GENERAL ARTICLES

ASSETS TO ASHES

Destructive, discriminatory, arbitrary, slipshod — that’s what this writer says of War Assets Corporation

J. J. BROWN July 15 1946
GENERAL ARTICLES

ASSETS TO ASHES

Destructive, discriminatory, arbitrary, slipshod — that’s what this writer says of War Assets Corporation

J. J. BROWN July 15 1946

ASSETS TO ASHES

J. J. BROWN

RALPH ALLEN

Destructive, discriminatory, arbitrary, slipshod — that’s what this writer says of War Assets Corporation

EARLY in 1944, when I was working at Research Enterprises Limited, a Government war plant in Toronto, I saw a pile of surplus radio transmitters on the factory’s salvage dock, awaiting delivery to a junk dealer. I asked the man in charge of the salvage dock if I might buy one, at a price several times greater than it was about to bring to the national treasury as scrap.

“Sorry,” he said. “You’re an employee. We can’t sell to you.”

Two years later, after the war and my job as a writer of manuals for radar equipment were finished, I went back to Research Enterprises and tr:ed to buy more government-owned equipment earmarked for sale to the nation’s swelling junk yards. The same man met me at the same salvage dock. He said: “Sorry, you’re not an employee. We can’t sell to you.”

Perhaps that Homeric piece of double talk should have surprised me, but it didn’t. It was only another episode in two and a half years of tilting with a billion-dollar windmill. It only represented another defeat in a one-man campaign to find some sense in the expensive colossus called War Assets Corporation.

It only confirmed my already well-documented conviction that the crown company charged with disposing of the country’s vast stores of surplus war goods either doesn’t quite know what it’s doing or has forgotten that its fundamental responsibility is to you and me, the ordinary, unincorporated citizens of Canada.

In our name, War Assets Corporation operates within the borders of Canada a semiautonomous commercial enterprise whose rules differ from the rules of any known system of economy, and whose methods of applying those rules, in my opinion, are arbitrary, slipshod and wasteful. The Corporation has had destroyed or mutilated huge quantities of public property. It has discriminated in favor of foreign purchasers at the expense of native Canadians. It has discriminated in favor of manufacturers and dealers at the expense of the individual consumer. With the toughest selling job in our country’s history on its hands, it habitually brushes off ready and eager buyers.

Perhaps I ought to explain the genesis of my absorbing interest in War Assets Corporation. I love machines and gadgets; as a practical scientist I like to have them around for their own sake, and as an incurable tinkerer I like to use them for making things.

But during the war most of the ordinary sources of supply were closed. The Government, meaning War Assets or its administrative forebears, was the only source from which the average man could hope to buy the electronic and mechanical components which periodically became superfluous to, or unsuited to, the war effort.

And from time to time War Assets was disposing of less technical stuff that I’d have been glad to buy at the going secondhand rate: an Army tent and sleeping bags for camping trips; an Air Force jacket; a pistol and .303 rifle for hunting; a compass and a set of ordnance maps for hiking; a small generator and gasoline engine to make a lighting plant for my summer cottage. Both before the Corporation’s birth in 1944 and afterward, I enquired regularly about the possibility of buying

surplus material of this general nature. The answer, almost invariably, was: “No such material available.” *

Manufacturers, retailers and junk dealers were obviously getting a different answer, because the stuff I’d tried to buy kept showing up on their shelves and scrap heaps. For the last year of my two and a half years of exploration through the gloomy Wonderland of War Assets, I admit I had no real hope of doing business with the Corporation. But I kept trying, partly from a sense of frustrated amusement, partly because the more I saw of War Assets, the more bizarre its business techniques seemed to be, and the more they seemed to call for enquiry.

I’ve collected nearly 200,000 words in letters and

documents illuminating the Corporation’s general and detailed methods of doing business. I’ve tried to pierce the Corporation’s obstructive breastworks in a number of armors, none of them adequate.

When I found I couldn’t get satisfaction as a private citizen I set up my own company and traded bond letterheads with the Corporation’s upper hierarchy.

When I found I couldn’t get satisfaction as Little Business, I got out a blue denim shirt and a pair of workrpan’s jeans and made personal forays into the junk yards and salvage depots of 10 large eastern cities, talking and occasionally dealing with the men who see the fruits of deliberate waste in its physical state—see it as lost labor and craftsmanship, rather than Continued on page 50

Continued from page 9

as soothing figures in a government report or as soothing words spoken by a politician.

One of my most interesting bouts with War Assets occurred not long before I left Research Enterprises. A foreman of the plant told me about a small lathe and drill press which were about to be turned over to War Assets for disposal. They would have been ideal for my basement workshop.

1 decided to try to Lmy them.

As a preliminary to making an official offer, I went to see Carson Smith, the War Assets representative at Research Enterprises. Mr. Smith said he had nothing to do with the allocation of tools, and advised me to write to R. Mosher, chief of War Assets’ machine tools and equipment section in Ottawa.

Mr. Mosher wrote back, saying that he had nothing to do with these particular tools either, and advised me to get in touch with Mr. Smith. So I got in touch with Mr. Smith again. This time Mr. Smith suggested I see a Mr. Hoar at the Toronto office of War Assets Corporation. I saw Mr. Hoar. Mr. Hoar said the Toronto office was only a branch office, and the man to talk to was Mr. Weese, at the head office in Montreal.

The next time I was in Montreal I went to see Mr. Weese. Mr. Weese wasn’t in, but one of his assistants in the Mechanical Division explained that the man to do business with was the representative of War Assets in the plant which actually held the tools.

That completed the third full lap, and I was back where I started, conferring with Mr. Smith.

I didn’t get the tools.

Since machine tools weren’t necessary to my livelihood, I could afford to chuckle—although not very boisterously. But in my wandferings through the administrative bog of War Assets I’ve run into a lot of people to whom the Corporation’s genius for impromptu snafus—as distinct from its formal or “policy” snafus—is anything but a subject for mirth. One of them is a Toronto war veteran named Douglas Harvey.

Harvey, a Navy man, built his personal rehabilitation plans around a small machine shop. Its specialty was going to be small metal products such as wheels and cogs for toys and photographic accessories.

Harvey was discharged in Halifax in August of 1945. On Sept. 2 he went to the head office of War Assets in Montreal to try to arrange for the purchase of the tools he’d be needing. He was received cordially and told to go to any war plant in his home town, Toronto, pick out the tools he wanted, and send their serial numbers to Montreal. The tools would be allotted to him as soon as they were declared surplus by the war plant; since all war plants were retrenching fast, he could hope for fairly quick action.

On Sept. 6, with the help of a cooperative official at the Small Arms plant in suburban Long Branch, Harvey selected the required equipment, plus three full alternative sets, and sent the serial numbers to Mont-

real, as he had been instructed to do. On Sept. 17 War Assets wrote him from Montreal that these particular tools had not yet been declared surplus. “But,” the Corporation promised, “we have made a note of your needs for future action.”

Three days later the helpful official Harvey had met at the Small Arms factory telephoned and told him that the tools Harvey had selected had just been declared surplus and consigned to War Assets for disposal. On the same day, Sept. 20, Harvey wrote the Corporation’s Montreal office, reminding it of his previous bid. There was no acknowledgment, but on Oct. 1 his acquaintance at the Small Arms factory phoned Harvey again and told him the tools he had ordered were being crated and shipped to another buyer.

Harvey phoned long-distance to the Corporation’s head office and extracted a promise from an official in the machine tools division to look into the matter and send him a reply by night letter. Two weeks passed. He received no night letter, nor any other form of communication.

On Oct. 17 Harvey wrote direct to Mr. Spratt, chief of the machine tools division. On Nov. 7 this letter was still unanswered, and he sent a wire. A week later Spratt wrote and explained laconically that the tools on which Harvey had made his bid 10 weeks earlier had been sold to a prior bidder.

“We will endeavor to check our inventory in regard to the availability of the machines you require and you may expect to hear from us shortly,” the letter concluded.

He never did hear from the Corporation again. In the meantime he had invested a substantial portion of his rehabilitation grant and savings in the rental and preparation of a building. His remaining capital had dwindled precariously, and he had missed his chance to hit the Christmas trade, so vital to a business of the type he had projected.

To restore his finances he went to work for a while as a clerk. Ultimately he got his shop going in March of this year, on borrowed capital and on tools he bought from a dealer. The tools cost him approximately three times as much as they’d have cost under War Assets’ secondhand price schedule.

The Corporation could have saved Harvey a lot of money and itself a lot of time by explaining its policy on machine tools to its own employees. The truth of the matter, although neither Harvey nor I knew it when we were conducting our separate negotiations, is that we didn’t have the right to bid on machine tools.

The rule is clearly stated in an official pamphlet entitled “Outline of the Policy and Methods of War Assets Corporation.” The pamphlet says: “Where the purchaser already has crown-owned tools or industrial equipment in his possession, he may deal direct with the Corporation when he wants those parts for his own use.”

With that exception, only tool manufacturers and tool dealers can bid direct for tools. This means that a soldier who has earned a dollar and a half a day through the war years, and comes home hoping to set up a machine shop, can buy government-owned equipment only from a middleman,

paying the middleman his profit, while the war-plant owner, who has already built a going business with government-owned tools paid for by the taxpayer, can buy those tools straight from the Federal wholesaler at a basic discount of 66%.

The general policy under which the Corporation operates was announced in October, 1944, by Reconstruction Minister C. D. Howe. Briefly, it is this: to sell all saleable surpluses at existing prices, but within the Prices Board ceilings; to control the flow of surpluses so that they would create the least possible disturbance to the normal economy of the nation; to reach the public by the shortest possible route; to keep out of unfair competition with established business; to seek expert advice from industry on price levels and marketing, “but not to act on such advice to the expense of public interest”; to keep out the speculator; “to recover for the taxpayers, the original investors in these goods, the largest possible cash return upon their investment without interfering with the eight other points mentioned.” These are direct quotes or close paraphrases from official literature.

Under the policy machine tools were only one of a department store catalogue of commodities that I had no right to buy from War Assets. I couldn’t buy a car from War Assets. The Corporation’s official literature explains why: “To prevent interfer-

ence with employment, the Corporation markets its goods through established trade channels in accordance with recognized business practice.”

This means that when one of the armed services is through with a vehicle that your money and mine paid for, War Assets sells it back to the original manufacturer or to a civilian dealer. The manufacturer or dealer ultimately resells the car or truck to an individual consumer.

The consumer pays the manufacturer or dealer two profits on the same vehicle, paying one profit as a member of the body politic and the other as an independent buyer. Under this system the Corporation has sold more than 15,000 new cars and trucks to dealers and manufacturers. On the average their cost to the Government was $2,012 and their selling price by the Corporation—brand-new and in a time of shortage—was $1,574.

The authority for these figures is the testimony before a parliamentary committee of J. H. Berry, the president of War Assets Corporation.

In one transaction the Corporation returned 84 new trucks to the Four Wheel Drive Company of Kitchener, Ont. The cost to the Government of the 84 trucks was $11,350 each. War Assets Corporation sold them back to the manufacturer for $4,801 each. The manufacturer channelled them back to priority consumers, to whom their price ranged from $6,800 to $7,200 each. I accept the Corporation’s statement that this is recognized business practice, but only with the reservation that it is not recognized by me.

The Corporation’s president has recently explained before two different parliamentary committees that it is impossible, because of the magnitude and diversity of its holdings, for the Corporation to sell as a retailer. Yet, over a period of 30 months, I tried, on the average once a week, to buy something or other from the Corporation, and not once was this interpretation of policy quoted to me. I was invited to believe that the sole reason I couldn’t buy was that the stuff I wanted was “not now available.”

About the time War Assets Corporation was discovering so many shortages among its surpluses, a parliamentary committee on War Expenditures and

Economies was beginning to discover how some of the shortages came about. The committee never did learn the full story, or the full cost, of the orgy of destruction that was conducted last year by the RCAF under authority of the Corporation. Neither the Air Force nor the Corporation took the trouble to keep records.

The verifiable facts, as they were admitted over a period of months by representatives of the War Assets and of the RCAF, are these:

Up to August, 1945, as a convenience to two large and busy organizations, it was the practice of the Air Force to carry out the physical destruction of what was described as “nonsaleable” surpluses which it had officially turned over to the Corporation. This was done at the Corporation’s request, and after it was done the resulting scrap metal was sold by the Corporation to junk dealers.

In theory that seems fair enough; in the liquidation of any war machine it’s inevitable that some machines and weapons will have no commercial value beyond the value of the raw materials that went into making them.

But in deciding what should be junked and what should not be junked, War Assets Corporation acted with a lordly profligacy for which I believe the annals of Canadiern commerce know no parallel.

A large proportion of the surpluses declared by the Air Force fell into the classification which the Air Force calls “surplus and repairable.” A more exact definition is almost impossible; the category covered everything from complete planes to claw hammers— used, worn and slightly damaged equipment of all kinds which the retrenching RCAF no longer needed itself but which could still be reconditioned.

War Assets recognized that what was superfluous to the RCAF was not necessarily superfluous to all branches of the national economy. On Feb. 15, 1945, the chief of War Assets’ aircraft division wrote the secretary of the Department of National Defense for Air and attempted to give him an all-embracing directive covering the disposal of repairable Air Force surpluses. This letter listed 49 specific types of equipment and ordered that the RCAF retain them “in their whole state”—that is, refrain from destroying them.

Immediately below this order for a limited amnesty, Corporation’s directive continued: “It is to be clearly

understood that all RCAF equipment not listed above and which is written off and placed in RCAF scrap bin is to be mutilated beyond possible repair. In this connection it is requested that instruction be given that mutilation must be carried out under the supervision of a competent officer or NCO.”

Under this clear-cut authority the Air Force, acting as War Assets’ agent, began destroying War Assets property at eight major disposal centres, in Vancouver, Calgary, Winnipeg, Trenton, St. Johns, Que., Scoudouc, N.B., Debert, N.S., and Penhold, Alta.

It lighted gigantic bonfires, some of which burned for weeks without interruption. LAC’s and AC2’s ran bulldozers over tiny mountains of instruments, and hacked at whole engines with hammers and crowbars.

Exactly what was the damage? No one knows. War Assets Corporation had taken delivery under blanket receipts, covering the type of equipment involved but not its quantity or its value. It took no inventory of the equipment before ordering its destruction. It made no check of the equipment’s precise nature or condition.

Under persistent pressure from the

parliamentary committee, the Air Force recently produced a partial list of the things its records indicated “may have been mutilated when repairable and surplus or entirely beyond repair.” The list covered only one of the eight major disposal centres—the one at Penhold—and covered only the type of article destroyed, not the quantity.

It included over 1,500 separate kinds of article—not 1,500 articles, remember, but 1,500 kinds of article, some of which went in job lots.

Here are some of the things that appeared on the list: medical equipment, gymnasium equipment, hairdressing and barbering equipment, laundry equipment, visual signalling and pigeon equipment (that’s only a beginning), oil and oil coolers, filters, strainers, stationery rubber stamps, carburetors, compressors, superchargers, armatures, distributors, condensors, magnetos, generators.

There were unspecified quantities of bellows, chisels, toolboxes, awls, calipers, clinometers, gauges, Hammers, soldering irons, pliers, tinsmith shears, bench vices, screw drivers, ammeters, fuses, inductors, magnets.

There were indicators (15 types), transmitters (three types), telechron motors (three types), microphones (four types). There were earphones and headphones and short-wave radio receivers.

There were tires (five types), foresters’ axes, woodcraft knives, windshield wipers, various types of aircraft and personnel dinghies, and airplane tents.

There were an unstated number of fish nets and one pair of snowshoes.

In fairness to War Assets I ought to add here that careless and casual though it was, the Corporation’s directive of Feb. 15 did forbid the mutilation of a number—though by no means all —of the items I have mentioned.

The Corporation didn’t get around to withdrawing the directive until Aug. 30. By then the Air Force had instructed its personnel to “refrain from the destruction of any surplus equipment” with or without the Corporation’s blessing.

How to Buy an Airplane

A merchandising agency that can afford to burn millions of dollars worth of property without even keeping books on it can’t exactly be expected to start rubbing its hands when a lone customer shows up waving a marked cheque for a few hundred. If I’d known a year ago what happened at Penhold, maybe I’d have given up then. As it was, I kept right on leaving my business card, and kept right on hoping that the Corporation wouldn’t be out to lunch forever.

I discovered that, technically, I did have some rights. According to its official folder, there were three things that War Assets would permit me, the consumer, to buy from myself, the taxpayer, without going through a middleman. I could buy a factory, a ship or an airplane. Under its general policy these are the only commodities that War Assets will sell direct to a private citizen or to a business that doesn’t qualify for a priority as a manufacturer or a dealer. The only major exceptions to this rule—in theory at least—are used and damaged goods which “cannot be disposed of through the usual channels of trade.” These are sometimes sold at public auctions, principally in rural districts and small towns.

In my scheme of things, a factory would have been cumbersome, and a ship would have been out of place. All right, I decided, I'll buy an airplane.

In the spring of 1944 I wrote War Assets, asking for a quotation on a Fleet Finch, a Tiger Moth, or some other light economical aircraft. H. M. Scott, general manager of the Corpora-

tion, wrote me in June from the head office in Montreal: “It has just been

decided as a matter of Government policy that the used planes being declared surplus are not satisfactory for civilian use and that, on account of the difficulty of obtaining type certificates, these planes should not be sold for private purposes.”

That same month War Assets sold 185 Fleet Finches to Charles H. Babb, a Glendale, Cal., aircraft broker, for $55,000—an average of $302 each— and Babb began arranging for their resale in North and South America. This raised two questions in my mind:

(1) Why were Canadian taxpayers denied the opportunity to bid on Canadian-owned planes before they were sold to an American broker at fire-sale prices?

(2) If it was impossible to obtain type certificates—that is, certificates of airworthiness—for the planes in Canada, how was it that they could be declared suitable for licensing elsewhere?

I put the second question to the Civil Aviation Division of the Department of Transport at Ottawa. The superintendent of air regulations replied: “It would appear that you have not been correctly informed regarding the circumstances under which certificates of airworthiness are issued by this department. The Fleet and Tiger Moth aircraft that were in general use by the RCAF are eligible for a certificate of airworthiness for general use (in Canada).

“These are surplus aircraft sold through the agency of the War Assets Corporation, Dominion Square Building, Montreal, and it is understood that the sale agreement does not guarantee that the aircraft are in an airworthy condition. The responsibility for the production of evidence as to the airworthiness of a particular aircraft will then rest with the purchaser, but, provided the RCAF will issue a certificate of serviceability, this department will consider the issue of a civil certificate of airworthiness.”

The smoke screen thrown up by War Assets Corporation was dissipated by the Department of Transport’s letter, but by then Fleet Finches had ceased to appear on the lists of aircraft surpluses.

I have no idea how much Charles Babb, the California broker, got for the 185 Finches he bought for $302 each. But I do know that in September, 1944, another American firm, Dayton Aircraft Exchange at Dayton, Ohio, was advertising nine used RCAF Fleet Finches for $1,950 each f.o.b. Moncton.

I came to the] conclusion that I might have better luck with the Corporation if I tried a more Olympian approach. I bought a brand-new typewriter ribbon and a quire of fancy stationery and set up a duly registered private company, Aero Research Associates.

As president, secretary and office boy of Aero Research Associates, I resumed my attempts to buy an airplane from my reluctant country. This time I shopped for a Fairchild Cornell, a heavier plane than the P'inch and the Tiger Moth, but a fast, acrobatic ship, not too expensive to fly.

I wrote War Assets repeatedly for lists of surplus planes, but no Cornells showed up for sale, either to me or to any other Canadian. Then, in

February, 1945, 53 Cornells belonging to the Canadian Mutual Aid administration were declared surplus at Reading, Pa. In the same month War Assets sold them to the same alert American broker, Mr. Babb. The deal was closed before Canadians who had been trying to buy Cornells knew of those particular planes’ existence.

Babb paid a better price for this batch—roughly $2,700 each. When I wrote and asked him to quote a price, he asked $4,500 in American funds, f.o.b. New York. After paying taxes and duties, the plane would have cost me at least $10,000 delivered in Canada, according to figures I obtained from Canadian Customs authorities.

A few months ago War Assets explained that at the time the Cornells were sold to Babb they were occupying American storage space and the American authorities were pressing for their removal. Nevertheless I still dispute that the transaction can be reconciled with the Corporation’s announced aims, “to reach the public by the shortest possible route”; “to keep out the speculator”; and to “recover for the taxpayers the largest possible return on their investment.”

Anyway, I didn’t buy an airplane. I did, however, buy two airplane engines—although not direct from War Assets.

The engines were Jacobs L4MB’s, the model used to power the Cessna Crane. On Sept. 19, 1945, in reply to my letters, War Assets offered me a choice of several used but airworthy engines at $750 and $1,000 each.

On Sept. 29 I found two used but undamaged Jacobs engines in a Toronto junk yard. The junk dealer told me War Assets had given them to him for nothing; he sold them to me for $20 each. Their RCAF logbooks were attached to the engines, so that I was able to make an accurate summary of their history and condition.

Seven weeks later, on Nov. 19, War Assets offered me a selection of “used and unairworthy” Jacobs engines for $250 each. Their logs were almost exact duplicates of the logs of the two engines I had bought for $20 each and a junk dealer had obtained for nothing.

The next time I was in Montreal I went around to the head office of

War Assets Corporation to see if the market in L4MB’s was showing any sign of getting a grip on itself. After introducing myself as a potential buyer, I was advised to write Standard Aero Engine of Winnipeg, the Canadian agent for Jacobs L4MB’s, to which War Assets had sold back a number of the engines.

On Dec. 19, in response to my enquiry, Standard Aero wrote me that it had a number of reconditioned engines for sale at approximately $1,500 each. The cost of reconditioning would run around $300 each, and I’m not suggesting that the Company was trying to claim anything more than a fair profit. But even allowing for the expense of major overhauls, I believe that when the same basic article sells for nothing on one price list, $250 on another, $750 to $1,000 on another and $1,500 on another, it’s not being very intelligently merchandised.

As I said earlier in this article, War Assets Corporation has the toughest selling job that any Canadian firm, private or public, has ever had to tackle. According to the latest statement its total sales already reach $150 millions. No one in authority has ever dared to guess the total volume of goods it will handle ultimately, but the materials declared surplus by the three armed services as of April of this year represented an original investment of more than one billion one hundred million dollars.

My criticism is not that War Assets’ admittedly monumental job isn’t being done perfectly. I simply maintain its policies are based on a false and negative philosophy, the philosophy of let’s get rid of it. Get rid of stocks, even though you have to burn them or sell them in haste for a fraction of what they might have brought. Get rid of customers, even if you have to smother them in red tape and deny the public treasury their sorely needed dollars.

I simply claim that War Assets has an insufficient respect for both commodities and clients, and that on those terms no merchant can succeed.

Editor’s note: A second article by

Messrs. Brown and Allen on the operatioris of War Assets Corporation will follow in the next issue of Maclean's.