Again, Alcoa

Few friends has Aluminum Co. of America but some of the warmest are to be found among missionaries. The loyalty of this pious rooting section is as well-grounded in material interest as that of the Mellon family, which owns about one-third of Alcoa's stock. When Charles Martin Hall, inventor of the process which started the company on its monopolistic career, died in 1914, he left one-third of his $27,000,000 fortune to the American Missionary Society and another one-sixth for advancement of education in the Near and Far East.

Alcoa may have friends in the scattered missions of the Near and Far East but at home is many an enemy. One of the oldest enemies is U. S. Attorney General Homer Stille Cummings. Mr. Cummings' enmity dates to the early 19203 when he was practicing law in Stamford. Conn. At that time he took a legal trouncing in a suit against Alcoa. Later his law firm represented Baush Machine Too! Co. in its prolonged efforts to recover from Alcoa $9,000,000 in triple damages for as an impressive a list of unfair trade practices as ever brightened a docket. In the end the famed Baush case was settled out of court, but meantime Mr. Cummings had become chief prosecutor to the New Deal. Hardly was he well settled in Washington before the Department of Justice started to investigate Aluminum Co. of America and the income tax returns of the man who was supposed to dominate its affairs, old Andrew William Mellon.

Last week the Alcoa investigation blossomed out as the biggest corporate antitrust case since the dissolution of old Standard Oil in 1911. In a Federal District Court in Manhattan the Attorney General not only requested perpetual injunctions to restrain Alcoa, its, officers, directors, principal stockholders and subsidiaries from monopolizing or attempting to monopolize the U. S. aluminum industry; Mr. Cummings also asked that Aluminum Co. of America forthwith "be dissolved and its properties be rearranged under several separate and independent corporations." Despite the fact that dissolution of the Standard Oil Trust touched off an historic boom in the shares of its component companies, Alcoa stock promptly crashed from $160 to $124.

Aluminum Co. of America has been unquestionably the world's most-investigated corporation. It was even investigated and hauled into court back in the trust-busting days of Roosevelt I. The Federal Trade Commission had it on the carpet in 1917 and again in 1919. Three years later both the Trade Commission and the Department of Justice looked into the company's purchase of a fabricating competitor. Later that year the Trade Commission started an investigation of the cooking utensil industry, which turned into a seven-year Alcoa probe. At the request of the Senate in 1926 the Department of Justice investigated to see if the company was living up to the 1912 consent decree. Alcoa affairs have also been thoroughly aired in private suits such as that of Baush Machine Tool. Yet Alcoa has always received a clean bill of health.

After a perusal of Mr. Cummings' 47-page complaint, Wall Street cynics opined last week that Aluminum Co. of America was being prosecuted for making money.

The complaint related how Alcoa was founded as Pittsburgh Reduction Co. in 1888 with $20,000 in cash, how it swapped stock for the Hall patent, how another $2,200,000 was then raised to start in business, how the only other cash invested was a paltry $584,375. In later years the company swapped stock for some $16,000,000 worth of properties, but out of Alcoa's $175,000,000 in assets, no less than $155,000,000 represented profits (to the end of 1934, last date used by the Department of Justice). Meantime the company paid out $82,000,000 in cash dividends topped off with a distribution of $22,000,000 worth of stock in Canada's Aluminum Ltd. Concluded the Government: "Profits of such size in supplying the public with an article of prime necessity . . .

are excessive and result from defendant's monopolization of this industry." Alcoa's Board Chairman Arthur Vining Davis would be the first to admit that his company produces 100% of U. S. Virgin aluminum. But to his way of thinking, that does not make Alcoa a monopoly. For one thing, the biggest source of the metal today is scrap aluminum. For another, there is foreign virgin aluminum, which passes into the U. S. comfortably even under a 4-c--per-lb. tariff. And while Alcoa controls 90% of the commercial deposits of U. S. bauxite, the reddish-brown, claylike ore from which aluminum is reduced, there is nothing, Mr. Davis would say, to prevent someone from going into the virgin aluminum business. The basic process has been available to anyone since 1909, when the patents expired.*

Most of the commercial ill will accumulated by Alcoa in its half-century of history has resulted from the fact that the company not only makes virgin aluminum but competes with its fabricating customers. At the start Alcoa had to manufacture aluminum products like pots & pans in order to sell any aluminum at all.

Having pioneered most of the uses of the metal, it stayed in each new field it opened.

According to last week's complaint Alcoa sells 90% of U. S. sheet aluminum moving in interstate commerce, 95% of the hard aluminum alloys, virtually 100% of the aluminum wire, cable, bars, rods, tubes, extruded and structural shapes, 50% of the aluminum cooking utensils, and an impressive percentage of all aluminum pistons, foil, castings.

Many an Alcoa competitor is firmly convinced that Alcoa's principal mission is to keep up the price of virgin aluminum while underselling them on fabricated aluminum.

That it could afford to undersell seems obvious, since Alcoa need take only one profit--the profit on the virgin aluminum it sells to its own subsidiaries, allowing the subsidiaries to sell their products at cost.

Highly exaggerated though this notion probably is, in the minds of aluminum fabricators it feeds upon Alcoa's proverbially arbitrary, take-it-or-leave-it attitude in dealing with aluminum users. Many a sharp word against Alcoa is currently heard among airplane makers who grumble of capricious deliveries.

In its complaint, however, the Government went far beyond allegations of monopoly and restraint of trade in the U. S., charging Alcoa with virtually rigging the entire world market, through its interests or the interests of its affiliates in foreign aluminum. Motive for this was alleged to be the company's desire to keep foreign prices high enough to discourage invasion of its U. S. preserve. Fifty years ago aluminum sold for $8 per Ib. Today it is 20-c-. Singled out by Attorney General Cummings was the fact that Alcoa hiked the price 1-c- last March just about the time it was reporting 1936 profits of $20,000,000 as against $9,500,000 the year before.

The 1-c- rise was insignificant compared to the gyrations lately in other metals. But aluminum was not deflated so-severely as copper, lead or zinc. In 1929 aluminum sold for 28-c-, was at 19-c- at its Depression low.

*When the late James B. Duke started to sink some of his tobacco millions into aluminum, 'Alcoa bought him out, the suspicion remaining that Mr. Duke was well aware of his potential nuisance value to Alcoa from the start.

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