of plant business, from BERT L. KRUZAN, JOSEPH GRUBB, CARL REYNOLDS, CARL WEINBRECHT and WILLIAM LARSEN, concerning physical description of the plant, from Chief JOHN DALTON; concerning precautionary measures and protective devices, from Chief JOHN DALTON and Mr. OTTO T. KREUSSER; and concerning labor, Mr. oTTo T. KREUSSER. Insofar as possible the outline contained in the plant protection manual is followed hereinafter: A. OFFICIAL PLANT PERSONNEL 1. OTTO T. KREUSSER was born in 1897 in New York City. He was Ohio. He has been with the General Motors Corporation for an army engineer during the World War stationed at Dayton, seventeen years. He was employed at the General Motors proving grounds, Milford, Michigan, for about ten years and with the Fisher Body Company for about two years. Be was loaned for several years by the General Motors Corpora- tion to the Museum of Science and Industries, Chicago, Illinois, and upon completion of his service there, returned to the General Motore Corporation, serving in the research department. Be was sent to the Allison Engineering Company Division of General Motors in December, 1937, M General Manager, which position he has held continuously since. RONALD HAZEN, Chief Engineer, and Superintendent of the North Dakota, and graduated from the University engineering department, was born October 3, 1897, of in Michigan. Corporation in 1923, in the research department, He began his service with the Genoral Motors where - 8 - Regraded Unclassified he served until the early part of 1926, when he left to teach school with the Wright Airplane Company during 1926 and 1927. Upon conclusion of his service there he returned to the General Motors Corporation, with which he has served continuously since, He came to the Allison Engineering Company Division as Chief Engineer in 1933. CARL REYNOLDS, Chief Draftsman, coming under the direct supervision of RONALD HAZEN, was born March 12, 1893, at Indianapolis, Indiana. He began work with the Allison Engineering Company in 1920. Due to slack business he was in and out of the company several times but has served continuously since 1924. JOHN D. WELCH, Comptroller, was born in England, February 1, 1898. He is a naturalized citizen of the United States of long standing and has been with the General Motors Corpora- tion since 1920, always in an auditing capacity. He came to the Allison Engineering Company Division in July, 1939, from the Frigidaire Corporation Division of General Motors, Dayton, Ohio. BERT L. KRUZAN, Production Superintendent, WB.B born October 22, 1893, in Indiana. He began work at the Allison Engineering Company July 17, 1918, and has served contin- uously since then. J. LLOYD ALLEN, Plant Engineer, wes born August 30, 1897, at Indianapolis, Indiana. He is a licensed architect and has been employed 6.8 an outside consultant for several years, first in 1935. He drew the plans and specifications for plant number two. He was in business for himself in Indianapolis, Indiana, from 1936 to 1938 inclusive. Be was employed by the Allison Engineering Company Division, General Motors Corporation, as 5. full time employee in January, 1939. WILLIAM H. McCOY, Superintendent of Fabrication, will be is 40 years of age and American born. His personnel superintendent of plant three upon its completion. He file was not available to Mr. KREUSSER, who stated that McCOY has been with the General Motors Corporation, to his knowledge, since August, 1919, and that he came from to the Allison Engineering Company Division, May 1, 1939, General Motors' Research Division, Detroit, Michigan. 4 Regraded Unclassified 45-Z JOSEPH K. GRUBB, Chief, Inspection Department, was born in Williamsport, Pennsylvania, November 26, 1898. He was in the ordinance department of the United States Army during the World War and came to the Allison Engineering Company in 1919, and has served continuously since. RAY G. KREMER, Personnel Director, was born in Columbus, Indiana, February 4, 1894. He was in the United States Army during the World War and since then has done personnel work for the Kingan and Company, Stuts Automobile Company, and Marmon Automobile Company, all Indianspolis, Indiana. He began his service with the General Motors Corporation in December, 1930, as personnel director, Chevrolet Com- mercial Body Company, Indianapolis, Indiana, and has served continuously with that company until August 21, 1939, at which time he came to the Allison Engineering Company Division. JOHN DALTON, Chief of Patrol Service, was born in Youngstown, Ohio, February 14, 1902. He completed high school at Youngstown, Ohio, and also completed two years of college work at Citadel College in South Carolina, where he played football. He served for six years in the Eleventh Infantry of the United States Army at Fort Benjamin Harrison, Indiana, during the years 1928-1934. He began his employment with the General Motors Corporation in March, 1936, as a patrol- man at the Chewrolet Commercial Body Company, Indianapolis, Indiana, and later became Chief of Patrol Service there. While at the Chevrolet Commercial Body Company he served about two years in the accounting department and attended Indiana University Extension Division at night, taking accounting. He was chief timekeeper until September 10, 1939, when he came to the Allison Engineering Company Division as Chief of Patrol Service+ HOBART L. WILSON, Material Supervisor, was born May 19, 1896, at Portland, Indiana. He was in the United States Army Air Corps during the World War and began his employ- ment with the Allison Engineering Company in 1922 and has served continuously since then. All of the executives of the Allison Engineering Company Division are designated by the general headquarters of the General Motors Corporation, Detroit, Michigan+ Prac- the tically all of these executives are old employees Allison of Engineering General Company for many years prior to the time it Motors Corporation or were with the - 6 - Regraded Unclassified 45-AA, was taken over by the General Motors Corporation. All of the above named officials, with the exception of Chief of Patrol Service JOHN DALTON, are members of the General Motors managerial, or bonus, group. It is a policy of the General Motors Corporation to pay to the members of the managerial group, in the form of bonuses, all profits in excess of seven per cent, which is paid to the stock- holders. The salary checks of the managerial group are forwarded from general headquarters at Detroit, Michigan, at which place their personnel files are also maintained, except that General Manager oTTo KREUSSER maintains B. personnel file on them separate and apart from the files maintained by the personnel department. 2. No reluctance on the part of plant officials to co-operate with the Government has been noticed in any manner. On the contrary, they seem anxious to co-operate and Mr. OTTO T. KREUSSER has previously called at the Indianapolis office on several occasions to discuss various problems pertaining to plant protection, espionage and sabotage, and related subjects. B. EMPLOYEES 1. At present there are 850 employees. This includes all three plants. Approximately 100 of these are salaried employees and the remaining 750 are on a hourly rate. Approximately 200 of then are assigned to plant one, 645 to plant two, including the main office force, and 5 to plant three. 2. The requirements for appointment to any type of position are that the applicant must be an American oitisen and must be fitted for the job. At the present time in plants one and two about 76% of all hourly rate employees are skilled mechanics and the other 26% are unskilled laborers. When plant three is placed in operation about 20% will be skilled mechanics and 75% unskilled labor. Applicants are required to take a physical examination given by the company physician, except that females are excluded. All old employees have been given physical examinations except the clerical employees. Appointments to all positions are made by General Manager OTTO PREUSSER upon the recommendation of Personnel Director RAY KREMER, except the executive personnel, which is designated by the General Motors Corporation's headquarters. Practically all employees taken on in recent months have been recruited unable from the State of Indiana, except where they have been to obtain certain skilled machine operators and thon they - 6 - Regraded Unclassified 45-BB have obtained them from Detroit, Michigan, and other cities, usually from a come other General Motors plant. On rare occasions they insert advertisements in news- papers in various cities, such as Detroit, Michigan, and Dayton, Ohio, where certain other plants are known to employ certain types of skilled operators which are needed by the Allison Engineering Company Division. Probably 75% of all employees were born in the State of Indiana. 3. All applicants are required to fill in an application form, a copy of which is furnished herewith to the Bureau. A recommendation as to certain additional questions to be placed on this form is being submitted. 4. The company rule is that all now employees are to be investigated before they are hired and this rule is gen- erally adhered to; however, on occasions they have had difficulty in locating a skilled machine operator and when they were finally successful in locating such an individual, because of the demand for his services, they have placed him at work at once and he is subsequently investigated. The investigation of all now employees consists of the mailing of 8. form letter to the last two employers of the applicant. A. sample copy of this form is furnished to the Bureau with this report. At the present time the personnel department is building up a reserve list of unskilled laborers with the view in mind of employing them when production begins in plant three. This list consists primarily of young men between the ages of 18 and 25 years and it is the plan of the company to take these young men and train them and develop them insofar as necessary into skilled mechanios. They are also conduct- Because of the large number of such young non available for ing an educational program for these young employees. employment, the company has endeavored to use & selective process to obtain only the higher type young men. In this connection they have inaugurated a system of investigating those young men prior to their employment. They also send out, when they employ any of these young men, the above- The mentioned form letter to their last two employers. investigation is conducted not by a member of the patrol the service, but by a company interviewer working under of the personnel director. A form report, supervision the use of the interviewer in reporting his investige- to for has been compiled and a sample copy is forwarded tion, with copies of this report. The investigation, the briefly, Bureau consists of one or two inquiries in the neighborhood - 7 - Regraded Unclassified 45-CC of the applicant's home and a personal call by the interviewer at the applicant's home, at which time he interviews the applicant's mother and/or father and sizes up, as best he can, the type of family from which applicant comes and his general baokground. 5. All employees of all three plants are working on Government material. As a matter of fact the only material produced by plants two and three are high-speed airplane motors for the Har Department. In plant number one, which is producing bearings only, there is no distinction made between Govern- ment material and commercial material, 11 employees working on both types. 6. There are four aliens employed. FRED T. PALMER, janitor in plant number two is English; ROBERT P. ROGERS, deaftsman, engineering department, plant number two, is French; S. J. HOCK, mechanic, assembly test department, is German; GENE NARDI, machinist in plant two is French. 7. FRED T. PALMER was in the British army for thirty years. Be has been employed by the Allison Engineering Company since October 13, 1938. Be has been in this country for several years and he permitted his first papers to lapse without obtaining his final citizenship papers. Recently, however, he has filed his second application for his first citizenship papers. ROBERT P. ROGERS was born in France and has been in this country for many years. He will receive his final citizen- ship papers in Jamary, 1940. He has been in the employ of the Allison Engineering Company since February 27, 1939. At the time of his employment he was of the impression that he was an American citisen, his second citisenship papers having been received in Chicago, Illinois. Investigation, however, indicated that this was not true and at the sugges- tion of the Allison Engineering Company, he has taken the necessary steps so that he will receive his final oitizen- ship papers in January, 1940. 8. J. HOCK was born in Germany and has taken out his first citizenship papers. He will be eligible for his final papers to became naturalized and he has stated that his second in approximately three years. This is HOCK's second attempt were never completed through an error on the part of in papers court clerk in Brook, Indiana, in 1934. He has been with the the Allison Enginsesing_Company since January 23, 1939. the United States for several years and heo been employed Regraded Unclassified 15-DD HOCK is an excellent mechanic and Mr. RAY KREMER advised that he is very unpopular with other employees because he is very concelted. KREMER stated that HOCK is really a. valuable and brilliant employee but is always showing off how much he knows to the embarrassment of other employees; as a result thereof there have been several rumors started about his being a German. HOCK claims that he was in the German army during the World War but that he thoroughly dialikes the present German government. When he came to the Allison Engineering Company he brought with him g. large set of high priced personally owned tools; many of the employees use their own tools but some of the old employees started a rumor to the effect that HOCK must have been an engineer and have plenty of money to own such a high priced set of tools and that he was probably sent there in the capacity of a mechanic although he was an engineer, in order to obtain information. Mr. RAY KREMER believes that these rumors were started by jealous employees and that they are without foundation. Mr. KREMER stated frankly that he was sold on HOCK and believed that he was & loyal employee and would be a loyal American citizen. GENE NARDI was born in France. He has been in this country for several years. Be has taken out his first citizenship papers and will receive his final papers in January, 1940. He has been employed by the Allison Engineering Company since July 16, 1938, is a loyal employee and nothing has been discovered indicating that he might be engaged in espionage or sabotage. Chief of Patrol Service DALTON has advised that there is one other individual in the plant whose name he wished to furnish, not that they had any information indicating that he was engaged in espionage or sabotage, but he believed his name should be made a matter of record with this Bureau. This individual is FRED G. PITZER. He is an Allison Engineering Company inspector engaged in the final inspection of bearings in plant number one. He is & naturalized American citizen and was born near Frankfurt, Germany. He is married and has four children and resides at Rural Route 6, Box 74K, which is 510 East Summer Avenue, Indianapolis, Indiana. DALTON states that according to the grapevine PITZER has a brother who is an officer in the German aviation corps and with when he corresponds. All of the above mentioned four alien employees are working on of FRED T. PAIMER, janitor in plant two, who cleans up around Government material directly with the possible exception the machine shop at that plant, where Government material - 9 - Regraded Unclassified 45-EF is machined. 9. No special precautions are taken to prevent the alien employees from committing sabotage except that the fact that they are aliens is known to practically all the individuals with whom they work and there are certain trusted employees of the company working in close proximity to the alien employees, who will promptly report to the company any suspăcious activity on the part of the aliens. 10. So far as is known to the management, none of the employees are members of or sympathizers with any subversive or foreign controlled organization, other than the CIO, which will be discussed later under the subject of Labor. General Manager oTTo T. KREUSSER believes it to be Communistic and under the direct supervision of the U.S.S.R. 11. All of the employees of the company, including the alien employees, undoubtedly have knowledge of the fact that they are working on Government material, insamuch as practically all material produced is for the War Department. As a matter of fact, accounts appeared in the Indianapolis newspapers indicating that the Allison Engineering Company is producing airplane motors for the War Department. 12. Most employees are members of a group insurance plan operated by the Metropolitan Life Insurance Company for the General Motgere Corporation. Membership is entirely voluntary, but a great majority of the employees belong. The policy costs $1.98 & month and the benefits are $2,000 straight life, $14.00 & week for thirteen weeks sick benefit, and $4.00 a. day hospital allowance and the cost of hospitalization and surgery. All new employees are eligible after 90 days with the company. The premiums are collected by the Allison Engineering Company's management and payments are made monthly to the Metropolitan Life Insurance Company through the General Motors central office at Detroit, Michigan. A copy of the pamphlet describing this insurance plan was obtained and is being forwarded to the Bureau with this report. 13. All employees, without exception, are fingerprinted and ment. Two copies of all fingerprints are taken and hereto- photographed by company employees in the personnel depart= fore one copy has been retained by the company and the other has at Washington, D. C., through the Indianapolis field each office. of been forwarded to the Federal Bureau of Investigation Four copies fingerprint cards, one for the employee's pass oard. and of each photograph are made, one for the one two for the personnel department's employees' record - 10 - Regraded Unclassified 45-FF 14+ There are no stiuplations in any of the Government con- tracts forbidding the employing of alien labor; however, as a matter of policy, the company is not employing any employees who are not American citizens. The question as to whether those aliens who are now employed will be retained is under consideration by company officials. 15. Personnel files are maintained in the personnel department under the supervision of Mr. RAY KREMER for all employees except the managerial executives listed earlier in this report. Those individuals have personnel files which are maintained in the personal possession of Mr. OTTO T. KREUSSER, General Manager, and, of course, their main personnel files are maintained at the general headquarters of General Motors Corporation, Detroit, Michigan. Every other employee has a file at the Allison Engineering Division. This personnel file contains the employee's fingerprint card, photograph, his original application, a copy of the espionage and cabotage laws signed by the employee, a duplicate copy having been given the employee for his retention; personnel files also contain a birth certificate, that is, all new employees are required to produce a birth certificate while all old employees are being required to furnish either a copy of their birth certificate or some evidence of their birth, such as an old insurance policy, et cetera. At the present time the personnel department is studying and getting ready to draw up a set of company rules. When these rules are compiled in booklet form each employee will be given a copy. They do not plan at present to havesach employee sign a copy of the rules for retention in their personnel file. Each perconnel file is kept in a. folder and they are filed in alphabetical order in fire-proof, looked file cabinets. In addition to the regular personnel file, there is kept in a separate file a card on each employee entitled "Employ" ment Record." This card is simply & ready reference and more or less 5. condensation of the employee's personnel file. A copy of the employment card used 1a forwarded to the Bureau with this report. C. HANDLING OF PLANT BUSINESS 1. The Allison Engineering Company is a division of the General Motors Corporation, Detroit, Michigan. 2. The Allison Engineering Company Division does not have any subsidiary plants. - 11 - Regraded Unclassified 45-GG Regraded Unclassified 3. All contracts of the Allison Engineering Company Division are with the Air Corps of the United States Army for the production of high-speed airplane motors except that about 92% of the bearings produced in plant one are sold commerci- ally. No airplane motors are sold to commercially owned concerns. 4. The official plant correspondence, both incoming and out- going, is not all reviewed or signed by the general plant manager or eny one other official. As to outgoing mails, the department head or executive will diotate a. letter over his own signature; his stenographer will then type the letter; he will review it and sign it. The ad- dressed envelope is attached to the letter and the letter, as well " other outgoing norrespondence, will be carried by the stenographer at the end of the day and placed in a basket on the desk of Stenographer Mrs. MARGARET LANGFORDS in the comptroller's office. There she seals and stamps the envelopes and places them in a. mail peuch. CLEM OSBORNE, head of the shipping and receiving department, personally picks up the mail pouch each evening and takes it to the main post office building in Indianapolis, Indiana. The pouch has a look thereon which is never used and is trans- ported by OSBORNE alone in his personally owned car. Each morning while en route to work CLEM OSBORNE goes by the main post office building in Indianapolis, Indiana, and picks up all mail in Post Office Box 894, which is that of the Allison Engineering Company Division of the General Motors Corporation, and delivers it to Mrs. MARGARET LANGFORDS. Mrs. LANGFORDS, usually assisted by the personal secretary of General Manager OTTO T. KREUSSER, opens the mail in the morning, timestamps it and indicates to whom it is to be delivered. The mail is delivered to the different department heads by JOHN ALLEN, a young man employed in the blueprint room of the engineering department, who also delivers the blueprints throughout the plant. Mrs. LANGFORDS and Mr. KREUSSER's secretary have each been with the company for more than ten years and they, as well as messenger JOHN ALLEN, are considered absolutely trustworthy by Mr. KREMER. Mr. KREMER has stated, however, that the mail is handled under the present set-up in a rather sloppy manner. He stated that, although he has installed many new and modern rooms at the Allison Engineering Company, he has not as yet had the time to give serious study to the handling of company mail. He advised, however, that when the main executive offices of the company are finally moved to their now quarters in the building of plant three, they will have a regular mail and supply room which will be restricted to - 12 - 45-HH one or two trustworthy employees. In addition thereto they will have one or two reliable messengers for the distribution of mail. KREMER stated that as a general rule all correspondence and blueprints in the various offices are placed in looked cabinets over night; however, occasion- ally some of the higher executives will leave a blueprint or one or two pieces of mail on their desks over night, particularly when they are working late in the evenings. As a matter of policy, however, it 18 forbidden for mail and other written matter to be left in the office on desks and tables over night. 5. & 6. Deliveries of Government material are up to schedule. The company is engaged in producing high-speed airplane motors under Government contract. It has been confidentially stated that these motors, by notual tests, have achieved a flying speed of 500 miles an hour. A majority of the motors are built for pursuit ships and mall bombers and a small percentage of them are for special jobs, such as for the Bell flying fortress. The motors are all of the same general type with some slight variations. Generally the motor may be described as a V-type twelve cylinder line engine, liquid cooled. One of the outstanding features of the motor is that it is liquid cooled. A secret liquid, which in some respects is comparable to Prestone, is used for cooling the motor; this enables the motor to be almost entirely inclosed, except for the cranksheft turning the propellor, which outs down the wind resistance of the plane tremondously. Several of these motors are utilized in planes which have the motor in the rear of the pilot. 7. The airplane motors are delivered directly to the Government inspectors of the Army Air Corps at the Allison Engineering Company plant. The Allison Engineering Company is responsible for the proper boxing and loading on the carrier. The responsi- bility of the company ceases the mement the carrier takes possession. All shipments are made under Government bills of lading and the Government designates whether or not the motor shall be transported by railroad, truck line, or air- plane. It is left to the discretion of the Allison Engineering Company as to which railroad, truck line or airline shall be used, The Government bills of lading indicate to which numerous airplane companies, principally located at Dayton, airplane company the motor shall be shipped and they go to Ohio, and Buffalo, New York. . 1. - Regraded Unclassified 45-II 8. At the present time the company has two contracts with the air corps of the War Department. One of these contracts, which will expire in December, 1939, is for approximately $1,800,000. The new contract, which began June 27, 1939, is for approximately $20,000,000.00 and must be completed not later than 1941. 9. The Allison Engineering Company Division, insofar as its contract with the War Department in conserned, is not a subsidiary; it is the only division of the General Motors Corporation producing airplane engines and the entire value of the above-mentioned Government contracts are delegated to the Allison Engineering Company Division. 10. Broadly speaking, it may be stated that the contracts with the Government are executed entirely within the plants of the Allison Engineering Company Division; how- ever, there are many parts, such as bolts, screws, etc., which are common to the aviation industry throughout the country, which are purchased from outside sources. All such items are readily available and can be obtained from numerous sources of supply. There are, however, two parte of the motor for which there is only one source of supply, the Stromberg carburetor is used exclusively in the airplane motors and it is produced only by the Bendix Products Division, Bendix Aviation Corporation, Stromberg Division, South Bend, Indiana, The only ignition system which may be used in the motors is made by the Scintilla magneto division of the Bendix Aviation Corporation, Sidney, New York. It is observed that both of these companies are on the list of industrial plants presently regarded by the War Department and Navy Department as having priority in the Bureau's plan for plant protection, and the Bendix Products Division, Bendix Aviation Corporation, Stramberg Division, South Bend, Indiana, is being presently surveyed by an agent of the Indianapolis office. In the production of the airplane motors the Allison Engineering Company is dependent solely for bearings received from and manufactured by its plant number one, 11. All plants of the Allison Engineering Company Division, that is, plants one, two end three, are located at Speedway City, Indiana. Generally it may be said that there are no decentralized units. - 14 - Regraded Unclassified 12. Plants one and two are operating at the present time at what is considered full capacity. There are two shifts, from 7:30 A.M. to 4:00 P.M., and from 4:00 P.M. to 12,30 A.M. in plants one and two. The plants are closed from 12,30 A.M. until7,30 A.M. A third shift could be insugurated and production stepped up, if necessary. The hours of the office workers and salaried executives are from 8:00 A.M. to 4:30 P.M. Plant three is not operating at all but will begin operations on a very limited scale December 1, 1939. It is anticipated that about March 1, 1940 the plant will be operating at full capacity, with two shifts similar to those mentioned above. 13. A. The output of plant two at the present time is eight airplane motors a month. It 10 anticipated that when plant three reaches peak production the output will be eight airplane motors a. day. B. The full capacity of plants one and two,as to personnel, has been reached at the present time, that is, approximately 850 employees. When plant three is in full operation about 1600 employees will be utilized there and if a third shift is inaugurated about 2400 employees will work in plant three. 14. Plant number one uses orude oil for heating facilities. It uses electricity obtained from the Indianapolia Power and Light Company as its principal source of power, in the opera- tion of its machines and for lighting the plant. It also uses & comparatively small quantity of gas, obtained from the Citizens Gas and Coke Utility, Indianapolis, Indiana. Water from the Speedway City reservoir 1a utilized for drinking and manufacturing purposes. Plant number two utilizes power of the Indianapolis Power and Light Company for the operation of its machines and for lighting the plant. This is the only source of electrical power available to the plant. It has a steem heating plant in which coal is used. A. small quantity of gas from the Citizens Gas and Coke Utility, Indianepolis, Indiana, is used in the laboratory. The drinking water and that used in manufacturing processes 18 obtained from the Speedway City reservoir. There are no other sources of supply of gas, electricity and water for plant two. Plant three has its own power plant in the form of five Diesel motors which will produce all electricity necessary to operate the machinery and heat the plant. It also has connections with the Indianapolis Power and Light Company, the whereby it may utilise the power of that company in - 15 - Regraded Unclassified event the Diesel motor power plant ceases to function. It has its own source of water in the form of two 65,000 gallon wells, both on the grounds of plant three, and one well is inside of the plant building. It also has a connection with the water company of Speedway City, whereby it can obtain water there, from the reservoir, in the event anything happens to the wells. Practically no gas will be used by plant three; that which is used will be obtained from the Citizens Gas and Coke Utility. 16+ See 14. 16. Precision tools, including the machines in the shops of plants one, two and three have all been replaced in recent months and should last at least three or four years under hard usage. No arrangements have been made for replacing them overnight, but machinery could be purchased in small lots and some of them could be obtained, if necessary, from other General Motors plants. As to repairs of the machines, most of them could be made by the skilled mechanics and operatore of the Allison Engineering Company. LY. In the event of an emergency, unskilled personnel could be rapidly replaced, inasmuch as they presently have on file the names, addresses and backgrounds of several thousand unskilled laborers. As to skilled laborers, they could be obtained largely from 38 other General Motors plants. At the present time men are being trained throughout the lant in all of the skilled positions so that there will be two or more men qualified to fill every position, generally many more than two. 18. Practically the only raw materials used in the manufacture of Government production are steel, aluminum and tin. There are numerous sources of supply for both steel and aluminum, in the United States, and the company at the present time utilizes several of these sources. It considers it very unlikely that there will be any shortage of these materials. Tin, which is important in the production of bearings by plant one, 1a the only naterial utilized which must be obtained from foreign countries. They have made it a matter of policy to keep on hand B. supply for at least one year in advance. 19. No processing materials, such as chemicals, are used by the Allison Engineering Company. One of the principal treatments of the metals utilized in the manufacture the of the greatest secret which the company has pertains to metallurgy airplane motor is the heat treatment. Probably - 16 - Regraded Unclassified 41-LL and the treatment of the various metals that & into the airplane motor, which treatment is given the metal in order that it may stand high degrees of heat, low degrees of cold and sudden changes of both. 20. Government materials pass through all plant units except the heating plants, certain auxiliary buildings, and storerooms of plant two. 21. Plants one and two employ B. night shift from 4,00 F.M. until 12:30 A.M. and the number engaged on this shift 1a practically equal to the number engaged on the day shift and the processes carried on are no different than those during the day shift. 22. In plant one the raw materials are received by a shipping clerk through Gate A; from there they are taken by a hand truck to the casting rooms, where the bearings are cast. From the casting rooms they are taken by hand trucks end placed on the floor in the machine shop next to the various machines; there the bearings are machined by several opera- tors on several machines, depending upon the type of bearing, and it is ultimately taken by elevator to the inspection department on the second floor. There it is examined by the final company inspector and approved or sent back for salvage. It is also examined there by the Government inspectors. From there it is moved to the shipping roam, on the second floor, where it is prepared for shipment to the commercial companies or to the Allison Engineering Company plant two. From the shipping room it is taken by elevator to the first floor and trucked out of Gate E. All bearings moving from plant one to plant two are hauled by an Allison Company truck. At plent two nothing is actually manufactured, that is, they do not produce their own metal, they have no foundry here. Hore the bearings from part one and material from other companies throughout the country are received and assembled into 5. finished high-speed airplane motor. For example, e. blook of aluminum will be received from the Aluminum Company of America and the pistons will be ground out and the metal treated by heat and by machine and the blook will be converted into a. finished airplane motor block. The parts and material received at the Allison Engineering Company from other companies are generally considered 0.8 either finished or unfinished the parts. The finished parts, such G.B carburetors, received from have been inspected by the Army or Navy Inspectors prior Stramberg Carburotor Company, South Bend, Indiana, usually to leaving their respective plante and have the inspector's - 1T - Regraded Unclassified MM soal of approval thoreon at the time of arrival. These parts, as well as all other material used in the production of the airplane motore, enter plant two through Gates I or L and are Promptly checked and invoiced by the shipping and receiving department. The finished parts having the army inspector's seal of approval thereon upon arrival are inspected by the Allison Company inspectors rather hurriedly to see if they have been damaged in transit and, if not, are placed in the inished part store room until such time as they are placed in a motor. Unfinished parts, such " an aluminum motor block or a. piston rod, are also received at the shipping and receiving department and upon their arrival are examined by the Allison Company inspectors and a few of them are given certain tests by the Allison Company labora- tory. These parts are moved from the shipping and receiving department to the various other departments, usually by hand truok. If they are rejected upon arrival, they are sent back to the company from which they came] if approved, these unfinished parte are then placed in the machine shop on the floor near the machines, where they are machined or processed and/or placed in the heat treating department for processing. After the unfinished part has been treated or processed, it goos through the company inspection depart= ment, where each part is inspected minutely. It then your to the Government inspectors, who pase or reject it. The Government inspectors make only fi. spot check and do not examine each individual part. The Government inspectors use the company blueprints and usually make their inspections in the company inspection department, however, they may inspect a. part at any place or time in the plant; they may pass or reject it at any time; if the part (then finished), passes the company and Government inspectors, it then ¿ to the finished parts room until such time as it actually in used in the assembly of a motor. In the assembly test department various new motors are assembled and tested, as are various minute parts. Upon completion of plant number three all of plant number two will be utilized for test purposes and plant number three will be utilized solely for production. In the assembly production department the airplane motors are assembled. An assembly line, such SA is used in an automobile plant, is not utilized, but the motor blook is placed ona stand and the parts are carried thereto and placed thereon by hand, except that certain of parts known as sub-assemblies, are assembled the in the groups assembly production department and are placed on the motor in as group+ After each motor in assembled, and Government inspectors E° over it carefully. of tests If company the motor is approved. it is then given . series on the torque stands. These stands ATR located in buildings - 18 - Regraded Unclassified designated on blueprint D as test laboratory and new test building. The torque stands are restricted areas at the times the tests are being run. One of the tests is to run & motor continuously for 24 hours. During this period of time only those individuals who have passes signed by General Manager OTTO T. KREUSSER are permitted in the torque stands. An armed guard is placed at the door of the torque stand and given B. key thereto end he will not permit anyone to enter except those having passes 8.5 montioned. If the motor satisfactorily passes the teste given on the torque stands, they are then taken into test acsembly, where they are torn down and the parte inspected individually by the Government and company inspectors. It is then reassembled, reinspected by the company and Government inspectors nd given & final test on the torque stand, after which it is given A final examination of the company and Government inspectors and, if approved, is shipped to the airplane factory designated by the Government on the Government bill of lading. D. PHYSICAL DESCRIPTION OF PLANT 1. Plants one, two and three are all located in Speedway City, Indiana, which has its own city goverment but is practically 8. suburb of Indianapolis, Indiana. The eastern boundary of Speedway City coincides with the western boundary of the City of Indianapolis. 2. Plant number one occupies about two thirds of 8. plot of ground consisting of 1.47 acres, bounded on the north by West Thirteenth Street, on the east by Main Street, on the South by West Twelfth Street and on the West by an unpaved alley. At the present time plant number one consists of two buildings of the same design which, to all outward appearances, are one and the same building. The building cooupying the northeast corner of the lot is a one story brick structure with conorete flooring 105' X 140'. The building which adjoins it is also constructed of brick and concrete. Both of these buildings have been constructed in about 1917; this latter building has & second floor, the flooring of which is of wood. From the inside and outside the two buildings appear to be one and this latter building measures 60' x 80'. Practically all of the firet floor west walls of these buildings at the present time are out and large addition, the approximate sise of the present two buildings, lot pasteboards have been substituted due to the fact that an 16 in the process of construction. Although the entire is fensed with 7' heavy steel wire fence, with three the strands of barbed wire on the top, DE are all lots on which - 19 - Regraded Unclassified -00 three plants are located, the east, north and west sides of plant one are only 6. distance of approximately three feet from the sidewalk or alley which surrounds them. lant two occupies about one-third of a plot of land consisting of 13.5 acres, which is bounded on the north by Gilman Street, on the west by Main Street, on the south by the Baltimore and Ohio Railroad property, and on the west by a. joint right of way owned by the Baltimore and Ohio and and P. & B. Railroads. The principal building is in fact two adjoining buildings of the name type construction and architsoture and to all appearances is only one building and hereinafter will be referred to as the main building. It is B. modern one-story brick, steel and concrete structure reported to be almost 100% fireproof. The eastern half of the building was constructed in 1936 and the western half in 1938. Adjoined to this building on the south by 6. passageway and of the same type construction, and considered part thereof, 18 a building housing the three torque standa on which the airplane motors are tested. The boiler house is also part of this same structure. In the main building of plant two are housed the main offices, the engineering department, the machine shop or production department, the heat treatment room, the production assembly department, the test assembly department, the inspection department, the laboratory and Government inspector's office. A rough drawing, showing the inside arrangement of this building 5.6 well 8.5 that of plant two is submitted with this report. In this building the airplane motors are actually produced. Ho ever, upon completion of plant three, plant two will be utilized only for developing and testing motors and plant three will be the production unit. Plant two also has what has been designated on the blueprint submitted 0.0 "Sow Test Building." This is in the same inclosure 0.0 the main building and about 25 yards to the southeast thereof. It is a brick structure now under construction and will contain three torque stands for testing motors. A spur traok of the Baltimore and Ohio Railroad rune in back or on the south of the main building and the New Test Building. Plant two also has several temporary one-story frame or metal struo- tures in the sure inclosure and about 25 feet east of the main building. One of these is the structure shown on blueprints submitted as "Steel House." This is used to motor oil and quantities of special grade clear will gasolime be referred is designated on the blueprint 6.8 "Storage." equal used in to later on 95 a fire hazard. Another these This store running tests on the motorn. This building of buildings is a frame one story structure divided into three - 20 - Regraded Unclassified parts as to aron. The north part is - tool crib and the office of the maintenance department and here certain fire apparatus, described hereinafter, is stored. The middle part is a shipping and receiving department and the south part 10 & machine shop which does special burring on bearings. Another of these temporary buildings is is 1. one-story sheet etal structure shown on the blueprint as "Employment Office." It is used as an employment office and for the houdquarters of the patrol service and personnel department. A low 4' fence, also shown on the blueprint, runs from Gate I to the cyclone fence at the roar of the employment office. There is a gate in this fence on the south side of the employment office which is always open and there is no look thereon. At the rear of the test labora- tory are the electric power transformers surrounded by BLO 8' wire fence with a gate which is locked. There is also located near the transformers a. temporary pumphouse and grid house for the gasoline tanks that are buried nearby. Outlet pipes to the gasoline storage tanks are above ground and looked closed. The north side or front of the main office building is about 8' distant from the midewalk on Gilman Street. Plant number three is in the process of construction. It will be partially completed by December 1, 1939, at which time production will start on a very limited basis. The General Motors Corporation has endeavored to make this 5. model plant and it was built with the idea in mind of preventing sabotage as well as attaining good results along the production line. Chief of Patrol Service JOHN DALTON advised that he has been assured by the general manager that he need spare no expense in protecting this plant. They plan to utilise the most modern equipment available which is practicable. Upon completion of this plant the main office will move from plant two to plant three. Plant three is a one story brick and metal structure said to be 100% fireproof. The main offices will be located adjacent to and in front of the production part of the plant and will consist of three floors. The ociling in the production part of the plant is approximately 20' high and the part in which the main office will be housed is about 30' high. The lower two floors will be utilized by the main offices and the third floor will be a cafeteria for the use of all employees. The plant is loonted in & 90 aors lot and faces north on Tenth Street. It is bounded on the east by GrandeAvenue, on the south by Indianapolis City Park and on the west and southwest by Coassl Road. The plant has no windows except on the north wide where the 21 Regraded Unclassified main offices will be located. It is lighted through artifi- cial electric light and has an artificial cooling system. The light, gas, electricity and water system has been described elsewhere. A spur track of the Baltimore and Ohio Railroad also enters this plot at the northeast cormer. At the southeast oorner are located three torque standa in a building of similar construction, connected with the main building in a manner similar to which the torque stands, or test building, are connected with plant two. Plant three will also have one other structure, B. small one-story briok building located at Gate 0, for the use of the patrol service. There will be no recreation room in plant three and the employees' lookers will be located around the walls of the building, near the departments in which they work. Each department will be separated by e. cage from the adjoining departments. Blueprints of plant three, as well E.E the other plants, are being submitted with this report. 3. The following blueprints and drawings are being forwarded to the Bureau of plants one, two and three: blueprint marked on the back as A is a. floor plan of the east side of plant number three of the Allison Engineering Division of General Motors Corporation, Speedway City, Indiana. This blueprint was furnished by Mr. WILLIAM LARSEN and for study should be placed next to blueprint marked B, where indicated. The blueprint marked B on the back is the floor plan of plant mmber three of the Allison Engineering Company Divi- except for the east side of the plant which is reflected sion, General Motors Corporation, Speedway City, Indians, in blueprint A. This blueprint was also furnished by Mr. the WILLIAM LARSEN. Blueprint marked D on the back is of Engineering Company Division of General Motors Corporation, to grounds and buildings of plant number three of the Allison Speedway number two. It also shows the location of all lines fences, of City. Indiana, showing its relative position plant well ad water, gas and power lines. The power marked plants D the back is of the grounds and buildings 5.8 number three and two are underground. Blueprint of plants number on one and two of the Allison Engineering fences Company Division of General Motors Corporation, showing and were above blueprints are, of course, strictly confidential. these and furnished by Personnel Director RAY KREMER. All of also water, gas and power lines. Blueprints C D The blueprint were furnished to the Federal Bureau of drawing Investigation. the files of the company indicated that prints marked E on the back is a rough sketch of Drawing by agent, showing the inside floor plan Division, the prepared plant number two of Allison Engineering Company - 22 - Regraded Unclassified -RR General Motors Corporation. Drawing marked F on the back is a rough sketch drawing showing the inside floor plan of the first floor of plant number one. The drawing marked G on the back is a rough sketch drawing prepared by agent, showing the inside floor plan of the second floor of plant number one. There are three offices in plant one and ten offices in plant two. All of the executive offices will be located in plant three when that plant starts production. The exact number of these offices is unknown at this time. 5. There are five entrances to plant one and for reference purposes they have been marked by agent A, B, C, D, and E on the blueprints submitted. Gate A is 12' wide, faces on Main Street, and it is through this gate that all raw material for plant one is delivered. Gate B is 6' wide and opens on Main Street. All employees are required to enter and leave plant one through this gate. Gate C is a 6' gate opening on Main Street, and all visitors and persons other than employees having business with the plant are required to enter through this gate. Gate D is B. 12' gate opening on Twelfth Street, which at present is kept looked at all times) however, upon completion of construction work on plant one the southeast corner of the lot will be used as an employees' parking lot and Gate D will be the entrance gate to that lot. Gate E is a. 12' gate opening on Twelfth Street and at the present time all material and employees used on the construction job enter at this gate. There are seven entrances to plant two which have been marked by agent on blueprints submitted 0.5 F, G, H, I, J and Z. Gate 7 is a 12' gate opening on Gilman Street and is the entrance to the office employees' parking lot. There is no entrance from the parking lot to the buildings proper and all persons entering must also leavy by Gate 8. Gate G is a. three foot gate opening on Gilman Street. This and other persons other than employees must enter through gate is the entrance to the main office and all visitors Gate G. Gate H is 61.9' gate opening on Gilman Street and all employees must enter and leave the plant through Gate Gate H, I the time clook being located just inside this gate. all is a trucks must enter and leave; also through this gate all 12' gate facing on Gilman Street. Through this gate applicants must pass and enter the employment office A nearby. 4º wire They fence rune from Gate I to the surrounding 7' fense just are also required to leave by this same gate. - 23 - Regraded Unclassified to the east of the employment office, in other words, this 4' wire Conce separates the employment office, which also houses the personnel department and the patrol service, from the remainder of the grounds of plant two. On the south side of this 4' fence is a gate marked by agent on the blueprints a.e K. This cate remains open and inasmuch 11.8 applicants are not given passos at the time they enter the gate marked I to C° to the employment office, it would be comparatively simple for them to walk past the employment office and, without being observed by the guards, 6° through gate K into the grounds of plant two. Gate J 18 8. 12' gate opening, on Gilman Street and in an entrance to the parking lot for all company employees other than office employees, this parking lot being located in the northeast corner of the grounds of plant two and 18 completely fenced in by B. 71 cyclone type fence, except for the entrance at liate J. Gate is is EL 4' [ate openin, between the parking Int for employees other than office workers and the grounds of plant two. This gate has never been used and remains looked at all times. Gate % La located at the southeast corner of the grounds of plant three. It is beneath this gate that a spur track of the Bultimore and Ohio Railroad runs into plant two. This gate remains locked at all times except when R. freight train is leaving or entering and arrangements have been perfected with the yerdmaster of the Baltimore and Ohio Railroad whereby he telephones Wie chief of the patrol service prior to the time any switching is to be come through this (ste. [here are four entrances to plant three which are designated or, the Diun- print submitted by agent LE ", 3, 0 and 2. Gate 1. in e 12' gate facing on Tenth Street nno =hen production it underway at ylunt three this Gate will be used BD an entrence rate for office employees only. it the present time it is being used to truck in material used in construction. Date N La u. 12' gate racing on Coasel Road and this gate will be used for the entrance of all employees other than office employees und will lead directly to the parking lot set aside for such employees. Gate 0 consists of two 12' gates facing on Grande Avenue. Through those raten will be shipped all materials to be used at the plant. Located at this gate is the patrol ourvice headquarters house. Gate P opens on Tenth Street and is the entrance for B. spur track of the hultimore and Ohio Reilroad. Tentative plans are for B. driveway with two gates to be constructed leading from Tenth Street to the main offices of plant three; however, 80 the present time the gatewnys (uive not been out out of the fence. To particular protection is given windows and skylights. through which entranoes wight be cade to any of the plant - 24 - Regraded Unclassified L-TT buildings, except that the guards are instructed to be on the alert to notice any breakage or open windows after hours and to promptly investigate them. Plant three will have no windows except those on the north side for the main offices. T+ All of the lots of plants one, two and three, including the various parking lots, are surrounded by a. 71 heavy wire fence with three strands of barbed wire above that, similar to cyclone fencing. The fence used by the company was manufactured by the For d Fencing Company, Indianapolis, Indians, and its trade name is "Ford Fence." The gates are of similar construction and are looked with padlocks. At the present time the company is ac uiring a new type padlock, the tumblers of which may be removed and adjusted whenever desired. 8. The lighting system for plants one, two and three la entirely electrical, inside and out. Plant three has the latest form of artificial electrical lights, similar in structure to the neon sign lights. Plant one has numerous windows through- out, but no skylights. Plant two has numerous outside windows and also two large skylights. The outside lighting of the three plants is described eleewhere. Plants one and two have large floodlights located on each corner of the main buildings and they, with the surrounding street lights, furnish adequate lighting for the outside of thome two plants. The present plan is for plant three to have indirect lighting so that floodlights would shine on the building rather than away from it. It is also planned to have floodlights shining on the fences surrounding plant three. 9. At the present time plant one has no parking recilities for its employees. However, upon completion of the construction work at that plant, all employees will have a parking lot located at the southeast corner of the lot. This lot is entirely fenoed in. Plant two has two parking lots, one at the west side of the plant for office employees, the entrance to which 18 through Gate F. This lot is completely fenced with Ford fence and the gate is unguarded and remains noans of identification are placed on the care of office open from 7:00 A.M. to 12:30 A.M. No stickers or other employees to distinguish them from any other cars. side There of is fence or other obstruction between the west At no main building of plant two and this parking lot. the the present time anyone may drive e. oar into this lot between the hours Plant two has another parking lot at west of 7:00 Adis and 12:30 A.M. and park it against the the side building. of the lot for all employees other than office employees. - 20 - Regraded Unclassified 45-00 Entrance to this parking lot is through Gate J and it is fenced on all four sides by the above-desoribed Tº Ford fence. Plant three when completed will have two separate parking lots, one located at the northwest corner of the lot for office employees and another at the southeast corner for all employees other than factory employees. Both of these lots will be fenoed on all four sides by similar feneing. 10. & 11. There are no official plant cars at the present time and all of the executives either park their cars on the street or in the parking lot at the west side of plant two. At the present time parking is permitted on all the streets surrounding plant one as well 8.8 those surrounding plant two except that on the south side of Gilman Street, in front of plant two, parking is restricted to two hours. It will be observed that cars may be parked on the streets surrounding plants one and two in numerous positions and not be a distance of more than ten feet from the actual plant buildings. Plant one has no dining or recreation rooms. The employees eat their lunch or dinner in the shops or offices where they work. During their lunch and dinner periods in the machine shop they generally gather and play cards. The lavatory of plant one is located in such 9. position that it is necessary for anyone entering the lavatory to go through the machine shop. There 10, however, another lavatory located on the second floor, used by the office employees and situated in such a. manner that it 1s not necessary for them to go through any other department to reach it. Plant two has no dining or recreation rooms. The employees there eat at their work benches and usually lava- play cards during their lunch and dinner hours. The entered either from the machine shop or from the production assembly the tory is located in such BL position that it may be department. There is also another lavatory located in is executive group of offices in such a position that it unnecessary to go through any other department to reach in it. In plant three all of the various departments will be rooms or will be caged in with a wire mesh fence, with separate corridors running between the various departments. It will be unnecessary. in going from one department to another, and to pass through any other department. The lavatories cafeteria will be located so that it will be unnecessary to - 26 - Regraded Unclassified 10 through any other departments to reach them. 12. No buildings of questionable character wer. noticed adjoining the plant property which could be used as a headquarters for sabotage or espionage activities. Broadly, it may be stated that all three plants are in rural areas. E. PRECAUTIONARY MEASURES AND PROTECTIVE DEVICES 1. There are seven departments having general jurisdiction in all three departments. They are the purchasing department, engineering department, inspection depart- ment, accounting department, personnel department, plant or maintenance department and production department. =. The company guard service is known B.S the patrol service and consists of uniformed patrolmen with special police powers. Each guard is required to purchase with his own funds a. .38 police positive special revolver. The guards wear a blue police uniform with Sam Brown belt and holster. Sidearms are not carried by the guards during the day shift except that those guards on special detail, such as guarding the motorway, carry their guns during the day. The patrol Mackinsw. A nickel badge appears on the coat and cap, reading service uniforms consist of cap, coat and trousers and blue Allison Division, Gemeral Motors Corporation, Special Police, Indianapolis, Indiana." The patrol service has three shifts, (if B. patrolman, his number and if an officer, his rank) from 7,00 A.M. to 3:00 P.M., from 3.00 P.M. until 11:00 P.M.I and from 11,00 P.M. until 7:00 A.M. Although plants one, of two and three are located outside of the city limits through B. special dispensation received from Sheriff Indianapolis, Indiana, they are within Marion County AL and of Marion County, all the members of the patrol FEENEY are designated as special police officers by the service Indianapolis police department. Their only police power, can which be exercised on company property; however, company MICHAEL is similar to that of any other police officer, the has Indianapolis, Indiana, to carry their only received special permission from Chief of Police revolvers MORRISSEY, when to and in from full work uniform. provided Arrangements that they department have carry been their will perfected guns respond only to whereby rather any Shariff mergency than AL the FEENEY Indianapolis the call sheriff's advised and furnish police that office. real he any emergency. did number This not was of have Bach done non a revolver needed, because sufficient number of men to B to member meet any of the patrol service is registered and also belon at the ing Indianapolis, Intiana, police department Regraded Unclassified WV in the records of the personnel department of the company, which records are maintained by Chief JOHN DALTON under the supervision of Personnel Director RAY KREMER. In addition thereto, each gun 10 also registered to the guard having possession in a. separate gun register maintained by Chief of Patrol Service DALTON. Chief DALTON also keeps in the files of the personnel department the special police power certificate Issued to each guard by the Indianapolis, Indiana, police department. He stated that prior to the issuance of Bu is 12. certificate the Indianapolis police department made a thorough investigation and two of his men were turned down because of prior criminal records, one of them being a misdemeanor of over ten years standing. These men were discharged. Each member of the patrol service 10 bonded to the company for $1,000 and to the Indianapolia police department for #1,000. The patrol service is composed of 20 patrolmen, 7 sergeants and one chief. It Le antici- pated that when plant three goos into production the guard service will be increased to about 45 men. The patrol service at present receives instructions in revolver shooting from Instructor SMITH of the Indianapolis police department. The patrol service has a five- an pistol team and has engaged in a. few matches. The present plan by General Manager OTTO T. KREUSSER, a firearms enthusiast, is to construct an outdoor pistol ranje for the patrol service on the grounds of plant three. At the present time one sergeant is in charge of each shift at plants one and two and a similar set-up will be maintained at plant three later one The guards are utilized for gate service, for patrol service of the outside fences us well 68 all rooms in the plant buildings, and for special guard duty. No plainclothesmen are used. At the present time the patrol service includes among its personnel five former Indiana State Folice officers, wight former soldiers in the United States Army and one redio technician. Radio is not utilized by the patrol service at this time but it may possibly be at a later date. The base pay for patrolmen La $165.00 a month and for sergeants $165.00 a month. Members of the patrol service are given three General Motore Corporation manuals on fire protection, patrol service and safety protection. Written examinations A are given periodically by Chief DALTON on the three munuals. sample examination on fire protection WILB furnished to agent and is being forwarded with copins of this report. Chief DALTON also makes out efficiency reports on each of the members of the patrol service and e copy of the efficiency report form was obtained and is forwarded to the Bureau herewith. No member of the patrol service was permitted to a firearm until Chief DALTON WSB satisfied that he was who capable Chief DALTON thinks need instruction are given it once D. week of carry handling it. In addition to the team pistol shooting, those at Tomlinson Hall by Police Instructor HARRY SMITH. The uniformed patrol JOHN DALTON care to the Allison Engineering Company Division. Prior service was inaugurated on September 10, 1939, when Chief to that time they had what DALTON described " & sort of compination - 28 - Regraded Unclassified janitor and guard service whereby the janitors took turns sweeping end supposedly guarding the gates. 5. The General Motors Corporation policy requires that all members of the patrol service at the time of employment be between the ages of 25 and 35 years, preferably married and of good moral character. They are required to possess 8. minimum height of 6º 9" and B. minimum weight of 160 pounds; however, this rule is flexible, particularly as to age limits and if they can find an unusually good man, they will employ him even if over 35 years. At the present time the patrol service has two men over 40 years and none under 25 years. Each applicant for a. position with the patrol service is investigated by the company employment investigator in a manner similar to the in- vestigation of other applicants, that is, a form letter 18 dispatched to his two former employers. However when a member of the patrol service applies for special police power with the Indianapolis police department, 98 all of them are required to do, he io fingerprinted and photographed by the Indianapolis police department and his prints are sent to the Federal Bureau of Investigation. He is also investi- gated by the Indianapolis police department and before he can receive his certificate of special police power he must be recommended by Chief of Police MICHAEL MORRISSEY and Chief MORRISSEY's recommendation must be approved by the Indianapolis Board of Safety. At the present time a brother of the secretary to Chief of Police MICHAEL MORRISSEY ie a member of the patrol service. Chief DALTON has advised that he has been swamped with applications for positions with the patrol service from present members of the Indiana State Police. He believes this is due largely to the faot that his entrance salary 18 $55.00 a. month more than that of the Indiana State Police. 4. In addition to the uniforms and revolvers mentioned above, each member of the patrol service is furnished with a. flashlight and a night stick. However, they seldam carry the night sticks. All of their equipment having been purchased since September 1, 1939, it was observed to be in very good condition. 5. As mentioned above, all of the three plant lote are fenced with Ford fence and no outside gatee are left open through which access may be gained to the plant except those entrances where guards are stationed. 5. No casual visitors are permitted in the plants. If an outsider has business in any of the plants, he is always escorted by a guard same or official of the company and wears an appropriate tag. The an are utilized in plants one and two and generally the sent systems system will be utilized in plant three upon completion of construction. - 29 - Regraded Unclassified Every employee has a badge bearing an individual number and also an identification card bearing his photograph, signature, fingerprints of the left and right index fingers, badge number, pass number, ago, height, weight, oolor of hair and eyes, date employed and the General Motors Corporation stamp on the card in such a manner as to place part of its impression on the photograph. It is also signed by Personnel Director RAY KREMER. At the present time B new badge is being made and all of the old badges will be called in and a new badge Issued to each and every employee. This badge will be about one inch aquare and will bear the following inscription: "Allison, - General Motors Corporation, Indianapolis, Indiana, "and thereon will appear two numbers, for example 266/032. The figure two of the number 266 will indicate the plant to which the employee is assigned. 66 will indicate the number of the department to which he is assigned and the 032, or any number under 400 or some other arbitrary number, will indicate that he is on the day shift and if over 400 will indicate that he is on the night shift. All employees from the General Manager on down are required to check in and out of the plant by time clook. All factory employees in plant one must use Gate B, referred to heretofore; all office employees in plant one must use Gate C₃ all factory employees in plant two are required to use Gate H and all office employees in plant two are required to use Gate G. A similar system will be used in plant three. No employees are permitted to use the truok entrances; however, all applicants at the present time use the truck entrance, I, at plant two and call at the employment office. They are not iven passes or badges of any kind and are simply instructed by the guard at Gate I to go into the employment office and see Mr. KREMER or one of his assistants. The namen of these applicants are not taken at the gate and there is no definite check to ascertain whether or not they leave the plant grounds. Às it has been pointed out before, it 1s possible for them to walk through the gate designated as E, surround the employment office and go out into the plant grounds. However, it should be pointed out that Gate I is only approximately 6. distance of approximately 15' from the employment office but the entrance to the employment office is on the mouth side and around the southwest corner of the employment office in such e. manner that the guard at Gate I cannot see the entrance thereto. It is understood that in plant three the employment of office the building with the main offices and will be arranged the for all three plants will be located in the front in manner that when no interviews are being given, will gate such a on Tonth Street will be closed and applicants 30 Regraded Unclassified 1.22 not be permitted to come inside of the fenced inclosures. All employees are required to leave by the same door that they enter and must necessarily do so, inasmuch as they are requested to punch B. time clock when they leave. The employee's personnel file shows the number of his badge and identification card. In addition thereto there is maintained in the personnel department B. card index in straight numerical sequence, listing the identification card, number and the name of the employee. A card index in also maintained for each badge, this index being broken down first as to issued and unissued passes, then by plants and then numerically. There are also issued, in addition to the badges and identification cards, 60 supervisors' pass cards bearing the supervisors' names, addresses, pass numbers, signatures and signed and approved by General Manager OTTO T. KREUSSER. It also bears a. red star stamped thereon, indicating that it was authorized by Personnel Director RAY KREMER. These are generally referred to as white passes end admit the bearer to any plant at any time; however, if he entera the plants or offices at irregular hours, he must sign the registor. The present arrangementsare for the Government inspectors working at the plant to be issued these white passes. At the present time they are issued only to company employees. At present there are 12 Government inspectors working at the plant. They are not required to have any badge or to wear any other identifying mark. They are admitted to any place in the plant on their War Department credential card. It is pointed out here that under this procedure any Government inspector of the War Department, no matter to which company he might be assigned, might enter the Allison Engineering Company Division and all of its buildings upon his War Department credential card alone. The guards have been instructed to admit agente of the Federal Bureau of Investigation to anyplace in the plant upon their displaying their Government oredential cards. This also appears to be an undesirable practice. A record of all the so-called white passes is kept in a. registry book in the personnel depart- ment. B. There are there must obtain the regular permission to plant the practically no visitors to plant one and from those main visitor has business at plant one or plant two who are offices at plant two before being admitted two he one. calls If nt a the lobby of the main office at plant Regraded Unclassified -AAA where there ar located a /uerd and 1. switchboard operator. Everyone who enters there, other than regular office employees who punch & clock, nust sign the register, which seta out his name, the company he represents, the official he desires to see at the Allison Engineering Company, the time of his entrance and the time of his departure. The switchboard operator them telephones the official whom they wish to see and if the official agrees to nee the caller he is then escorted by B. guard to the official's office. All such callers are given a four inch red card pass bearing & number and it in placed on his coat lapel, at the time he enters the plant. When the call is over, the official whom the visitor has contacted calls the cuard at the front lobby (Gate G) and the guard goes to his office and escorts the visitor out of the building. The guard at this time takes back the pr.ss from the caller. The passes are numbered in sequence and the number of the pass is written on the register opposite the caller's name and the guard cheoks the register to indicate that he has taken back the pass when the caller leaves. The name of the official whom the caller is to nee is written on the pass at the time it is given to the caller and each pass is destroyed by the guard after he takes it from the caller, at the time he leaves. In other nords, the same numbered pass is never issued twice. The passes are bought in lots of 5,000, numbered in numeric-1 sequence. They are kept. looked up in a fireproof cabinet in back of the switchboard and no one has EL key to the cabinet except the patrol service. The patrolman on duty has one key and the others are kept in a master key file by Chief DALTON in the personnel department. When a. patrolman ['oes off duty he gives all of his keys to his sergeant, who gives them to the sergeant in charge of the night shift. Only office employees my enter Gate G at plant two. A guard is on duty at this entrance, 68 mentioned above, during regular business hours. from 7,30 A.M. to 6,30 P.M., after which the door is looked and anyone who enters or leaves between 6,30 F.M. and 7:30 A.M. must use the factory employees' (hte (H) where 5. guard is on duty 24 hours B. day. 7. Chief of Patrol Service JOHN PALTO advised that if the Allison Engineering Company Division employed any undersover operatives, he does not know their identity and if auch are employed, they are undoubtedly nent there from the headquarters of the General Motore Corporation. General Manager UTTO T. KREUSSER stated that it would, of course, be impossible for any large company to operate without sone sort of informent - 32 - Regraded Unclassified among its employees. lie stated that lie 10 not permitted by law at this time to place paid informants in the plant because they have been marked n.e labor spies. Both he and Chief WALTON stated, however, that there are older employees of the company who, because of their loyalty. come to them and furnish them with information 08 to the activities of other employees. Mr. KREUSSER was of the opinion that since be is now restricted by law from placing so-called labor spies in the plants, the Federal Bureau of Investigation should place undercover men therein for this reason. If he were utilizing so-called labor spies, they would also be furnishing him any information which they developed concerning sabotage and espionage, in addition to the other types of information which they usually furnished about employees and union activities. Therefore, since he is unable to utilize the so-called labor spies, he believes that the only really antiefactory and most affective manner to combat sabotage and espionage within the plant is the placement of agents of the Federal Bureau of Investigation therein undercover. He stated that he had no desire to know who any such agents were but that if the Bureau wanted his help in that connection, he would very readily, foyd with the utmost secrecy, make arrangements for their being employed in the plants in strategic positions. There is no private detective agency working at any of the plants of the Allison Engineering Company Division. The only evidence of rabotage has already been reported to the Indianapolis office of the Federal Bureau of Investigation and the details thereof have been reported to the Bureau in the 0880 entitled: "UNKNOWN SUBJECTS; Conditions at Allison Engineering Company, Indianapolis, Indiana) SABOTAGE," Indianapolis file 65-29. 10. There is no official mail room at the Allison ingineering Company although there will be when their new offices are loonted in plant three. A description of the menner in which mil is handled by the Allison Engineering Company has previously been set out in C4. 11. No particular protection 18 given the material loaving the plants by truck or railroad or mail from espionage or out elsewhere. No material leaves the plants by water. It sabotage, The manner in which mail 10 handled has been pointed has been pointed out elsewhere that the responsibility of the the motors are turned over to the common carrier. Most Allison Engineering Company Division ceases at the moment all 33 - Regraded Unclassified -CAC of the motore are shipped to the airplane companies under Government bills of lading by either air, rail or truck, whichever the Government designates on the bill of lading: however, the Allison Engineering Company selects which trucking company, railroad or airline shall do the trans- porting. The motors are placed in mealed crates and after being turned over to the trucking company no protection 18 given them by the Allison Engineering Company. Motors shipped by rail are also sealed in crates and places in boxoars on the Baltimore and Ohio spur tracks coming within the grounds of plant two or plant three. After the motora are placed in the freight cara, AL seal is placed on the door of the car and the Allison Engineering Company offers no furt er protection thereto. The only inspection made of the railroad care is that at the time they first enter the grounds at the plant, they are inspected on the outside to see that no bums or trespassers are concealed thereon. The inside of the cars are not inspected by employees of the Allison Rngineering Company, either before or after the motors are placed therein. Those motors which are sent by air are placed in sealed crates and trucked by B. truck of the Allison Engineering Company to the Indianapolis Airport, where they are placed upon en airliner. No pro- tection is given the motor from the time it leaves the Allison Engineering Company plant in the truck except that the driver of the truck and a helper eccompany the motor to the airport. Cars do not accompany the motor to the airport. If. The receiving and loading platforms of plants one, two and three are within the fenced areas and other than that no particular protection has been given them against sabotage or espionage. The same system of issuing truck passes and the admission of material is employed in plants one and two. All trucks entering the grounds of plant one or two are issued a gate pass. These passes are numbered in numerical sequence and are made out by the guard, in duplicate, at the time the truok enters the gate. These passes are dated and show the plant number, the time in, time out and name of the trucking company. At the time the trucks enter, & rather casual examination is made of the truck by the guard, primarily to nee that there is nothing and receiving do not actually enter the building but back in up across therein department takes all matorial at Gate A except merchandise. At plant one the shipping and the trucks sidewalk. At plant two all material trucked 6000 the through Gate I to the shipping end receiving department, SA- Regraded Unclassified -DDD which is located approximately 100 feet from Gate I and in full sight of the guard on Date I. One copy of the gate pass is kept by the guard and the other is delivered by the driver of the truck to the clerk of the shipping and receiving department. X notes on the Cate pass the articles received or shipped out and the time out. The copy of the gate pass signed by the shipping clerk in picked up by the guard on the gate at the time the truck leaves. Shipping reports by the shipping and receiving clerk are furnished to the accounting department and the original gate pass also goes to the accounting department and the gate pass is checked by the accounting department against the shipping reports. The shipping clerk is required to place on the back of the gate pass substantielly the seme infor- nation which appears on the shipping report. The duplicate gate pass is retained by the patrol service and 1s kept on file for a period of 60 days after which it is destroyed. No pass, other than the gate pass, is given to the driver of the truck or any of his helpers and the guard does not check the invoices or other papers of the truck driver at the time he enters or leaves the plant. Copies of the original and duplicate gate passes have been obtained and are being forwarded to the Bureau. It is E. General Motors Corporation policy for the patrol service to examine all outgoing packages being carried physically out of the plant; however, those that are shipped out by truck or otherwise are not examined by the patrol service. Incoming packages, whether being carried physically or on trucks, are not inspected. Chief of Patrol Service DALTON thinks it would be next to impossible to check each package on 6. truck coming in. At the present timo the shipping clerk is supposed to cheok all outgoing packages leaving by truck and make sure the truck driver does not take out anything that does not belong to him. All out- going shipments by train within the plant confines are checked by the shipping department. The Baltimore and Ohio spur tracks which run into plants two and three come directly from the Morfield yards located in west Indianapolis at about the 1800 blook of Washington end Kichigan Streets. 13. There are no finished products stored in warehouses off the plant property. 14. The plants have no wherf. 38 Regraded Unclassified 16. CARL REYNOLDS, chief draftsman, engineering department, located in plant two, has charge of the blueprints. Several of the motors produced by th Allison Engineering Company have as many as 6300 parts and over 1,000 different parts. There is an original and also at least four blueprints for each part. The loss of one or a group of prints would be relatively unimportent from 9. point of espionage or sabotage. The plant officials estimate that if someone stole all the prints of the various parts, it would take them several years to set up a plant and acquire the necessary precision tools and machinery which would enable them to produce the motor. The really important think and without which the motors could not be produced ie the shop technique. This ie a matter which is never put in writing and probably could not be. For example, the blueprints or specifications may call for a. perfectly round ball bearing, but through certain tests it is ascertained that this type of ball bearing reacts in & certain manner under high degrees of heat, therefore, in order to allow for the reaction, the bearing may be made one thousandth of an inch off center which will be taken care of when the bearing is placed in the motor and heated in that the bearing will then be absolutely round. It has been estimated that even with a complete set of prints and the necessary tools, it would probably take a year end a half or two years to develop the proper shop technique. The original tracings from which all the blueprints are made and from which they can be reproduced are filed in fireproof cabinets in B. room of the engineering department having no windows and only one door, which opens into the engineering department. This door is metal except that the upper half is composed of wire safety glass. CARL REYNOLDS keeps in his personal possession the only keys to this room and to the cabinets therein where the tracings are kept. Also kept in fireproof cabinets in the name room are the tracings and the only blueprints which might be of any possible use to a espionage agent. They are known " the master assembly prints and the master installation prints. These prints roughly show cross section views of the motors and the relative positions of the parts contained therein. Generally these master installation and master assembly printe are never issued to anyone in the plant, who but are made available to the Government inspectors call for them when they are making the final inspection frequently of a motor before it is accepted by themselves the Government and out of the plant. The blueprints are made shipped in the drafting room of the engineering department. - 36 - Regraded Unclassified Undinarily four prints are made of each tracing. CAPL REYNOLDS cheoke to nake sure that no extra copies are made by measuring the amount of blueprint paper used in reprodue= the the four copies. of the four blueprints made of each part, one (008 in EL master blueprint file contained in & looked metal file cabinet in an area of the engineering department surrounded by a e' wire cage with a teller's onge and one door, which is kept looked. A file clerk stands in this cage and whenever anyone in the engineering department wants G. blueprint, he fills out a chargeout, which is inserted in the file in place of the print. These chargeouts in the master blueprint file are checked periodically to make sure that all prints are returned. Blueprints are left on the drawing tables in the engineering department over night. CARL REYNOLDS advised that the theft of prints left on the drawing tables over night would probably cause less trouble than it would take to charge them in and out each night and morning to the numerous employees. One or more copies of each blueprint for a part goes to the production department, which includes the machine shop, laboratory, test assembly, production assembly and heat treating room. Each copy sent to production is marked 1, 2, 5, 4, etc. 60 that every copy may be distinguished from every other copy. A card index is maintained in the englueering department on each blueprint, the cards being filed by number and showing to whom the blueprints were sent, when, and what copies were sent. What happens to the prints in production 18 not the responsibility of the engineering department except that they occasionally make checks of their chargeout system to ascer- tain whether or not they have all been returned. When production finishes with the blueprints, they are returned to the engineering department; a proper notation is made on the index cards and if production on that particular part is completed all copies are destroyed except the master copy. The destroyed blueprints are not placed in the trash, but are burned by JOHN ALLEN, an employee of the engineering department who delivers all blueprints throughout the plant and who also, 0.8 mentioned elsewhere, distributes mail throughout the plant. One copy of all blueprints goes to the inspection department and a similar procedure is followed there, Insofar 11 the engineering department is concerned, that 1s, the engineering department checks occasionally to see that the blueprints have been returned and when they are, they are destroyed. One copy of all blueprints is sent to the Government inspectors. These inspectors are 37 Regraded Unclassified 18-666 not absolutely required to return the blueprint but generally do. On a few rare occasions they keep the prints for their own official purposes. Occasionally sub-contractors, such as the Stromberg Carburetor Company, will request certain blueprints, as will some of the airplane companies using the Allison motors. These blueprints are mailed to them after CARL REYNOLDS has ascertained that the company making the request is on the approved list of the War Department. In addition to the numerical card index maintained on each such print, another card is kept on each company making such 6. request 80 that the engineering department can tell at any time which prints have been sent to which company and when they were sent. These are followed up regularly and when the prints are returned they are destroyed and burned. These blueprints are shipped by regular mail, unless they are considered of unusual importance and are then shipped by registered mail. The blueprints received at the inspection department from the engineering department are delivered by JOHN ALLEN. These prints are requisitioned by the enginsering department and a receipt is signed therefor by Chief Inspector JOSPPE GRUBB or one of the foremen. When the blueprints are received they are placed in unlocked metal file cabinets and B. com- plete set of prints is retained there for each part and also the master assembly and master installation prints are kept there. The foreman will hand out the printe as he assigns the work. The inspection department is separated from the other departments by B. cage and work goes on in that depart- ment from 7:30 A.M. to 4:00 P.M. except that one nan remains on duty from 4:00 P.M. to 12,00 P.M. At 12:00 P.M. the cage 1s looked and no one can gain admission to the inspection department without climbing over the wire partition. The blueprints are permitted to remain in the open over night. Chief Inspector JOSEPH GRUBB advised that frequently the production assembly department or the machine shop will want an extra print for a part, particularly when two men in the machine shop are machining the same part on two dif- ferent machines. Instead of going to the engineering depart- ment, which would probably be closed, to obtain a blueprint, broken they will walk into the inspection department while the man = on duty in the evening is out and help themselves to one of the blueprints. Mr. GRUBB stated that frequently prints lost in this manner but they have always shown up finally. He are stated that they have no chargeout system in the inspec- tion department and be believes that some further precaution - 38 Regraded Unclassified should be taken to provent even the temporary loss of prints and he believes that some system will probably be worked out at plant three. Blueprints ment from the engineering department on requisi- tion to the production department go to clerk ROBERT CROSS in the machine shop. Frequently these prints are routed to him automatically with a Job order signed by Production Manager BERT L. KRUZAN. The blueprints are then distributed by HOBERT dross in the muchine shop and this is where the real confusion A8 to blueprints exists. It is impossible for NOBERT CROSS to inaugurate any chargeout system for the prints in that the print stays with the job rather than the individual; for example, one particular part may be machined by 20 different individuale in the machine shop. It is neces- sary for the blueprint to stay with that part at all times. Foreman JOHN LEONARD of the machine shop, Chief Inspector JOSEPH GRUBB and CARL REYNOLDS pointed out that if each time a blueprint went from one individual to another in the machine shop a chargeout was made therefor, it would take more time to do the clerical vork than it would to complete the machine operation. The master assembly and master installation prints are not sent to the machine shop. The only other department to which they (0 under production ie the produc- tion assembly department. ROBERT CROSS stated that blue- prints for parts are left on the machines in the achine shop over night and frequently prints are lost temporarily but that in the long run they usually show up. Chief Government Inspector JOSEPH HIDWALL advised that there 16 kept in his office a complete set of blueprints, including the master assembly and master installation prints. These are kept in a sufe to which he only has the combination and are used only for reference. He stated that these prints are charged out to him by the engineering department and when the job is completed the full set of prints is returned to the engineering department. He stated that he had no suggestions except that he had noticed that the master assembly prints are kept in the assembly production depart= ment in & onbinet that is not looked. He was of the opinion that it sould be impossible to devise any type of chargeout system in the (mohine shop. CARL WEINBRECHT, supervisor of the production assently department, advised that B complete set of blueprints for each motor, including the master essembly and master instal- to lation prints. are charged out to him just as they are the inspection department. Prequently, however, he does - 39 - Regraded Unclassified -III not get a complete set until after the motor is finished, due to the fact that the engineering department is behind in its work. He advised that he keeps this complete set of prints, including the master assembly print, in an unlocked metal file cabinet in the assembly section along the north wall, near the west side of the main building of plant two. This cabinet is located in the same room that faces on the parking lot on the west side of plant two, No system of charging out blueprints is used in the production assembly department because it is not practicable due to the similar set-up of that department with the machine shop. WEINBRECHT advised that he distributes the blueprints with the individual jobs and that the blueprints follow the jobe until they are completed and then come back to him at which time he sends them back into the engineering department. Blueprinte are left out on the work standa in the assembly production department overnight. Certain precision tools used in the assembly production are kept in A. metal file cabinet along the north wall near the cabinets in which the blueprints are kept and the only key to this cabinet is kept by Chief Inspector BEN LOGAN of production assembly. CARL REYNOLDS advised that the only blueprints which 8 to plant one are for bearings. Blueprints on bearings are made up by the engineering department at plant two upon requisition by the officials of plant one. The blueprints are then sent to plant one by messenger. These blueprints, as well LE all other company property, have to be given en in and out pass by the patrol service whenever they leave the plant. What happens to the blueprints after they reach plant one is the responsibility of that plant. The original tracing and one copy of each blueprint made for plant one is kept in the engineering department in plant two, being kept in the master blueprint file. J. 8. McLAUGHLIN, draftsman, plant one, advised that he is in charge of all blueprints at that plant. He stated that five copies of all blueprints are made by the engineering department at plant two; that the tracing and one of the blueprints are kept in the master blueprint file at the engineering department. The other four are delivered to plant one by messenger and Mr. MoLAUGHLIN signs a receipt therefor. Mr. MoLAUGHLIN keeps these blueprints in an unlooked file cabinet located in the draftsman room of plant one until such time as the job is started and then he sends OD# copy of each print to AL MOORE, the machine shop foreman, - 40 - Regraded Unclassified HENRY MAIDKWALD, & production inspector and CLAUDE GOLDEN, the final inspector. McLAUG LIN keeps n written chargeout record of each print. Upon receipt of the blueprint by foreman AL MOORE he places it with the job and it follows the job in much the name manner of it does in the machine shop of plant two. MOORE advised that it would be impracticable to endeavor to charge the blue print out each time it changed hands in the machine shop+ He stated that the prints are kept on the benchas or on the machines over night;when the particular job is finished, the prints are returned to MoLAUGHLIN by MOORE, MAIDENWALD and GOLDEN at which time he makes the proper notations on his chargeout cards and they are then destroyed by him, except that one copy is kept. The copies which are destroyed are burned in the furnace of plant one by McLAUGHLIN. 14. Keys to all doors and rooms of plants one and two may generally be said to be in the possession of the personnel department in a key file maintained by Chief of Patrol Service JOHN DALTON. lowever, there are certain excep= tions, the key to the room in which the original tracings of blueprints and the master assembly and master installa- tion prints are lospt, in the engineering department, is kept by Mr. CARL REYNOLDS, head draftsman of the engineering department. This in done in order that the guarda may have access, particularly at nights, to all rooms in the plants. Confidential files are divided into three categories, those which are maintained in the accounting department, per- taining to payrolls and the cost of operation, etc., those pertaining to administration, kept in the general plant manager's office, and those pertaining to production, kept in the chief inspector's office. The confidential files maintained in the accounting depart= ment are kept in a safe to which JOHN D. WELCH, comptroller, has the combination. The confidential files kept in the general plant manager's office are kept in a safe to which only Mr. KREUSSER and his secretary have the combination. The confidential files in the engineering department are kept in et. looked cabinet in the office of Chief Engineer RONALD HAZEN. HAZEN is the only individual who has the key to the ombinet and General Manager KREUSSER has advised that he can't even get into this cabinet. As pointed out elsewhere, the key to the metal cabinet in production assembly, where the precision tools are kept, is in the possession of Chief Inspector BEN LOGAN, who has the only key. The key to the room and files in which the tracings 41 Regraded Unclassified BAS and master blueprints are kept. in in the possession of only Mr. CARL BEYNOLDS. Veneral Manager OTTO T. KREUSSER has advised that till ere is no mastor key file. where duplicate keys to all looks are kept. lie >tated that the patrol service has keys to every room in all the plants in order that they hay gain admittance to any of the rooms during the ours of the night when no one olse is present. Be stated that he doubted seriously the advisability of giving to the guard service keys to all cabinets such as the cabinet where the precision tools are kept in the production assembly department and to the cabinets where the master blueprints are kept. He stated, however, that he believed that there should be kept at some centrally located point in the plant, such as under Mr. supervision, EL duplicatekey to all such cabinets. As it is now, if Chief Inspector BEN LOGAN failed to ap ear at work or lost his key, it would probably take several hours to obtain another key to the cabinet containing the precision tools, 17. The powerhouse of plant number one is located in a half basement at the rear of the building and orude oil LA used exclusively. The only purpose of this powerhouse is to produce heat for the plant. The only plan for security of the powerhouse is that the (uards regularly check it during their patrol service. There 16 no boilerhouse at plant number one, the heat being by hot air. An atten- dant is on duty in the powerhouse 24 hours B day. Plant number two has its powerhouse located in A one-story brick structure of similar design to the main building was attached to the main building and test laboratories by a. covered passageway. This surv structure also houses the boilers. Coml is lised here who the powerhouse 1s only for the purpose of Turnishing steam heat for plant number two. The power end boilerhouse of plant number two it a restricted area and only the attendants thereof end the guarda are admitted. The only len for security of this power and boilerhouse, other than the fact that it 42 Regraded Unclassified 45-LLL is a restricted area, is that the guards regularly check it in their patrols and an attendant is on duty there 24 hours a day. Plant number three has a cooling and ventilation system and the heat will be furnished by Diesel motors. 18. Electric power is transmitted to plant number one by power lines of the Indianapolis Power and Light Company. The transformers are mounted on poles at the rear or weat side of the plant. No protection is Given the transformere except that they are mounted on poles of about 15' in the air, on the outside of the plant. No recommendation has been made as to furnishing additional protection to these transformers inasmuch 68 the power lines could be sabotaged at any point along several miles from the power company to the plant. The electric power lines of plant number two are underground and the transformers are located at the rear of the test laboratory, as shown on blueprint D. The trans- formers are surrounded by a 7' wire fence with a looked gate. No special protection is given except that the guards regularly inspect the transformers during their patrols. Power of the Indianapolis Power and Light Company is used. Plant number three will generate its own power with Diesel motors and in addition thereto it has B. connection with the Indianapolis Power and Light Company whereby it may use that power for auxiliary purposes in the event the Diesel motore break down. Power from the Indianapolis Power and Light Company 1s brought into plant three by an underground senvey. The transformers are located at the rear of the main building of plant three and are surrounded by a 71 wire fence similar to that used in fencing the entire property. No special protection is being afforded the transformers of plant three except that they are being covered by the regular guard service. 19. When tests are being run on motors on the torque stands in the test laboratory or new test building of plant three, a. guard is placed on duty outside of the one door leading to the torque stands and no one is permitted to enter the tarque stand except those individuals having 6. pass signed by General Manager OTTO T. KREUSSER. An armed guard is on frequently lasts more than 24 hours. Keys to the individual CARL duty during the entire time the test is being run, which WEINBRECHT, chief of production assembly and JOHN WRIGHT, chief torque stands are kept in the personal possession of of test assembly and when the teste are run the keys are turned over to the guard on duty. - 43 - Regraded Unclassified MMM 20. Do explosives or imflarmable materials are kept in any of the plants other than (asoline and oil. The large gasoline tanks, 6.6 incicated on the blueprints, are buried at plants two and three outside of the plant buildings. The pipes leading to these tanks are about two feet out of the ground and the caps are screwed down and padlocked thereon. No particular protection is afforded these areas other than from the standpoint of being a fire hezard, except that when the tanks were put in the ground, the guards watched the filling in of the earth to make sure that no bomba or explosives were buried in the ground near the tanks. The tanks were 0180 carefully examined to make certain that no explosives or other foreign materials were contained therein. 21. No cameras are permitted on the plant grounds by anyone, including employees, except that the company has one official photographer who muken photographs, only on the instructions of General banager OTTO T. KRIUSSER. 22, lio alcoholic beverages are sold on the premises. 23. The stock in the storage rooms inside the plants WEE found to be in 8. general orderly condition. No materials were stored therein that were combustible or inflammable other than that blueprints and paper forms and stationery might be considered 6.6 inflamable. All of these materials were maintained either in fireproof rooms or in Fireproof cabinets. 24. There did not appear in any of the plants any combustible materials in such amounts GE to create a fire hazard within any of the plant buildings. 25. The packing and shipping roome at the plant were properly sufeguarded against fire hazards with one notable exception mentioned below. All guards are instructed to report materials noticed in the plant or grounds. As outlined immediately any supposedly inflammable or explosive above, the large tanks of gasoline are buried and are grounded to prevent the generation of statio electricity. 26, In the D as "Steel House, there are stored tests. large quanti- east yard of plant number two, in a house marked on blueprint of oil and clear gasoline, used in motor ties to the north and adjacent to this house metal there Directly considerable quantities of oil-soaked 10' is ahavings. dumped This pile of shaving in approximately Regraded Unclassified NNN- high and covers an area 10' x 10' I 10'. Large quantities of oil run out of those shavings and collect in pools on the ground around the entrance to the building marked "Steel House" where the gasoline and oil are stored. A match carelessly thrown into one of these poola of oil might very readily result in a fire and an explosion of the gasoline stored in the "Steel House." It is noted that the "Steel House" is but a distance of approximately 201 from the "New Test Building" and 6.6 Chief of Petrol Service DALTON stated, an explosion of the gasoline in the "Steel House" would probably blow the "New Test Building" into the next county. Es stated that he has mentioned this to the plant officials several times but no action has been taken. RUSSELL WRIGHT, superintendent of test assembly, advised that the oil could be removed from the metal shavings and saved by utilizing equipment similar to the blower employed in laundries. 27. Oily waste is kept in red metal containers with D. top and no other materials are placed therein. Waste paper and other trash, including the wante paper from the front office, with the exception of blueprints, 18 hauled out to the city dump in the company's half ton truck. Appropriate metal waste cans are placed throughout the plants for waste papers and trash. Waste cans are emptied weekly or more frequently if they are full. 28. The guards inspect these waste dans during their regular patrol. 29. Office waste paper baskets are emptied at regular intervals, at least once B. week, and the paper is bundled by the company maintenance department and taken to the city dump in the company's half ton truck. Blueprints which are destroyed are burned in the company powerhouse. 30. No open flame lights were observed near combustible material. 51. No woodwork or other combustible material was noticed BO close to steem pipes, boilers, flues or furnames that they would create a possible fire hazard. 52. Hot ashes are permitted to cool on & conorete floor and are then taken by a company truok to the city dump. - 45 - Regraded Unclassified 33. Hone of the roof coverings on any of the plant buildings appeared to be defective and it may be stated that all of the buildings appeared to be in excellent repair. 31. All stoves, furnaces, pipes, "chimneys and flues are inspected at regular intervals by the company maintenance department and the city and state fire marshals, as well as the insurance underwriters. Às B. result of & recent inspection by the company maintenance department, all of the plumbing fixtures of plant one are being torn out and new ones installed. 36. No fireproof rooms are provided where employees may smoke except that the machine shop and plant buildings are considered almost 100% fireproof. Employees are permitted to smoke at any time they care to on the job, the only restriction being that they are not permitted to smoke in restricted areas, such 6.5 the torque stands and in certain other areas, such 0.0 the vicinity of the outlets to the buried gasoline tanks, which areas have been marked with no smoking signs. The plant guards are instructed to be on the alert and promptly report any violation of the smoking rules. 36+ All plant records are maintained in metal fireproof file cabinete. 37. Nost of the employees, other than office employees, have individual metal lockers located throughout the various departments of plants one and two. The employee may obtain a company look for his locker and he is given the only key thereto, or if he prefers, he may place his personally owned lock on his locker. The employees are permitted at the present time to keep anything that they care to in their lockers and many of them have their personally owned tools, which they keep in their lockers. The employees are charged with each company tool which they take from the tool orib, but they are nlso permitted to keep these in their lookers over night if they care to; however, all company precision tools, other than the actual machines in the machine shop, are kept in a. looker of the production assembly department described hereinbefors. - 48 Regraded Unclassified -PPP Employees are also permitted to keep clothing. blueprints and a great variety of things in their lockers. No check is made of the lockers by the company. It is contemplated that in plant three each employee will be given an individual looker and the same plan will be followed as is now in effect in plants one and two. 38. See 26 and elsewhere. 39. No electrical fixtures or wires were noticed to be loose or broken. Às stated before, the plant seemed to be in excellent repair and the electrical equipment le being constantly checked by the company electricians assigned to the maintenance department; it is also checked at regular intervals by the city und state fire marshals and by the insurance underwriters. 40. No electric cords were noticed roped over nails or in contact with any other metallic objects or surfaces. 41. No electric fuses were observed in the plant replaced by wire or other improper current carrying materials or devices. 42. There are no fire doors or shutters in plants one and two. However, the production part of plant two is separated from the main offices by B. fireproof wall. Plant three will be, insofar as possible, 100% fireproof. 43. The general condition and state of repair of the windows, partitions, plastering, flooring and everything else observed seemed to be in excellent repair. 44. No unprotected windows were observed that appeared to constitute EL fire hazard. 48. Combustible stocks, n.2 mentioned elsewhere, are maintained in fireproof rooms in all lants and the only hazardous the operation might be the testa run on the motore in torque and there is, of course, a. possibility that stands. These torque stands are of heavy brick construction of the motors might blow up during the test. However one this possibility is considered very alight by stands the company are engineers in such B. substantial manner that It no may damage be and they believe that the torque would be no one stays in the room in which tested. torque All constructed done outside of the torque stands. the stated stands are that located while the motor is being - 47 - Regraded Unclassified if the instruments are in an adjoining room and safety glass approximately one foot thick appears in a peep hole of the torque room BO that the persons conducting the test may observe the motor without any danger of being injured in the event it did explode. 46. There are no unnecessarily concealed spaces which night prove to be fire hasards. 47+ There 1s only one slev tor in all three plante. This le located in plant one and goes only from the First floor to the second floor, This elevator shaft may be closed by doors as may be the two stair shafts Going from the first floor to the second floor of plant one. 10. The only temporary partition is located in plant one where the west wall has been removed during the construction program and substituted therefor have been sheets of paste= board. This pasteboard is, of course, inflammable; however, it does not appear to be M. fire hazard as there are no quantities of combustible naterial located nearby. 19. No fire pails are used. Chemical extinguishers were in place, in good condition and readily accessible to any employee. All hose and hose nozales have been replaced within the past two months. 50. All fire equipment was completely checked in June, 1939, be which time all valves were checked and (ound to at operating satisfactorily. They have not been checked since that time. 61. were would be ineffective in case of a fire. No portions of Sprinklers found to be obstructed in such as. manner are utilized in all three plants and that none they of them the sprinkler system were exposed to freezing. 53. ia no organized fire brigade in any of the department plants There time. The foreman of the maintenance in plant at this of his employees, all of them located are and (our constitute the company fire department. «11 They two, in the use of fire equipment, as are advised members that trained protective service.. Chief DALTON three and he plans the other two plants in the Dear of the to or organize a fire brigade at plant future. he also at to organize the workmen from each specific department duties at plans members of the fire brigade, each with to perform in the event of fire. - 45 - Regraded Unclassified 04. No regular fire drills have been held either by the company fire department or by the plant employees. 86. & 56. Each plant has a sprinkler system which has & paraffin seal. When the room temperature becomes high enough to melt the paraffin seel, the sprinklers begin opera- tion and a. bell alarm good off. The fire equipment of plant one, in addition to the sprinkler system, consists of 150 feet of hose in a. temporary wooden shed just outside of the plant. There are also fire plugs in strategic positions located inside and outside of the plant. The fire protection equipment of plant two consists of 500 feet of hose maintained in the maintenance department. There are also fire plugs in strategic posi- tions outside and inside the plant. Also located in the maintenance department of plant two is a Foamite hand truok of 50 gallon capacity with 20 feet of hose, which 18 accessible to anyone at all times. Plants one and two are only a half block from the City of Speedway fire department. Every department in plants one and two has st least one fire extinguisher located in EL strategic posi- tion. Most of the departments have several fire extinguishere therein and the following types of extinguishers are used. A soda acid extinguisher is used where combustible materials, such as lumber or paper, are stored. Sode acid has a tendency to spread liquod fire but is good for paper, rag or wood fires. Formite extinguishers are good on liquid fires because they out out the oxygen and these types of extinguishere are used in plants one and two around combustible and inflam- mable liquids. The bad feature of this type of extinguisher is that it is very hard to clean up after being used. Carbon- tetrachloride extinguishers are used exclusively on eledtrical fires because it is & non-conductor. This type of extinguisher is placed in strategic positions around the torque stands and transformers. Carbon dioxide extinguishers are the cleanest and the ensiest to use. They are also used around the torque stands, ins smuch 6.5 they will not damage high-priced motors to any degree if used thereon. Plant three, in addition to having the above-mentioned types of extinguishere and sprinklers, will also have a anall motor fire truck, according to the pre- sent plans. The condition of the above-mentioned equipment was good, moet of it having been purchased or tested since June, 1930. so Regraded Unclassified 07. The hydrants on the plant grounds and in the buildings were observed to be readily accessible and free from obstructions. The patrol service is instructed to look for any obstructions and to report them promptly. 68. & 59, The maintenance of the hydrante and other fire-fighting equipment comes under the supervision of the company's maintenance department. The hydrants are not tested at any regular intervals. The hose houses are readily accessible to anyone and free from rubbish. 60. As stated above, the hose used, both on the plant fire apparatus and the various hydrants, was tested within the last two months; however, no regular schedule for testing this equipment has been set out. 61. The only fire alarm system of plants one and two is that E bell goes off on the inside and outside of the plants at the time that the sprinkler system goes off. There 1e no system whatever for iving manual alarms. 62. Fire elarm boxes and telephones are not readily accessible to the plant guards and employees. 63. All the plant personnel has not been instructed in the procedure to be followed in CADE of B. fire. 84. Adequate exits and fire escapes are provided and they are free from obstructions. BS. Vents are provided in all plant buildings where there are explosives or obnoxious gases and dust, the principal places being in the torque stands at plant two. 66. There have been no fire drills at either plant one or two. 67. Steam pipes, radiators, etc. are free from combustible materials. 68. Personally owned automobiles of employees are not the permitted to enter lots described hereinbefore; however, manner the automobiles no the plant. They are only permitted on company parking on the parking lots are not identified in any automobiles of company employees. gv. The machinery and equipment of the plant is in excellent shape and kept in the very best state of repair. - 50 - Regraded Unclassified -TTT 70. The source of water supply for plants one and two is the city water department of Speedway City, Indiana, for fire protection, drinking and water used in production. No particular protection is given it to protect it from sabotage. Plant three will have its own supply of water in the form of two wells, one located inside of the building proper and the other located nearby on the grounds. It will also have a connection with the reservoir of the City of Speedway City as an auxiliary supply of water, in the event the water supplies of plants one and two were mabotaged, the wells located in plant three would furnish & sufficient supply of water, however, no arrangements have been made for piping this water and they do not plan to do no. 71. There are no outstanding hazards in the immediate vioinity of either of the three plants. They are all located in a rural section and the surrounding areas have been stripped of all wooded areas susceptible to fires. 22. All storm sewers have at their outlets baffles which would prevent anyone from entering the plant proper through the sewers. 73. There is no food served in plants one and two except that there are vending machines from which the nen obtain Code Cola and milk. Plant three will have a cafeteria. No laboratory tests are made of the drinking water. F. LABOR I. The Allison Engineering Company Division has had no serious labor troubles. The CIO has boen making a membership drive and endeavoring to put the entire company on a basis similar to that of other General Motors Corporation plants. It will be recalled that the United Automobile Workers of America is an affiliate of the CIO and controls labor in practically all General Motors Corporation plants. CLARENCE LYONS, head of the CIO at Indianapolis, Indians, and an employee of the Chevrolet Motor Company, Indianapolis, Indiana, (now on a leave of absence) contacted General Manager OTTO T. KREUSSER about five months ago, by tele= a. phone, and endeavored to make arrangements to have conference with him for the purpose of discussing collective Mr. KREUSSER stated that he has refused to bargaining. disouss the matter with LYONS for the reason that be believes will make it appear that he has obtained some concessions. that the moment he even discusses it with LYONS, LYONS - 62 - Regraded Unclassified Visa KREUSSUR stated that undoubtedly there are sume members of the CIO in the Allison Engineering Company, however, he believes the percentage is very small. He stated he did not know the exact number or the identity of the members. He advised that, without any suggestion on the part of the management, a group of the older employees of the company, when they heard that the CIO WAS trying to make inroads there, got together and organized a union known DE the United Engine Mechanica Association. Mr. KREUSSKR stated that the employees wanted the company to back this union but that because of recent legislation he, of course, would not be in a poel- tion to sanction & company union. Be stated that they requested authority to hold B. meeting on the company property and he refused them permission to do this. He stated that he has heard through the grapevine that this union now has a. membership consisting of more than 50% of the employees; that they have their own attoriey and that they have regular meetings. It was apparent that Mr. KREUSSER felt rather sympathetic toward this group and he stated that they were the old timers and the loyal employees of the company. He insisted, however, that this group was organized through no suggestion of the management and that he can truthfully state that it is not & company union. Mr. KREUSSER stated that he anticipates some difficulty with the CIO in the future and that they will undoubtedly endeavor to organize the employees of his plants. Be states, however, that they have been unoue- cessful in doing 80 and he thinks it will be unsuccessful in the future, inasmuch as the company has more to offer opinion the CIO was composed largely of Communists and certain the employees than the CIO. He also stated that in his branches of it are undoubtedly directed by Communiste who are taking their instructions from the USSR. He stated that he had nothing definite to prove this conclusion but stated that it was & matter of cormon knowledge and referred to such out and out Communists 8.5 HARRY BRIDGES. Mr. KREUSSER stated that he WLS at a loss to understand how the Government could permit such individuals AB HARRY BRIDGES, an edmitted Communist who is taking his orders from a foreign country. ties to of the CIO, he knew of no foreign influence which remain at large. lle stated that, outside of the activi- had been brought to bear upon the employees of his company. as Regraded Unclassified Mr. KREUSSER stated that another of his labor problems, which he considers of B. very minor nature, has been that come of the old-timers who were with the Allison Engineer- ing Company have to 8 certain extent resented the imposi= tion of certain rules and regulations installed since the company W&B taken over by the General Motors Corporation. He stated that prior to the time it WRB NO taken over, these old-timere had B. great deal of freedom and worked pretty much as they pleased. He stated, for example, that same of the old-timers, according to the grapevine, had referred to the plants 6.8 Alcatraz after the fences had been placed around them. However, he stated that he knew of no old employee who, in his opinion, would commit an aot of sabotage or espionage. Re stated that they were B. loyal group as a whole end although doing some complain- ing privately, he considered them faithful employees and good American citizens. 2. A small number of men belonging to the CIO are employed by the company, however, the CIO is not recognized. The company is not operated 26 EL closed shop. The only unions known to be operating in the plants are the CIO, which in endeavoring to bring the employees into the United Auto- mobile Workers of America, and & local union formed within the Allison Engineering Company, known 5.8 the United Engine Mechanics Association. This latter union, so far as is known, is not affiliated with the CIO or the American Federation of Labor. Rr. KREUSSER did not know the names of any plant employees who were officials in either of these organisations. 0. The percentage of labor turnover at the company is about two per cent. This is usually due to the fact that 5. new man is hired for B. skilled job and it is subsequently found that he is not able to fill the position and, there- fore, he quits or is discharged. Inclosures, TO BUREAU -- Blueprint marked A on the back, a floor plan of the east side of plant number three. Blueprint marked B on the back, 6. floor plan of plant number three, except for the cast side of the plant. - 63 - Regraded Unclassified Blueprint marked C on the back, showing the grounds end buildings of plant number three and its relative posi- tion to plant number two. Blueprint marked D on the back, showing the grounds And buildings of plants one and two, also the fences as well a.e water, gas and power lines. Drawing marked E, is a rough sketch drawing showing the inside floor plan of plant number two. Drawing marked P is a. rough sketch drawing showing the inside floor plan of the first floor of plant number one. Drawing marked G is a rough aketch drawing showing the inside floor plan of the second floor of plant one. One application for employment form of the Allison Division of General Motors Corporation. One employment record card of the Allison Division, General Motors Corporation. One form letter of the Allison Division, General Motors Corporation, forwarded to former employers of applicants. One report form used by the interviewer of applicants for the Allison Division, General Motors Corporation. One efficiency rating sheet used by the chief of patrol service, Allison Division, General Motors Corporation, for rating members of the patrol service - 54 - Regraded Unclassified 45-XXX One daily report of the members of the patrol service, Allison Division, General Motors Corporation. One questionnaire on fire protection given by chief of patrol service, Allison Engineering Company Division, General Motors Corporation, to members of the patrol service. One copy of a pamphlet entitled: "General Motors Corporation, Group Insurance Plan. One application for membership in employees' group insurance plan. Two copies of gate pass of the Allison Engineering Company Division, General Motors Corporation. - PENDING - -55- Regraded Unclassified Regraded Unclassified December 26, 1939 Mr. Otto T. Kreusser General Manager General Motors Corporation Allison Engineering Company Division Post Office Box 894 Indianapolis, Indians Dear Mr. Kreusser: Based upon the survey which vas made of your plant by a Special Agent of this Bureau, the following recommendations are being set forth which suggestions it 18 felt my be of value to the plant. Please feel free to discuss these recommendations thoroughly with the Special Agent who delivers this letter to you. The recommendations contained in this letter apply mainly to Plants Humber One and Number Two, it being impossible to make a complete survey of Plant Number Three in view of the fact that that plant is presently under construction. I have instructed Mr. B. 5. Sackett, Special Agent in Charge, Federal Bureau of Investigation, United States Department of Justice, 323 Federal Building, Indianapolis, Indiana, to have 4 Special Agent contact you on or about March 1, 1940, when it is expected that Plant Number Three will be completed and in operation. At that time, & complete survey will be made of Plant Number Three and such additional recommendations as ap car necessary and desirable as 6 result thereof will be made to you at that time. With reference to the selection of personnel employed at the plant, including members of the plant guard force, it is recomended that the present appli- cation form utilized by you be enlarged to include additional information with respect to the applicant. -22L Letter to Mr. Kreuseer - 2 - 12/26/39 In this connection, it is particularly recommended that further information be obtained from the applicant as to his relatives, especially those residing in foreign countries. Further suggestions as to types of informa- tion which should appear upon the application form will be made to you by the Special Agent who is assigned to confer with you. It is suggested that a more thorough investi- gation be made of all applicants for positions at your plant and particularly that the information supplied by the applicant as to his place of birth and citisenship be verified. In this connection, it is suggested that inquiries be made by form letters to schools which the applicant has attended and to former employers, requesting information as to statements made by his relative to his place of birth and citisenship. It is also felt desirable that personal attention be given to the investigation of applicants, either by the Personnel Manager or by an employee under his supervision who in designated to conduct such investigations. It 10 recommended that identification cards be issued to all employees at the plant, including office personnel and Government inspectors, which cards should contain a mall photograph of the employee and will be utilised by him to identify himself on entering the plant. In addition, it is recommended that identifica- tion badges be provided all employees, including office personnel and Government inspectors, to be worn by them in a conspicuous manner upon their outer clothing at all times they are on the plant property. These Identi- fication cards and badges should be issued try the Personnel Department at the time the employee is hired or the Government inspector enters on duty at the plant. Sufficient records should be kept of identification cards issued to insure against a person leaving your employ with- out turning in da identification card to the company. In this respect, it is suggested that before an employee's final check is given to him, his identification card be obtained and subsequently included in the personnel file of the employee prior to the time the file goes into the closed section. with respect to each identification badge, a record should be kept showing the time it was issued to an employee and the time it was returned. Regraded Unclassified 40-AAAA Regraded Unclassified Letter to Mr. Kreusser - 3 - 12/26/39 This record should aske it possible at any future time to determine the identity of each employee who has used a particular badge and the time during which be me in possession of it. The plant guard force should receive up-to-date lists of credentials and badges. With respect to telephone repair sen and other service and maintenance men, it is recomended that those individuals be required to enter the plant in the came manner as visitors and that before entering the plant they obtain the usual visitor's pass and an identification tag which shall be worn conspioususly on the outer garments of the individuals. Both the pass and the identification tag should be returned to the individual issuing them on the completion of the person's basiness in the plant. It is recommended that a form be prepared which is to be filled out prior to the issuance of a visitor's pass. This form should include the date, the name of the visitor, his address, the name of the person to be visited, the nature of the visit and an agreement to abide by and be subject to all plant rules and regu- lations as well as & waiver granting plant employees permission to subject the visitor to any search or detention deemed advisable by the employees for the protection of information pertaining to or the property of the United States Government. It is also suggested that there be included a waiver releasing the plant being visited from all liability in the event the visitor receives any injury while on the plant property. A notation should be made on the form as to the time the badge is issued and the time it is returned. A visitor should never be left alone in the plant and should be constantly accompanied by a guard or by & proper plant official. Visitors found unaccon- panied should be taken to the plant guard headquarters where necessary inquiries should be made as to the reasons for their presenos unaccompanied in the plant. A system for -BBBB Letter to Mr. Kreusser - 4 - 12/26/39 the issuance of permanent passes to individuals other than employees my also be considered. Such passes should be issued only to sub-contractors and other persons who are well-known and who have frequent business at the plant. These passes are to be similar to the identification cards issued to employees but should clearly inlicate the status of the persons carrying them. The matter of "spot" searches of employees as they enter and leave the plant perhaps merits par- ticular attention. From a protective standpoint, mich searches are believed to be highly desirable in that they provide the only practical method of supervising the entrance and exit of employees to prevent. the intro- duction of harmful materials into the plant or to prevent the transmission from the plant of confidential materials. However, the effect of "spot" searches upon the morele of the employees must be considered and it is suggested that you give consideration to instituting a system of "spot" searches in the light of your own personal know- ledge of the effect which such a eystem might have upon the morale of your personnel. with respect to the handling of plant mail, it is suggested that & locked pouch be obtained to be utilised in taking mail to and from the post office. & key to this pouch should be available at the post office and 4 second key should be available to the employee charged with the duty of handling the mail at the plant. It 18 recommended that the members of the plant guard force be provided with a pass or credential card similar to that provided to employees at the plant for use in identifying themselves. Re: orts should be submitted by each guart at the conclusion of his tour of duty and these reports should be maintained at the plant for a period of et least six months and preferably longer inasmich an they will be of material assistance in providing date for future investigations. Regraded Unclassified -CCCC Letter to Yr. Freusser - 5 - 12/26/39 It is recommended that whenever a motor is shipped from the plant by airplane that an employee of the plant guard force accompany the motor from the plant to the Indianspolis, Indians, airport and remain with it constantly until it is placed in the custody of the common carrier. It is recommended that a system of communication be established at Plants One and Two between each gate at which a guard is regularly stationed and some central point, preferably in the plant guard force headquarters in the Employment Office, so that if the guard on duty at a gate finds it necessary to leave the gate for some reason, he may signal or call for assistance. It is recommended that a member of the plant guard force inspect all railroad trains entering the plant area on the spur tracks. In this connection, it is sug- gested that all railway care be inspected inside and out- side to insure against unauthorised persons gaining admittance to the plant. Careful inspection should also be made of these care for dangerous materials such as explosives and the like. It 10 recommended that members of the plant guard force assigned to the various gates, in addition to examining all packages carried out of the plants, also carefully in- spect all packages being carried into the plant for explosives and any other materials that might be used in espionage or sabotage. It is recommended that the practice of disposing of oil-soaked shavings next to the Steel House in the east yard of Plant Two be discontinued. The present practice of piling this material adjacent to the Steel House wherein a large quantity of oil and clear gasoline is stored 10 & definite hasard. It is recommended that the gate in the four foot fence surrounding the west and south sides of the Employ- sent Office be kept locked or constantly guarded in view of the fact that under the present arrangement whereby this gate is left constantly unlocked and unguarded, an applicant for e position at the plant, either before or after leaving the Employment Office, may walk through this gate into the plant proper. Regraded Unclassified -DODD Letter to Mr. Kreusser - 6 - 12/26/39 It is recomended that all Incoming trucks be first checked by the guard before being allowed to enter the plant proper. A registry system should be installed at the plant truck gate wherein an accurate record is kept. concerning the identity of the truck and the driver, the time at which the truck entered the plant and the purpose for which it entered. The record should also reflect the license number of the truck and the signature of the driver as well as His belner, if he has one. Truck drivers should not be allowed to enter any of the plant buildings except on emergency neca- sions, in which instance they should be accompanied by a guard. Each truck should be required to leave the plant by the same gate at which it entered and should be checked out of the plant by the guard opposite the record rade re- flecting the entry of the truck. At the time of leaving, the truck should again be examined by the guard to determine that no unauthorized material is in the truck and the guard should also observe that the individual driving the truck is identical with the person driving at the time it entered. It is recomended that & master key file be 68- tablished. It is suggested that in this master key file there be kept a duplicate of each key used in the -lant. In this connection, it is suggested that in this master key file, there should also be kept a duplicate of the keys DOW main- tained solely in the possession of certain company officials] for example, the keys to the individual torque stands kept by Vr. Russell "right and VT. Carl winbrecht; the key to the cabinet in the Production Assembly in which precision tools are maintained, kept by VT. Ben Logan the key to the room of the Engineering Department and the cabinet where the original tracings of all blueprints are maintained, kept by Mr. Carl Reynolds. In the event any of these keys ST# lost, the lock should be changed and keys therefor should be issued to the proper person or Decsons. It is recomended that waste paper from the main offices in Plant Two and the offices in Plant One be com- pletely destroyed daily by burning or some other method under the supervision of a trusted company employee in a manner similar to the supervised burning of obsolete blue- prints by the Phgineering Department. The present practice of enotying office waste paper haskets and transporting these contents to the city dump where they are deposited without being burned or destroyed in some manner should be immediately discontinued. Regraded Unclassified EEEE. Letter to "r, {reusser 12/26/39 It is recommended that additional precautions be taken to safeguard against the loss or theft of con- fidential blueprints and the like st Plant Two after they leave the Engineering Department and are charged out to various production departments. It is recognized that since the blueprints generally must go along with the job, it is impracticable to charge them to one employee and recharge them whenever they are transferred from one employee to another. However, it is suggested that when a Flueprint goes from one production department to another, the custodian of the files from which these documents were originally charged out be notified so that appropriate entries as to the location of the document can be made on the charge-out card. Since it is not practicable in pro- duction to charge out blueprints to individuals, it 1m believed that they should be restricted so far as possible to the department to which they are charged. The practice of Machine Shop employees on the evening shift obtaining blueprints from the Inspection Department without authority should be discontinued. This existing practice can be corrected by having all blueprints in the Inspection Department placed in locked cabinets by the custodian thereof at the conclusion of the day shift rather than being left in the open all night. It is recommended that the complete sets of blue- prints including the master assembly and installation sete which represently kept overnight in unlocked cabinets in the Inspection, Production and Assembly repartments, be kept at all times in locked cabinets except when in actual use. It is recommended that personnel in positions having access to confidential information be selected with particular care and any person with & known subversive tendency indicating that he might engage in espionage or sabotage activities should not be placed in such a. position. It 10 recommended that all employee lockers at the plant have 8 company lock thereon or be kept unlocked. The present practice of allowing employees to place their own individual locks on these lockers should be discontinued. These lockers should be inspected at irregular intervals by officers of the plant guard force and such inspection. should occur at least onee a. week. muring this inspection, Regraded Unclassified Letter to Mr. Kreusser + 12/26/39 the general condition of the locker should be observed and . careful search of the locker should be made for any evidence of espionage or sabotage on the part of the employee to whom the locker is assigned. These inspections should also be arranged 80 that the employees will not have knowledge before- hand of the times at which the inspections are to be made. It 18 recommended that an appropriate fire brigade of plant employees be formed. There should be a plant fire chief at the head of this brigade. A general fire alara signal should be installed and fire drills should be held at regular intervals. Definite instructions should be given to all employees as to their acts in the case of fire. Arrange- ments should be made whereby the nearest office of the Federal Bureau of Investigation, United States Department of Justice, will be immediately notified by telephone when any fire or explosion occurs at the plant. Purther suggestions as to this matter will be made by the Special Agent who is assigned to confer with you. It 16 recommended that a book of plant rules and regulations be prepared and a copy furnished to each employee. This procedure is advisable in order that the employees may be acquainted with the regulations to which they are expected to conform and will serve to refute any claim by an employee disobeying the rules that he was ignorent of them. May I again suggest that you discuss the above recomendations directly with the Special Agent who delivers this letter and that you present to him any questions which may aries in your mind with reference to these recommendations or to any other suggestions that you may have for the improvement of the protection of your plant. I should also like to take this opportunity to suggest that you feel free at any time to communicate with as or with the Indianapolis office of this Bureau with respect to plant protection matters. Very truly yours, John Edgar Hoover Director Regraded Unclassified 46 List of items pending, including new items for which application is being usde A. ORDNANCE ITEMS Field and Ammittion 500 75 Belle guas with 1,250,000 shelle. Any number of y anti-aircraft or 57 theffe anti-tank - (either from stock or from priorities) small Area and Ammunition 500,000 Lee Infield Rifles with 500,000,000 .30 ball ammunition 5,000 Thompson sub-machine gans, or any part thereof, with 1,000,000 rounds of ammunition (from Any or Havy) Suare Manufacturing secturent (now or old) For nitrocelluloss powder manufacture For amonia caridation For small arm nanufacture Nitrecellulose powder. Any further quantity of nitrocelluloss powder. June 11, 1940 C 0 ? Y Regraded Unclassified 47 3. ATROPIATE ITEMS 21 U. is X FAXE X Stocks 03 Northrup Roabers with equipment and the following boabs 30 1b+ 33,700 100 1b. 58,590 Any number of additional cumbet machines (fighters or bothers, Date loeings) 1 Priorities 500 North /merican harvard Trainers for Capada 4 Allison ingines & cratt 5 whitney (double Pasps) There is a further list of priorities for which application has been cade and 80 far refused or reasins unserswered (see list (a) of Tay 21st of which a copy 10 attached). June 11, 1940 7 I Regraded Unclassified 48 List "A" Anglo-Pronch Purchasing Board Aeroplanes Aeroplanes an order for United States Services for which priorities are desired. Pursuit Planes 200 P-40 Curtiss of which it 1a understood deliveries will be made to the United States Army monthly from June onwards. 30 P-38 Lockheed of which deliveries to the United States Army are expected from July onwards. 40 P+39 Boll of which deliveries to the United States Army are expected from July onwards. Bombers 180 2-20 Douglas for which deliveries are beginning shortly. 200 B-26 Glenn Martin for which deliveries are beginning in August. Transport Planes 35 X-3 Douglas planos for transport use due for delivery to the A1г Mass in the next three anoths. General All except transport planes to be equipped with United States guns and ammunition; boobs, boab-sights and bombrucks. Regraded Unclassified 49 C. SAVAL ITEME $ Destroyers (complete with terpodess) spare terpedees) - especially anti-aireraft ammition) Equipment (torpadses, was heads, depth boabs, grans and amenition) for the priority granted on 20 notor terpode boats. Any number of bosts similar in type to the Moter Torpedo Boste for which a prierity for 20 has already been granted (..g. mesquite bests). June 11, 1940 C 0 F I Regraded Unclassified (CONFIDENTIAL) 50 SHOWN FOR PMP - ares IS ONLY THE INT STAP OF MOBILIZATION - REQUIREMENTS POR MOBILIZATION BEYOND THE H/P BOULD INCERASE INSICATED SHORTA CHEATLY. (Nomal Service Training activities and M are etc., and be provided for ever and above PMP requirements. Requirements for such activities will further increase indicated shortages.) ITEMS BY ALLIES PRESSURE PMP STATUS 1. GRERANCE ITEMS Field Date and Amerition 500 75m Gross deleased in compliance with h. order 6-11-1940 wish No surplus (1,075,000 rounds 1,250,000 Shalls 625,000 already released.) May number 30 Antiaircreft Gase 52 No surplus MAY mmber 7Am Inti-tank Grand 1,160 lie curplus Small Arms h Aumilian 500,000 Enfield Rifles OK . Can Relence 500,000. with 500,000,000 .30 Ball - No surplus (130,000,000) rounds already released free stocks à priorities.) 5,000 Thompson Grand 1,286 No surplus with 1,000,000 Bounds Amountion 2,000,000 So eargible - Ritroselluless parter Any further quantity Can Malease 100,000 Carrges for 155m Gup (OPT) (2,500- 000 100.) Sysure Equipment (am or old) For poster - Arrangments being sade by Office Assistant Secretary her emails main Var (Dal. Dama) to ture ord certain Items et this equips M ml as mater to the Allies. Regraded Unclassified (cart) 51 CONFIDENTIAL COPY PRESENT ITEMS REQUESTED STATUD AIRPLAND Stocks 93 Northrup Boubone 93 A-17A'S Released with 83,700 30.1b Bosbo 52,500 11,343 30-10 Boxbs Relessed (5363 Newy) 58,590 100-1b Hombe 43,800 3,565 100-1b Boobs Rolessed 1565 Nevy) Any number of additional combet anchines, fighters or bombers, Dage, Beeings The murplus Priorities 500 North Amorican Harward Treiners for Canada Now subject to negotiation be treen North American & British Government. 4 Alliwon Inginee 1 already turned over - Allian st present behind schedule - ditional ongines will be fur- atabed R5 room 38 they can be produced. 6 Tratt & Whitney (double Weaps) None will be in existonce for several months. Airplanes - order for United Glites services for which pricepties are destred. EXTET IN ALL CATEGARIES; Purmuit: 200 - P-40 insufficient planes svailable to equip combot organisations and train combat 30 - P=38 crows are in existence. In Continental United States ONLY 40 - P=39 1883 PLANES AVAILABLE FOR TRAINING 4351 PILOTS and student pilotn. To turn over Transport: 35 - DO-3 any of these airplanes as they because available on current procurement school- Bombers: 200 - B-26 ules will aggravate - already scrious deficiency and any seriously jeoperdise 190 - Am20 national defense. Regraded Unclassified Your 11/2/1990 imp h SHORTAGES SHOWN FOR PMP - THIS IS ONLY THE 71251 STEP 52 OF MOBILIZATION - REQUIREMENTS FOR MOBILIZATION BEYOND THE PMP WOULD INCREASE INDICATED SHORTAGES CHEATLY. (Normal Service Training activities euch as CMTC etc., mot be provided for over and above PMP requirements, Requirements for such activities will further increase indicated shortages.) PRESENT ITXMS REQUESTED PMP BY ALLIES SHORTACES STATUS be PRONANCE ITEMS Field Crune and Ammunition 500 75mm Guns Released in compliance with Kr. order 6-11-1940. with 1,250,000 Shelle 825,000 No surplus (1,075,000 rounds already released.) Any number 3° Antiaircraft Duns 52 No surplus Any number 37m Anti-tank Owne 1,160 Ho surplus Small Area & Ammittion 500,000 Enfield Rifles OK - Can Release 500,000. with 500,000,000 .30 Ball Amm, No surplus (130,000,000) rounds already released from stocks & priorities.) 5,000 Thompson Sub-machine Ouns 1,286 No surplus with 1,000,000 Rounds Ammition 2,000,000 No surplus Nitrocallulose powler Any further quantity QK. Can Balance 100,000 Charges for 155m Own (OPF) (2,500- 000 1bs.) Spare Manufacturing Equiment (new or old) For nitrocellulose powder manufacture Arrangements being made by For ammonia oxidation Office Assistant Secretary of The (Col. Burns) to turn For small arms manufacture over certain thems of this equipment to the Allies. Regraded Unclassified 53 PRESENT ITEMS RECORSTED SHORTAGES STATUS AIRPLANES Stocks 93 Northrup Bembers 93 A-17A's Released with 83,700 30-1b Bombe 52,500 11,343 30-1b Bombs Released (5343 Havy) 58,590 100-1b Boubs 43,800 3,565 100-1b Bombs Beleased (565 Havy) Any member of additional cembat machines, fighters or bombers, e.g.,Boeings No Surplus Priorities Now subject to negotiation bo- 500 North American Harvard twoen North American & British Trainées for Canada Government. 1 already turned over - Allison 4 Allison Engines at present behind schedule . ad- ditional engines will be fur nished as soon as they can be produced. 6 Pratt & Whitney (double Basps) None will be in existence for several months. Airplanes on order for United States services for which priorities are desired. SHORTAGES KIIST IN ALL CATEGORIES, 200 - P-40 insufficient planes available to equip Pursuit: combat organisations and train combet 30 - P-38 crews DON in existence. In Continental United States ONLY 40 - P-39 1883 PLANES AVAILABLE FOR TRAINING 4351 PILOTS and student pilots. To turn over Transport: 35 - DC-3 any of these airplanes as they become available on current procurement sched- Benbers: 200 - 8-36 ulso will aggrevate an already serious deficiency and my seriously jespardise 180 -- 1-30 national defense. Regraded Unclassified V 54 List of items pending, including new items for which application is being made A. ORDNANCE ITEMS Field June and Ammunition 500 75 name gune with 1,250,000 shells. Any number of 3ª anti-aircraft or 37 the anti-tank (rune (either from stock or from priorities) Small Arms and Ammunition 500,000 Lee Enfield Hifles with 500,000,000 .30 ball ammunition 5,000 Thempson sub-machine guns, or any part thereof, with 1,000,000 rounds of munition (from Army or Navy) Spare Manufacturing Equipment (new or old) For nitrocellulose powder manufacture For amonia oxidation For mall arms manufacture Kitrocellulose powder Any further quantity of nitrocelluloss powder. June 11, 1940 C o 7 I Regraded Unclassified 55 B. AEROPLANE ITEMS BI U. S. ARMY OR HAVE Ex Stocks 93 Northrup Bombers with equipment and the following bomber 30 1b. 83,700 100 lb. 58,590 Any number of additional combat machines (fighters or bombers, " Boeings) X Priorities 500 North American Harvard Trainers for Canada 4 Allison Engines 6 Pratt & Whitney (double wasps) There is a further list of priorities for which application has been sade and BO far refused or remains unsuswered (see list (a) of May 21st of which a copy 10 attached). June 11, 1940 C 0 P I Regraded Unclassified 56 List "A" Anglo-French Purchasing Board Aeroplanes Aeroplanes on order for United States Services for which priorities are desired, Pursuit Planes 200 P-40 Curtiss of which it is understood deliveries will be made to the United States Army monthly from June onwards. 30 P-38 Lockheed of which deliveries to the United States Army are expected from July onwards. 40 P-39 Bell of which deliveries to the United States Army are expected from July onwards. Bombers 180 A-20 Douglas for which deliveries are beginning shortly. 200 B-26 Glenn Martin for which deliveries are beginning in August. Transport Planes 35 DC-3 Douglas planes for transport use due for delivery to the Air Lines in the next three months. General All except transport planes to be equipped with United States guns and ammunition; bombs, bomb-sights and bombracks. Regraded Unclassified 57 C. NAVAL ITEMS 48 Destroyers (complete with terpedoss) spare terpedees; ammunition, especially anti-aireraft - Equipment (torpedoes, way heads, depth bombs, guns and assenition) for the priority granted on 20 motor terpedo boats. Any number of bosts similar in type to the Motor Terpedo Boats for which & priority for 20 has already been granted (e.g. mosquite boats). June 11, 1940 C 0 P I Regraded Unclassified 58 June 12, 1940. 3:45 p.m. RE ALLIED PURCHASES Present: Mr. Purvis Sir Henry Self Mr. Ballentyne Mr. Young Mr. Nelson Mr. Foley Admiral Spear Mrs. Klotz Spear: I have got a little item of four hundred eighty-three thousand dollars to get back from that Electric Boat Company. H.M.Jr: Are they here? Young: There are only three of them. Sir Henry and Ballantyne and Purvis. H.M.Jr: You will have to help me out as to what I have got here, because we were going pretty fast. Young: On this stuff? H.M.Jr: Yes. Sit down. Do you know what 16 what - Spear: If he is not here, I will go. H.M.Jr: Yes, he 18 here. They are coming here. Sit down. Ed, on this other stuff, I am 1Ad to have you stay if you want to, but it is not necessary. (Mr. Foley left the conference.) H.M.Jr: I think I am going to just tell them what we did and we can check this thing off in your office. Young: Just tell them what they get, not what they don't get. Regraded Unclassified 59 - 2 - H.M.Jr: Tell them what they get, yes. Otherwise, I will be here all afternoon arguing. (Mr. Purvis, Mr. Ballantyne and Sir Henry Self entered the conference.) H.M.Jr: The President 1s still waiting to have the Allies come in and sign the contract on those twenty boats. Purvis: We will do that, then, without further formality. I frankly didn't know it. What I do then 1s write the letter of application to you for the transfer? Spear: He would like to have you make the recuest for the boats and then we clear at this time and leave, because, Mr. Purvis, we made private statements on that thing up there and in order to release the lien and get the - in behalf of the Government, I have got to get a refund on that money. Purvis: Frankly, I had it to ask you what we had to do. I am sorry I didn't realize or I would have done it before. Spear: I just wanted to explain that we are ready to go any time you are ready. Purvis: You will get it tonight. // H.M.Jr: Thank you, Admiral. (Admiral Spear left the conference.) H.M.Jr: Mr. Purvis, this is quite a complicated story as to what you get and you are going to get some things you didn't ask for and some that you did ask for that you won't get. So if you don't mind, I think it will take maybe B. half hour to go over it, and I Am going to ask you to go back to Mr. Nelson's office, because it has taken me 3/4 of an hour to get it and they have got it all. Nelson: We have got it all. Regraded Unclassified CO m I , H.M.Jr: It 18 quite complicated and they have offered some things which weren't on the list. Purvis: Quite. I think it 18 much more -- H.M.Jr: You didn't fare too badly, but on the other hand, the Army particularly 18 really down- mouthed about the situation but - you didn't fare too badly. Purvis: Fine. On the question you put to me this morning 80 AB to make - in principle on the objection, we are going to go ahead. H.M.Jr: Now, just A second. Purvis: That leaves the question of price still in the air, because of the situation which has developed this morning, but authority was telephoned to me after I left your room from Beaverbrook and Monet in the same room saying that they are prepared to go ahead. H.M.Jr: On the six thousand? Purvis: Yes, six and four. If type comes into that picture, it may take FL day to clear that, and it may be wise to leave it for a day, but I want you to know that in principle, the thing 18 OK and subject to the working out, of course, of the details. H.M.Jr: Let me just do this now. (Placing call for Mr. Knudeen.) Purvis: The thing that has been worrying Sir Henry, as I mentioned to you last night, 18 the proper adaptation of engines to aircraft frame designs, which BO far have been designed for Wright and Pratt & Whitney engines, and only A few for Allisons, and there may be A. problem there that we don't know ouite where it stands, is that right? Self: Yes. If you Are going to take the engines made here out into aircraft also made here, then those aircraft will have to be designed for the engines you made. I think Dr. Mead Regraded Unclassified 61 - 4 - had it in mind that it was desirable to double bank the Allison design 80 that one engine will go in the other airplane. That makes a very strong point for everything to be in production quite soon. (Telephone conversation with Mr. Knudsen follows:) 62 June 12, 1940 3:50 p.m. H.M.Jr: Hello. Operator: Mr. Knudsen. R.M.Jr: Hello. Wm. S. Knudsen: Yes. H.Y.Jr: Knudsen, this is Morgenthau. K: Yes, sir. H.M.Jr: Purvis 1s sitting here with me now. K: Who? H.M.Jr: Arthur Purvis. Hello. K: Yes. H.M.Jr: And he's had a telephone -- with Lord Beaverbrook and the English Government 16 ready to go ahead with the Rolls Royce engine, taking 60%. K: Yes. H.M.Jr: With this proviso -- ah -- Purvis and I sent a cable today -- hello? K: Yes. E.M.Jr: jointly, to try to find out when the more advanced engine would be available before they wanted to go ahead with the Merlin 20, you see. K: Well, Mr. Secretary, we have no information whatever on the Griffin engine. H.M.Jr: I know, but I sent a long cable today to Ambassador Kennedy asking him whether he couldn't get the details from Lord Beaverbrook. Regraded Unclassified 68 - 2 - I ought to have an answer on that tomorrow, but 80 -- I mean, they'd like to wait another 24 hours and those plans will most likely be here tomorrow anyway. K: Yeah. H.M.Jr: But he wants me to tell you that the English Government is ready to do ahead if the -- if this other engine 18 not far enough developed -- what do you call it K: We're perfectly sure it isn't. H.M.Jr: The Griffin isn't K: We're perfectly sure it isn't that far, sir. H.M.Jr: Well K: He'll have to take the 6,000 engines of the Merlin type H.M.Jr: Well, frankly, I don't think Mead knows because the fellow he's relying on, Olley, does not know. K: No. I think he'll have to make up his mind to take 6,000 of the Merlin engine. H.M.Jr: Well, that may be perfectly so, but the man that Mead 18 relying upon for his information 18 Olley, and they've refused to tell Olley. K: I see. H.M.Jr: So that's why I sent a cable to Ambassador Kennedy and I certainly will have an answer by tomorrow and the plans will be here tomorrow BO I don't think that any time will be lost. Do you? K: I see. Then we wait until we hear from you. H.M.Jr: Well, they ought to hear certainly by tomorrow, and, as I understand it, the plans will be here tomorrow. They weigh a ton and a quarter. K: All right, sir. (Laughs) Inclassified 64 - 3 - H.M.Jr: Got room for them? (Laughs) K: All right, sir. (Laughs) H.M.Jr: All right. Thank you. K: Good-bye. Regraded Unclassified 65 - 5 - H.M.Jr: He is laughing. Purvis: As a matter of fact, I believe it is two tons. They tell me it is two tons now. H.M.Jr: That 1s right. Anything else? Purvis: Nothing. I have been asked to put on the table - it 1s already on yesterday but not specifically, twenty flying fortrees Boeings ae distinguished from saying - by the way - but I don't want to bother you unduly about that. I will first hear what has happened. The reporters are all out here. Can you give us any advice as to our line? So far we have been, as you know, proceeding exactly in accordance with what you felt was wise, and we have refused to give out any comments. They asked me about destroyers on the way in, and I hedged and said, "Of course, we would like destroyers, battle ships, and anything they could declare surplus in the form of fighting equipment,' but we refused to single out destroyers or any other one thing. We naturally are only too happy to take such fighting equipment R.S may be declared surplus. H.M.Jr: Let me 800 if Woodring or anybody said any- thing. Purvis: Yes, because you 800 there 16 a swarm of them. Nelson: They are out there. Young: I think Chick is out there. (Mr. Schwarz entered the conference.) H.M.Jr: Chick, could you tell me, did any of the gentlemen who left the room say anything to the reporters? Schwarz: No, sir. They asked A few of them their names and they told them who they were. H.M.Jr: Well, I should think the simplest thing 1s that you are here to discuss additional materiel. Regraded Unclassified 66 - 6 - Purvis: But we don't know where we stand. We don't know anything to tell them. H.M.Jr: You might say you are making progress. Purvis: We can say -- H.M.Jr: That you are making progress. Purvis: Encouraged. H.M.Jr: And there 1s more material in the wind. Is that what you call it, or on the way. Purvis: Fine. I am very glad to say that. H.M.Jr: We are sure that there will be more. Purvis: Yes. H.M.Jr: How 18 that? Because you will get - there 18 more to come. Purvis: Yes, excellent. H.M.Jr: Not very much, but there is more. Purvis: I am delighted even at some more. H.M.Jr: That would be accurate because I think it is a mistake to over emphasize it, but there 18 some more. Good night. Purvis: Thank you very much indeed. There is nothing special you think is going to come tomorrow? Should I stay over? H.M.Jr: I think you have done this to me today. Purvis: I will go away for one day. May I come back Friday? H.M.Jr: No, today ie Thursday, isn't 1t? Purvis: No, you haven't got your week-end yet. You have got to last another 24 hours. H.M.Jr: I don't know whether I can make it. Regraded Unclassified 67 - 7 - Purvis: Jacquin has gotten word from the other side and he has been pushing us. H.M.Jr: Well, of course, I haven't got a piece of paper on the flying fortresses. Purvis: It was just for example Boeings. I think we might first find where we stand now. H.M.Jr: What a man. Purvis: I may go back to New York and leave you free for a day. H.M.Jr: And -- Purvis: But if you think there 1s the slightest use in staying over, I will stay over. H.M.Jr: I think the New York air is lovely. 08 Treasury Department Division of Monetary Research Date 6/12/40 19 To: Mrs. Klotz From: This is the statement the Secretary referred to. also need by Am MR. WHITE Branch 2058 - Room 210 69 6-12-40 I want to indicate clearly the Treasury's position with respect to the repeal of tax exemptions affecting interest on all public securities. I am opposed to any action modifying contractual obliga- tions exempting from taxation interest on outstanding Federal secu- rities. The Treasury is in favor of a repeal of those statutes granting exemption of interest on all future public security issues (Federal, State, municipal and local), including the obligations to be issued under this Act. However, even if the tax exemption affecting future State, municipal and local issues is not repealed at this time, the Treasury wishes to reserve the discretion it now enjoys under the Second Liberty Bond Act and make the interest on the notes to be issued under this Act subject to Federal taxes. Regraded Unclassified 70 I am here today to give my support to the pending bill for increasing the revenue of the Government and raising the limit of the public debt to meet urgent needs of National preparedness. Since the members of this committee are thoroughly acquainted with the fiscal situation I will do no more than review it briefly. The President in his Budget Message of January 3, 1940, estimated that expenditures for the fiscal year 1941 would exceed normal receipts by $2,876,000,000. Regraded Unclassified 71 - 2 - He anticipated that recovery of excess capital funds from Government corporations would yield $700,000,000, and he recommended that $460,000,000 additional taxes be imposed to cover emergency defense expenditures. This left an estimated deficit of $1,716,000,000 to be financed by borrowing. Events since that time have made it urgently necessary to increase expenditures for National preparedness far beyond the amounts included in the 1941 Budget. It is estimated that, on the basis of appropriation bills which have passed and those which are now pending in Congress, expenditures for the fiscal year 1941 will exceed by $4,350,000,000 the revenues so far provided. Regraded Unclassified 72 - 3 - The borrowing power remaining under the existing debt limit was, on May 31, 1940, $1,950,000,000, and it is estimated that by June 30, 1940, the unused borrowing power will have shrunk to $1,700,000,000. In the light of the proposed additional expenditures for National preparedness, it 18 anticipated that, unless the Congress acts to relieve the situation, the Treasury's authority to borrow will be completely exhausted by the end of January, 1941, and the working balance of the Treasury will be too low for safety. Such a situation calls for prompt action by this Congress. Regraded Unclassified 73 - 4 - The Treasury working balance 18 now approximately $1,200,000,000. It would be undesirable to permit it to fall much below this level. Reduction of the balance would yield no significant saving in interest cost. When viewed from the standpoint of the insurance and financial security which a large Treasury balance affords, the interest cost of the Treasury bills issued to maintain the balance 1s small -- at current rates it amounts to only $130,000 a year. The maintenance of a substantial balance is distinctly in the interests of economy and financial strength because it gives to the Treasury the flexibility in the timing of the issue of securities desirable at all times and particularly needed in times such as these. 74 - 5 - The financing of the increase of Federal expenditures for National preparedness requires provision for additional taxes, or a decrease in other expenditures, or an increase in the National debt beyond the present statutory limit. In my judgment all three steps are required. This bill provides for raising additional revenue of $729 million for the fiscal year 1941 and approximately $1 billion yearly thereafter. The public is willing and ready to accept the additional burdens necessary to support adequate National defense. Regraded Unclassified 75 - 6 - It is important not only to increase revenue with which to help finance our preparedness program, but also to cut expenditures wherever feasible. However, I disapprove of random reductions in appropriations which are likely to enforce premature curtailment of expenditures for relief, retardation of the necessary execution of public works or impairment of essential administrative services. The enlarged preparedness program will increase employment but its effect will not be immediate. There will inevitably be a lag of some months. To force take men off work relief rolls before the preparedness program has its effect on employment would hamper rather than help our purpose of mobilizing a great National effort to strengthen our defenses. 76 - 7 - I am also opposed to placing a disproportionate part of the cost of our National defense program upon Federal employees by reducing their salaries. Along with the rest of the people of this country they will make an increased tax contribution in accordance with their ability to pay. The new taxes will apply equally to them as to other individuals. Many Government employees, too, are already making extra contributions in the form of added hours of work without pay. Regraded Unclassified 77 - 8 - I strongly favor the passage of legislation to raise emergency revenue for purposes of National preparedness in the amounts provided in this bill as well as the provisions of the bill raising the limit of the public debt. Members of the Treasury staff are here and are prepared to discuss technical details with you. 78 The National City Bank of lew York ESTABLISHED 1812 New York June 12, 1940. OFFICE OF THE VICE CHAIRMAN OF THE BOARD Dear Henry: I am sorry I W&B away when you called on Monday. I WSS in Syracuse attanding the meeting of the New York State Bankers Association. Had I been on hand to answer your telephone message I should have suggested for the refunding issue just about what you did. It seemed to ne the right thing to do, as the market reaction has indicated. I liked also your statement this morning about the tax exemption. The attached resolution was unanimously adopted by the New York State Bankers Association. They are prepared to be helpful in any way that they can. You may have noticed that they elected me president yesterday for the coming year; so that is another capacity in which you my feel free to call upon me. Sincerely yours, Pandosh Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. WRB.H Regraded Unclassified 79 The war in Europe has brought home to our people the long developing threat of dictatorship to those democratic institutions which have given this country the highest standard of living in the world, the widest freedom of life, and the greatest respect for the individual. Therefore, be it resolved that the New York State Bankers' Association and its members pledge the full weight of their influence toward complete cooperation of banking with industry, labor, agricul- ture and government in the supreme effort that is needed to bring to rapid fulfillment an adequate program for the proper defense of the United States, and the preservation of those principles on which this nation was founded. We reaffirm our faith in the courage and capacity of our people to meet this challenge without sacrifice of that demo- cratic heritage we seek to preserve." Regraded Unclassified COPY:BLS CONFIDENTIAL 80 AIR MAIL AMERICAN CONSULATE GENERAL American Foreign Service, Hanoi, Indochina, June 12, 1940. SUBJECT: Cargo transitted to China during May, 1940. THE HONORABLE THE SECRETARY OF STATE, WASHINGTON SIR: I have the honor to refer to my despatch no. 85 of May 8, 1940, in regard to the quantity of cargo tran- sitted to China via Indochina during the month of April, 1940, and to submit the following information as to the quantity of cargo transitted during the month of May, 1940. In sum,the acceleration of transit via the Indochina-Yunnan Railway continued favorably and, despite a decline in traffic over the Caobang road, there was a further appreciable decrease in the amount of cargo at Haiphong awaiting transit to China. Exclusive of transportation of coal and materials for the use of the railway, the cargo transported by the Indo- china-Yunnan Railway during the month of May amounted to 16,628 tons, an increase of approximately 10 per cent over the cargo transported during April. Of this amount, 14,944 tons (including 3,863 tons of rice) represented shipments from Haiphong, 817 tons (including 172 tons of rice) represented shipments from Hanoi, and the balance, 867 tons (including 298 tons of postal material), repre- sented all other shipments. Transportation of coal and railway materials are understood to have amounted to about 3,200 tons as against 2,300 tons during April. Exclusive of transportation of the railway's own The quirements, the daily average during May was 536 tons as against 502 tone during April and as against slightly less than 300 tons during March. Disruption of traffic during several days, due to the washing away of a retain- ing wall, reduced the month's traffic by somewhat over 1,000 tons. Regraded Unclassified 81 2 - Other routee of transportation to China via Indochine decreased in importance. According to the Southwest Transportation Company, traffic via the Caobang road did not amount to more than 900 tons, of which approximately 300 tons were gasoline and petroleum products, the remain- der being copper bars, wire, et cetera. It 1s reported that 104 new trucks entered China by the Caobang road prior to the ban imposed by the Government General of Indochine. Pack train routes carried not over 300 tone of miscellaneous cargo. The largest single item of shipment to China R&S rice (slightly over 4,000 tons), followed by gasoline and petroleum products (about 3,500 tons), materials for the Ssechwan-Yunnan Railway (mpproximately 2,000 tons), et cetera. Shipping agents at Haiphong estimate that arrivals of cargo at Haiphong for transit to China amounted to not over 3,000 tons, mostly gasoline and petroleum products, and that transshipments to Rangoon and to other possible ports of entry into unoccupied China aggregated about 7,000 tons. Gasoline, trucks, metal bars, et cetera. made up the bulk of these transshipments. The greater part of this cargo, both arrivals and transahip- ments, is understood to have been Chinese Government cargo. Total transportation to China, by all Indochina routes but exclusive of the railway's requirements, amounted to 17,828 tons, of which about 11,500 tone were supplies for the Chinese Government and semi- governmental agencies (including the Post Office, Salt Gabelle, Szechwan-Yunnan Railway. Tunnas Provincial Government, et cetera) and the remaining 6,300 tons were for private commercial interests. With new arrivals estimated at 3,000 tons and transshipmente at 7,000 tons, the net gain in decreasing the cargo congestion at Haiphong and at other points in Indo- china may have been as much as 16,500 tons. Accordingly, at the end of May it is estimated that there remained about 135,000 tons of cargo awaiting transportation to China. Regraded Unclassified 82 - 3 - Conditions of transportation for the month of June should be even more favorable, resulting in a further large decrease in the cargo congestion at Haiphong, provided that there are no adverse political developments. But observers are becoming more pessi- mistic asto to such a possibility. Respectfully yours. For the Consul at Saigon, CHARLES S. REED II American Consul. In triplicate to the Department (By air mail) Copies to Embassy, Chungking and Peiping Copies to Consulates General, Hongkong and Shanghai Copies to Consulates, Kunming and Saigon 815.4/815.6/800 COPY 07 I.E Il 21A 21 JR 056 THE 12. THATES YEARS 83 PARAPHRASE OF TELEGRAM SENT TO: American Consul, Milan, Italy DATE: June 12, 1940, 1 p.m. NO.: 34 The Department refers to its telegrams of April 19, 6 p.m., No. 14, and May 22, 5 p.m., No. 23. The Treasury Department requests that you discontinue the daily telegraph reports on the market. HULL (HF) 20 Nd EA:LWW Regraded Unclassified 84 EN PLAIN London Dated June 12, 1940 Reo'd 2:53 p.m. Secretary of State, Washington. 1620, June 12, FOR TREASURY FROM BUTTERWORTH. The increase in the fiduciary note issue from pouris 580 million to pounds 630 million announced in the House of Commons last night is accepted by the financial press as not indicating inflation for the reasons noted in paragraph 3 of my No. 1549 of June 7. Nevertheless EVEN amidst the over-riding military anxisties of the moment there is realization that steps to coordinate financial with Economic policy become increasingly urgent with mounting wage totals coinciding with diminishing supplies of consumption goods which will bE intensified by the steps described in paragraph 2 of the above mentioned telegram. Accordingly hopes are Expressed that Greenwood and the new Committee set-up, reported in my 1517 of June 5, will soon bear fruit. (I gather that there is a pull-devil pull-baker struggle going on arising out of Greenwood's desire for an Economic general staff). For the moment intensification of the Regraded Unclassified 85 -2- #1620, June 12, from London. of the savings program tends to meet the situation (the total for the WEEK ending May 28 was pounds 10 million as compared with Et weekly average of pounds 5.2 million since the third WEEK of the savings campaign) but there are misgivings occasioned by the postponing of a second budget and the apparent hesitancy of the British Treasury in issuing a new war loan suitable for larger investors and institutions. Meanwhile British Government Expen- diture for the supply services for the week ended June 8 jun, ed to pounds 61-1 million as compared with pounds 48 million the WEEK before, pounds 42 million the week ended May 25, and a weekly a verage of pounds 41.1 inil- lion during the nine weeks April 1 to June 1, and pounds 33.7 million during the thirty WEEKS September 2, 1939 to March 31, 1940. At the same time the tender issue of Treasury bills continues to increase at the rate of pourse 15 million per WEEK with indications, noted in part 2 of my No. 1593 of June 11, that the market's holdings of bills are probably EVEN Miger than indicated by the growth in the tender Issue. KENNEDY HPD Regraded Unclassified on 27 85-A TREASURY 14164 CK GRAY MEXico City Dated June 12, 1940 Rec'd 6:38 peme SECRETARY of State Washington 193, June 12, 1 p.m. Referring to my telegram No. 191, June 11, 3 p.m. regarding sale of dollars on Mexican Exchange, Bank of MEXICO absorbed $900,000 yesterday. No transactions of significance today. Dollar currently quoted at pesos. Dies AE E 129 EMB SML 5.15 BOAL 86 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 12, 1940 TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Sterling moved within a six-cent range today. The opening rate was 3.75, three cents lower than yesterday's close. After advancing to 3.80 in the mid- morning. the pound moved downward, reaching B. low of 3.74 late in the day. It closed at 3.75. Most of the reported purchases of sterling by commercial concerns were made for the purpose of paying for goods shipped from Great Britein prior to June 10 and now in transit to this country. Sales of spot sterling by the six reporting banks and the Federal Reserve Bank of New York totaled L470,000, from the following sources: By commercial concerns I 38,000 By foreign banks (Europe and South America) L422,000 By the Federal Reserve Bank of New York (for Latvia) I 10,000 Total 1470,000 Purchases of spot sterling amounted to L377,000, A8 indicated below: By commercial concerns L280,000 By foreign banks (Far East, South America and Europe) L 97.000 Total L377,000 The following reporting banks sold cotton bills totaling L6,000 to the British Control on the basis of the official rate of 4.02-1/2: 63,000 by the Bankers Truet Company 2,000 by the National City Bank 1,000 by the Guaranty Trust Company L6,000 Total Spot sterling in the amount of L46,000 was purchased from the British Control et the official rate of 4.03-1/2 by the following banks: L34,000 by the Irving Trust Company (for rubber and tin) 11,000 by the Guaranty Trust Company (for rubber) 1,000 by the Bank of Manhatten (for rubber) L46,000 Total Regraded Unclassified 87 - 2 - The French franc displayed a firm tendency against both the dollar and the pound. In terms of our money, the franc rose from .0214 at the opening to .0218 in the mid-morning. It remained around that level during most of the afternoon, even though the pound moved off. Consequently, the franc appreciated against sterling to 171.50 francs per pound (as against the rate of 176.40 which has prevailed for some time). Very little inter-bank trading in francs actually took place, however, and the quotations reported by the New York banks consisted mainly of rates at which they satisfied the needs of their own customers. The banks explained that their branches in France were moving from Paris, and that the higher franc rates reflected the difficulty of making franc payments under the existing conditions. Developments in the other currencies were as follows: The Swiss franc was steady at an offered rate of .2243. The Canadian dollar, which closed at a discount of 21-1/2% yesterday, experienced an improvement today. The final quotation WELS 19-3/4%. The lira and reichamark were unchanged at .0505 and .4000 respectively. The Cuban peso, which has shown a weak tendency in the past few days, improved to 10-7/16% discount today, as against 10-15/16% yesterday. Late yesterday afternoon, the Mexican peso, which had remained unchanged at .1672 since January 3. rose sharply on substantial offerings of U.S. dollars emanating from Mexico City. It was reported that a larger part of these offerings represented a flight of Mexican capital from the United States induced by the fear in Mexico that our country might become involved in the war. At the end of the day, the peso were quoted at .1818 bid and .2000 offered. These rates again prevailed today. The yuan in Shanghai advanced 1/4# to 6-1/40. There were no gold transactions consumated by us today. The State Department forwarded to us & cable stating that the Bank of 8weden would make two shipments of gold totaling $3,153,000 for its own account from Sweden to the Federal Reserve Bank of New York, the disposition of which is unknown at the present time. These shipments will be placed on board two steamers sailing from Petsamo, Finland, in the near future. The Bombay gold price was equivalent to $36.16, off 15#. CONFIDENTIAL Regraded Unclassified 88 3 - Spot silver in Bombay declined the equivalent of 1/4 to 45.12#. An export of 400,500 ounces of refined silver bullion was made yesterday from the United States to Bombay, according to the Commerce Department's daily statement of silver exports and imports. In London, the prices fixed for spot and forward silver both rose 1/2a to 23-1/2d and 21-7/8d respectively. According to a report received from London, spot silver rose on bear covering, while the forward quotation was strong as a result of future purchases made by Indian interests. The U. S. equivalents, calculated at the official sterling-dollar rate, were 42.72$ and 39.77#. Handy and Herman's settlement price for foreign silver was again quoted at 35#. The Treasury's purchase price for foreign silver was also unchanged at 35#. There were no purchases of silver made by us today. CONFIDENTIAL B.M.S. Regraded Unclassified 89 June 12. 1940 M. Fele STRICTLY CONFIDENTIAL Mr. Geshren will you kindly send the fellowing coblegram: "ANNEIGAN CONSUL MILAN (ITALY). Reference Department's 14. April 19. 6 p.m. and 23. May 22, 5 p.m. Treasury desires that daily market cable be discontinued.º 0:1ap:6.12.49 Regraded Unclassified TREASURY DEPARTMENT 90 INTER-OFFICE COMMUNICATION DATE June 12. 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL At 12:50, or Saturday, June 8, Minister Procope of Finland called on me. He said that be was ready to pay the $159,000 installment due June 15 from Finland. He wanted us to know that he was not behind the Vandenberg proposal. He had felt sure that something definite and more favorable would be forth- coming from the Administration itself, following the statement made by the President when the December installment was paid. In the absence of this, the Minister is not entirely favorable to a third person, such es Senator Vandenberg, taking up the matter. The Minister added that he was asking Mr. Jesse Jones to permit him to draw upon the unised part of the second Export-Import Bank credit to Finland for funds to enable him to make the debt payment on June 15, and also to amortize credits already drawn under the first Export-Import Bank arrangement with Finland. The Minister stated that the publicity man of his Legation had been in touch with Mr. Early of the White House, and that the latter had referred him to Assistant Secretary Gaston of the Treasury. The Minister said that he did not insist upon any "show" if he malces the payment on June 15. but desired to know the Secretary's wishes. When I mentioned this matter to the Secretary on Monday morning, he referred = to Mr. Bell. The latter did not favor any "show". The Minister spoke with me by telephone this morning. Ee stated that after Alsoussing the matter with the State Department and receiving B clearance from that Department. he was free to talk the question over with Senators Vandenberg and Harrison yesterday. The State Department had written the Senate Committee that it would like to see something further done for Finland. The two Senators 1th whom he talked were definitely of the opinion that no legislation could be passed this week or probably this session with respect to the Finnish debt. Tandenberg had the idea, however, that he might neek some formulation of menti- went by his Committee, favoring a reopening of the Finnish dobt question, 60 that this could be taken up later. Minister Procope 1s, therefore, ready to Co ahend with the payment. When I told him that I thought Mr. Bell would not favor the idea of a presentation of the check before the radio, as last time, the Minister said that he would like, nevertheless. to have an opportunity to bring the check in personally and présent it either to Secretary Morgenthau or Under Secretary Bell. When I explained that the Secretary was likely to be absent on Saturday, Minister Procope volunteered that he could bring the check in on Thursday. Regraded Unclassified 31 2 After this conversation with the Minister, I summarized it to Mr. Bell at 9:20 this morning. Hr. Bell asked me to let the Minister know that he world be glad to receive him at an hour to be fixed after it 18 learned whether Mr. Bell will be obliged to attend any Congressional hearings after today. I told Mr. Bell that while the Minister did not insist upon 8 full "show", he had expressed a desire to give out a statement tomorrow that be intende to make the payment, and had observed, furthermore, that one could not prevent the press correspondents from hearing of the affair and coming to the Treasury. After talking with Mr. Bell this efternoon, I telephoned Minister Procope stating that the Under Secretary would be pleased to receive him at 10:30 tomorrow morning, Thursday. June 13. The Minister replied that he had ordered the check from the National City at New York only after I had spoken with him this morning, and that he feared that it would not be here by 10:30 tomorrow. He requested that the date be postponed until Saturday. Mr. Bell agreed to this, BO the Minister is expected to come in at 10:30 Saturday morning with e. National City Bank check drawn to the order of Secretary Morgenthau for payment on account of the Finnish Treasury. I told the Minister that the Treasury will not give out any statement until June 15. The Minister said that he planned to dve A statement to the press tomorrow in regard to his contemplated payment. de said that it would be impossible to restrain the press reporters and photographers from being around the Treasury on Saturday morning. In accordance with Mr. Bell's instructions, at 4:30 I telephoned Mr. Livesey of the State Department, with whom Mr. Bell had spoken earlier in the afternoon on the subject of the Finnish payment. I gave Mr. Livesey a summary of the plans. He took no objection thereto. Be thought, however, that the Hungarian and Rumanian Ministers might be making some payment tomorrow. This might give them some lead over Procope in the matter of publicity. jud STRICTLY CONFIDENTIAL Regraded Unclassified 92 June 13, 1940 The attached letter was delivered to HM, Jr. at 10:25 a.m., June 10, 1940, by Major Smith, the new liason officer between General Watson and the War Department. He said he hoped we could handle this matter without bothering the President and I said that we would. The original of this letter was returned to General Watson via Major Smith. 93 WAR DEPARTMENT WASHINGTON June 8, 1940. MEMORANDUM for The President: Subject: Release of aircraft. Tentative arrangements have been made to exchange 93 A-17-A Army airplanes (attack bombers). Bombs to make the air- planes immediately effective must be of our type. Two to three months would be required to re-work these planes to accommodate foreign type bombs. In order to supply bombs, it will be neces- sary to consider the bombs as an accessory of the airplane. Whether or not this can be legally sustained is questionable. To furnish approximately one-fifteenth of the number of bombs desired by the Allied Purchasing Agent it will be necessary to release approximately one-seventh of our entire bomb stock in the two sizes required, - 30 and 100 pound bombs. Additional bombs are under order, but the first deliveries will not be made for another six months. In view of our shortage of bombs, I request your decision in the matter. they Secretary of War. Regraded Unclassified S4 WAR DEPARTMENT WASHINGTON June 8, 1940. MEMORANDUM for The President: Subject: Release of aircraft. Tentative errangements have been made to exchange 93 A-17-A Army airplanes (attack bombers). Bombs to make the air- planes immediately effective must be of our type. Two to three months would be required to re-work these planes to accommodate foreign type bombs. In order to supply bombs, it will be neces- sary to consider the bombs as an accessory of the airplane. Whether or not this can be legally sustained is questionable. To furnish approximately one-fifteenth of the number of bombs desired by the Allied Purchasing Agent it will be necessary to release approximately one-seventh of our entire bomb stock in the two sizes required, - 30 and 100 pound bombs. Additional bombs are under order, but the first deliveries will not be made for another six months. In view of our shortage of bombs, I request your decision in the matter. they Secretary of War. Regraded Unclassified 95 June 12, 1940 2:10 p.m. H.M.Jr: Hello. Admiral Towers: This is Admiral Towers. H.M.Jr: I hope you had a nice day yesterday and the wedding was a success. T: Thank you very much, sir. Everything went off very smoothly and, thank God, it didn't rain. H.M.Jr: Good. I take. it, it was out-of-doors. T: It was at the F Street Club, in the garden there. H.M.Jr: That's nice. Say, Admiral, I keep a diary and I've got a blind spot. I know that you and Captain Kraus came to see me at a quarter of twelve on June 5th, at which time we talked about those dive bombers. Hello? T: Yes. H.M.Jr: But I called you up sometime previous to that and asked you to make a survey of what you could spare and I kept no record of when I called you, or whether I called you that morning or the night before T: You called me at my house the night before H.M.Jr: I see. T: and I can verify that from my record because I did make a record of it. H.M.Jr: I see. T: You called me at my house the night before. H.M.Jr: Well, and told you -- do you remember what I told you? Regraded Unclassified 96 - 2 - T: You told me -- you gave me in general terms what you wanted and asked me if I would look into the matter and then come and see you at a quarter before twelve the next day to discuss it and that's when I said that I had gone into it and told you about these 50 dive bombers. H.M.Jr: But I called you up the night before. T: You called me the night before, yeah. H.M.Jr: That's why I have no record. Well, if I don't hear from you again, I'll just make a note I called you up the night before. T: Yes, that's correct. H.M.Jr: That's correct. T: I'm sure of it. I can get my diary here in a second and check it. H.M.Jr: I'll hold on. T: (Talks aside. Mise Bring that diary in right away.) I keep a confidential diary and keep it locked up and just make sort of aide mem- oires or entries into it. H.M.Jr: Well, I do too and my secretary's been after me because there's a blind spot when I first called you and I couldn't remember. T: (Talks aside) I say under date of June 5th, "At the request of Secretary Morgenthau I proceeded to his office in company with Captain Kraus at 11:45. Mr. Morgenthau had called me at my house the previous evening H.M.Jr: That's right. 0. K. T: and requested this conference." Regraded Unclassified 97 - 3 - H.M.Jr: Right. That whole job on those 50 bombers, getting them and getting them out of the country 18 the most beautiful Job I've seen done. T: Thank you very much. H.M.Jr: It was a beautiful job. I was very much upset to see that one of those pilots was lost. I hope it wasn't a Naval Reserve man. T: It was a Naval Reserve man, but fortunately he was a bachelor and the Curties Company had taken out insurance, 80 his family -- I think they had him covered for $15,000. H.M.Jr: I see. Well, thank you so much, Admiral. T: You're entirely welcome. H.M.Jr: Good-bye. N 13 97-A BRITISH EMBASSY, WASHINGTON, D.C. June 12th, 1940. Secret. Dear Mr. Secretary, In Lord Lothian's absence in New York, I send you herewith the two latest reports from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, havile Butter The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. 97-B Telegram despatched from London on the afternoon of June 11th, Formal declaration that Italy would consider herself at war with United Kingdom and France from 01.00 hours on June 11th was made by Italian Foreign Minister to British and French Ambessadors at 16.45 hours on June 10th. Thirteen Italian merchant Vessels and an Italian patrol trawler have been seised in home waters and Italien D.B. "Umbris" has scuttled in Fort Sudan. 2. No further news of enemy nevel units reported at Trondheim in my immediately preceding telegram. AS no information can be obtain regarding H.A.S. "Glorious" and His Mojesty's Destroyers "Acasta" and "Ardent" it is presumed that they have been lost, together with trane- port "Orama" and tanker oil "Pioneer". 3. Owing to movement of French 0.9.0. little information received on June 10th regarding position on Western Front but general lines of operation appear to be Montmedy-Rethel, thence along River Aione north of Rheims, thence along River Oure through Oulchy. West of this position not clear, but line thought to be along River Oiee from Compiagne to Pontoise thence along River Seine to Rouen. It is however known that onemy have crossed River Seine southeast of Pont de l'Arche at Venables, Hendsbouville end St. Pierre du Vauvray. British reserve units reported yesterday in contact with enemy at above places and also holding ridge at Pont de l'Arche. British division which has been operating in coastal sector reported cooperating with local Havre def- ences. Troops reported very exhausted. German air raids on Havre reported increasing in intensity and Regradethlduclassified 97-C ÷ swing bridges onto quays have been damaged. 4. Last night Wellington aircraft attacked targets in Soissons area, Whitleys attacked road and reil-orossings east and northeast of Rouen and over River Some, and Hampdens attacked crossings over River Meuse and railway junctions at Liart (west of Mesieres) and two other reilway junctions northeast of Seden. Hampdens also attacked oil targets at Dueseldorf and Aschen. All above aircraft returned (except one Wellington) but no reports yet available. Attack by Blenheims on river approaches between Rouen and Les Andelys yesterday was successfully carried out direct hite being elaimed on tank and transport columns roads and a railway siding. Large fighter patrols operated over northern France yesterday but visibility was bad and no combate reported. All our aircraft returned. 5. No air attacks on this country in the last 24 hours. Single airoraft reported yesterday over South Coast, Seapa and Wiek. Le Havre was heavily bombed. Regraded Unclassified Telegram despatched from London 97 D on the evening of June 11th. 1. Malta was bombed at 0515 hours today and one enemy aircraft shot down by anti-sireraft. No further details received. No movements of enemy surface craft reported since outbresk of war. One enemy submarine reported off Algiere but general onemy submarine activity immediately prior to and since outbreak of war appears to be less than expected. 2. Enemy attacks with infentry and tenks continued yesterday along general front Steney (west of Montmedy) - Compiegne. Some progress believed to have been made between Steney and Neufchatel-sur-Aisne. Reports of enemy progress in area south of Soissons conflicting but understood that Germane had reached outskirts of Chateau Thierry and Villers Cotterete yesterday evening. Main enemy attack on lower Some 18 between Vernon and Rouen. Enemy reported to have setablished bridgehead east of Louviers and at Vernon. Latter unconfirmed, Estimate enemy infantry which have crossed river Seine east of Louviers consists of four battalions. Report of enemy armoured fighting vehicles south of river Seine not confirmed. 3. British division together with certain French troops now located in St. Valery area. Communications with Pecamp reported out by isolated enemy armoured fighting vehicles. Fecamp reported in German handa. Two battalions of this division end two French bettalions have ero sed Seine at Quellebeur, Two brigades belonging or attached to this division are at Havre. Line being held outside Havre reported as Montvilliers-Pontaine- Le Mallet. Advence portion of armoured division is in Regraded Unclassified 97-E 97 is in Bernay area, one armoured brigade 10 in AJOB area with patrols southeaet of Louviers. Remainder of division is north of Le Mane. 4. Dieppe has been successfully blocked and demolitions carried out. 5. Bienhoims attacked enemy concentrations east of Louviers. Two aircraft failed to return one known to have crashed in France. Fighters operated over area Feeamp - St. Valery - Dieppe. Two HE 126's shot down confirmed and one ME 109 unconfirmed. One Hurricane missing. British air ettacks on enemy communications in France and Belgium last night were successfully carried out and bombing was effective. Attack on oil targets in Germany had to be abandoned owing to bad visibility. 6. Main German air attacks today were in support of army and on area north of Paris. Havre was also bombed. Attacks ware carried out against shipping and mine laying continued. 7. Conflisting reports are being received regarding German troop concentrations in Norway but it is known that about 30 merchant veasels are dispersed in fjords between Christiansand and Aalesund and that German mavel units are at Trondhjeim. Germany could spare at least one or two divisions from existing forces in Norway for overseas operations without counting further reinforce- ments which could be sent to Norway. Considered possible that threat from Norway might be directed against some northern objective such as Shetlands. Parose, or Iceland. Regraded Unclassified 97-F BRITISH EMBASSY, WASHINGTON. June 13th, 1940 SECRET Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Wheream the Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. Regraded Unclassified SECRET Telegram despatched from London on evening of June 12th, 1940 Regraded Unclassified 1. Nothing to report from Montmody to East. To the Dost, French line runs Le Chesne-Vousiere-Brienne- Fismee-Chatesu Thierry-La Ferte-Mareuil-Crepy-Verberie, thenee along 01se to Mourecourt, thenee along Seine to the sea. Germans hold small bridge-head across Marne at Chateau Thierry, and west of Paris they hold bridge- heads over the Scine at Vernon, Los Andely and Elbour. Between Vernon and Lee Andely, the enemy are coross the river in some force, and hold a line Vernon=Pecy- Sur-Eure-Louviers. Remmante of the 2nd Amounted Brigade are in contect with the energy along this line. Le Havre was attacked heavily from the air yesterday, and four transports sunk. Also bombed twice last night, but evacuation of British troops continued according to plan and 5,000 were embarked. About 6,000 remain. Situation of British and French troops in St. Velery reported critical at 0100 hours today, beaches being under heavy fire, Every possible effort being made to evacuate this force and maximum air support is being given. 52nd British Division now at Le Mane. 2. German pressure along the whole front between Vousiera-Marcuil remains heavy. West of Paris, main German thrust at present is between Vernon and Rouen. Every indication that heavy German attack impends east of Rheina, is now directed on the River Harne. 3. Blonheims attacked enemy columns and tanks north of Le Havre yesterday evening. All aircraft returned. Last night Wellingtons not fire to noode on Pranco-Belgian frontier north west of Seden, whitleys/ -2- 97-H Whitleys attacked road and rellway crossings at Fleury, Abbeville and Amiene and Hampdens attacked communication in the area of Ison-Sedan-Givet and marchalling yards at and Cologne. Two of our bombers missing. Fighter airoraft operating from England yesterday shot down eight energy aircraft confirmed and four unconfirmed one Surricane missing. In addition one Heinkel 111 reported over South London this morning was shot down near North Poreland, 4. Testerday afternoon Hudsons attached onemy force in Trondhein Harbour comprising one battle cruiser squadron 2 cruisers 3 destroyers and 2 supply ships. Direct hits with 250 1b. bombe from 15,000 feet on 2 cruisers. One large transport also hit and appeared to be on five. One liudson lost by anti-aircreft fire and another by energy fighters. Utsire wireless station (near stavanger) also successfully attached by Mudson aircraft. 5. Three air raids on Malta yesterday two on military objectives and one on civilian areas. Casualties alight four enery planes shot down confirmed and one unconfirmed, 6. Yesterday, Blenheims made two attacks oi. large concentration of aircraft st R1 Adem (East Libya) causing much damage to enemy sircreft hangers and petrol stores. One British aircraft crashed and two are missing. Two acrodrames at Amare (sritrea) also attacked by Wellesleys who report attack appeared to be complete surprise an considerable damage done to hangore and aircraft. One Wellesley missing. !erodrome at bassawa later sttacked but no report yet received. Regraded Unclassified S7-I -3- 7+ Whitley aircraft despatched to attack targete in Turin and Genon yesterday. Reports not yet received, 8. Since the beginning of hostilities nine Italian merchant vessels have been captured, 7 scuttled and 2 benched. 9. All quiet in Gibraltar up to 21 hours last night. 10. Corrigendum. Paragraph one of last telegram but one. 0100 hours should road 0000 hours. Regraded Unclassified 97-J BRITISH EMBASSY, WASHINGTON, D.C. Secret June 13th, 1940. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Louran e Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. Telegram despatched from London 97 late on the evening of June 18th Some officers and mon were evacuated from Veules this morning but subsequently enemy field guns are reported to have made this beach unterable. At 15 hours today the position on the River Ceine-River 0160-Miver Jerne to Reuil-sur- Norne wes that were at!!! pressing. An ottempt with air coopers! on VBB being mada to reduce enemy brid cheade of lbeuf, Louviers end at Vernon. (nemy armoured Cighting vehicles are reported to be attepking Phoims, north and weat and alon to have стоявес the River Marne at Jaulonne. The rose bridgen over the river In nouen have been destroyed. Germane are in occupation of the right bank of the river ith armoured fighting vehicles. :- definite regarding French forces end 5lat Briti Thich were In Seint Valery this moreing. The 5th French army nos been withdrawn to the Fiver varne between Reuil and La Poste. C. Today Alenheims have attacked enemy tervets at were. Poluel, and Leis Andelys, three of our aircraft mission. Hampdens which attacked enemy communications 10 cres of Laon-Seden last night obtained Chreet hits 85 follows:- shremfeld Cas Borks, Hirsho Reilway Junction, and marshalling yards st L Perte, convoy are buildings Cherlevisee station/ Regraded Unclassified S7-L + station Libramont Petrol and Ammunition Dumps. Hits also registered on eerodromes at Plushing, Hamstede and Metelem. shitleys despatched yesterday to Turia bombed Fiet works and marshalling yards, considerable damage believed to have been caused. Whitleys also bombed Ansaldo works and docks at Genoa and caused explosion at the former, reports not yet received from some aircraft and a number were unable to complete the task. One aircraft missing. 3. Italian and German air operations yesterday appear to have been similar to that of who prévious day. Considerable transport activity butween western Germany, Belgium and northeast rance. 4. Understood yesterday Sicily Air Command was increased by 180 bombers and 72 fighters. 5. No reports yet of any movements of major units of Italian fleet. Regraded Unclassified 98 June 13, 1940 My dear Admiral Noyes: will you please send for me the following confidential cable to Ambassador Kennedy via secret naval code: QUOTE - Army is prepared to turn in on June 14th 93 Northrop A-17A planes with bombs furnished by Navy. Rolls Royee plans will arrive in Washington at noon today. Many thanks for your cooperation. UNQUOTE Yours Sincerely, Rear Admiral Leigh Noyes, U.S.N., Director of Naval Communications, Room 2622, Navy Building Washington, D.C. Sent by 6/13/40 Secret Service 14 21 Margenthau, In Regraded Unclassified A June 13, 1940 Bear Mr. Secretary: The British Government, through Ambassador Joseph J. Kennedy, has shipped to as, as the representative of the United States Govern- ment, certain patents, drawings, operation sheets, manufacturing and assembly specifications and working models covering one or nore of the Holls-Royce airplane engines and parts. The shipment, I as informed, is now at the Mailway Express office in Washington. It is my thought, in order not to lose time, that the consign- ment be turned over to you at once. Since the material has been sent to se, I should appreciate receiving as soon as possible a complete inventory. There remains to be agreed upon between the British and ourselves the terms upon which the patents are to be made available to this Government. Any licensing arrangements affected by the Army or the Navy will necessarily have a bearing on such settlement. Therefore, prior to the consummation of any negotiations for licensing the manufacture of the engines in this country, I should like to be consulted. Regraded Unclassified 98- B - 8 - If this arrengement is satisfactory, I should appreciate your indicating your agreement at the end of this letter. Very truly yours, /s/ H. Morgenthau, Jr. Secretary of the Treasury. The Homorable The Secretary of War. they Approveds Secretary of War June 13. 1940 Regraded Unclassified Hendr has 39 notsun what capies P4 1/13/40 93 NORTHRUP AEROPLANES Deliveries We would like to have these delivered at Mitchell Field, New York, in accordance with the following schedule of deliveries: first day 5 second day 7 third day 5 fourth day 5 fifth day 6 sixth day 6 seventh day 7 eighth day 7 ninth day 8 tenth day 8 and 8 from then on. Arms and Ammunition We would like to take deliveries of arms and ammunition, including bombs at New York, if possible at Raritan Arsenal. Spare Parts and Equipment We would like to have these consigned to the British Purchasing Commission, care of British Ministry of Shipping, 25 Broadway, N.Y. In carload lots we would like to have the bills of lading endorsed, export lighterage free; for less than carloads, we would like to have bills of lading marked for export. Further Information Complete details will be supplied as soon as possible. June 12, 1940 C.T.B. Regraded Unclassified 100 13 I 3 Transplanes Regraded Unclassified (G-387-467G-KF)(I)- 37.) A-17A AIRPLA Regraded Unclassified 37.) A-I7A AIRPLA Regraded Unclassified 553G1 NORTHROP A-17A - 4408 AC Regraded Unclassified 55361 104 NORTHROP A-17A - 0408 A.C Regraded Unclassified 60 51 Regraded Unclassified 52177 18594A.C. Regraded Unclassified Regraded Unclassified G-509-109 Regraded Unclassified - - - - - 60 54 Regraded Unclassified 110 CONFIDENTIAL June 13, 1940 To: The Secretary From: Mr. Young Major Brooks reported to me this morning that the 93 A-17A's were proceeding on schedule and should be ready for delivery tomorrow morning. The contract with Douglas for these planes is to be signed this afternoon, and a separate contract covering the bombs and ammini- tion for the planes, as well as the item of 100,000 charges of nitro-cellulose powder for 155 mm guns (released yesterday) will be signed with one of the powder companies today. Dy. 111 WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON, D. C. CONFIDENTIAL June 13, 1940. MEMORANDUM FOR SECRETARY MORGENTHAU: Reference the 80 A-17 planes, on detailed investigation I find that these A-17's are approximately 20 miles an hour slower than the A-17A's, have no retractable landing gear, are an obsolete airplane entirely unsuited for present day combat, and would require from 6 weeks to 2 months to be equipped with bomb racks, machine guns, etc., to put them in fair combat condition, and even then for night bombing only. In view of these facts, indicating that they are of no immediate value for fighting, and that they are of considerable importance to us for Air Corps training, their loss involving a serious handicap to an already aggravated condition regarding training of pilots, I do not believe their rolease to the Allies is justified. Chief of Staff, up, is this sent to that young som When 6-13-40 CONFIDENTIAL Regraded Unclassified WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON, D. c. CONFIDENTIAL June 13, 1940. MEMORANDUM FOR SECRETARY MORGENTHAU: Reference the 80 A-17 planes, on detailed investigation I find that these A-17's are approximately 20 miles an hour slower than the A-17A's, have no retractable landing gear, are an obsolete airplane entirely unsuited for present day combet, and would require from 6 weeks to 2 months to be equipped with bomb racks, machine guns, etc., to put them in fair combat condition, and even then for night bombing only. In view of these facts, indicating that they are of no immediate value for fighting, and that they are of considerable importance to us for Air Corps training, their loss involving a serious handicap to an already aggrevated condition regarding training of pilots, I do not believe their release to the Allies is justified. 12mg CONFIDENTIV Regraded Unclassified 213 WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON, D. C. CONFIDENTIAL June 13, 1940. MEMORANDUM FOR SECRETARY MORG NTHAU: Reference the 80 A-17 planes, on detailed investigation I find that these A-17'a are approximately 20 miles an hour slower than the A-17A's, have no retractable landing gear, are an obsolete sirplane entirely unsuited for present day combet, and would require from 6 weeks to 2 months to be equipped with bomb racks, machine guns, etc., to put them in fair combat condition, and even then for night bombing only. In view of these facts, indicating that they are of no immediate value for fighting, and that they are of considerable importance to us for Air Corps training, their loss involving B. sorious handicap to an already aggravated condition regarding training of pilots, I do not believe their rolease to the Allies 16 justified. Chief of Staff. CONFIDENTING Regraded Unclassified 114 CONFIDENTIAL Im 13. 1940. Dear Mr. Endsen: I - sending you herevith, for your confidential use, the following reporte: Part I - Airplance Deliveries of and Box Orders for Airplanes, May 1 - June 8, 19401 Unfilled Orders at Estimated Deliveries on June 8. 1940. Part II - Airplane Enginee you 1+1 Deliveries of and Nev Orders for Airplane Ingines, May 1 - June 8. 1940; Unfilled at 3/10 Orders and Retimated Deliveries on June 5, 1940. You will note that these tables carry forward through June 5, 1940, the information furnished you on Monday of this vedr. Am additional copy of each report 10 enclosed, in accerdance with your request transmitted through Mr. Donald Helson. Sincerely, (Signed) H. Morgesthau. Jr. Mr. Villiam 8. Imion, Chairman, Advisory Commission to the Council of National Defense, loss 2064, Federal Reserve Building, Washington, D. e. By Messenger 100 GOHsek MAFILE COPY Regraded Unclassified 115 CONFIDENTIA June 13. 1940. Dear Mairal Stark: I as sending you herewith, for your confidential use, the following reports: Part I - Airplance Deliveries of and New Orders for Airplanee, May 1 - June 8, 19401 Unfilled Orders and Retimated Deliveries on June 8. 1940. Part II - Airplane Ingines Deliveries of and New Orders for Airplase Engines, May 1 - June 8, 1940; Unfilled Orders and Notimated Deliveries on June s, 1940. You will note that these tables carry forward through June 5, 1940, the information furnished you last week. Sincerely, (Signed) H. Morgesthau, Jr. Admiral Harold R. Stark, Chief of Noval Operations, Havy Department, Washington, D. c. onl 1 A GCHjek M FILE COPY Regraded Unclassified 116 CONFIDENTIAL June 13, 1940. Dear General Marshall: I - sending you herevith, for year confidential use, the fellowing reporter Part I - Airplanes Deliveries of and New Orders for Airplanee, May 1 - June 8, 19401 Unfilled Orders and Retimated Deliveries on June 8, 1940. Part II - Airplane Ingines Deliveries of and Sev Orders for Airplane Ingines, May 1 - June 8, 1940: Unfilled Orders and Retimated Deliveries on June 8, 1940. You will note that these tables carry forward through June 5, 1940 the information furnished you last week. Sincerely, (Signed) H. Morgenthau, Jr. General George c. Marshall, Chief of staff, Var Department, Washington, D. 0. GCHtek By Memenger / 100 M FILE COPY Regraded Unclassified 117 WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON June 13, 1940. Dear Mr. Morgenthau: I have your letter of June 13, with confidential reports enclosed: Part I - Airplanes. Part II- Airplane engines. I note these reports carry forward through June 8, 1940, the information you furnished us last week. Thank you very much for this further data. Faithfully yours, Honorable Henry Morgenthau, Jr. Secretary of the Treasury, Washington, D.C. TREASURY DEPARTMENT 118 INTER OFFICE COMMUNICATION DATE June 13, 1940 TO Secretary Morgentnau FROM Mr. Haas M. Attached is a letter from the Republic Aviation Corporation which we received with this week's reports. The writer asked that I call your attention to the fact that unless they receive some new orders in the near future their production capacities will be partially idle in a few months. In this week's letter to the company I said that I would bring their letter to your attention. For your reference I am attaching our record of the company's orders and scheduled deliveries. 3300 2700 600° Regraded Unclassified Leauf FARMINGDALE a. STRICTLY CONFIDENTIAL REPUBLIC AVIATION CORPORATION 1 JUN 8 - 1940 JUN 1940 19 FARMINUDALE, LONG BLAND NEW YORK TELEPHONE ⑉ A-308 RECEIVED June 7, 1940 JUN 8 1940 AIR MAIL - SPECIAL DELIVERY Division of Mr. George C. Haas Director of Research and Statistics Research and States Treasury Department Washington, D. C. Dear Mr. Heas: Thanks for yours of June 6 in response to which we are submitting the data you requested. I hope you will be kind enough to call Mr. Morgentheu's attention to the fact that our production capacities here will in a few months be partially idle and that we have quite an ex- tensive possible production capacity which can not be utilized unless we receive orders in the immediate future. In fact, our present production organization can not be maintained unless we have sufficient business to justify same. I would greatly appreciate your coopera- tion in this matter. Sincerely yours, unkellet W. Wallace Kellett WWK:WN Enclosure Regraded Unclassified -20 AIRPLANES 120 STRICTLY CONFIDENTIAL Deliveries and New Orders* REPUBLIC AVIATION CORPORATION May 1, 1940 to Date Class of purchaser May 1- May 24- June 2- June 9- June 16- June 23- June 30- July 7- July 14- July 21- and type of plane May 23 June 1 June 5 June 15 June 22 June 29 July 6 July 13 July 20 July 27 ELIVERIES 5. Aray Miscel laneous ......... 1 her Foreign XP-1 Pursuit ....... 9 4 ZPA Pursuit ....... 2 3 Total Other Foreign 11 7 Total All Purchasers 11 8 0 V ORDERS Total All Purchasers : o o o ca of the Secretary of the Treasury. Division of Research and Statistics Date: June 11, 1940. cluding Spares SOURCE: Reports from Individual Companies. Regraded Unclassified 121 AIRPLANES STRICTLY CONFIDENTIAL Unfilled Orders* Juse 8, 1940, and Entimated Deliveries, by Months REPUBLIC AVIATION CORPORATION deliveries Unfilled Class of purchaser orders* 1940 sad 1941 1942 type of plane June 4. June 1940 9-30 July aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Ang. Sept. Del. Nov, Dec. /m. Fab. Mar. Apr. May June July Total U. 8. Aray 97 1. 1 5 6 - 4 6 13 12 15 15 15 Total D. 8. Nevy, Total U. 1. Army and Savy 97 1. 1 5 6 - 4 6 13 12 15 15 15 Total Britien Empire and France. Total South America Total Other Foreign 112 13 18 15 17 17 17 12 Total Toreigo 112 13 18 18 17 17 17 12 Total D. 1. Commercial Total Unclassified Drand Total 209 14 19 23 23 21 17 16 6 13 12 15 15 15 0. 8. Area 12-43 14 1 1 5 5 2 XP-47 (29-47A) 2 1. 1 7-44 EL 1 2 3 6 12 12 15 15 15 Other Foreign EP-1 (F35) 62 6 10 10 10 10 10 6 29A 50 7 8. 5 7 7 7 5 Grand Total 209 14 19 23 2) 21 17 16 6 13 12 15 15 15 Office of the Secretary of the Treasury, Division of Besearch and Statistics. . Including Spares. Bourow: Reports Cros Indivi Dispantes. Regraded Unclassified 122 June 13, 1940 At lunch with Mr. Knudsen today I told him that I had discussed with the President this morning my idea of making the Allied money go further through not asking them to pay for all of the plant expansion necessary for their program. I said that in the case of Ford the U.S. Government might pay for all of the tools and then the Allies could buy the enginee from Ford the same a.8 they would buy motor trucks from General Motors without pay- ing for the toole. The President approved the idea heartily, and pointed out that in the case of Aluminum Company of America we should build a plant for them, pay for it, and then lease it back to them on account of the anti-trust suit pending against the company. I reviewed the grounds with Mr. Knudsen at lunch, and I told him that if the Allies had a billion dollars I wanted to make it stretch just as far as possible. I then sketched this plan for him and he asked whether it wouldn't be better to let the Allies pay back a certain amount on each engine as they were delivered. He gave the ex- ample that if the U.S. Government and the Allies combined were going to place an order with Ford for 20,000 engines and the tools cost $20,000,000, add $1,000 to the cost of each engine, and then pay off the money they had borrowed with that $1,000. It seeme that Mr. Knudeen met with Jesse Jones last night and he reached an impasse with Jones because he (Jones) said that on the plan Knudsen was suggesting he didn't see how he would get paid back. Mr. Knudsen said that for eleven days he has been going around in circles and getting nowhere and that this seemed to be the answer to all his problems. Knudeen then asked, "If I do this will I have Sullivan on my neck?" I said that we would send for Foley and find out. Foley listened to the program and he can see no objection provided that the Ford Company would borrow this money from RFC and agree to pay back the RFC no much per unit as they deliver each unit. Mr. Knudsen then said, "Well, what if we have & cancellation of contracts? Who will lose?' I told him that the government will have to take the loss. I said that if I was the manufacturer I wouldn't want to go into this business and take thie risk not knowing how long the French are going to continue fight- ing. Knudsen then wanted to know what would happen If they ordered a lot of stuff that we couldn't use. I told him that we had already crossed that bridge and they have got to order the kind of stuff we can use; otherwise we don't do business with them. Regraded Unclassified 123 - 2 - Mr. Foley then dictated the following paragraph: Mr. Knudsen wrote a short memo in pencil in my presence to the effect that the cost of the tools would be spread over the units to be produced and the money advanced to be repaid from sales by the manufac- turer, the title to the tools to be in the manufacturer and the financing to be on a loan basis, and the goods to be manufactured to be of standard American design. Mr. Morgenthau then dictated the following: I suggested that Knudsen talk with the President about this alone after his meeting with him today, and then give me a telephone call to tell me what they had decided, and then I would get in touch with Arthur Purvis and try to have him come in at 9:00 Friday morning to meet with Knudsen, Foley and myself. 124 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 13, 1940 TO Secretary Morgenthau FROM Mr. Foley For the Secretary's Diary At a conference yesterday afternoon at the office of William S. Knudsen, Advisor on Industrial Production, which was attended by Mr. Knudsen, myself and Mr. Kades, there was discussed a proposal (which Mr. Knudsen dictated and which is attached hereto) to erect a plant for the manufacturing of Wright aircraft engines. The plan proposed by Mr. Knudsen contemplates that the RFC advance Wright Aero- nautical Corporation the sum of $50,000,000 for building and equipping such a plant. Title to the land, buildings and machinery would be vested in the Government which would lease the same to the Corporation for 3-1/2 years at a rental for such period of $14,157,000. This sum is arrived at on the basis of charging $585 for each motor produced, it being contemplated that the Corporation would manufacture 24,200 engines during that period, this being about 575 engines per month. For these engines the Government would pay $363,000,000 which is about $1,500 per engine. Apparently this figure is arrived at as an average price by estimating the cost of an engine to be $10 for each horse-power. The profit on the sale of the engines would be about $25,600,000, or approximately 7% of the contract price if the rent (about 4% of the contract price) is charged as a cost of performing the contract. I advised Mr. Knudsen that his plan would be satisfactory up to this point and that the rental could be charged as a cost on this basis. However, Mr. Knudsen's plan also contemplated that at the expiration of the contract Wright Aeronautical Corporation would have the option to purchase the building and equipment at 50% of the balance between the initial cost and the rental paid. In other words, the Corporation having paid $14,157,000 in rent would receive that amount as a credit on the purchase price plus an additional credit of $18,000,000 and could buy the plant by paying the Government $18,000,000. I stated that giving such an option would be very doubtful. After paying the purchase price of $18,000,000 from its profit of $25,600,000, Wright would have left $7,600,000 plus a new plant costing $50,000,000. Whether the profit would exceed the limit of 12% of the contract price and Wright get a windfall would depend upon the market value of the plant upon the completion of the contract. I explained to Mr. Knudsen that, although this is anybody's guess now, to depreciate a plant of this character by 36% in 3-1/2 years would be difficult to justify, especially since an additional 28% of the cost (returned to the Government as rent) is included by Wright in the price charged the Government for the engines. We also considered various ways of handling the special machinery problem. I suggested that the manufacturers borrow money from the RFC for the purchase of the machinery in their cm name and repay the same as deliveries to the Government are made, the RFC being meanwhile secured by a chattel mortgage on the machinery. 9.M.7L Regraded Unclassified 125 COPY June 11, 1940 Referring to the Curtis Plant proposal of $50,000,000 to be furnished by the R.F.C. for plant "J" investment, my suggestion is that the R.F.C. turn the required funds over to the Curtis- Wright Company which builds and equips the build- ing, which is Government property. The Curtis-Nright Company will rent the building and equipment from the Government for 42 months to manufacture 24,200 motors and will pay in rental, $585.00 per motor produced, or $14,157,000.00, this rental being a legitimate charge against cost, but with no profit to the manufacturer. At the expiration of the contract the manu- facturer will have the option to purchase the building at 50% of the balance between first cost and the rental paid. In this way the manufacturer, on a cost of sales amounting to $363,000,000 will have the plant at half value, plus a profit of $25,638,000.00 or approximately 7% The Government will have an expense of $32,078,000.00 or $1,326.00 per motor, or approximately 8.8% Regraded Unclassified 126 June 13, 1940 Memorandum for the Secretary's Diary At the Secretary's request, Ed Foley and Chuck Kades called on Mr. Knudsen at his office in the Federal Reserve Building today at 5 p.m. Mr. Knudsen said that he had talked with the President after the meeting of the Advisory Commission to the Council for National Defense concerning the program for financing plant expansion and tooling as agreed upon with Secretary Morgenthau and Mr. Foley at luncheon today. The President, according to Mr. Knudsen, said that he was in general accord with the scheme, but if there were monopolies then the Govern- ment should not loan, but should construct and lease the plant to the manufacturer. Mr. Knudsen said that he wanted to write out the formula which he did in his own hand and gave it to Mr. Foley to dress up in legal language. Foley told him that he would work it over tonight and give it to him when he came to the Secretary's office tomorrow morning at 9 o'clock. The following is what Mr. Knudsen handed to Mr. Foleys "The Treasury Dept. agrees to the principle that plants built or equipment furnished in the emergency shall be titled to the manufacturer and handled thru the R.F.C. on a loan basis. The cost of such plant and equipment shall be spread over the total require- mente in numbers of pieces. The amortization charge will be & legitimate part of the price per unit, but will carry no profit to the manufacturer. The funds obtained thru this method will be remitted to the R.F.C. LB units are sold. "This is applicable to domestic or foreign business with the proviso, however, that foreign orders must be standard American material. No material of special design can be included. The assumption is that Govern- ment will assume loss due to cancellation before com- pletion of the orders." E.N.7L 127 The Treasury Sept agrees to the principle That Prents Guilt ~ Equipment furnished in the Emegency shall be litted to the Monutacture and Landled thrus the R.7. C.. a loan basis the Cost 7 moh plant and gupment shall be spread an the total equipments n number of Prices. The shaige rice be a legitimek part of The Price probit Nice carry no project to the manufacture The funds obtained there this method mile G smitted to the R.Y.C. a unit. ensues. this is applicaph to someti or Foreign business mh 92. thel tereign advs must be meterial no matirial of special design ca be included. the Assismption in The Inviment we arme loro due to to before completion of the ades Regraded Unclassified 128 The Treasury Sipt agrees to the principle That Rents Guilt n Equipment furnished in the Emegency shall be litted to the Monutacturer and Landled thru the R.7. C.on a loan basis the Cost 7 much plant and gupment shall be spread an the total equipments n number of Prices. the olaige rile be a legitimph part of The Price probit Nia any no project to The manufacture The funds obtained there this method mis G smitted to the R.Y.C. a unit. ensues. this is applicaph to somili or Foreign business mh the the terrign Gelis meal & 75 meterial. No material of special design an be included the is That inc arme loos desi to before plation of the addes. Regraded Unclassified 129 June 13th at 6 p.m. Mr. Stettinius Just phoned to say that you had asked him to give you a list of dates of delivery on bombs, and the information has not yet been arrived at. The engineers are working tonight on the matter and will have tomorrow afternoon, for the first time, exactly what they can do in the way of delivery. As soon as he gets this information he will phone you and tell you. N. M. Chauncey 130 THE ASSISTANT SECRETARY OF THE NAVY WASHINGTON 13 June 1940 My dear Mr. Secretary: Thank you for your Memorandum of 10 June 1940, enclosing a copy of the Memorandum to you from the President, dated 6 June 1940, instructing the Secretary of War and the Secretary of the Navy to clear all contracts for purchases through Mr. Knudsen, Commissioner of the Advisory Com- mission to the Council of National Defense. May I take this opportunity to express to you the appreciation of the Navy, as well as my own, for the courtesy and cooperation which you and your Staff extended to the Department during the time that you cleared these contracts. With kindest personal regards, I remain Faithfully yours Compton Honorable Henry Morgenthau, Jr. The Secretary of the Treasury Washington 131 HSM PLAIN London Dated June 13, 1940 Rec'd 5:51 P. m. Secretary of State, Washington. 1639, June 13. POR TREASURY FROM BUTTERWORTH. Une. There have been rumors in the City and Else- where GS to how far the President's indication of material nid to the Allies included credits or other financial facilities and some discussion on this subject has appeared in today's financial press. The most note- worthy article appears in the Lombard Street column of the FINANCIAL NEWS. Although this is written by Einzig, nonetbeless the chairman of the FINANCIAL NEWS 1s Brendon Bracken, M. P., who has become Winston Churchill's parlia- mentory private secretary and was made n Privy Counselor 5 few days ago. Furthermore the freedom with which the British Treasury is now granting permission for dollar purchases is as much a confirmation of the following as it is El response to the urgency of the situation: "Fortified by President Roosevelt's pledge, however, the Allied governments presumably will consider it safe unhesitatingly 132 hsm -2- No. 1639, June 13, from London unhesitatingly to buy for cash all the war material avail- able on the assumption that their chances of obtaining maximum quantities of modern materials as soon as they become available will be in no way prejudiced. If in the meantime their gold and foreign Exchange resources are reduced they will have to presume that the United States will not withhold necessary weapons for resisting the Nazi- Fascist aggressors merely because the Allies lack dollars to pay for them. By the time any such question arose, the admir stration should have had B reasonable opportunity to overcome any isolationist resistance to legislative changes Enabling the Allies to obtain war material on a credit basis. If so, it may be reasonable to assume that henceforth the volume of American W ar deliveries will bE determined by the capacity of the Ameri can armement indus- tries-which can be Extended rapidly. Financial considera- tions presumably will not weaken the material support promised by President Roosevelt." As the FINANCIAL TIMES and the TIMES point out, a rumor also gained currency in the City that the British authorities are to borrow American securities declared by British owners and not commandeer them for sale because funds might be allowed to be reised in America against their deposit". On which the TIMES cautiously comments: "Indeed, it seemed to bE based QB much upon a wishful interpretation 133 hsm -3- No. 1639, June 13, from London interpretation of the Extent of United States political recdwill LS anything Else". Two. The British Treasury announces with reference t o the provisions of regulation 3B of the defence (finance) regulations 1939 that permission for the issue of securi- ties in a form transferable by delivery will not be given in any instance where it is possible to issue those securi- ties in registered or inscribed form. Where special cir- cumatoness EXIST which might bE held to justify the issue of suburities transferable by delivery (E. g. temporary documents) applications may be made to the Capital Issue Committee If the issues of the securities concerned require Treasury consent under regulation 6 (control of capital 18SUES). In all other cases, applications should be addressed to the Bank of England Exchange Control. Paree. The British Treasury have also made two orders, the defence (finance) (restriction of payments) (No. 2) order 1940 and the defence (finance) (export of goods) (No. 2) order 1940, giving effect to in arrangement which has been made with the Argentine authorities for regulating payments between the two countries. Under the provisions of these orders D.S from the 14th June all payments to persons resident in the Argentine from persons resident in the United Kingdom of a commercial or current financial nature may only be made in starling to an Argentine special account 134 ham -4- No. 1639, June 13, from London account with a United Kingdom bank registered as such by the Bank of England under the defence (finance) regulations and all exports from the United Kingdom to the Argentine must bE paid for in sterling from a special account. As heratofors, all other remittances from the Argentine to the sterling area will also be made by the debit of a special account. KENNEDY NK The YAMIS INT 07 LECHNICAT BRONK BIO nny 10 VM SI WASI while House makey Hm h. has 135 when - whan copy D4 MEMORANDUM Aeroplanes We have received a request from France for twenty 4-engine Boeings (flying fortresses) to be released immediately with the ides that they be flown over to the other side. As there are important orders on hand with Consolidated Aircraft Corporation for 4-engine Boeings it would be possible to realace, next year, such deliveries as could be conceded to us now. New York, 13th June, 1940 136 June 13, 1940 9:06 a.m. H.M.Jr: Hello. Operator: Mr. Purvis. Go ahead. H.M.Jr: Hello. Arthur Purvis: Hello. H.M.Jr: Arthur? P: Yes. H.M.Jr: Good morning. P: Good morning, sir. H.M.Jr: How are you? P: Very well, thank you. H.M.Jr: Arthur, could you give me -- ah -- approximate figure of the amount of money that you either have or have signed contracts for for plant expansion in this country. P: Yes, I'm sure we can get that. You want that for the British and French? H.M.Jr: Yes. Oh, I want a good guess, I mean, couldn't you just give me one? P: Oh, I see what you mean. Well, now, let me see. Off hand already -- when you say signed contracts you mean either letters of intention or contract. H.M.Jr: Yes, I mean, like powder factories and things like that. P: $100 -- let me see -- $200 -- it's a little difficult. I should say it might be anywhere between 300 and $500 million. H.M.Jr: In plants? 137 - 2 - P: I would think 80 because you see the -- the airplane 18 approximately, I suppose $100 million, isn't it? H.M.Jr: I thought that was around 860. P: Ah, but you see that was when you were at Pratt and Whitney, W&B it not? H.M.Jr: Yes. P: And look here, I think before I give you -- just let me ring you back in five minutes. H.M.Jr: Well, if you could ring me back any time before 9:30 because I have something very important that I want to use it for. P: Yes. H.M.Jr: See? Very important. P: Yes, I'll do that. And one other thing ...... R.V.Jr: If you could call me back in the next 20 minutes and give me an approximate figure of how much you neople are putting into plants P: Yes, I'd rather do it that way. It won't take me, I don't believe, more than 10 minutes. H.M.Jr: Right. P: Thank you. Regraded Unclassified 138 June 13, 1940 9:14 a.m. H.M.Jr: Hello. Edward R. Stettinius: Good morning, Mr. Secretary. H.M.Jr: How are you? S: Good, sir. H.M.Jr: I wonder if from your former company you could get something for me? S: Right. H.M.Jr: I'd like to know, first, if they would give you for me the list of the bombs which were in this order, I mean, how much of each the way it was finally set up, you see. S: Yeah. H.M.Jr: And then, what 18 the date of the first delivery and when do they complete delivery on each group of bombs, I mean, how long will it be before they begin to deliver the 30-1b. bombs and when do they finally deliver, you see? S: By the various items. H.M.Jr: By the various items. 8: Yeah. H.M.Jr: Because I think that I'm being kidded and I don't like to be kidded. S: You want me to check this from the other side rather than from this side. H.M.Jr: I'd like you,if you would do it with Steel ...... 133 - 2 - S: Right. H.M.Jr: Directly with Steel, because I think the Army is kidding me. S: I shall do that immediately, sir. H.M.Jr: I may be doing them a gross injustice ...... S: Ah -- I'll get -- it might take me a few hours to get it. H.M.Jr: Oh, wonderful! S: 0. K. H.M.Jr: But you see what I want. S: I understand. H.M.Jr: Thank you. S: Right-o. 140 June 13, 1940 2:31 pm. H.M.Jr: Hello. Operator: Go ahead. H.M.Jr: Hello. Hello. Arthur Purvis: Hello, good afternoon. H.M.Jr: How are you? P: Very well, thank you. H.M.Jr: Arthur, I don't want to raise your hopes too much, but I think I've worked out a new formula whereby you would -- how shall I say -- be paying for your goods that you ordered in this country -- whereby you wouldn't have to put down the money in advance. P: Oh, good. H.M.Jr: And I had lunch with Knudsen and he says that this is the answer that he's been looking to for eleven days on everything. He wants to apply it to everything. Hello? P: Yes. H.M.Jr: The thought being -- 18 that the Government would advance the money -- this Government -- hello? P: Yes. H.M.Jr: to the manufacturer and then as he delivers each unit, he would add the extra amount for either machine tools or whatever the cost 18 to the unit, and then pay back to this Government what we've advanced him. P: I see. So that in effect would mean that not even in the case of the machine tools would we have to put the money up in advance. Regraded Unclassified 141 - 2 - H.M.Jr: Correct. P: That would be very satisfactory. H.M.Jr: Wouldn't it? P: Excellent. H.M.Jr: Well, Knudsen 18 crazy about it. I talked about it with the President this morning but it is 80 far-reaching and runs into BO much money that I asked h1m to talk to the President about it again this afternoon when he B&W him. P: Yes. H.M.Jr: And I'd appreciate it if you wouldn't tell this to B. living soul until we've definitely cleared it. P: No, I won't. H.M.Jr: If I hear from Knudsen after this meeting it's all right. I think it's sufficiently importent that you be here at 9:00 tomorrow morning to sit down with Knudsen and me. P: Who'll there be? H.M.Jr: Just you, Knudsen and I. P: Yes. Good. H.M.Jr: At 9:00 tomorrow morning. P: All right. R.M.Jr: To settle this because then he'd go ahead and this would be the formula for everything from now on. P: Excellent. H.M.Jr: Starting with the Ford Motor Company. Regraded Unclassified 142 - 3 - P: Yes. H.M.Jr: Where the tools run to $30 million, you see? P: Yes. That would be very good indeed. H.M.Jr: You see? P: Excellent. H.M.Jr: Now the only proviso we'd make on this 18 that all the manufactured goods under this would have to be subject to American design and pattern. P: Yes. H.M.Jr: I mean, in other words, we wouldn't want to make special things we couldn't use ourselves. P: No, naturally. H.M.Jr: I mean that out of this production line would have to come something which we could both use. That would only be fair. P: That would be reasonable. H.M.Jr: Don't you think 80? P: I think 80. H.M.Jr: Well, I'm quite excited about it. P: Yes. Then, as a matter of fact, it's the first -- it's the first possible break though in a long subject, isn't it? H.M.Jr: Well, I know it is for you and Knudsen says for eleven days he's been going around in circles trying to get 8. formula. P: Yes. H.M.Jr: And he's taken it, and he's crazy about it. P: Yes. Well, now I think that's simply splendid. I'll be there at 9:00 o'clock with the greatest pleasure. Regraded Unclassified 143 - 4 - H.M.Jr: Well, let's leave it this way. I'll call you either way just as soon as I hear from him and I'll hear from him within an hour. P: All right, splendid. H.M.Jr: But I'm quite excited about it because it really ought to be very helpful to you. P: Yes, exactly. H.M.Jr: And that's what I want it to be, and I've been trying to rack my brain to find something to make your money go further. P: Yes, exactly. It becomes very important now that we probably will be forcing the issue in purchases very strongly. H.M.Jr: Yes, but, I mean, this stretches your money. P: No. H.M.Jr: Doesn't it? P: oh, what was that? H.M.Jr: I say, this makes your money go further. P: Oh, it stretches it, definitely. H.M.Jr: Yes. P: oh, definitely. H.M.Jr: Now, one other little thing. In 8 cable that I got late last night from Kennedy ...... P: Yes. H.K.Jr: He'd been in touch with Lord Beaverbrook, and Beaverbrook had given him a number on these Rolls engines of 3300, and I think Sir Henry Self said 3600. P: Yes. Regraded Unclassified 144 - 5 - H.M.Jr: And Mead has been bothering me which it would be and I said, well, after all, take the higher figure. P: As I understand the difficulty which has not -- when I got the message yesterday, I think I told you it was in the form of a rather violent telephone message from Lothian who had been speaking to Beaverbrook on another matter, and Beaverbrook had Monnet with him. H.M.Jr: Oh, yes. P: And had said that -- will you please get a message quickly to Arthur Purvis saying that he can go right ahead. Now then, the -- Monnet will send a cable authority to him tonight H.M.Jr: Well, that's tough. : ...... for the thing. Well, now then when the -- we get in this morning, there 18 no cable from Monnet on that subject, probably due to the fact that yesterday was 8. pretty hectic day and today may be even more hectic. H.M.Jr: Right. P: But what I -- as I see it, on the British side there is B. definite confirmation saying, yes, 3300 are ours and what I'm really waiting for now is Monnet's cable saying yes, 6,000 1s the total for the combined two Governments and the French are sending you separately the necessary authority on the 2700. H.M.Jr: Well, I P: Well, I'm expecting - H.M.Jr: Well, I just wanted to let you know that the figure that Kennedy used was 3300. P: Yes. Regraded Unclassified 145 - 6 - H.M.Jr: And I'm not going to fuss with it any more. I'm going to leave it with you. P: Yes, quite. I'm hoping very much that at any minute this afternoon the cable will come in from Monnet because he specifically said it was coming yesterday. H.M.Jr: All right. Well, I'll let you know. I'll have somebody phone your office just as soon as I hear but I think that you ought to -- I want you to sit in on this for I really think it's important. P: Oh, it's -- it might be quite vital. H.M.Jr: Yes. P: Thank you ever 80 much. H.M.Jr: I'm trying to think up something every day. P: (Laughs) And thank heavens there's somebody there who 18. H.M.Jr: All right. P: Thank you, Henry. H.M.Jr: Good-bye. P: Good-bye. 146 THE UNDER SECRETARY OF THE TREASURY WASHINGTON June 13. 1940 MEMORANDUM TO THE SECRETARY: I should think you might announce at your press conference the following: Preliminary reports from the Federal Reserve Banks indicate that we have received approximately $260,000,000 of the 3-3/8% Treasury bonds in exchange for the new 1% note. We will get & further report late this evening as to the amount included in last night's mail, which will increase the above amount. DOB Regraded Unclassified 147 HSM GRAY Paris Dated June 13, 1940 Rec'd 5:15 a. m., 15th Secretary of State, Washington. URGENT 1170, June 13, noon. FOR THE TREASURY. Dean Jay of Morgan's who left for Niort at 2.30 a.m. this morning advised the Counselor last Evening that a sudden and SECI at meeting of the Paris banks was called by the Bank of France on Monday afternoon. The banks were informed that the Bank of France at Paris would hereafter operate as B. branch and not as the head of the institution. In the event of German occupation of Paris the banks have been instructed to destroy all bank notes in their possession hert. A proces-verbale including B. list of the bank notes thus destroyed is to bE mada in Each instance and will be used to obtain replacements of such notes from the Bank of France at the termination of the war. The National City Bank and Chase have closed their offices in Paris. Morgan's and the Guarantee still remain Regraded Unclassified 148 hsm -2- No. 1170, June 13, noon, from Paris remain open with skeleton staffs. The banks no longer receive deposits and no transactions in foreign Exchange are being carried out: BULLITT RR 10 THE au VISA LECHNICY 201 .... 10 401 301190 110 at Oi MA al HUL 000 16. ENL BECOMED 13 JI PLAIN LONDON Dated June 13, 1 940 Rec'd 9:26 a.m. Secretary of State Washington 1631, June 13, 2 p.m. FOR TREASURY FROM BUTTERWORTH. With regard to the Anglo-Japanese agreement reached in Tokyo yesterday, the detailed terms of which the British Treasury state have undoubtedly been communi- cated to Washington through our Embassy in Tekyo, Pinsent is to bE instructed to make inquiry as to whether the United States will purchase the ten per- gest of the : pount held in Tientsin, the proceeds of which are to be allocated for Chinese relief under the supervision of the international commission. If no it vill bE shipped to San Francisco; if not it will no doubt have to be absorbed by India. KENNEDY HSM Regraded Unclassified 150 AC PLAIN London Dated June 13, 1940 Rec'd 9:15 a.m. Secretary of State Washington 1630, June 13, 1 p.m. FOR TREASURY FROM BUTTERWORTH Under a new Order in Council the maximum penalties for 09 ENCES against the DEfence (Finance) Regulations, 1939 JTE increased. The regulations previously pre- scribed moximum penalties of three months' imprisonment and a fine of 6100 on summary conviction and two years' imprisonment and & fine of 6500 on conviction en indict- ment. ThE new order provides that as an alternative to there fines penalties imposed may now include a fine not EXCEEDING three time's the value of the subject matter of the offense. The Treasury also gave notice that it is proposed to compile a list of numbers of bearer securities which are owned by persons in Enemy territory or Enemy-occupied territory or which have fallm into Enemy hands. Informa- tion is to bE sent to the Bank of England, Securities Registration Office, without delay through the company secretaries or paying agents in this country if the securities 151 - 2 - #1630, June 13, 1 p.m. from London securities were issued in the United Kingdom and through a ban'' in the United Kingdom if they WETE issued abroad. Names and addresses of beneficial owners, place of deposit and definitive numbers and denominations of bonds, warrants, Et cetera, and all other relevant particulars are to bE given in the fullest detail. KENNEDY HSM 10 1115 VISA LECHING YIII Dre my R 59 ! 00 Att DESSIT Line