Appendix — Ford Motor Co. v. United States

Supreme Court brief1972

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Text

Supréme Court, US.

FILED

APPENDIX. | \ sep 10 1971

a

~ | E: ROBERT SEAVER, CLERK,

‘ | = |

Suyreme Court at the Buited States

FERM, 1971

No. 70-113

* FORD MOTOR COMPANY, Appellant,

; vs.

UNITED STATES, ET AL.

APPEAL FROM THE UNITED STATES DISTRICT coy rT

FOR THE EASTERN DISTRICT OF MICHIG

GS | FILED APRIL 7, 1971, ®

PROBABLE JURISDICTION NOTED JUNE 7, 1971

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INDEX —

&

Complaint filed with the United States District Court

for the Eastern District of Michigan, November 27,

"Relevant Docket Entries .......- fo ae

1968 a

' Answer of Ford Motor Company, filed January 26, -

1962 een 12a

Excerpts from Transeript of Trial, commenced Jan-

uary 17, 1967

"Opening. Statement of Jerome G: Shapiro, Attorney |

for, Ford Motor Somes

-

Gecdrwieant witnesses |

Testimony of: ‘Harry F. Davis, Vice ‘President | in

2

_. Deatimony-of-Wilson “Brumback, Engineer in ‘the’

- spark plug. plant of the Prestolite Division of —

ELTRA Corporation located at Decatur, Alabama 40a

7 Ford witnesses. +.

Deposition of Robert H: Davies, Preakdiat of Elee:

tric Autolite Company 1959-1963, Alor of the

Board of ELTRA Corporation 1963-1964... 49a

Testimony of Bernarg A. Chapman, Executive 2 Viee :

_ President of American = Corporation 1960-

———

eal

1966. ....... 96a

: “Deposition of Earl Richard. Fiene, Vice President

and Director of Marketing, ciaecreee: Division of

‘“\ ELTRA Corporation ............-- 104a

Deposition of Arnold W. Hartig, Vice President at

Director of Purchasing, Chrysler Corporation ... 125a |

Deposition of John F. Karr, Manager, Distribution —

— eran. of8 Tire + Rubber Coaapany . coda Ate

5]

° =

: y v

- \ .

\ ‘ N\

l6a .

“mee Charge of Sales and General Sales Manager of =

[ _ Champion Spark Plug Company . sa 22a

uu 4

Testimony of John B. Hodges, Forward Marketing .

- Plans Manager, Ford Autolite Parts Division,

_ Ford Motor Company - 2 reseeee, 1398

~ Testimony of Irving A. Duffy, until 1966, Diesstor

and member of Executive Committee, Ford me

Company : i‘ .146a

Deposition of Charles E. Beck, President-and Chief

xecutive Officér of Ameriean Bosch Arma Cor-

_ poration, President and C Chief Executive Officer

a, of me Pieming Oe 1961-1964, Director of Busi-

, lanning Office of Ford“Motor Company

1958-1961... . 155a .

‘Deposition of James F. Peniaes; General Manager,

Home and Auto. . Supply Department, Firestone >

Tire & Rubber: Company . in 176a

Deposition of Harry J. N oznesky, President of

General Battery & Ceramic Corporation ............... 188a /

Deposition of’ George F. Krieger, President of ,

_Robert Bosch Corporation - 193a

Closing Argument of Jerome’G. Shapiro, Attorney

for Ford Motor Company .....«.... a 209a -

Closing Argument of William H. McManus, Adtor- _

ney, Deperkuent. of J ustice —_: | 21la

Exhibits Introduced at. Trial _ a

«GRA, Esaeistice of Facts pertaining to, Spark |

Plugs - 212a

Q-1, Agreement dated April 12, 1961 between 1 The a

Electric Autolite Company and Ford Motor Com-. |

j pele en AT

| @2, Purchase Parts Agreement dated April 12, 1961

between The Electric Autolite Company or and Ford

_ Motor Company ......4 : 278a

G3, Memorandum dated Sutamber 13, 1960 re

Spark Plug and Battery Operations . 2898

PAGE |.

ae PAGE

G- 5, Prescadstign-<<spociabed Products 5 Marketing

| Program—August 21, 1959 ....2 2060.

_ 6, “Memorandum dated October 1, 1959 | re Status - ,

of the Private Brands Parts ‘Marketing Program 315a

=_

G-7, Presentation to Marketing Committee, January -

15, 1960 ... , 393a

_ G8, Associated Products Marketing Report, July: 2

15, 1960 ......:. 7 3438

G-9, Memorandum dated December 1 1, 1960 re e Brand

Policy for Parts Sold by Ford Motor Coinpany .... (8598 *

G-12, Memorandum to geen of the Integration : _

Committee ; 365a *

G-14, Memorandum dated Apni 12, 1961 1 re Acquisi-

tion of Certain Assets of the Electric verona

Company. ae 392a

- G-19, Memorandum dated April: 20, 1961 re ‘Spark |

Plug and Battery Brand Policy .... 4044

-. ~@-23, Letter dated March 12, 1962. from J. 8. French ~~

ve, to I. A. Duffy . 4128

. G-26, Memorandum dated March 13; 1962 from E. RB.

Stroh to J. R. Frei een: ‘wecvecee 4158 ©

G-36, Autolite Advertisement, J July. 1962 . a 417a

G-39, Autolite Advertisement, October 1966 22.2... 4188 —

@-100. through G-117, G-137 ‘through’ G-153 and = 4

G-157 through G-159, Statistical Exhibits severeceseree 4238

F-36, Spark Plug Distribution Systems as of Decem- :

ber 31, 1966 4644

F-37, Domestic Automobiles—Branding of Original :

= Equipment Spark Plugs : ; = 460 -S.

- F-38, Brands of Spark Plugs Regularly Stocked by So

Metropolitan’ Area Service Stations, 1966 —....... 4600 |

F-39, Brands of Spark Plugs Stocked i in those Serv- ;

ice Stations ——— Autolite Spark Plugs ....,-.... - 46/0

2

he

~ : PAGE

| "#57, Estimated Share of Domnentio Spark Plug . .

Production by Brand Name “s 468a

58, A Comparison of Autolite’s Original: Bauip-

ment: Installation, Replacement.,and Originally _

_ Equipped U.LO. Shares -....... 469a

-F-60, Spark Plug Production by Brand, Selected. |

Years . 470a

F-61, Replacement Sales of Autolite Spark Plogs.... 47la

' F-70, Memorandum re Preliminary-Findings of the

Special Studies Group—O’Leary Corp. -..-------------- 4728

F-73, Memorandum re “irae Aemporation Field .

Trip , 482a ©

i = duetter dated October 27, 1960 from H.J. Nor-

to H. L. Kohlmeier ........°-.: : 490a

F-83, Letter dated March 24, 1961 from H. J..Noz-’

nesky to H. L. Kohlmeiér ae Levecinceee 4928 ||

F-85, Letter dated December 19, 1960 from W.Boe-* *

decker to L. H. Hyde ............. 493a.-

. Opinion of the District Court on the Macita, dated

_ June 7, 1968 .. : 49a

Final Judgment Proposed by Department of J eutien /: 572a. :

Final J udgment Proposed by Ford Motor Company .. 579a

_ Excerpts from Transcript of Hearing on Rélief, com. |

“menced January. 12, 1970

Opening Statement of William H. McManus, Attor-

ney;. —— of J ustice : . 585a

Government itetin’

Testimony of:H. Michael Mann, haste Professor

- of Economies at Boston College, Special Assist-

ant to the Assistant cnanianhs nai Antitrust" .

Division 1968-1969 - 588a .

Teena ieaiaeaeianaiaieT TR

*

ee.

ie Ford witnesses

Ogee

Testimony of Thomas C. sii General ania

Autolite Parts Division, Ford Motor Company .... Gye

Deposition of Earl Richard Fiene, Vice President —

and-Director of Marketing, —— Division of

ELTRA Corporation ...,...: 70,

‘Testimony. of Joseph T. Neill, General Guiiniiaie :

“Manager, General Parts eciitig Ford ‘Motor

Company . 77a |

_ Exhibits Intr8¥uced at Hearing on Relief zs | |

GRA, Champion Rate of Return on.Commonh Equity: 753a

FR-3, ’ Spark Plug, Service Parts and Battery Sales

. and bers of -Antolite Disfributors During.

. Threé” Periods of Progressive, —

Policies / T54a

_ FR-9B, Autolite jeivartinensent, Amauat 1969... _ T55e

. FR-10B,; Autolite Advertisement, September 1965 7568

‘FR-10D, Autolite Advertisement, 1966 .: 7579

FR-43, ELTRA’s Forecast of its Participation in

Estimated Private Brand Portion of Mass Mer-»

chandisers’ Share of -Replacement Spark Plug

Market by 1980: 3... 768a

° whet lige feta ier : ,

. PAGE -

-—FR-11, Replacement Sales of Autolite Spark Plugs 7580

_ FR-12, Timing of ‘Spark Plug. Pricing Actions ........ 7608 a2

FR-13, Spark Plug Historical Price Data sciatic 76la

FR-27, Type of Service Outlet Normally Used for ere

- Engine Tung-Up by Age of Vehicle ..., . 762a:

FR-40, U. 8." Replacement Market ‘Spark Plug ‘

Brands by: Manufacturer ........ 73a *

FR-41, U. S. Replacement Market Spark Plug Mar. ae

Ket, 1969 ance 7668

, FR-42, ELTRA’s Estimate of non-OE Bfand U. ne

Replacement Spark Plug Market : . T67a

' Final J whine of ‘the District Cont filed December a Te

. 35a

Order of the Siaion Court of the United States a

vi

_ PAGE

FRAG, ELTRA’s Forecast of its Participation i in |

- Estimated ‘Private Brand Portion of Oil Com-<

panies’ Share of AR Spark Plug Market.

by 1980 ..... \ —

Opinion of: the District Court on Relief, dated J uly 7, ~

1970 , é

770a

18, 1970

— ee jurisdiction, dated J une 7, 1971 .:... 794a bee

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Relevant Docket Entries

November 27, 1961 .

"January 26, 1962.

_ February 8, 1962

September 16, 1966

January 17 through

| -February 16, 1967

January 18, 1967 .

J auuary - aie

Februasy: 1 961 |

| | April 17 960

May 10, 1967

May 25-26, 1967:

Complaint filed ‘in’ United States —

District Court for the Eastern Dis-.

trict of Michigan —

Company _

_ Answer. of Defendant The Electric

Autolite Company:

Answer of Defendant Ford Motor

Stipulation of Facts Pertaining to .

Spark Plugs

“Frial before Chief Judge Freeman

Motion ‘of. ELTRA Corporation for: |

dismissal .

Plaintiff’s Memorandum in ‘Oppo-

-. gition to Defendant Electric Auto-

for Dismigsal fe |

Plaintiff's Su lementary Memo-

randum in Opposition to Defendant

lite/ELTRA Corporation’s Motion

ings“of Fact and Conclusions of ~~

- Law :

‘Comment of Defendant Ford Motor

_ Company on Plaintiff's Proposed —

Findings of Fact and Conclusions

of Law )

. Electric Autolite/ELTRA Corpo- °

- gation’s Motion for Dismissal

Plaintiff's and Defendant Ford

- Motor. Conipany’s Proposed Find-

Oral argument before Chief Judge,

Freeman .

2a

Relevant Docket. Entries -

June 10, 1967

September 19, 1969

October 20, 1969 ~

~

January 12.93, 1970

€

April 2,-1970

July 7, 1970

‘December 18, 1970

Y

February 16, A971 ~-Notice of Ford Motor Cena of |

Opinion of Chief Judge Freeman -

on the Merits

» Plaintitt's Proposed -Final Order

and Memorandum ‘in Support —

thereof.

’ Defendant Ford Motor Company’s |

Proposed Final Order and Memo-

~ randum in Support thereof _

Hearing ~ ‘on Relief. before Chief

Judge Freeman »

~- Oral Argument on. Relief before’

Chief Judge Freeman

“Opinion of Chief J udge Freeman

on. Relief

_ Final Suigusat of. us. District”

Court for the Eastern District of

Michigan

Appeal to ‘the Supreme Court of ©

_ the Reis States

6

eg le Be

po : =. ‘Complaint , * we

UNITED STATES DISTRICT COURT = oo

Eastern District or Micuican—Sovruern. Division — | :

Civil Action No. 21911

‘Filed: November 27, 1961.

: , . °

de ~* Urrep Scares oF AMERICA, | _

| ee - Plainttff,

vs | ) :

Forp Motor Company and

Tue Evecrric Autouite COMPANY, = _

Defendants. . -

sO | The United States of ‘America by its attorneys;-acting

_. under the direction of the Attorney General of the United =~

States, brings this civil action to obtain ‘equitable relief Se

against the above-named defendants and complains and al-

leges as follows a

Jonisp1cri08 AND VENUE ~ |

{The complaint is filed and this action is instituted »

‘against the defendants. under Section 15 of the Act of Com- .°

_ gress of October 15, 1914, c. 323, 38 Stat. 736, as amended,

- entitled “An Act to supplement existing laws against unlaw-

gu restraints and monopolies and for other purposes,” com- a

~ monly known. as the Clayton ‘Act, in order. to restrain the

-. continued violation by the defendants, as hereinafter al-

leged, of Section 7 of said Act, 38 Stat. 731, as amended by

the Act of,Congress of December 29, 1950, c. 1184, 64 Stat.

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os “Defendant Ford Motor Giastany ‘ainiatas offices,

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freniects business and is found within the Eastern Dis-

. trict of Michigan.”

3. Defendant The Electric Autolite Company transacts

, business andi is found within the Eastern District of Michi-

gan.

4, Fora Motor Company: hereinafter refer red +0. as

“Ford,” is nained a defendant herein. ‘Ford is ac rporation

organized and existing under the laws of the State of Dela-

ow are, with its principal office located in Dearborn, Michigan.

- The Electric Autolite Company, hereinafter 1 referred .

: ts as “Hlectric Autolite,” i is a corpora on organized and

existing under the laws of the State 0 Ohio, with its prin--

. eel office located i in Toledo, Ohio.

ro TRADE AND (CoMMERCE

6 Ford is primarily engaged in the ‘maftafacture per

sale. of passenger ' cars and trucks and related parts and

accessories. The company also manufactures tractors, farm.

- implements and related parts and accessories. In 1960 Ford

was the third largest industrial corporation in the United

States according to sales. “Ford’s sales for that year were

_ $5,237,899,262: its total assets as of December 31, 1960, were

7 $3,756,803,522. |

7. The production of automobiles represents one of the _

nation’s most highly concentrated major industries. In—

- 1960 the three largest automobile manufacturers accounted

for over 90 percent of total domestic automobile production.

During the first half of this year the two largest automobile

i asemahensiiaaah iu ( Ford. and General. Motors Corporation)

. 58

Complaint - :

accounted for over 80 percent of the nation’s automobile

"production. ¥or the-year 1960 Ford accounted for more than

28 percent of the total automobiles produced in this country. _

‘For the first six months of 1961 Ford’s share of the total

domestic production had increased to more than 30 percent.

-. 8 Ford. is the most-highly integrated of tle domestic.

. automobile manufacturers and produces substantial -por-

—~ tions of the steel, iron and glass required in its manufactur-

ing operations. In addition to manufacturing substarttial.

_ quantities of its basic raw material requirements, Ford also

manufactures a substantial portion of its requirements of

automotive electrical systems and components. For exam-

ple, Fordmanufactures. most of its réquirements. of ‘gen-

erators, starters and ignition coils, and the company also

manufactures a, substantial portion of its requirements of -

| instruments, voltage’ regulators and horns. However; Ford

has traditionally purchased its spark plugs and batteries

from independent companies. Champion Spark Plug Com- |

.° pany, hereinafter referred to as “Champion,” has for many

years supplied Ford’s spark, plug requireméits for original

installation and: for sales in the automobile repair and re- _

placement market, often referred to as the“‘after-market.”

throughout the United States through franchised car deal-

" /ers and through independent parts distributors and.jobliers.

9. Electric Autolite was, prior to the sale of certain

assets to Ford, hereingfter described-in more detail, one of

the nation’s largest non-integrated suppliers of automotive

parts and accessories. The company manufactured a full

line of automotive electrical products including batteries, ‘

generators, spark plugs, electrical motors, instruments and

ignition systems. The company has, for many years, been

. , ,

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4 Ford 'sells parts and accessories in interstate commerce |

. . -duction in 1960. ._ >

6a

4)

Complaint | —

a supplier of parts to automobile manufacturers for instal-

_ lation as original equipment in automobiles. In addition,

the company has for many years sold its products, including - ~

_ spark plugs, to automobile manufacturers, warehouse dis-—

tributors, and jobbers, under the well-known. trade name

“Autolite” for automobile repair and replacement purposes.

Electric Autolite’s salés in the automobile repair and re-

placement market (“after-market”), were made through an

experienced sales organization which distributed the com-

_ pany’s products in interstate commerce See the

_ United States. | |

10. The. manufacture of aperk lige was, prior to the

acquisition hereinafter more fully described, dominated by ©

_-two independent, non-integrated manufacturers, .Electric

Autolite and Champion, and one integrated automobile pro-.

ducer, General. Motors Corporation. These three companies

manufactured spark plugs for original installation and jor

-the automotive after-market. These three ‘co a

' * accounted: for more that 90 — of total domes gr

\

11. Independent non-integrated cr such as ‘ee

tric Autolite, although small in size compared to the inte-. .

grated automobile manufacturers, have played an important

‘role in the introduction of new products, the improvement

of technology, and the development of more efficient opera-

_ tions in the industry. These independent non-integrated

' companies act, to some extent, as. suppliers of original

equipment to automobile manufacturers. and, to a greater .

extent, as suppliers of parts for the after-market. 7

12. There are certain recognizable patterns in. . the dis-

tribution of spark plugs, other electrical system parts, and

autoniotive onc and accessories in: Senegel Direct sales

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Complaint

are usually made by the manufacturer to large automotive

- parts distributors, oil companies, ‘automobile manufactu-

- pers, tire manufacturers, chain stores and mail order

~ houses. The automotive parts distributors normaly resell

to jobbers who in turn sell to garages, gas. stations, auto-

"mobile parts stores and sometimes to car dealers. Thg oil

companies resell primarily to gas stationé. The tire manu- —

facturers resell to their own retail chain stores. The auto--.

mobile manufacturers, in addition to using the parts as

original equipment, resell to their dealers and also to job-

bers, who in turn sell to gas stations, garages, automobile

“parts stores and other car deglers. Ultimately, mail order _

houses, chain’ and independent automobile parts stores, __

«garages, gas stations, and car dealers compete inthe sale

“of parts to the automobile owners. \ oS .

13.. Prior tothe sale of certain assets to Ford, herein-

after described in.more detail, spark plugs and other elec- .

trical system parts manufactured by Electric Autolite were

sold in competition with similar products manufactured or -

distributed by Ford to jobbers, garages, car dealers, gas-

stations and automobile parts stores and truck and auto-

mobile fleets, as well as to car owners.

| Orrewses CHARGED

14.. Pursuant to an agreement entered into on April 12, |

| 1961, between Ford and Electrie Autolite, Ford sequired, -

- aniong other assets, the spark plug manufacturing facilities,

|‘ the ‘hattery plant at Owasso, Michigan, the tradé name

. , “Autolite,” and all of the customer lists and outstanding

} agreements with distributors and purchasers pertaining to

! the ‘acquired operations of Electric ‘Autolite. The effect of

the foregoing agreement may be substantially to lessen

4

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——— na 2 .

7

“Complaint”

eet s ‘eciuipatiiion of to tend to create a aubioaia) in - sialiiiiin of, . oy

Section 7 of the Clayton Act, among. other | ways, as follows? ~ 3 a

a. Competition generally in the manufacture, dis-

- ‘tribution and sale of automotive ae may be +

a substantially lessened; ee

Sts. 58 aie b. " Concentration in. the ee distribution of

and: gale of automotive’ parts has been substantially

increased to the detriment of acta and eine

iit ‘competition; ase : a

a - @ Actual and potential competition “between _ vel

_ | [°° Ford and Electric Autolite in the manufacture, dis- *

ae tribution and sale of automotive parts hag been ~~

re eliminated ; 3 pI,

-d. Electric “Autolite has pains eliminated as an.

. . important competitive factor in the manufacture,

a distribution and sale of automotive parts-to the -

a OT Rte detriment of actual aid potential competition; - |

3 . e. Ford’s advantage’ over its competitors in thé

- _. manufacture and sale of automotive parts maybe ,

| ) _ enhanced to the detriment, of actual and B eter

eee Aik Seas . a

rf;

: Rie Competition generally i in the raniafacture, dis-

re ce ge sition and sale of automotive electrical perts and |

’ Se components may be substantially lessened ; ig ;

ge Concentration in the produétién, distribution: es

and sale ‘of automotive electri¢al parts and com- | |

ponents has been - substantially increased to the a

detriment of actual’ and potential: competition ; ae

pa. Sf | Pre ae Actual and potential: competition elivcen me

Seer te Foftl and Electric Autolite in the eaenare, aie

9

perenne pent . verre annie anes oo raat tad i ~ noe amma - ; ne

ai

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tribution and sale of automotive electrical partsand =

componentg-ias. been. eliminated ; ea, : : | is

“i, Bleetric Autolite: has been eliminated as an

_ important competitive factor. in the manufacture,

- distribution and sale of automotive electrical parts }

-

id

and components to the detriment of actual and poten- — Ps

. tial competition; - my ig Te ee

_ 3, ‘Ford's advantage over its competitors it the

“manufacture and sale of automotive glectrical parts

- and components may be enhanced.to the detrimeht .

of actual and potential competition; — : ;

k. Competition generally. in the manufacture,

.. distribution: and gale of spark plugs’ both for use in

original equipment, and for réplacement purposes :

7 may be substantially lessened; it are

1. Concentration in the mariufacture, distribution —

. and sale of spark plugs both for use in original °

- equipment and Jor replacement purposes has been -

. gubstantially increased to the detriment of actual and |

potential competition ; ve agers

Ae

mi. «Actual ‘and potential. competition between — )

Ford and Electric Autolite in the. manufacture,

'. distribution and sale of spark plugs both for use in’ -

original equipment and for replacemerit purposes s

has been eliminated; Ses ee ies ee ie

ik, -Eléetrie Autolite has been éliminated as an -

ee important competitive factor in the man ct r jee

~ . distribution and sale of spark plugs both for*ssé, in.

_~ °° original egaipment and for replacement purposes to

. . the detrinient of actual and potential petition;

° 4.

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‘Complaint ,

oO. ‘Ford's fa cuntngtitive pdvamkage t over its competi-

‘tors -in the manufacture, distribution and sale of

spark plugs both for use in original equipment and

for replacement purposes may be enhanced to the

_ detriment of actual and potential competition ;

p.. A substantial share of the automobile original °

“ “equipment ‘markets for spark plugs ‘and batteries

have been foreclosed to independent suppliers of

these products to-the detriment of actual and poten-

tial competition ; _ _

i. The Ford dealer on ad. a ap- |

proximately 8,000, has been foreclosed to independ-

‘ent suppliers of spark -plugs, batteries and other

automotive parts as ‘possible outlets for their

_ products : to ‘the detriment of actual and“Potentiet

competition ; - om

'.r Ford’s navlatene over. its smaller semnetitnrs

in the manufacture, distribution and sale of. auto- —

mobiles may be ‘enhanced ‘to the. detfim ent of actual

ar and potential competition ;

> 8. Mergers and - ‘ aequisitions involving other

- manufacturers of automobiles,- parts or related. _

Oo

accessories may be fostered to the detriment of actual. 3

and potential competition in ‘the manufacture, dis-

* es and sale of such acon

Wuererore, plaintiff prays ;

i i ‘That the acquisition described in “paragraph 14 of .

this: Complaint be adjudged a violation of Section 7 of the , |

— Aot.2

Complaint

2. That under such terms and conditions as the Court

may prescribe defendant Ford be required to divest itself . _

of the unlawfully acquired assets of Electric Autolite

including specifically the trade name “Autolite.” ae? “

, 3. That-the plaintiff have such other and further relief Ne

as the nature of the case may require and the Court may.

_ deem just and proper... .

4: That the plaintiff recover the cost. of aii action.

~

SS Rosmr Fy Kewmipr oo

. -Rebert F. Kennédy ~. -_* et: —S

oy Attorney General -_ oe

“Wituam C. McPrke

_ William C. MePike

Leg Lorvinerr © - :

a ~ Lee Loevinger -*. og

Assistant Attorney General |

‘Arthur H. Kahn

ttorneys, as

Department of Justice © |

Laney L. Wriums ) a

Larry L. Williams =| oy 4a

- Attorney,. © Set 4. 4 ae

_ Department of Justice -_

, Run ee: Pd

Lawrence Gubow

United StatesAttormey = ti

12a

| Answer, | .

‘UNITED STATES DISTRICT couRT

a Eastern District oF MicHIGaN ,

SouTHERN Division

Civil Action No. 21911.

¢ . . .

. Unrrep Starss or America,

: . 7 . 7 .

Plaintiff, ~

v. ey

Forp Méror Company and ‘Tae Hurcrric Autourn

Company,

| ‘Defendants.

a >

Forp Moror Company, by its counsel, “answer's - the cont: |

plaint herein as follows :.

1.’ Denies each and ever? allegation contained i in para-

graph 1 of the complaint, except that it admits that this

action purports to have been instituted under Section 15

of the Clayton Act, ¢..323, 38 Stat. 736, as ‘amended..

2. Admits each and avery allegation eoatained 4 in para

graph 2 of the complaint.

| & States that it is without knowledge or information :

sufficient to form a belief as to the truth of the allegations

contained in paragraph 3 of the complaint. .-

. 4. Admits each and every allegation contained i in para-

graph 4 of fhe complaint. . |

13a ¢

| ‘Answer

5. States that it is without knowledge - or information

sufficient to form a belief as to the.truth of the allegations

contained : in paragraph 5 of the complaint. -

6. Admits each and every allegation contained in para-

graph 6 of the complaint, except that it states that it is

without knowledge ‘or’ information sufficient to form a |

belief as to the truth of the allegation’ that in 1960 Ford

Motor Company (“Ford”) was the third largest industrial

corporation in the United States decording to sales, and ex-

_eept that it denies that Ford’s sales for, 1960 were

$5,237,899,262 and that Ford's: assets as of December 31,

° 1960, were $3,756,803,522, and admits and avers that under

Ford’s principles of:consolidation of accounts in effect on

December 31, 1960, the sales of Ford and consolidated sub-

sidiaries for the year 1960 were $5,237,889,262 and the as-

sets of Ford and consolidated subsidiaries as of December

31, 1960, .were $3,756,803, 522.

7. Admits each and every allegation contained i in para-

graph 7 of the complaint, except that it denies that the pro-

‘duction of automobiles represents one of the nation’s most —

highly concentrated major industries... . |

8. Admits each and every ‘allegation contained in para-

graph 8 of the complaint, except that it denies \that Ford .

manufactures any of its basic raw material requirement,

that Ford is the most highly integrated of the| domestic _

automobile manufacturers and that Ford traditionally has

purchased: its spark plugs and batteries from independent _

companies, and. except that it admits and avers that Ford .

has purchased spark plugs and batteries from independent _

companies, and that Ford also sells parts and accessories

directly to the United.States Government.

da

a4 —_ Answer

9, Denies each and every allegation contained in para- |

rraph 9 of the complagt, except that it admits and avers

_ that The Electric Autolite Company (“Hlectric Autolite”)

has been a supplier of parts to some automobile manufac- e

turers for installation as original equipment in automobiles, |

that Electric Autolite sold its products, including, spark

plugs, to automobile manufacturers, warehouse distribu-

tors, and jobbers under the trade name. “Autolite” for

automobile repair and replacement purposes, and that Elec-

tric Autolite’s sales in the automobile_repair and replace-.

ment market were made thropgh a sales organization which

distributed the company’s prodosta in: interstate commerce

in the United States. ; | )

10. Admits each and every allegation otintained in para-

graph 10 of the. complaint, except that it denies that Elec-

tric Autolite in any way dominated the manufacture. of -

| spark plugs, and except that it states that it is without . -

_ ‘knowledge or information sufficient to form a belief as to

_ the truth of the allegation that Electric Autolite, Champion

- Spark Plug Company and General Motors Corporation, to-

gether, accounted for more than 90 percent of wotal domes-

tic spark plug production in 1960.° —

11. Denies each and every allegation contained in para- |

graph, 11 of the complaint._ .

12. Denies each and every allegation contained i in para-

graph 12 of the complaint, except that it admits that there’

are many channels of distribution for automotive parts and

_ accessories. 7

13. Denies each ond every elleeation 0 contained in a. pare.

graph 13 of the complaint.

14. Denies each and every allegation contained in para-

graph 14 of the complaint,. except that it admits that pur-

-

Dated: * January 25, 1962.

Answer

a

“suant to an secomanl dated April 12, 1961, between Ford

and Electric Autolite, Ford nequired certain assets from

Electric Autolite, principally a spark plug manufacturing —

facility at Fostoria, Ohio, a battery plant at Owosso,

Michigan, the trade name “Autolite,” customer lists per-

taining to’the ac equired operations of Plectric Autolite and

cértain agreements between Electrie Autolite and certain

parties pertaining to the acquired operations of — |

Autolite. ar

Wales defendant Ford Motor Company dementia

judgment against plaintiff herein dismissing the complaint

as to it with costs and disbursements and for such other

and further relief as-to the court may seem just and proper.

" Witaaam T. GossetTr —

Attorney for Defendant

_ Ford Motor Company:

' The American Road

Dearborn, Michigan

/s/ Writs T. Goseerr

Of Counsel. | | 7 |

Grorar E. Brayp

Grorcr E. Brann, Je.

3709-23 Cadillac Tower |

_ Detroit, Michigan

L. Homer SuRBeck

JEROME G, SHAPIRO

‘1 Wall Street

‘New York, New York

RicnarpB.DarnacH © -

The American Road

- Dearborn, Michigan

16a

+ Opening Statement of Jaaue G. Shapiro, Attorney ;

for Ford Motor Company . |

aio ie eae

a Rpt eyes

(40) Now this is an unusual condition, but it is oxpli-

- gable and oxiate bocause of the economics, the business -

dynamics, of the spark plug industry. Thoro has nover — -

“been, your Honor, more than ono ‘major supplier for cach

*major make of vehiclosa—major vehicle manufacturer.

This phenomenon results from a couple of interrelated

factors. In the firat place, it is the consequonce-of the

technology of the spark plug industry. A. spark plug

must be qualified by a vehicle maker before it- achieves

> the status of recognition that it needs in order to be offec-

tive as a component and to attain status in tho: market

place after the vehicle has left the: dealership. _

The Court: Is that the reason that tho after-

market in agers plugs follows the original equip-

ment?

Mr. Shapiro: Yes, your Hones ; that is one of

tho reasons, And the technological reason is prob-

ably complicated for someone who indorsed it,

but for me it’s fairly simple, and that is that every

engine has a heat range, and in order ’ for a spark

plug to function properly [41] in that engine, it has

to have an appropriate heat range for that purpose,

because #f the spark plug burns too hot, it may pre-

ignite, and if it pre-ignites, it will harm the engine

seriously. If it burns too cold, it won’t burn out or

burn off the accumulating residues and the tip will

foul and will not function properly. So that the

spark plug has to be attuned, froma heat range

standpoint, to the particular engine in = it is.

——— tofunction. _— - oN

A>

¥

17a

Opening . Statement of jens G. Shapirs:

Attorney for Ford Motor Company

Now, it is in part because of this heat range problem, _

* because it is pr@@ont for the mechanic installing a spark

plig. at the retail level, it’ is prudent for him to install

the spark plug which bears the same brand and which.

is of. the same typo as the spark plug that was placed in

the vehicle as original equipment, because the chances are

it will function better. But in addition to that, the

mechanic, as a human animal, wishes tq avoid unjustified

criticism. Sometimes if an engine malfunctions, the owner

might take the vehicle into another service station than

the one that installed the spark plugs during a tune-up,

and the mechanic will look under the hood and he'll see

spark plugs that are not original equipment ones, and

ho’ll say, ‘Well, of course your engine is malfunctioning.

- Who-put that set of spark plugs in your car, It’s the wrong

sot of spark: plugs,’’ So the mechanic, in order to tore-

stall and avoid that kind of situation, fegls perfectly safe

and [42] customarily does install the same brand and type

as was originally in the engine. And that mattef is not -

in dispute here. Your Honor heard this morning Mr. —

The Court:. No; I understand you agree on that. :

Mr. en “Yes, we agree on that. .

e ad . an i

[55] — Honor, in this case, for the Government to -

prpve ‘that Ford Motor Company would have entered the

market by internal growth, and that Chrysler would not,

isinsurmountable.

There -are three reasons for that. In the first place,

Ford Motor Company knew, as did everyone else in the _

sparkplug industry, that if Ford Motor Company con-: |

structed its own spark plug facility, the spark plug indus-

18a

Opéning Statement of jena G. pidpiro,

Attorney for Ford Motor Company

try would have been i in a condition of over-capacity to the ~

_ extent of the Fostoria production in excess of what could

[56] 7 be = ofa —— without major

On status.

- That concept, that fact, that jobeal growth call have

created vast over-production in the industry, with attend-

ant effects on the pfarket, would have deen a substantial

deterrent to Ford Motor Company in any consideration of

ewhether to enter or whetlier not. -

Secondly, if Ford Motor Company were on the verge

of constructing its own spark plug facility, its supplier,

-Champion, would have known this. And Champion would

then have had a very strong incentive ® come to Ford

and offer it economic incentives that were: unrejectable.

Third, Ford Motor Company knew that it would take

_ years before it could develop a technological position in -

the spark plug industry equal to Champion and that,

having done ‘so, it would take additional years.to build up

- an after-market expectation by installation of original

‘equipment spark plugs under a Ford-owned trade-mark

that would result in a volume that would maze the busi-

‘ness profitable. re

[57] So Ford had the prospect, your Honor, if it wenk

in by internal growth, of an industry of overcapacity, of a

tremendous ‘time lag before it could have a profitable

operation—and. I’m talking about years—as well as the

countervailing, balancing situation of ‘an offer by Cham-

pion of unrejectable economic incentives.

a. ©, @. @ ° en

[59] Your Honor, the in is precisely on the other

toot. “Champion is more dependent on Chrysler now that

Chryslér is the oily major OE potential for Champion

i:

i

:.

i

;

i

;

Ford.

198

Opening Statement of Jerome G. Shastri,

reaidaed for Ford Motor Compayy

[60] than ever it was before. Ghaeeton sold opiack plugs |

- for replacement purposes to Ford at a price higher than

Champion is now éelling replacement spark plugs to ©

_ Chrysler. That was a bargain that Chrysler exacted and

that Champion accepted after — had — the .

_ sole independent.

Secondly, Ford Motor Cheaply had. siuacinal Cham-

ae to’ supply it with private label spark plugs and

Champion had.refused. Champion is now supplying Chrys- ~

ler with MoPar spark plugs, private label spark plugs, 25

per cent of their ——* which they did not do for.

os e* «* .¢ .

[86] Your Honor, I am talking about wine map

_tive advantage rather than economic benefit. Ford Motor -

‘Company paid a price for the Autolite trademark. It

paid a handsome price and it was getting something for

. it. We. are not denying that, your Honor. Ford ‘Motor |

_ Company bought an asset, an intangible asset, to be ‘suré,

_ buta valuable ca ‘asset. It ‘paid money ‘for it.

But, your Honor, this did not give ‘Ford Motor Com- -

- pany a decisive advantage in. selling Ford parts in the

after-market. -

Now, in connection with selling all-make’ parts in the

aftér-market, you may get a little. more demonstration of

what: kind of advantage or non-advantage Ford is getting.

Ford tag been selling a» all-make line) or, at least offer-

ing—I must qualify it by saying offering\an all-make line ~

in the after-market under the Autolite trade-mark. Year —

after year, Ford Motor Company sales have ~ exceeded

one milion dollars in the all-make line under e Autolite

trade-rhark. And they have been — it; they ave been

offering it. wis 4 ae \

Me

Opening Statement of Jerome G. Shapiro,

| Attorney for Ford Motor Company

“rf 8 Saek Honor, an cniipiaition: of the history of General

' / Motovs in thé all-make after-market gives you an insight

as to what Ford can expect. General. Motors had not until

°1959 been in. the after-market with £87] an all-make line.

They first started in 1959. - °° es

Now, when General Motors started, they started with

Delco, which was a name that I think on any comparison, _

is a better name or 4 name. that was more accepted. i in the,

after-market‘than Autolite, if only’ for the reason that

General Motors had fifty percent or more of the cars: on

the road. Delco had’ been original equipment on General |

Motors for.years and was very well known in the trade, °

had been very well supported in the: after-market. N ot

only that, but General Motors started with a distribution ©

' system ‘that cotisisted, among other things, of 26. ware-

houses; so that General Motors did not have to go through ©

the AEA, did not. have to go through a warehouse distrib-

utor which was independently owned and which handled

other lines. General Motors was able to sell directly to

the jobber out of its own warehouses, which is called the.

_ two-step system. General Motors was in a the after-market :

with that. — :

‘ So, it had its name; it hail its distribution syetem, pa

. in wddition to that, General: Motors obtained: practically -

~ an exclusive position in what is known as the TBA. Fire-

stone, Goodyear, they had the General Motors line of parts, ©

and all service stations—there are 350,000 service sta-

yO tioris—all the service stations that go to jobbers for their

parts, were exposed not only to [88] the régular jobbers,

tht also to these TBA sellers and the TBA line of distri-

‘bution through the tire companies and the oil companies ,

and General Motors had that position almost to the oneiee

sion n of everybody else.

€

8 Opening Statement of Jorinéi G. Shapiro, . irk te

_ Attorney for Ford Motor. Company OOS

And y et, your Honor, the wie will show that ied =

‘Motors’ ‘sales of - all-make parts have remained relatively wee

small, compared to its. Delco-Remy original ae

replacement business.

So, if General. Motors has not ft been’ able to ae it in that

__ five years or six years with the starting point that it had,

‘ to be sure Ford Motor Company will not be able to gain |

a decisive advantage in that all-make after-miarket on the

basis’ of anything that it acquired from Electric Autolite. eae

That is all we are’saying.

é of

We are not deprecating the assets, acquired.” We are’

not saying that value was not received. ‘What we are say- -

ing, your Honor, is-that from an antitrust standpoint, |

from a Section 7 standpoint, it is not benefit but decisive ‘

advantage that we are talking about and Ford Motor.

Company has obtained no decisive. advantage i in any respect

from ‘anything that it purchased from Electric Autolite.

* .@ * -* e

om

Testimony of Harry F. Davie, Vies President in charge of

* sales and General Sales Manager of Champion

; _ DIRECT/ EXAMINATION |

“« . . °

. *

* peoey Q. Now, do you make one or more—do you make

one or more spark plugs, one or more different types of

spark plugs each year?. A. Yes. We make in the area of

about 300 different types. — =

_ Q. And why do‘ you make these various types? A. Be-

cause of the requirements of the specific engines they are ,

‘manufactured’ for, we tailor oo plugs to each individual . |

., type of engine.. 4

- » Q. So that a spark plas for a ‘Cade might not fit :

on a spark plug for a Ford; is that it?. A. That is correct.

- Q. And this would even be true among different: Ford.

vehicles? | A. That’ 's correct. Variots engines that per-- |}.

tain to Ford, ‘models would ‘require possibly a different type

Rene of spark plug. : : .

os The ‘Court: What modifications do you have to ran

m2 make in ‘spark plugs to accommodate the require- | :

opto various engines? Could = — tell

me ge y without— tie

A. (Interposing) Well, as Mr, Shapird 8 said in his open-

ing statement, the engine has. given requirements, and the =

‘thing that you must worry about ‘in theespark plug. is the |

pre-ignition range, the range ~where the spark plug would .

get too hot, or the fouling range, the area in which the +

- spark plug would get too cold. They vary from about . — |

* [693] 700 degrees, normally, as the fouling point. If the - |

plug runs below that you will pick up a lot of carbonaceous

deposits and you will get‘a skip at low speed. Conversely, ~

if your plug runs ‘beyond 1800" eee in the arins. tips,

ei

Set Poe wt as ea hi dt OR BO Nie nT Oa te

-

.

e e a e

| ei arry F, Davis—Direct Esamination

and the siedveies get hot and they pre-fire the mixture,

then you are in pre- ignition and this is a very destructive

position, 80 you must tailor that spark plug for that specific

engine so that it will operate normally Between a Tange

of ‘700 degrees low and 1800 degrees high, ._ oe ,

Q. (By Mr. McManus) Who are the major manufac-

turers of spark plugs i in the United States? A.. Currently,

there is Champion, of course;.A-C which is a *Division of

General Motors, and Autolite, which is Ford. They are -_

principals.: There are many others but—

Q. (Interposing) Would you tell us some of the others

that you can call-to mind? A. Well, you have Prestolite,

which is the present Eltra Division." You have General

Battery and Ceramic, who make many private brands.

And they are about, fundamentally, the major ones. You

‘have Zeller Corporation in es. but they, too, are

- private brand manufacturers.

_ Q. Now, I think the, tecord shows that for a period of |

_-years, quite a number of years prior to April, 1951, at least,

- you were a supplier of ‘spark plugs to the Ford Motor

Company ; ; is that correct? |

* [694]- The Court: Did you say ‘ape

_ A. (Interposing) ’61. | |

~ Mr, MeManis: Excuse me. April, 61.

> A. 61,

‘The Court: I thonehd you said ’51. _

Mr. McManus: I must haye “‘mnisspoke, your .

‘Honor. I meant to say ‘61. ;

.-The Court: You meant "61.

Q. (By Mr. MeManns) Is that correct _& That is %

~ correct.

24a ;

£7,

Harry F. ‘Davis—Direct Examination

- The Court: ‘Benes 3 me. What was your question _

gave again? :

Mr. McManus: Maybe I will .ask the question

Q. (By Mr. McManus, continuing) I think the record

shows and could.you tell me if it is true that prior, at least,

to April, 1961, you were supplying spark plugs ¢ to the Ford

Motor Company? A. That’s correct. °

Q. Now, could .yon. tell ‘me what were your contractual |

‘relations with the Ford Motor Company in supplying. these

plugs? A. Well, it was actually a contract that recreated

itself every year. We had to negotiate a separate contract

each year. But, excluding the possibility of a‘price change,

either up or down, we would just automatically continue

[695] to do.business with Ford at the stipulated prices.

Q. Were -you ever aware, or were you ever informed by’:

’ Ford officials that any other spark plug manufacturer was

_ attempting to acquire this business? A. Yes, sir, There

were numerous. qccasions, oh, a few years preceding 1961,

where we knew that Electric Autolite _Company was very

seriously trying to obtain the Ford ‘waniaian, the Ford

_ spark plug business.

Q. Are you presently a supplier of alk plugs to the |

Ford Motor Company, i in the United pment. A. No. No,

sir. :

Q. Approximately when did this, your sales to Ford, -

ceaset A. We stopped shipment of service plugs, those

* that they resell, immediately when they informed us of their:

purchase of the Autolite Company, and we agreed, in the

interests of keeping their production lines going, that we

_ would provide them with ‘original equipment plugs for an

additional two months. So that I would say—that was

April—May,. June, about July was the termination of our

dealing with Ford in the United States.

. e . oe .

. .

= . + ; i : .

_ Ba

, Harry F. Davis—Direct Examination

Q. That would.be July of 19611 A, That’s correct.

— Q. When and how were you informed of Ford’s acquisi-

tion’ of the Autolite spark. plugt_ A. Their purchasing

people called us and told us that. they [696] had acquired

the Autolite Company. a a

Q. This was before ar after: the acquisition? A. This

was immediately after the acquisition. We had no knowl-

edge of it prior to.then.- °° oar 5 |

- Q Now, at the time of the acquisition, were you selling ©

_ spark plugs to Ford abroad? A. Yes, sir. ae

- Q. And where was that? cA. We were selling them in’

: England; we were selling them in Canada; we were selling

them in Mexico; we were selling them in Brazil. -

Q. Are you still selling-—

The Court: (Interposing) Are you saying tha

- was before? . SO |

A. That was before, your Honor.

The Court: But to Ford?

A. ToFord;yes,sir, | .

Q. (By Mr. McManus) Are you still selling spark plugs -

_ abroad to Ford Motor Company? A. We have two areas

left. We are no longer. in Canada, we are no longer-in

England. But we still do provide some spark plugs for

them in Brazil and Mexico. \ :

Q. Now, in Brazil and’ Mexico, are those automobiles

_manufactured there? A. They are manufactured there, and

* the provisions of the

» e

[697] The Court: You're saying, then, all of the

-plugs that you sell to Ford in those two countries are ~

used in cars that are built in those countries? _

- A, Manufactured in those countries, yes, sir.

®

salam na etter nih i os | a

¢

Harry F. Davis—Direct Examination

- Q. (By Mr. McManus) Now, do you make spark plugs

_ for all American automobiles—for_use in all American —

automobiles? A. Yes, sir. NP

Q. Now, is it necessary for you, when a new model comes

out, for you to qualify your spark plug on'that new model?

A. We must. | a

Q. Now— a : = 4% ¢

The Court: How do you go about to do that!

_ Mr. McManus: I was goihg—

The Court: Qh. “ x 3

Mr. McManus: Go right ahead, your Honor.

A. Well, it’s rather difficult in our position, being the

— lone independent in the business, because we have no access

to Ford’s engineering nor do we have to General ‘Motors’

engineering, and consequently, we have to wait until they ’ve

actually produced the car. Then we scurry out and’ buy

one of each model, take it into our own laboratory and

determine what Champion plug shall fit that particular

engine; and many times we don’t agree with those that they

put in originally. We believe that we can design a plug

that will fit the engine sometimes better [698] than the

original equipment plug. | ,

The Court:, You’re not given specifications for

the plugs in ‘advance by the automobile. manufac-

turer? | 7 :

A. Not at all, sir.

The Court: You, develop that yourselves 7

_ A. We develop that ourselves. |

Q. (By Mr. McManus) Now, at the present time-are you

selling plugs to any automobile manufacturer? A. We sell ©.

currently to Chrysler and to American Motors Corporation.

se

, .

27a

Harry F.-Davis—Direct Examination a

' Q. Now, in regard to, say, Chrysler, for example, do you

obtain any advance information on their new models!

A. Very definitely, yes. eo. feat ae

Q: Could you explain generally how that comes about?

A. Well, normally a new engine that’s used .is engineered

probably two to three years before its actual introduction

into the vehicle, and consequently, we work with them and

help them develop the plug that is suited for that particular

engine, and in the case of Chrysler, we have advance knowl.

edge of what their engines require. But in the case of Ford. —

and GM, we don’t until we get the actual vehicle, where we

can get the engine and tailor our plug for it then. |

- Q. Now, at the time that you were selling to. Ford, did

you get this same type of advance information? A. Very

definitely. ‘We. helped them develop plugs for new [699]

engines that wouldn’t. make their appearance in a vehicle

for a couple years. “ “ar

Q. Now, when this information was given to you, was it

for general circulation or was it considered confidential

information? A. Very definitely confidential.

Q. Did they so inform you? A. Yes. : |

_ Q. Is this also true in regard to your arrangements, with

Chrysler and American Motors? A. Very definitely.

. \ Q. Since 1961, are you aware of the use of Champion

spark plugs in any racing cars built by the Ford Motor .

Company? A. Yes, but I must qualify that. Those in

which they have no financial interest, we have been very —

successful in having Champion spark. plugs installed and .

used. But in the racing business today, they do have con-

tractual arrangements with certain drivers, and part of the |

- contractual arrangement is that they must of necessity use

the Autolite plug. | ips Tet Le,

Q.-Have Champion plugs ever been used in any of the .

General Motors cars that were used for racing? A. Oh,

ee ee

28a

: ’ Harry F. Davis—Direct Examination

| 5 very, , definitely. We had a very pleasant experitiffe i in that —

| - area, because at the a races—let nie go back a

minute. ° : ty

‘The fact that Mr. Shapiro brought out in his [700]

| original statement’ here, that OEM influences after-

\_ market, we were very cognizant of that, and knowing

that the vast percentage or the fact that GM repre-

‘sented the vast percentage of the cars that made up

the American market, and the fact. that all of those

were constantly using AC plugs as original equip-

ment, we had to find a way to combat that. So we

went racing, if you.want to use the word, and for-

tunately the people that raced the General Motors

| products invariably felt that our product would

‘operate better, and consequently they used them and

we publicized that fact so we could persuade the con- ©

sumer that it was perfectly safe and, in -fact, desir-

able to use a Champion spark plug in ‘a General |

Motors product.

. Q. Now, do you know’ that actually your douse plugs in’.

: which you are original équipment supplier to Chrysler, are |

_ your spark plugs also used in General Motors- and Ford

automobiles by the ordinary individual? A. Oh, yes. We

predominate: the market, and consequently we have to sell

in great numbers to General Motors and Ford owners to

. Maintain our position of dominance. :

Q. Now, other than sales to original sjuipmneng manufac:

turers, what other channels of distribution does your com-

pany use? <A. Well, basically the greatest single ‘outlet

we have are the hard parts distributors and/ jobbers who -

_ buy from the warehouse distributors. Then we have the

major oil companies [701] and we have the rubber com-

panies. bas re very — to the Electric a

"298.

Harry F. Davis—Direct Examination

o

Battery people in the type of markets that we sell our

product through.

Q. Now, you talked ‘about warehouse disttibutors? Did 7 .

you mention those? A. ‘Yes.

Q. Does the quality of -warehouse distributors in this |

| - eountry vary? A. Oh, very definitely. “You have good. ones

and bad ones.

Q. Is it important, in selling your produet, to have good

ones? A. We try to be very selective. We have far fewer .

- distributors than our major.competitor, AC, but we believe

that we have the select ones, the better.ones. ;

Q. Do you have'an opinion if, in obtaining warehouse

distributors, it’s an advantage to have a full line of prod-

ucts or a single line of products? A. No, we’re somewhat

at a disadvantage there. It’s definitely an advantage to

have a complete line. I think you have-reference to spark

plugs, ignition, possibly fuel pumps, as General Motors

distributors have, or AC and Delco distributors have.

‘The Court: Now, wait a. minute. Full line of

what?

Mr. McManus: Well,'a full line of ignition-type

products, as he testified to.

[702] Q. Now, today, as the testimony here has brought

out, Eltra, who is selling spark plugs under. the Prestolite-

_ brand,—are -you aware of the warehouse distributors that

_ they have? A. Yes. They are very ineffective to date. I

don’t know what the future will bring but they have a, I _

would say, a lesser caliber warehouse distributor than either .

ourselves or AC or. Autolite.

- Q. Now, as I understand your testimony, you indicated

that you ceased selling plugs to Ford | in the summer of

19617 ‘A. That is correct. - <

Sa

° 7 30a ‘ x :

. Harry F. Davis—Direct Examination |

- Q. When you were informed by Ford that they had

bought the Autolite spark plug facilities, what did you do

in order to acquire any other OE business?) A. Well, we

knew it was paramount to have the overtones of original

- equipment so we immediately redoubled our efforts to get

- the business at Chrysler because we did have American -

Motors and this was the end of the passenger car market

for us. So we immediately went to work on Chrysler. and

ultimately were successful in selling them. —

Q. Did you approach amrrenet -A, Very definitely, yes,

sir.

Q. Did you’ have any | assurance when you approached

them that you would get this. business’. £703] A. Not the

. slightest. — =

Q. Prior to April of 1961, who was your largest customer.

for-spark plugst A. Ford Motor Company.

_ Q,-Are you aware of any companies buying spark plugs

a

» RS

4 tH,

,

that purchase more spark plugs than the Ford Motor -

Company? A. Well, the only—naturally, the General

Motors Corporation would purchase more spark plugs than

_ the Ford Motor Company because they build more cars.

- Q. Do you know of any customer who does not manufac-

ture his own spark plugs who would be a larger customer

than Ford Motor Company? A. There is none.

Q. When I am asking you this question, I am including

- eithera customer who is buying for original equipment or a

_ customer who would be: buying for the replacement market.

A. That is correct. There is no one larger than the Ford

Motor Company, beyond G. M, :

Q. Have you ever seriously solicited G.M. to sell hans’

spark plugs? A. Not seriously. We have done it as a-.

defense maneuver on occasion just to keep AC busy while .

we were wees to get os else.

ee

. 8la

Harry F. Davis—Direct Ezamination

Q. Have you ever been successful i in getting any of their

business? -[704] A. No. No, sir. .

Q. Do you know why you haven’t been. eucoscatal in

getting any of their business? A. They. have their own

spark plug division and it is ‘very natural for them to use it.

Q. Now, in your opinion, has Ford’s: ‘aequisition of the

Fostoria plant increased or decreased the likelihood of a -_

substantial hew entrant into the manufacture of spark |

plugs? ;

The Court:: on me. Will you state ‘that agita: 7

so that I can understand that =r, or have it

read.

Mr. McManus: Surely, your Honor,

9. Has Ford’s acquisition of the Fostoria plant of Elec-

tric Autolite in your opinion increased or decreased the

likelihood. of any substantial new company coming into

the manufacture of spark plugs? A. Well, ei think acces _

question it has-decreased it. .

Q. Why would you. say that? - A. Well, with Ford site ‘a

its own spark plug company and General Motors having its _ ;

own spark plug company and Chrysler doing business with

the Champion Spark Plug Company and American Motors

_ doing business with Champion, there is very little left for

any other company. And, then, in addition, it is a well

known fget that spark [705] plugs are bought for original

equipment at less than manufacturing costs, so it would be ,

pretty impractical for one of the lesser spark plug com-':

panies to attempt to get in that business when the only way -

they can get in is by furnishing spark plugs at ‘less than

_what it cost them to manufacture them. ‘

-Q. Since the Ford acquisition, has your company Sin

approached by: any of the other automobile ——

looking forward toa merger? A. No, sir.

/

| ome ° .

Horry F, Davie Crom Eeamination .

Q. Is your company. ecingorned that Chrysler may onter. -

inte the manufacture of spark plugs? A. That is a distinct

concern on our part because we have—being independent

and having no affiliation with them, it is completely possible

that should we not serve them: well or price correctly to

_ _ them, that they could go to another spark plug manufac-

turer; and the very. definite one that they have used ir

negotiating-with us is the fact that they might buy from the -

Prestolite Compat ny if our, arrangements aron’t satis- -

factory. .

, | _* @ @ ° @

\. . CROSS EXAMINATION

sd e @ re | e

(711] Q\I understand. Now, I think you said on direct

examination that your sales of spark plugs are quite sub-

stantial currdntly, is that correct? A. That is correct. We

are doing very well in the after-market, but, naturally, in

the OEM field, our sales are a little bit om because of the

loss of the Ford [712]. business,

Q. In the OEM field, the difference in: your business is

mo .the difference-between Ford Motor Company and Chrysler

production, isn’t that correct? A. That is correct, yes, sir.

_Q. You have, in effect, made a switch of customers from

Ford to _ Chrysler, isn’t that right? -A. Right. _ ‘And

Chrysler erijoys a lesser share-of the market, ine a

Q. Do you know whether or not your current sales are as.

- great as AC’s current sales in the after-market? A. In the

after-market I believe they: are. greater. ae He

Q. You do?’ A. Yes, sir. , 2 Ps ,

. The Court: What was that question again, vias ?

_- Mr. Shapiro: I asked, your Honor, whether Mr.

- Davis knows whether Champion’ s sales are greater:

re or lesser or how sl compare to AC’s in the after-

- ita

Harry F. Davie—Oréve Bainilactlon

"market, and he said he believes ‘they are rater, oe

Id that correct, Mr. Davist Et 31 Be

_ A. Thatis correct.

Q. Well, now, you mentioned that you have tino cerainie

_ plants, Mr. Davis. Where were they, again? A. One is in

Detroit arid the other is in Cambridge, Ohio. ... -

713] Q. When was the Detroit plant - -constructed? A.

Oh, that goes way back in history, prior to my time. But

I would believe that it came, into ‘being about. para ha

116 or ’17:

Q. Have you done any enlargement of that facility within

the last few years? A. Not in the last two years. We are

currently just about to break ground-for a brand new plant

in Detroit-that will have increased capacity. . | ef

Q. Ceramic capacity! A. Ceramic capacity...

-Q. When do‘ you expect’ that plant to be finished? A. I“

believe it will be ready for. production at the and of this

year of 1967. ot?

Q.-Is that site near the current Detroit plant, o or is it far

away? A. It is out in the Eight Mile area of Detroit, and .

I can’t tell you specifically what the ‘address i is. But out in-

that general area. It is quite removed from our =a

facility.

: oOo

Q You are not planning to. close down your present ~

f facility, are you? A. Only after the new one is in opera-

tion. Yes, we will close it down then. ~

Q. Do you expect the fiew plant to equal or exceed the |

- eap- [714] acity of your present’plant? A. The only reason

for building it,.we will — the capacity of this present:

plant.

Q. You feel the need of ie ceramic ne is that

correct! A. That's correct.

"Beery F Davis—Cross. Examination

—Q. Now, in talking oheuk: your cotnpetitors, I think you

said your major competitors were A-C and Autolite; is that -

correct?, A. That’s correct. . *

Q. And I think you said that your major ‘competitor, as

between. those 2 two, was A-C? A. That’s correct.

Q. “And. you said: that there were other ie

Prestolite, GB & o and 1 Zeller. Is that correct? A. That’s

. Correct.

Q. Now, when you jnniiitidd Prestolite, I don’t. know

‘ whether it was clear that you were talking about both the

ne _\sPrestolite brand and also private labels. Do ). you know

whether Eltra produced both Prestolite and private labels?

e

vA. They yery definitely do. ‘They produce, Prestolite and

, they have numerous private brands.

~. Q.-Now, I think you testified during the tens you were

. supplying Ford, Electric Autolite made attempts to get

~ +” Ford’s business from you. -Was that something that hap-

_ pened more [715] than once? A. Oh, yes. That was.a ~

. constant effort on their part, for four or five 7 =. to

the acquisition. , 7

Q. And you were doccenatal, in soaitadiiais 100 siete

‘throughout that period, isn t that correct? * That’ 8

correct ; yes, sir. .

Parte ‘Weil, now, you were able, were you not, to offer Ford

. greater advantages as_a supplier than Electric Autolite

. was, isn’t that correct? A. ‘That’s correct.

Q. And ‘isn’t’ it true that you would have been: ‘able to |

offer Ford mote: advantages ds a supplier than some new

! ‘company that might come Bate Isn t that true? A. _ Very |

- definitely.

'Q. So that, jeally,, you were not in Angee of’ losing the

Ford . Motor Company business to some other supplier

during that sn it isn’t that. trae?! A. That i is true.

> .

a ——— -

~

acon

, 35a

Harry F. Davis—Cross Examination

Q. So that if a new company had come into the market

- with spark plugs, the chances are very unlikely, aren t they,

before 1961, that they could have become original equipment ~

-on any major vehicle? Isn’t that correct? A. That’s

correct, because of the tremendous job that Ford was doing

in reselling our spark plugs.. The original equipment busi-

ness is desirable because it-gives you a shot [716]-at the

’ . after-market. ‘But the after-market is the. profit area on :

- which you operate and wé; in conjunction with Ford, had

built their service volume in the after-market to a point

where it was very profitable for them and equally. profitable

for us.. a

a. Well, I take it, then, ‘that you were not ae ree

until you learned of the. acquisition that Ford Motor Com-

pany would integrate manufacture and push you out? A.

- ‘We were concerned about Autolite getting in there, because 7

there was no actual affiliation, no financial arrangements

between Ford and Champion, and we:had to sell them a

-. quality. product arid service them well to retain that busi- _

“nesg. And if Autolite had been able to persuade them that

they could have done as well or better, our account would be -

in jeopardy. It is different than GM and A-C, because A-C

.is a Division of GM. Now Autolite is a.Division of Ford.

Q. Well, aren’t :you now: in’ ‘the same position with

_ Chrysler as you were at Ford, where you feel you have to <

- give them a quality product at. a good price in order to stay

int A. We are very vulnerable at Chrysler. I mean we

. don’t rest on our laurels any single day, because we: know

that we have the specter of Prestolite in the background ..

willing to battle ‘us for that business, and we have-no ties

with Chrysler other. than'a good product sold well and their

[717] selling well. i

Q: Do you: feel that Prestolite is a serious threat at

Chrysler; is that right? AvI sincerely do.

\

jin

36a

- Harry F. Davis—Cross Examination

3 Q. Do you think that there is any other potential SUP->

plier of Chrysler. besides Eltra that you are concerned

about? A. No. Car manufacturers as such want absolute

quality. They have to have ‘it to sell a quality product.

And I don't believe, after you pass the area of Champion,

A-C, Autolite and Prestolite, that .there is a real quality

manufacturer: that they would turn to.

Q. Well, getting: back to the possibilfty, while you were

supplying Ford, that Ford might integrate, did you feel .

during thé course of that or suspect that they might build —

_ their own plant and push you outt A. Oh, we had some

whisperings here and there over our fifty years of associa-

tion. that they might entertain the idea of going in the

spark plug business. But we felt that if we could continue

to service them as we.were, at a price that was satisfactory

to them, with a quality product, that we could retain their.

business, | and we were guccessful in doing . that for fifty °

years.

equipment spark plugs below cost was a substantial factor

in that, wasn’t it? [718] A. It was sort of an insurance.

_ Q. Now, Mr. Davis, since the acquisition in April of

1961, have Champion’s sales of spark plugs gone up or

down! A. They have gone up in the total, but in original

equipment they have gone down.

Q. I understand: How about your net. sales as a com:

pany? Have they gone up or down? A. They have gone up.

Q. How: about your net earnings as a company, have they .

gone up or downt A. They have gone up..

. Q. Is it true that your net sales in 1965. were the highest |:

in your history? A. That’s correct. :

* Q. And is it true that they have gone up every year from

1961 to 1965! A. -That’s correct.

Q. And. the fact that you were eile them original ;

ee Oe eee a ae ee

87a

* Harry F. Davie~-Orose Examination

Q. rere is it true that your wit earnings in 1965 were the

‘highest in your history? A. Yes, sir.

Q. And is it true that they have gone up every year from

1962 to 1965% <A. Yes, sir. But I must qualify that, if I

may, bécause if you aren’t doing that you are standing —

still, arid when you are standing still you are going back-

wards. The after- [719] market industry increases on an -_

average of .six percent a year, so from ’61 to ’67. we would

have to have something in the area of about a 35, 36 percent

increase over ’61, currently, or we would have lost our.share

of the market:

Q. Well, apdrt from your share. of the saad, don't 3 you

have a 14 percent—or didn’t you, in "1965, have a 14 percent

ratio of net earnings to net sales? A. Yes, sir.

- Q That is a pretty good ratio, isn’t it? “A. It’ s one that |

we have to, not apologize.for, but explain constantly.

- Q. You are a strong company, aren’t you, Mr. Davis?

A. Very. |. -¢

Q. Now, Mr. Davis, let me ask youa question sheeionen |

testified that the fact that Ford acquired Fostoria had some

effect on. possible newcomers ; is that ight A: That’ +

right.

Q. Well, as I understand it, however, the chance of a

newcomer coming in, even before the acquisition, in an

original. equipment situation, was very, very small; ian't

_- that correct? A. Very small; yes, sir.

QQ. Well, now, suppose that instead of acquiring g Fostoria

_ Ford Motor Company had built a plant of its own and left

- Electric Autolite with the Fostoria plant and had dis- [720]

_ placed Champion as original equipment to Ford by virtue

~ of its own manufacture. Would Champion have been in a—

better or a worse situation than it is today? A. I think

Champion would have been in a better situation than it is

38a"

Harry F. Davis—Cross Examination. -

today, for the simple reason that had Ford developed its

own spark plug without any known aftermarket distribu-

tion, such as they acquired. when they acquired Autolite, it

would have taken Ford much loriger to make a penetration

of the market with its own product than it would have—than

it has since they have acquired the Autolite, because-Auto-.

. lite had some established distribution that Ford got in the

process of the acquisition, and unless they had gotten that

they would have had to go on and create their own in the

after-market. - . Sst |

[721] Q. And that would have taken quite some time?

A... That. would have takén quite some time.. - .

Q. They not only would have had to develop: their own

distribution, but it would have taken some years, would it |

not, before the original equipment.vehicles were starting to

use replacement spark plugs in the af ter-market ; isn’t that

truef A. Yes. There’s a rule of thumb that it takes about |

18 months before the average new car reaches the position

where it requires new spark plugs. ms

Q. And before: you have a population of vehicles ‘on the

road that are requiring substantial replacement, you have

several year's go by, don’t yout A. I would say about 18

months, _ - : : \

‘Q. Well, that’s for one year’s production. A. Bight. ~

- Q. But then in order to have— A. You're right. You’re

right. | sa

Q Wouldn’t it take, six to eight years before you had

- ehough vehicles on ‘the road to justify a substantial sales

. organization? A. Yes, I think that’s valid. .

Q. One thing, Mr. Davis. Mr. Hartig of Chrysler testi-

fied on deposition that Chrysler’s price of replacement

spark plugs from Champion now was in the high twenties, |

,, and I [722] wondered whether you could be a little bit more

: -_ 398

i arry F. Davis-—Cross Examination

specific on ‘the price that Chrysler aye you for ieidatennat

_ spark plugs? A. Well, 1 think Mr. snenee, who certainly —

should know, is in error, because we’re under. a cease-and-

‘desist order from the FTC.and we must. sell everybody ona. ,

. like basis...

[737] Q. Did Champion, prior to 1961, have a policy

against supplying pfivate label spark ‘plugs to major auto-

mobile manufacturers? A. Yes.

Q. You wouldn’t have. supplied a private ‘label came plug

to Ford, for example; before 1961, would yout A. Oh, I

_ think because of the size of ‘the Ford account we would have

entertained the-idea; yes, sir. ;

Q. Well, weren’t you asked on one (occasion or more to

sell private labels to F ord, and didn’t you say you would

rather not do that? A. We do that with any major-cus-

tomer. We are of te opinion that we: would dilute the

name ‘‘Champion’’ if we get too much private brand busi-

ness, SO On every occasion we try to discourage them from

buying the private brand. - —

Q. You-do, however, sell some private brands to Sears &

Roebuck, Montgomery Ward, and AGes; is that correct!

A. Yes, sir. | :

Q. Do you know what date you. started eclling your

private brands? A. Well, Sears-Roebuck, we have been

selling them for about ten years.. And’ Montgomery Ward,

we have been selling for approximately the same time.

Atlas, that is of more recent wise] origin. That has been .

about three years. |

| The Court: Is sae Standard Oil!

A. Standard Oil; yes, sir. |

"Testimony of Wilton Brumbeck, Engineer ‘in the spark

| plug plant of the Prestolite Division of ELTRA Cor-

poration located at Decatur, Alabama .

fr”. «DIRECT EXAMINATION

: Ce e e @ . r

- [744] Q. Now, aro. you concerned with the- complete .

_ manufacture of spark plugs—do your duties cover the com-

plete manufacture of spark plugs? A. Yes, sir. :

Q. Do. your duties also cover the manufacture of or the

purchase of ceramics by your company? A. Yes, sir. -

Q. I would like to refer you to Government Exhibit G-20,.

which I believe you have a copy of. A. Yes, sir; I have one.

Q. This is Government Exhibit G-20 for identification.

Referring you to the first written page, this document is

dated May 28, 1962, and it is addressed to Mr. R. H. Davies,

or who was Mr. Davies? A. At that time he was president

of the company. 4

Q. And there were copies to—could you tell me who these

- other gentlemen were? A. Yes, sir. Earl Fiene is vice- -

president of. sales ; Robert Twells was 4 consultant at the

- time, had. been the manager of the Fostoria plant, vice-

president of the spark plug division; E. R. Koppel was vice-

president of the. Electrical Products Division; R. O. Boden, -

_ plant manager of the-Decatur plant; W. F. Purves was

plant ‘manager of the Sarnia, Ontario plant; and J. J.

Bohmrich C45] was. pk may of the International

Division.

Q. Now, the subject here is: - Ceramic Manufaétating

Facility. Was this — bla caiare by oT A.

Yes, sir. |

Q. Were you directed to prepare this vaemorandum? A.

_, Yes. sir.

Q. Who directed you to prepare it? < Mr. Davies.

RS cae RE ERNIE BY ONE

| eres

lain ——

: Wilson Brumback—Direot Eva tate

Q. Was it-the normal course of your employment to.

prepare a memorandum of this type? A. Yes, sir.

Mr. McManus: Your Honor, the Government

‘offers G-20. - .

_ Mr. Shapiro: No objection, your Honor,

The Court: All right. It is received. .

Q. N ow, this was a proposal. to establish a facility for the

* manufacture of ceramic insulators for wars, plugs;.i is that

correct? A. Yes, sir...

Q. At that time, in 1962, was the Eltra Cotporation—was

it the Eltra Corporation then, do you. know4 A. I believe

so. I would have to check the dates.

Q. Eltra or the Electric Autolite? A. -Eltra or: the old

. Electric Autolite.

'Q. Was it engaged in ‘the manufacture of ceramics for.

spark [746] plugs? A. No, sir. .

Q. This was a proposal recommending that Eltra go ees

the manufacture? A. That, is correct.

Q. Was this proposal ever carried out? A. “No, sir.

, Q Do you know why the proposal was not carried out—

‘were you informed? A. Yes, I was informed that- since

- there were sources of supply which the company was using,

it wasn’t felt that the exaeerinnss of cited would be Sppro-

priate at thet. time. |

The Court: What was 5 the reason, please? 7

A. Because there was an existing source of supply, they

didn’t feel that the expenditure of the money would be ;

appropriate.

-Q. Do you know at that time who your sources of aie |

would be? A. Ford Motor Company, primarily. There

“were some others,—a Japanese company was furnishing

insulators to our Sarnia plant; and ~ Frenchtowa —

42a : . B |

Wilson Brumback—Direct Examination

-Q Now, I gather, from your memorandut! that. the

acquisition of insulators from Japan was not satisfactory

because of communications problems? cir] A. That is

_ correct, :

Q. Lalso gather fram your memorandum that the French-

town insulators were not of good quality? A. Not of the

: quality that we were accustomed to. That is correct.

Q. Today,—I don’t know if you answered this—who are |

you purchasing ceramics from? A. Ford Motor Company.

_ Q. Do you purchase from anyone else? A. No, sir.

7 -Q. Do you know of any other manufacturers of ceramics

: that might possible be suppliers to your company? A.

“There are some possibilities, although we haven’t done any

looking, serious looking, for, quite some period of time,

Frenchtown is still in business. - Zeller, in Defiance, Ohio,

'. makes insulators and 1 think would be a possible source.

Carborundum i is also'a possible source. They do make some

_ insulators... ote

Q. Do you aoe if the quality of Frenchtown ‘has im-

- proved or not? A. No, sir;I don’t know.

' Q. Do you know if the quality of the other companies

that yon mentioned has? A. No, I don’t, only by’ general ‘

reputation.

Q. Do you know what the general reputation is? [[748]

_ A. Carborundum’s is excellent and Blue Crown, 1 cet

says or Zeller, is essentially ‘the same.

The Court: What was that name, the first one?

A. Blue Crown. ne

- QQ. Do you happen to know the aay of these com-

, panies for making ceramics? A. No, sir.

Q. You don’t know if it is high or lew; is s that correct? ©

A | terms of on and AC —_ high, it is 8 low. |

Wilson Brumback—Cross Examination.

Q. I see. A. In terms of being adequate for our needs, 1

can’t tell you. It would be fairly close, in any case.

Q. Do you know, does Carborundum make ceramics for

spark plugs? A. Yos, sir. 7

Q. For whom do they make them! . A. They at them

‘for s couple of small companies. One is Sfitt in Columbus, :

Ohio, and the other one, I don’t. remember the name 9 of, a

relatively small company. * —

The Reporter: The name of that company, eirt

A. Btitt, (spelling) S- ti-t-t.

‘The Court: You see, the Reporter i is not familiar

with these names and neither ath I.: The names [749] .

mean nothing unless you are a little more deliberate

about giving the’ name’.

A. Allright, sir. |

Mr. McManus: Those are all of the questions that

I have of this witness, your Honor.

The Court: All right. Cross-examine.

| CROSS-EXAMINATIQN ©

By Mr. Shupiro: ie ; .

-Q. Mr. Brumback, have you ever had any. experience « or. -

- responsibility in the sales end of the business?’ A. Only

from an engineering-sales standpoint. I have made some

calls on engineering departments of various companies, yes,

aie.

Q. But you bovat saa sales. responsibility i in the ee

Rs market or sales responsibility i in selling through distribu-

tion channels of one kind or another? A. No, sir

¢

Q.. Did you consider when you wrote the memorandum

' which has been marked G-20 that Eltra or Electric Autolite,

— ~Q. You felt

_ the onion

proposal to the one.ander

44a

Wilson Brumback-<Cross Keamination |

‘whatever it was then, had the capability of establish a

veramic operation? A. Yes, pit,

C760] Q. Do you believe, Mr, Bruinback, that Mitra now

- has the financial and engineering capability to establish a-

ceramics facilityt A. Yes, sir.

-Q. Do you have any operation on- going now at Nitra

which would be: relevant to its establishment of a ceramics

facility t A, Yor, sir.- We have a laboratory process for

making insulators in our Decatur plant. We havg in sib-

mission state a similar proposal.’ Savage

~ Qs Lam sorry, Ldidi’teateh you. A, We havea similar —

iscussion here, ulao being, sub- ;

mitted to our management now,

Q. Currentlyt A. Yessir,

Q. And did you write a memorandum or any ind of | .

recommendation, ‘either orally or otherwise, on such a

proposalt A, No, sir, -

Q.: Do you believe that this would be something that itra

is capable of doing in the form in w hich the recommendation.

is being madet “ A. Yes, air.

~Q. Now, in the memorandum, G-20, on page. 3, is a atate-

ment that: ; : = ;

NLS nn quality i is satisfactory but de- [751] livery

promises have not been, and currently are not. being,

-met. Additional capacity at Ford, now expected by

_ September, will probably solve this problem,’’ =

Will you state, Mr. ‘Brumback, whether, after you wrote

the memorandum, the delivery problem ae to. was

taken care off. A. Yes, sir; it was.

Q. And did you thereafter receive on-time and saints

delivery service on ceramics? A. ‘Yes, sir.

-

1 had the finaucial capability. an well as -

apability; is that correct? A, You, sir.

28 oe Me

_ Wilson Brumbich-CroibSleominction ? eae

Q. And you are e reoviving such dotivedyrtrom Ford Motor

. Company at the present timet A. Yes, sir 7

Q. Now, Mr. Brumback, on page 8 of G-20, thspemoran- ,

‘dum OLE ase

‘By establishing -o spark plug bnisediipr facility,

the company can earn 17.7% return on investment,

strengthen ‘its competitive position .in the market

place, and once again, establish itself .as'a prominent

‘factor in tho spark plug business.’ |

Would you explain what you meant by that? A. Yos, sir.

I think that ‘return on investment”? in pretty strdight-.

. forward... The strengthening of competitive position in the

‘market place refers to some questions that had been asked.

by customers about our establishment of a [752] ceramics

source, and, therefore, our continuing the supply or avail.

ability of spark plugs to thém. And I think the ‘‘prominent

factor” refers to reputation in the industry and that any

manufacturer making aljof his own components is bound

to have a better reputa@On than one who buys part of his

components. etc ) te

Q. You mentioned that customers had made inquiry.

- Was there any particular. customer that you havé in mind?

A. Yes, sir, -At that time, our largest customer. was Atlas

Supply Company whigh is Standard Oils of the various -

states. And they pa

of insulator supply. | “2 ae

Q. Are they still» customer of yours? A. Yes, sir.

Q. All right. Who else supplies Atlas, if you know! A.

Champion and General Battery. :

Q. Now, you mentioned renchtown Porcelain maou:

Is that the same as General meer? A. That i is a Division

of. General sie Ye that’ ’s right. .

~

460,

ow

vy

| _ Wilson Brumback—Foss Examination >

— @ That company is ‘General; Battery and. Coramies, ‘isn’t:

Rr a That eorrect.,

Q. Now, age 3 again of G-20, in the next to the last

‘eae ree

ac . : “Of the foar potential domestic sources Champion,

AC, Ford, and Frenchtown; all are manbfact- [753] |

urers of spark plugs in direct cdrapetition with-The .

_ Electric Autolite Company. This not’dnly puts the-—

| company in.a poor. and vulnerable competitive posi-

tion, but also exposes any design or development —

. ° “work being done to the’ competition from whom

| insulators are purchased. si

First, Mr. Birazhbeck, could you say what you meant |

by ‘‘putting the company in a poor and vulnerable

ct competitive position’’? .

ne Mr, McManus: Your Honor, I object to that ques-.

| - ton, I believe:the document very clearly states what —

- Mr. Brumback had in mind. There isn’t any difficulty :

in interpreting that particular phraseology. . The ;

_ « document,speak 3 for itself.

~The Court: Well, I don’t ape whether it does or

doesn’t. -I think that the witness may

~ question. Laicare iS a

_ > A..§*Poor and vilnerable competitive position” refers to,

I think, any situation. when you'are buying any. component

from a competitor. ‘You are doing a couple of things. You

~ are giving.the competitor a certain amount of profit out of .

“your own organization, and you are- giving the. competitor,

a good knowledge of your schedule, what you are producing,

how many, when; and if you get a new program coming in _

and you increase your schedule they will know this by your |

. scheduling. So I think it is generally not C754] a desirable

eg ~— to buy from a competitor. .

cS

4

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i 7 | . ata : oe : :

Wilson Brumback—Crose Examination

Q. Is that the reason that you are considering establish- -

ing your own ceramics facility, to make that additional _

profit and to:have your own scheduling within. the confines

‘of your own orgamfization? A. I don’t know that ‘‘consider-

ing’? is a good word for what we are doing and that is why

I am hesitating’ on your “question a little bit. .

ya

~ Q. Well, do you find you are in an adequate competitive -

position with circumstances as they are currently? A. Here

again, I don’t know how to define ‘‘adequate”’. We don’t »

seem to be at. anything like a tremendous disadvantage.:

Q. Now, if you had volume that would justify an invest- a

ment in a ceramic operation, what would be the attitude of

1 management toward putting such a ceramics operation into

. effect? A. It’s my opinion, if, the volume were adequate, =

~~ that their’ attitude would be in favor of the facility. 3

Q. Well, for example, if Chrysler were to give Eltra. its

original equipment business, what would Eltra’s reaction -

be to that, in ternis of ceramic facilities? A. Here again,

- itis my opinion baad would go right, — with the facility

in. that case.

e

Q. And they would be able to do that? [755] A. Yes, sir. -

Q. Now, with respect to design or development work.

being done to the competition from, whom insulators. are

mind there? Any particular supplier?

The Coutt: What was that reference again?

_ Mr. Shapiro: It is the second half of the sentence

-on page 3, your Hong, that says:

ha

. also exposes any design or: development work

being done to the competition from whom insulators ~

are purchased.”’

-- Q. (By Mr. Shapiro, continuing) Did - you have any

particular sabes in . mind there? A. I think this one

}

_ purchased, that part of your sentence, what did you have i in =

\:

again, you ated tao look at all of the: various: suppliers, but.

"anyone with an engineering department doing less work |

Q. What-do yofi-mean by “doing less work than yours?

A. Well, less develpoment work. Fewer engineers, smaller

staff—this kind of thing. |

QL Would that be of concern with respect to Ford Motor

Company? -A. No, I don’t think so.

Ya ours was doing, would be: concerned about this.

Q: Would’it be of concern. with — to Frendhtownt

A. Yes, sir.

[756] Q. But you don’t consider that that aspect is a”

problem with Ford Motor Coripany as: your: piramics sup- .

pliert A..No, sir.”

_ Q.. Mr. Brumback, ‘one; forther question. In connection

-with this consideration of a. ceramics facility, or whatever it

is other than consideration that is going on now, is that for’

a ceramics facility with the same or greater or ‘lesser

' ceramics capacity than contained in-G-201 A. It would”be

somewhat smaidler than contained i in G-20.

Q. — than. that 1 in at in contemplationt A. Yeu, sir.

. . e ee .e

7

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2 ° *

Deposition of Robert H. Davies, President ‘of Electric Auto- \

.’ lite Company 1959-1963, Chairman of the Board of

_ELTRA Corporation 1963-1964 :

DIRECT EXAMINATION

7 . 8 e. @, * \

351] “*Q. Would vou say that the principal ‘Beciuees of

the Electric Autolite Company i in 1959 was the er

supply business? AL Yes.

‘*Q. Did you have any special relationship with any of

the vehicle manufacturers? A: Yes, we—we had a very

close relationship with Chrysler a oe —!

‘prior to my coming there. -

' *Q. Do you have any. idea what. oonuuians of Electric

Autolite’s business was. comprised of sales to Chrysler, just

generally, i in 19597 A.In1959? ~~ . ,

“*Q. Yes. A. I’d say. about 60 per cent.

* -**Q. Do you happen to. know what percentage that was

‘earlier, say, in 1955? A. I don’t think it would be much.

different in 1955. It might have been a little more. —

“*Q. That, estimate you gave us isa very rough one, I

——assumet- . Very _rough.

“lt could be more, Neliaie I just happened to

recollect, as you mentioned it, we did have more

*. battery business from Chrysler pack in the days—

[852] whether it was 1955 or not, and prior—prior.

| \ years we had more. battery business than we had, and

perhaps we had more bumper business, too, dnd a few

other items. But as of 1959, we still had the full line —

of electrical equipment for Chrysler. ae ee

“«Q ‘Is it fair to’ say, then, that the principal business of

Electric Autolite was ajtomotive business,:and the principal

automotive customer of Electric Autolite was Oeeraect 7

A. That’s right.

2 ; , +

50a

Robert H. Davies—Direct Examination .

; «Q. Now, did the Electric Autolite Company go into. any

_ automotive businesses that you know of at the suggestion of.

_ Chrysler? A. Yes, I understand we went into the spark

. plug business originally. at the suggestion of Chrysler; and

this is all hearsay because 1 was not there—we went into the

. bumper business because of Chrysler; -went*into the dic

casting business; and I believe also the ‘wire business—wire

and cable business.” *

4Q. How about instruments A. Aatomotive ‘instra--~ .

‘+ ments, no, I don’t believe so. I think it was one of the

original businesses of Electric Autolite..

‘<Q. Did you & into the metal trim business at Chrysler's 8.

suggestion? [853}A. I believe so. | 4

— Q. Were any of the businesses that you went into; or

that you were ‘in, in whieh’ you supplied Chrysler, unprofit-

- able to Electric Autolite Company? A. Yes; Ahe bumper

business, lithographing® bu iness, metal trim} “at times the

wire and cable business vas not’ too good; I think the

instrument busin2ss was det initely not agian at the time —

I came with the company.

‘*Q. Do you have any. idea, wh Electric Autolite-was—

seechit aeeteen as oes A. Well, the

primary reason was the fact that we had what we call the

main electrical package, which was the starter-generator,

and coil; and voltage regulator, plus the spark plug business,

which was kind of the heart of the- -business, and quite profit-

-able when we had it with Chrysler, and because we wanted

to service this customer we maintained these othe:

‘esses as a service to I don’t: believe —

~~ this was t the: original intention nel we went into them.

‘But once in them, we didn’t want to get put because

Chrysler depended upon us. .

| spent aon Chr say Chrysler depended on you, ‘did you.

_ depen ryslert na A. Oh, yes; we oe ;

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‘ .

’ ise ry

Robert H. Davies—Direct Examination fis

a upon sedi mainly for that main heart of ‘the business, 2

so far as the electrical package and spark plugs were

concerned.

“Q. Did you ‘have any ‘kind of an - erigineering relation:

ship with ‘Chrysler that was differént from the ordinary

vendor-vendee kind: of relationship? A. Very ‘close rela- of

_ tionship; we acted almost as if we were a division of

Chrysler, in having regular meetings with their engineering

department and our engineering departments to a greater.

- extent than is normal under general suppliét relationships.

* Q, Did your advertising have any particular slant in

the direction of Chrysler, or was it just brand advertising?

A. Yes, it had a slant toward .Chrysler; I think there have

been some programs with ‘Chrysler where we had put ~ ;

-” Chrysler in our ads, Chrysler cars and so forth.

— “Q. Was there any element of personal relationships. that |

was peculig -between ‘your company and Chrysler? A.

Well, this As again hearsay, but in the days prior to—to, _ |

believe, 1955, 1954, ‘in,the-early-days of the- company, Mr.

-Royce Martin, President of Electric Autolite Company, and

Mr. K. 'T. Keller, had a—worked out several arrangements —

and were also at each other—held each other in great [855]

‘respect, and I think this is how the relationship with

Chrysler and Electric Autolite developed, and that’s all.

‘¢Q. In connection with. the kinds of sales “hat you as a

company made to Chrysler, I. take it that, some of the sales

| __were-for Chrysler’ 8 use in Shee equipinent installation?

‘A. Right. a Sey 3

““Q. Is that correct? A. Corvect. | 5

**Q. What is the term in the business that you use to

’ denote that kind of sale? A.. OE’, or original equipment.

“Q. So when we talk about ‘OE sales’, you are talking

| about sales: of parts to a vehicle manufacturer, which . ase . |

a: ae

>

Robert . Davies—Direct Examination ©

= vehicle manufacturer installs in the new vehicle; is that

| correct! A. That is correct. |

°

_/ distribution by Chrysler? A. Yes, we did:

Q. Did you also sell replacement parts. to Chrysler for |

@

**Q. Could we call that kind of sale ‘OK parts for riglacé- “ye

ment’? A.. To their dealers; OK — for replacement to

their own dealers...

_ [856] “‘Q. And is that the ay way that Chry sler die-

tributed replacement parts that they purchased from. yout —

A. I believe ‘so. They. have what they call-a~Mopar dis-

-.tributor, which they delivered the products to the Mopar

distributor, and he distributed it to the dealers dnd. the

__gpecial-accounts -¢ of theirs.

_ poeeenttd “*Q. But the tiltimate way of that sullasaiaias getting to’

_ the consumer was through the Chrysler dealers ; is that

correct? A. That is correct. |

—- “Q. Apart from ustal sales to Chry sler of OF parts, and 7

>... OK parts for replacement, did you make any other sales of

" \... > replacement: parts? A. Yes, we-made sales in what was

‘known as the ‘after market’, and this was through, basically,

the Automotive Electric Association distribution method.

Ag Were these also OF parts for replacements! A. -

oO

Yes, they were OK parts for replacement.

~* “Qe/What is an AEA warehouse? A. An.AEA ware-

. house is one which distributes mainly original equipment

_ parts to jobbers and to—sometimes directly to retail outfits,”

' gfch as service stations,.or—jobber is usually i in between a

- ‘warehouse distributor and a. retail outlet.

‘“‘Q. Does the AEA, 86 far as you know, handle any [357] |

_ particular type of replacement parts?’ A. Well, in—origi-.

nally, practically nothing but original equipment parts.

‘<Q. How was this in 1959; was that practically that way?

A. This was the way it was in 1959.

Sat ‘a

aa A 5 alan mg i Ba RS Ie Ba Oe > eee ead

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‘Robert i. Davies—Direct Examination on

.Q; And i in 19611 A. in 1961, pretty 1 oats the sane,

_ Q, Have you ever, in the course of ‘your business, had

occasion to refer to what ‘SORT ‘people call the genuine parts

or authentic parts- oncept of. merchandising? A. I am

sorry; will you repeat that, please?

__-Q. Have you-ever referred to or heard referred to the

‘authentic or genuine parts concept of therabandising? A.

Yes.’

. *Q.. What i is. that? A. This i is where the only parts that Ct

are: distributed are those that are equal—excuse me—iden-

_ tical ‘to. the parts that are on the saiempnaanet’ and manufae- |

‘tured by the same manufacturer.

. **Q. And is this concept something that ‘is manifested

" through advertising. and through an Grientation, of distribu-

tion, or in what way do you— A. It was identified indefi-

“ni ‘ly as—and by the—by the distributor himself, as being

\

e authentic or [858] genuine part that was—the same as -

was on the automobile.

«Q, Did the Electric Autolite Company haves an nbthintic

or genuine parts orientation in their distribution: patterns?

A. Yes; practically all of our ‘so-called after market distri-

- bution was on the authentic or genuine parts otype of

distribution. “ Ek me

‘“‘Q. Was this part of the same ‘ kind ‘of xinatiitheen that

the AEA warehouses had that you testified about? A. Yes.

‘$*Q, In other words, the AEA ‘warehouses sold virtually. ot

‘all origina) equipment-parts for replacement? A. Right.

““Q. And you sold virtually all original equipment ai .

for replacement; is that correct? A. Right.

**Q. And you sold yours through the AEA warehouses; |

is vat correct? A. That is correct. "A

a) * . * ..

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et da

joer.”

_ Robert dH. Davies—Direot Examination

[875] *Q. Mr. Davies, you indicated that your eiarkk

-plug—Electric Autolite’s ‘spark plug—was ori ginal equip- °

,ment on Chrysler for approximately noni y wanes A.

Tae 8 right. vi

“Q. And that you knew of no other, and know: of no

other: ‘supplier; is that correct? A. That Js correct. =

_ ‘Q. Do.you happen to know from your work in ‘the busi-

_ ness how long a period, ‘and what period, ‘Champion sup-

plied Ford Motor Company? A. By hearsay, I have heafd

that it was almost fifty years. .

_ “Q. Do you know when. General Motors. first acquired “

~ AC, and. how long that relationship has lasted? “A. AC -

* eomes from the words Albert Champion, which . was the

originator of. Champion spark plugs and I am sorry, but I

* don’t know the date when they started. © 3

" #Q. Does: 1911 sound right to you? [87 6} Ai It is a,

long time, and*I thixtk that would be in order...” |

. **Q. So, as far ag-you know, up until, say, 1961, there had

- been no shifts in spark plug sourcing among the big three - -

vehicle manufactureys, except for Chrysler, as we know, in

1937, for approximately close to fifty years? ‘A. Right. |

“<Q, When you sold original equipment spark plugs for

original equipment installation, what approximate price

did -Electric Autolite charge? A. Approximately’ six. to

eight cents, depending on mpet type of spark-plug was

Bi] ““Q. Was the business represented by those spark

‘plugs at the price of six to eight cents profitable business,

‘as far as Electric Autolite was concerned t A. mn it. was 8

-~ Joss business.

*Q. In other words, it costs you more to sineaiadiatie a ;

spark-plug than the six or eight ceats that you aon for

At? . A. Correct.

Aca nt 6 igige

\; ~ Robert H. Davies—Direct Examination

~. «9, Do \you have sit ‘idea what the difference ‘was, just

generally—\ A! ell, I would. say the cost at that time was _

in the: neighborhood of, say, seventeen cents. . And; of

= course, on the market, you would gef—after market, the

retajl prive was somewheres around seventy-five Pcie ‘to a

dollar and a quarter, I think it was.

“‘Q. So that you were selling substantially below cost. te

for original equipment —, ‘is that correct? A.

. } That is correct. - ~

“*Q. Why in the: world did you ai it? A. Well, mainly as”

_ we followed the existing pattern when we got into the ‘indus.

_ try, and I believe that the r@ison.it. was done by Champion

-—who, I believe, inangurated this particular. practice—was |

the fact that-in order“tq@ get a spark phig, om an original— *

. as an original equipment on-a car, on Vehicle, [878] thi’

gave you an entry int@ the after market; there was a ’

2 tendency to consider that the. spark plug was. put in there

under engineering specifications, ‘and that it was wise to

maintain the same type of spark plug—not only type, but

: make—in, the same vehicle. ,

. Biapcanaits it gave you | an entry into the after marks

@" ce . « *. A . ee

~ [883] **Q. In other words, the spark plag sellers, the -

original equipment spark plug sellers, were.in effect paying

a price for whatever increment they got-in the after market. |

resulting from the fact of their” OE status; is that corredtt

A, That.is correct. ‘

“<Q. Did -the spack: “plugs that you sold tc Chrysler for

replacement sales by Chrysler—were the prices. different

from the. prices for OE. installation? A. Oh, definitely,

yes, they Were different than the OE installation. ee

were a profitable. item for us. | ;

Robert H. Davies—Direc Examination 7 \ _

\

“Q, Then I take it that your sales in the after inarket of Ss

~ replacement: spark plugs were & slao a profitable item, too? ae

“A. Correct. : ON

— §Q. So your ‘willingness to sell 1 below your cost was for ;

' the pnrpose of obtaining whatever benefit. there. wasinthe-*

after niarket? A. Right, == an

“79844 Q. Both through Chrysler ranlacenient sales and |

‘- through your own replacement sales, for replacing original -.

- equipment with the same plug? A. Correct. ;

' . Q, Same brand of plug? A. Correct.’’

= . a) .

a ee 2 . * i ‘ — 7. ;

"purchase by Chrysler of parts for the 1961 mod&l year

would thive ended, whent A. Ended in June of 196 4d

“*Q. I see. A: ‘Well, so that this was a—quite a large —

_ piece of our business, and, as I ‘mentioned earlier, it was

kind. of the core of our relationship between Chrysler and

mae ourselves. It was the biggest single vélume of business we ~

_- did with Chrysler, and—so that it represented to us a major * .

, , v . . . > a .* = s

[909] ‘‘Q. I mean the supply for it; in other = the-- - ° |

7 . shift in our thinking, because many of our other parts were f | |

—other things we were doing, such as bumpers, and the 7

- metal trim, and some of these others, were not on a prone ah

able basis. Actually, there were only two areas.that were “*

‘ona profitable basis at the time when I caime into the com-

pany, and that was spark-plugs and the electrical parts.

“So the problems were somewhat severe. | S !

' *Therefore several things started. in with [910]

- Chrysler; Chrysler had been deteriorating in the market:

‘ place, over a period of time; which had even taken our elee-

trical parts business downward from what it used to be; as -

their percentage-of the. industry decreased and they, lost.

‘volume, we lost volume. - o |

“And this was true in spark plugs, as well, althongpetie”

. relationship;was a little different. = = .

ue

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. ° a . . : Q *

Robert H. Dereer wen Examination

: Then also Chrysler was having some difficulties in the

| ‘intertial organization, which was widely publicised, and this

gave us cause-for concern. ,

‘‘They—we -weren’t sure where they were heading and

we: ‘depended on them, because of our relationship or spark

| plugs, ‘particularly, which was our only major of the big

three—the only major spark plug account: that we had- on

| . ‘original equipment, which is the vehicle i in which’ you anal =

trate the after market. =. ,”

‘So that these were considered problems |

‘eThen also, having—Chrysler announcing the fact that ?

they: were going into their own electrical parts, this brought

the problem on that our distribution in the after market was

through AEA, which was dedicated to the sale of only [911]

original equipment, authentic parts, and we were in compe-

tition with companies on the’outside, Echlin, for one.

‘They supply NAPA, which is .N ational Automotive

| Parts Association, which is—does not make authentic parts ©

or distribute them. They distribute parts: ‘only to that—

‘that théy manufacture for all ears, but they don’tehave any

_ original equipment lines. They: don’t sell any original

equipment manufacturer, were at one time considered gyp

parts people. They, became legitimate with time, and—ab |

being a going business.° ~.

** And this presented a problem betanns we were—hapenen

we wete only in the origizial equipment business: Our type

of distribution would aot allow. us to produce so-called

- extended line parts.: Parts for General Motors, parts for

Ford, parts for cats that we didn’t have the original equip-

ment.on. And this is where these other competitors of ours, .

_ the NAPA and a few others on the outside, could dé this, - 7

‘bevanse their distribution was extended distribution; they

make parts for shea igl s-car where there were no arm .

| particularly.

--- ed >

.

/¢

~ 680

| Robert H. Davies—-Direct Examination Baa

[912] ‘And so it became appafent that if we were to ‘

. continie with ANA distribution, that we would godownhill,.. °-

because our—the amount of original equipment we would .

have was*going to decrease reheated when this contract

came to an end Pee

“So that.if you could combier: thre fact. that tha average |

- life of an automobile may. be seven to ten years—it used to

- be ten years, it is closer to seven now—that the parts life—.

our bu8iness would continue to decreas? unless we could get

other distribution—I mean, other original equipment to go

7 On. And there wasn’t too inuch left,- because Mord was

“making their own; General Motors was making their own;

and now if Chry sler would make their own, there wasn’t

, <really too much, in the way of automotive original equip-

ment to get. So this was a problem; we didn’t know quite

What we were guing té do about it.

| “Some other things, with the Chrysler going out of busi-

ness, some of these other businesses who. were not making

money were going to have to stand on their own feet or we .

would have to get out of-them,: because now that the rela-

‘tionship was somewhat—it was different with Chrysler, we

were no-longer justified in. maintaining [913] businesses

ae anak we couldn’t make many S in.’ i

2 . e e . .* .

(916) “Q. Why is that? Why didn’t you know what

was goirig to happen in the spark plug business? What was

your fear in that? A. Several fears’ first, what was hap-'

pening to Chrysler at that time, this has nothing to do with

the excellent management they have today. They were—it

was publicly seen in the: ee had major

troubles ‘internally.

*« And there was a little tendeboy for them to_not be able

to get —_ answers out of them of what they were ® going to

E ‘ _ .

further in spark plugs, maybe into batteries, maybe into

other areas. = i eS |

sibility of Chrysler doing something on‘spark plugs?! [917]

A; Not themselves. . We did run into some peculiar situa-

- tions, where we found out that Chrysler had requested bids

from some other people. 8

“<Q. Who did they: request bids from?’ A. One was from

Champion, at one time, and 1 believe—this is hearsay, now,

- was one—in fact, both of them are—but from, | think it was,

~ Hastings, I believe. — Sexttyi 3

bay .

“This difficulty of, also—now, this conies at a little later

3 “date; this comes after we began to realize this problem,

that:-we were—we were so dependent upon, for our most.

Phat we felt

_ profitable business in the compaily, Chrysler.

we must somehow bréeaden this line, and this when we

- started to—we did build our advertising up for a period of

time to aee what would happen, would we get move sales by.

building up on advertising. ’

We. found a few things; we “found that sales didn’t E

"specifically follow advertising immediately. “You might—

the big problem in the spark plug business is getting on the

shelf of the retail outlet, such as the service station.

_ ‘And one of the other problems that this caused was the

fact that the sales to these retail outlets, getting on the

shelves, they. are not [918]_,going to carry more than one or

possibly two spark plugs in their shop. -Therefore—and

ee,

-_ there was no vacuum in the marketplace. SE

“So that advertising alone didn’t help you get on the.

. \ shelves too well. ww to have some other reasons, and.

Dy

o a

60a -

Robert H. -Davies—Direct Examination

We—one is the—if you are,on a piece of original equipment”

that is expanding, auch as Ford was, and GM has always

been very guod, there are some opportunities for you to

- maybe get on the shelves; But with Chrysler.declining and - |

the whole thing in some trouble, the thing didn look very

_ healthy tous, - :

‘Therefore this is when we -atarted putting on pressure -

to get into other companies, try to get into. International.

Harvester, into American Motors deeper, into Ford—we

tried to make a special effort to get into Ford Motor Com-

pany to get some of their business, and there were some.

other problems—one other factor that was taking ‘place.

There was also « shift from the original equipment parts,

which was,a problem, People stopped going down to their

dealers as much for serv ive. l mean the owner, the automo- |

bile owner. |

“They tended to go ‘to their service stations tei minor

tune-ups, to get the points [919] changed, spark plugs -

changed and so forth. And therefore, because so much of

ours had been through original equipment, this business

was declining for us as well, and this major shift gave—tho

ABA distribution didn’t service the service stations, the —

gasoline stations, as well as some of these so-called gyp

liftea, like NAPA. They had a broad line of parts which

_ they could put in, that covered all automobiles, and-whereas

the ABA, who operate only: ont: original pacts, had more .

! difficulty doing this.

(920) «<Q, Getting back to spark hee for a minute, on

what kind of basis were you at Chrysler—was it-a five-year

. o ten-year contract, or was it see | else? A. You

mean on this— . |

“Q. Spark plugs. A. We had n no definite contract. We

used to get a purchase order once a’year, but rio longterm

_*

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Robert H,. Diviee-Direot Examination — es

"Q. Did you consider that Chrysler might. want to inte- -

grate its own spark plug manufacture at any timo? A.

‘Phi we folt-was a, possibility, mainly because wo felt that

if Chryslor hadn’t had the difficulties that they had had, or

were having, internally, that their program had—the aspect

“that they. would go on, and do more of this type-of integra-

tion, and that they wanted—thore was a feeling that they

‘wanted to get into the after market themselves. But the

whole thing was stopped to some degree by this particular

trouble thoy were having, and yet we felt if they ever got

out of their troubles, they would proceed again. * 7

““Q, Did you ever consider whether Ford integration of —

. manufacture by Ford would have any; effect on you as a

spark plug supplier? A. If they went into the spark plug

business themselves?

' [921] “‘Q. Did you ever consider what would happen if

. Ford Motor Company integrated the -spark plugs? A.

There was another thing that concerned us. When we ap--

——

proached Ford to got more business, we-found-a degree of

-interesfTrom Ford, but mainly in 1958, the Champion Spark —

- Plug Company went ‘public—they had been a private com-

" pany up to that time—and.the figures that came out were

very. large—showing very large profits, and up to that time

‘no one on the outside knew how profitable the spark plug

Champion being a private company, AC being part of

General Motors, and our company having more than one

product, our figures were buried as well, our spark plug

profits, § = . ett :

=

‘‘Therefore, when Ford—the thing we felt—they didn’t

_say this exactly, but we felt when Ford saw those figures

and saw how much profit there was in it, I think they were .

_° a little shocked themselves—that is my feeling; it is not.

what they said—but that this is something they had let get

- business was, because all of our figures were buried, ~

\

62a

y ae

ee

Robert H Davies—Direct Bzamination

, by hens over a period of years, and the very essence of that

~ much profit going to a supplier would be enough to make

Ford think in terms of integration into this business or

_ doing something [922] about it.

‘*So that was—this created igsour minds tho. fact that

Champion nfight be pushed out some day into the open

market, and they being the leaders. in. the field, that they.

would have to find an entree into Chrysler, or being the only

other one of the big three and: would do almost anything

to do that, givé them almost any kind of a deal to do this.

**Even if it came down to giving the spark plugs for

nothing; they would do it, if it was legal to do it; and ~~

because they were hardoreesst to: maintain their position -

_ without the Chrysler—without one of the big threo in there

AS an original equipment.

~So-this made it very. difficult, for us to see our way”

clear as to what-we were going to do.in the future.’’ - fo

°. e « ° °

[935] *Q. Do you understand why it is that, as you |

testified, a status as OK supplier to one of the major vehicle

manufacturers. is ‘necessary for an after market position?

A, Well, I thought I covered that, but maybe I will cover ~

it'a different way, inv terms of it as a matter of acceptance _

first. )

“Kt SocdaX have a linear relationship to oe many spark

plugs you sell in the after market exactly, but it doos have

- an effect.

“<Service stations do ial want to take upon themselves,

_ generally, the responsibility of putting what is considered

to be an integral part of the engine something in that might

- not work, that might—if you break off the bottom of a spark

plug in an engine, you can ruin an engine very easily. So ©

7 therefore ~s are a little prone when i in doubt, unless they .

~

—_——

_—

~v

68a

“Robert H, Davies—Direct Examination. oN gy *

are experts themselves, to try to use the spark plug that

_the manufacturer originally put into the unit.

‘‘On the other hand, that is not linear; some of. them will

—who are. knowledgeable snough, may: put in, if they .are

sure of the right plug, it [936] might ies an AC spark plug.

into a Ford,car 6r vice versa..

- «This is the main reason why if you are. not an original

equipment manufacturer of spark plugs forthe original -

equipment, you are looked u maybe giving the man a

problem, who to put the spark plugin. He is taking’a

y putting. it a and it is one that is very difficult to

2 overcome.

‘Tf you lose your. stato as an original equipment sup-

plier, people remember that you did work with an original

" equipment supplier and you may be able to sustain a certain

amount of business on that basis, but it is because—the

‘feeling is thet you have ‘been completely tested by the com-

pany who is using your spark plugs, therefore they are

not really taking much risk by stocking your spark plugs

by supplying, even on other cars, although there is a

tendency to try to keep it on the car that you supplied it for.

“(Q. Well; if, say, Chrysler had: switched to Champion

because Ford had integrated its supply, so that Champiéh

for Chrysler, AC, and Ford Motor Company as an original :

sequipment supplier for itself— A. Right. « ae

[937] ‘*Q. —were. competing in the after market with

you, who did not. have OF status, how long do you think you

_ could have sustained a major position in the after market?

A. It would ‘start declining almost immediately, but we

considered some of these things from time to time, and we

figured that probably steady declifte for five years, where |

‘you might arrive at a plateau which would be ‘now, not

much different; you’d have some advantage because people

s remetuher that you were an original pepe, but you

a .

a

eh

. Robert H. Davies—Direet Examination

éactaaats wouldn't be in ‘tho: santo position you ware

originally. ~

‘*Now, this might be a little different bebween us ‘and

Champion. Champion wore the leaders; we wero not. We

were number three. We were down the line, and a poor

"- = three in the senso of dollar volume, compared to the others.

~ 'Pherefore, our problem was a little more difficult. Cham-

pion might have a better opportunity to give it a go because ©

they have the major distribution already, and—but at tho .

samme time they, because they don’t know that this is true, —

they would be‘desperate to maintain this position as an

. original equipment supplier, and would do almost anything

[938] to-do that.. ~~

- **Qne good piece of evidence of that is that as-of this

-*particular. point in time, Champion has changed a lot of «|

ff their policies. .They won’t make a private brand plug ap’

/ ‘toa certain point because they were maintaining the

Champion, but they started to make a few private brand — ;

plugs as a hedge, I believe, ang.oven f in the case of Chrysler -

-—Chrysler has—started a MoPar brand which Champion,

I: feel, feels forced to supply to maintain. its position to

continue to sell ‘Champion spark plugs throngh Casyslet. os *

® e e ee:

rei « “Q, You indicated that you thought that baiiwiten

| were trending in the ditection of private brands, and you °.

testified that your use of the Autolite brand on spark plugs

had the problem that you have just mentioned, in‘the event

that you might lose the original equipment status. _ 6

“Under these circumstances, what was your view as to.

the future of the Autolite brand at’ the time, 1959, 1960?

A. It became—we became painfully aware of the\fact that —

we were supporting a situation which had very limited

= for ms and yet we were—rather forced to 'to maintain

<

-—6«a Ct

Robert Hi. Davies—Direct Ezamination

it wo it iad some “ales as time went on, perhaps waiting for .

a miracle ‘and hoping that there would be some way that ~

would become clear to us as to how to take advantage of :

the name that-we had, .

Wo had a prétty good name in our “Autolite brand, ‘but :

it was deteriorating, and we did try to put, as I said, put

-more into it in advertising, even, to, see # that would do |

. anything, with very little success. —

“Q.-You stated your problems as you saw them we

‘*What actions did:you take, as far as you can recall, to

meet these problems? .[942] A. Well, as I mentioned.

hefore, the first thing we tried to do is to get more spark.

plug business. We did this by making solicitations to prac-

tically all of the OKM customers, of course, except General °

Motors, who had their ‘own, and we went to gvery one of

them and tried to get more business on’ the OEM basis to

offset anything that we might possibly lose at Chrysler.

We did increase our ‘advertising budget.in our spark

. plug’ area, to. see if we could get on more shelves, attract

_ more hesiness from the, after market, and try to increase ;

: ment plug than we were. ‘So we felt if we could close that.

our. position. .

‘One of the things that we knew was that, in uals :

t6 the amount of original equipment plugs Champion sold —

to the amount of original equipment plugs that we sold,

Champion was getting more business per original equip-

gap a little through advertising, and—it might be some aid

to us; we were not able to do much i in that direction. We a

- did a little, but not much.

The other thin I suppose you ‘wait: me ‘to develop all |

2 cr |

a if Robert i. ; Daview-Direot Keamination

rae) “Q Now, you mhentlotied as one of the thinuge you -

_ did, in order te try to meet thone problema, was to appreach —

" Ford Motor Company to have them buy more otuft from :

pens haines night A. Yeu | fh} ee,

“Q, Do you remember thatt, A. You ge

~— *Q, Did those discussions lead to anything? A, Well,

“we had a lot of discussions, Most of the early discussions»

. were done by dub .aales people, who were involved there,

and they put on presentations, and they saw many different,’

people, and dhe engineers, parts people, and did all kinds of

gales—amade all kinds of sales efforts to get some of this

business, And in the process Wwe had an opportunity to

“talk to niany of the executives, and try to impress thet

with the fact that we wanted to get some of this business,

“We didn’t ‘meet with too much encouragement, some

“« eheouragement by some people, but it was going.to be a.

- long haul the way we could ace it,

; ve HQ Did disvussions ultimately develop one way or r EMO]

“another AL Well

HQ, sathat looked toward purchase of all or part of the

7 Blectric Autolite assets. A. Well, as the discussions wont

o on, we pretty tnuch exposed our problem to Ford as to |

| - reasofis why we felt we had to go—get more businoss,‘and

pr also made the. point that we would be'a darn sie.

er to them because we needed them so bad, and they—-

aa ultimately, I don’t know“vhether we—what happened, .

|; . bait it kind ef bubbles up out of this, that—well, perhaps we

should go into a joint venture on some basis. ©

‘We were getting really kind of desperate. i in terms of

acquiring some kind of further business, and so the—out of _-

the discussion came the talk of possible acquisition, and’

Feerk led ‘eventually to a formal meeting concerning this, °

- where we discussed it in depth, and we talked about, ‘Well,

what about bah whole epany at one time.’ And these. :

ES

Tae”

pe

2

~.

- WG didn’t put the spark plug facility in it.

~ . s

fae cM Sa

s+ | Robert, Daview—Dieoot Heamination

-+ + é é . . a

‘discussions went on for a period-of six months: of #0, off and

on, with us not finding any real common ground to do this.

~ — Tt was a great deal of mistindorstanding in terms of what

it wold take to do the job, and over a poriod of six months,

‘| {OKO} think they—the Ford ppdple began to. learn our.

problema in depth and-we began to realize what they wanted

in depth, and «0 we finally arrived ata position which we

gould both compromise on and came up with tfis—the deal

-that wax consummated, - | °

Q,. Aid the deal that. was.consum

mated included & park

~ plug plant, did ft not? A. That's right. as

“Q, And which one was that? -A. Fostoria. |

- wQycAnd that loft you with tho Decstur, Alabama plant,

or hadn't you gotten that yet? A. Wo had the Decatur, but

. os

mee

“Qi You did that ‘subsequently? A. You.

“Q, Did you have a plant outside the United Statos that .

Fe manufactured spark plugs? A. Yos, in Canada, =

—“O> Where is that? A. Sarnia, Ontario.”’

oe * ‘ @ Oe,

(961) “Q./ And what else was incl

"plug plant, the Avfolite brand name, apd worked in a—we

‘. had @ distribution system that went with Autolite—all

: - Autolite parts, The, after market-— ees ae

’ y ‘distribution system’, do you mean the, contact .

with ABA warehouses that you mentioned? A. Right. ..

. — “Q, And with anybody‘else; any jobbers or anybody?, A. —

6Q, }

in this particular case, all of the distribution far spark

s

« va

4 o'', ; ae . .

t= ow @ x. ‘

’ pa iba “ i “-

Fa n . .

ep

| , uded in the deal, do -.’

- you recall? A. Well, yes; we sold a battery ‘plant, a spark.

plugs, Autolite spark plugs, and Autolite batteries, which — |

- ‘would be a combination of jobhgrs and-warehouse distribu-, —

tors, and’ mostly the [952] distributors, for the. Autolite

“Robert H. Davies—Direct Daamination ,

“Q. You were allowed ‘under the agreement, or were you,

_ to sell to these same people. This was—you weren’t giving

an exclusive arrangement? .A. No; we could sell to anyoné

Autolite brand—who wished to continue to buy from us

the Autolite. brand,

““Q. This wag what, spark plugs? A. This was anything

—Q, Anything? “A. Yes. -

' Q. This: wasn’t forever, was it, the Autolite brand.

You ‘were. selling the Autolite brand, were you not? A. We

-were—in other worts-—- . =

“A. ‘We could sell to anybody i in the origial equipment,

who had been buying from us! ‘

“Q- For example, taking the warehouse distributors

‘--whose contracts, or whatever it’ was, you turned over in

- connection with the acquisition, could you sell to them under”

_ the Prestolite brand, for example? A. ‘Yes.

**Q. Could you sell any other brand to them thatAjon

[953] wanted to? A. Yes.

“*Q. As far as: your, spark plug people were eontarien: if

you were to sell Prestolite spark plugs, was there any re-

striction on where you could sell those? A. N 0, no restric-

tion. _ ‘ ;

“<Q. Was there any restriction on where you could sell

batteries under. any name you wanted except Autolite? A.

No restriction. ]

“Q. So really you ‘were introducing certain distribuitors

to Ford Motor Company but were free to sell them your- .

self? A. Yes. , \

—Q. After that? A. That is correct.

‘““Q. Indeed, I think you testified earlier that the AEA

warehouses now carriéd Prestolite parts; do they not? A.

Right. |

PO ee

f™ 69a .

Robert H. Davies—Direct Examination 4

**Q. Did you also sell any service parts inventory to

Ford in connection with the acquisition? A. Yes, we sold _

them:a base inventory so they, could properly service the - 7

accounts for the Autolite brand, and then supplied further .

Autolite parts to [954] keep the inventory up to date. . ~

“*Q. With respect to those service parts that you sold,

were .they substantially contained. in ca 1900 Autolite

catalogue,— A; Yes.

‘<Q. —which we earlier introduced here?. A. There were :

- some parts we left out of there because they had become old

. and obsolete, and we didn’t feel: it was necessary.””. _

- Mr. Shapiro: Yeur Honor, the reference ‘there is

to F- 2a, the reference to the 1960 Autolite catalog. -

- QI suppose there were some nuts and bolts or. some-

thing that were included? A. That’s right. And we would

be in a position to supply those if they got.an order for

them, but it wasn’t necessary for them to carry «it.

~ **Q, Was there ever any talk in the course of } your nego-

tiations about selling assets and not-including the Autolite

trademark? A. Yes, there was—this held up—held-up the —

discussions, the negotiations, a great ainount because Ford.

thought, well, they said-we have a brand name, we’d like to t

just maybe buy a spark plug plant and a battery plant; and

- we said, ‘Well, from otr [955] standpoint, though, this

would make no sense. First of all the spark plug plant you.

' would like to buy is a hig one, and it would put us out of

. business for.a while until we could build another-one or.get

- this other one completed down in Decatur,- Alabama.

Therefore, if you are going to buy spark plug plants, you

_. have to buy the Autolite name, too, nas we arate * be

_ able to be supplied properly.’ :

And so they couldn’t understand this. They said, ‘We

don’t want tha A Antolite name.’ “This was the early dis-

cussion.

. , 4

cy. = =, ce /

; tw <

Robert H. Davies—Direct Examination —

"480 it: took a long. time to revognine: that the Autolite

' mame had some value to it, and that as ‘far as we were

a)

concerned, the price was going to be the same if it—whether

they bought, the plant alone, or the Autolite—with or with-

out the Autolite name, so that we couldn’t sell particularly

the spark plug plant without : selling the Autolite name —

_ with it.

*Q. Did you consider Clitysler as & sdaidble sliasuaiive

purchaser of, the assets? “A. Yes, but it—at the critical

time, when this was taking place with Ford,:as I under-

" stand it, ‘prior to my time with the company, discussions

had. gone [956] on with Chrysler, but particularly when

_ they were discussing whethér—when they were going into

their own electrical parts business; naturally the thing was,

‘Instead of doing that why don’t you buy our facilities?’ -

And they looked it over, and they said because. of the union |

“ay problem in Toledo, that—an old plant, that they felt that

~ they would be better starting from scratch themselves.

“And— = | ‘

.**Q. Was there any other reason that you know about, ;

that might have prevented Chrysler ‘fr being a pur-

chasert A. No, I don’t think of anytMing, unless they -

didn’t have the money; I apace they had the money—they

built their own.

“<Q. You had mentioned’ ‘earlier something about the

" relationship of the parties on a personal basis, and I~

thought you might— A: Oh, well, it—I think Autolite was

a~—Electric Autolite was in a decline at this particular time

with the then Chrysler management, and I felt that they

probably didn’t want anything more to do with Electric

Autolite as far as getting that deeply involved with them.

They wanted to start out brand new and new aed and new

| processes, and.so forth.”

ve

7 la

° . , Py G

Robert H. Davies—Direct Examination -

“poss “Q, Did you consider that, having inensitaienl the

Autolite name, you would be left with any appropriate

trademark to use in yopr business, or did-you think you =

- had onet A. Well, no, we had two things we wanted to do. .

First of all, we felt that the private brand business had |

never been exploited properly by our own. company, that

_ we could have used it as a fill-in type,of business, and yet -

some of our competitors were making it their main business,

"And we felt that. inasmuch as we were not able to sup-

- port a major brand name, we could support a angderate

’ brand name, such as Préstolite, and—because there are

seme . ‘customers’ that want a brand name, and yet. we .

wouldn’t be faced. with he task of supporting @. major .

brand name.

‘*Now, we could have a let Autolite eee name

trickle Backwards down to that position, [959] but we felt

to do that would have been taking a loss in the capacity in

‘plants and so forth, and that if the route we chose was

better for Electric Autolite and if we ‘had the Prestolite

brand name, it was a question of’maintaining it and maybe ©

giving it a little more emphasis. But we certainly weren’t. _

going to pour the money into it that we poured intg Autolite —

and then-concentrate a lot of our efforts into the privtae

brand business, going after more private brands, and which

we were successful i in doing, getting more of this type of

business,” a er 5 o

. . * . * .s

- “Q. Did you actively -solicit Chrysler as an original -

equipment account? A. Yes. Well, Mopar wouldn’t have

been sold on the same basis:as an original equipment brand.

If you sell a private brand spark plug even to an original .

equipment account, yon sell it on a higher price than you |

would your:own brand name because you are [960] not

going to get _ after market with their name. a, &

.s

ors

‘ .

4

J,

Ta

“Robert H. Davies—Direct ‘Béamination

4g, if they wore to uso the Prestolite brand naine, would |

you sell to them at the regular: original equipment price?

- AvcIf they would give us an ordg# in volume, yes; not a

small one, But one that would make it worth gur while, we

would have done it. When 1 was there wo: wottld have,

*Q. When you were iene Af am talking now about

1964, “A. Right.

-“Q, You were there throughout that entire serio’ L

think? A. But I was not too active in the last part.

Q. During the period that you were active in 1964,

' “would you have taken on Chrysler as an original equipment

&

account if it had been available to yout A. Yes.” As an -

original equipment account. In a volume at least-for some -

‘proportions. to make it worthwhile—obviously not 10 per |

cent of their business.

“Q. Were you in a position to do this? Did you have

_the capacity to do itt A. We had the ‘potential capacity.

We had—we could have started off on some percentage and

_ we-had [961] methods of pushing our capacity up by

_ ° ordering numerous more machinery and so forth, but we

- eertaihly had the technical capacity.

**We had the capacity to t them < that basis; we.

" would: have eventually had to expand to take care of the

_whale requirement, plus the after market.

- **Q. Did you have available’any equipment with which -

you could have made ceramics? A. Yes, we had in storage

_ whole ceramic ts which would have been able to be put

| into operation. We found it more economical to. purchase

*- @ur ceramics, but we felt if our volume ever got to.acertain _

point and we wanted to go into our own ceramics, we had |

this plant in storage which se be put into r pesenrgt ina

“fairly short time.

“<Q. Do you know what the source 5 of that ceramic plant.

- wast. A. This was B & G@ spark plugs; they liquidatéd part :

wr

24

“

i)

78a

%

\ ober H, Davies—Direot Beswinelion-

| of their—I guose all their facilities, 1 believe, ond we picked |

up: the ceramic plant in the process.

*Q. Do ‘you know the ica A. 1963 or 1964; 1963, I

think. :

a, Did you talk to sapelie yourself at Chrysler abéet

head of their purchasing, Mr. Daley.

Q, Did anybody else in. the. Eltra organization talk to

anybody, as far as you know? A. Yes, 1 am sure people— |

other people talked to Mr. Hartig, and maybe some of his.

_ people in the purchasing department, and the engineers -

have been talked to.

“Q, You made, I suppose, a bid for that biisiness! A. -

Right.

- Q, And were you prepared to oe the business if it

| had come to you. Is that right? A. That’s right.

**Q, As far-as you know, would Eltra be willing ¢o supply

Mopar spark plugs hse nel if medias wanted them at

any timet ‘A. Yes.” 7

: * ** * Paicast ae

[963] ‘‘Q. I think I asked you this question before, what

the capacity of the Fostoria plant is. I think you said you .

_ didn’t know. A. I didn ’t know, but I would assume—I

“mean, we were doing some $22 million worth of business at

that time. Ii imagine we could have put out thirty ” thirty- |

five million dollars worth of business. —~

J “‘Q. Does half a million plugs a day sound right as a

' capacity figure? A. I think that’s about right, yes.

“Q: In your opinion, could the Fostoria plant, with its -

eapacity, been run scometieeny, without a Fr vehicle. OE.

_ sioco fA. ‘No. a

_ ‘

the possibility of becoming their original equipmen i

.. gupplier, any time after 19611 A.

“‘Q. With whom did yow talk? ‘A. Mr. Hartig, who is

as

co

rari

Robert H. Davies—Direct Examination —

**Q.: Getting into ‘the. technical area a little bit, “Mr.

Davies, what is the: heat range problem that people talk

. about in the spark plugs business? A. Well, engines— .

~~~" engines are built differently, and have different-kinds-of...-.

capacities, and also how the engines are used. We have

what we call.a-cold [964] plug and a hot plug, and the hot

plug is one—it’s got to be inversely proportional—is one

- where the engine doesn’t ever get very hot, so you want a

~ ~-plug that will give a good spark and will do a good job

| under cold situations.

‘‘So that in the framework of hot plug and cold plug, it

- depends: on what situation that you are—that you want.

A hot plug—in terms of a hot spark, however, when it gets

_ into the area—thermal conductivity i is what you are talking

about. Ms

— ‘We actually use cold plugs for racing engines, for exam-

_ ple, because of the fact that the temperature inside the

combustion chamber gets so hot that on a plug that would |

- get incandescent on the plug, and you get pre-firing on the

. ‘plug and you want what we call a cold plug to = it from .

firing: when it gets hot.

~*°T¢ has high thermal conductivity ; it cues the heat away .

quickly, and more or less buries the sparking element in ;

~~ shell so that it is not that way out in the gas stream.

‘So that hot and cold plugs are—difféerent engines re-

quire hot plugs or cold plugs. A.little old lady who drives

to the store once a day and never gets her engine hot hasa’ -

_ problem.’. She needs [965] a hot plug, so that she can— -

doesn’t foul up and corrode—corrode out, and get a lot of

condensation on it when it is shut-down, so you need a -

different kind of plug for her than you have with the young

fellow who may want to zip around the corner quite fast.

. *Q. Now, to get a particular degree of thermal con-~—

ductivity, what is the characteristic of the ceramic that is.

Po

wr.

. ‘ "-Robert H. Davieo—Direct Examination - —

important! A. There § are several ways of doing it. Chem- .

ically you change the chemical content,; and one of the ways

of doing it-is to put—before the ceramic is fired, is to put

material in there that when it ig put together before it is

* fired is organic in nature, or wiif'vaporize, when it is fired

- it will leave hollows in the hollow spots inside—make it

porous so that you get a better thermal insulation. .

‘‘Q..So, in other words, the thermal conductivity is a.

function of the relative porosity of .the ceramic; is. that

right? A. Porosity and also some chemical elements, some

chemical elements will have more race J or less de-

’ pending on what they are.

‘‘There are two ways of doing it, and both of [966] them

are usually combined as you range from hot plug to a cold

plug.

‘*Q. If the plug is niore porous, does that 1 mean that it

will be a hotter plug or would it be a colder plug? A. It

. would be a—if.it is mere porous, it would be a hotter plug.

““Q. Yes, it would ‘be a _ good conductor? . A.. That’s

right. - |

*Q, And if the saroaity were less, then it would, be,a

colder plug because it would be a better thermal conductor: j

is that right? A. That’s right. ;

“Q. And to get the degree of porosity that you 8 are ‘talk- |

ing- about, you would put certain organic. elements in the |

mix? A. That’s right.

- *Q,- And get the conie of porosity that you. wanted!

A. Right: |

‘<Q. You mentioned sist that it took quite a long time

for Electric Antatte to ney its plug for -Chrysler— A..

Yes.

~ Q, —when hey fret went in? A. Yes. :

[967] ‘‘Q. Is there a-general close relationship: ‘between

the engineers who engineer a plug and the engineers who

Téa

Robert H. Davies—Direct Examination

engineer an engine in order to qualify. a spark plug! A,/

Yes, This is usually a very close liaison between the two

- groups, and it takes quite a bit of trial and error_also to_

' get the right heat range for an — to —_— under ‘all

circumstances. °

**In fact, some of them do not have to changégspark plugs ~*~

to different conditions sometimes, because the heat rahge is—

not adequate for tlie whole range of operation At ; might be

‘subjected to.

~_ **Q. So/you say the trial and errgr is 5 the way in whieh it

isdonet A. Yes. It is an art rather than a science, really.

**Q. Now, dees that mean that you, as a spark plug manu-

-. facturer, could not pick up a—say, an AC spark plug, and

duplicate it exactly so that your plug would be as well quali-

fied as the AC, plug for General Motors vehicles? A: You -

~ mean to their engineers’ satisfaction?

. *Q. Yes. A. Without the liaison and so forth, we might

come up with one that is as good and would pass, but would

not have the same chemical contents or— [968] but we

would end up with the same result in the engine. I mean—

“@ Function?. A. Same function. _But we couldn’t—in

fact, if you even gave me the chemical formuia I might not

be able to do it, because you have to Know the heating cycle

and a lot of things about it, what the grain size of, the

ceramic is and a lot of things about it... o

**So come up with—so I guess your question is, if we saw |

a General Motors plug and we wanted to come up with one

_ equal to it, could we do it.in a vacuum, I mean, without any _

‘help from General Motors. But we might do it with what .

we think is the plug that we think is good enough ;- whether

_ their engineers might think so or not, we don’t know, but

we’d feel that we could market it on the after market. |

‘“Q. You could-market it on the after inarket, but do you

ee Motors

‘on ee 0, Me |

Robert H DasiensOrues Evamination - ay ae

car,-or woulf the engineers of General Motors think it as

good\as the AC plug?. A. You are boxing meg i in here-——

“QT realize the problem. . But what I mean is: Is all

- - this work among engineers for naught, or is [969] there

\ some valug to it? A. There is some value to it, definitely. apne

‘*Q.. Right, A. But there are—and there are areas of |

conflict whieh the customer always wins, but sometimes the

supplier doegn’t think he is particularly. right. But.never-

theless you need that—you need that engineer’s—the engi-

@crirng—the, customer’s engineering approval before you

- can be considered an\original equipment supplier. _ —

‘\Q. And, as you have testified, the question of whether .

you\are an original equipment supplier or not is related to

the pw are of whether your spark plug is acceptable in ~

the after market; is that correct? A. That is correct.””

\ ie, . o ° ®

CROSS EXAMINATION = = 2 « *

ee See Pe ee Pe his |

[972] ‘‘Q. Now, getting back, you\indicated that at one.

time, you had gone to Ford—I think it is Ford Exhibit 3—

-and presented a plan to them to sell them some spark plugs; 7

is that correct?” A. I didn’t, but our people did, yes. :

“*Q. I am sorry ; did you enter inte those negotiations?

A. No. |

“Q, Were you present per those negotiations? Y Sees

- No, not that particular one that you.are talking about. This -—

was & sales presentgtion to the Ford Motor Company. .

‘‘Q. Then you had testified previously that, during the

presentation, or sometime thereafter, you. discussed ae

them the sale of Autolite spark plugs to Ford Motor Co

pany, is that correct? A. This was not during ea\

presentation. | < soe Oe ee

a

" Robert H. Davies—Cross Bzamination : 7 .

3 “Wwe had enyiecink mean, our salos people Were off their

doorstep almost.daily, talking to.anybody who would listen

to us, both engineers, purchasing people, even thoir sales —

~ people, high pers) up in management as they could get, to:

try: to get an order for spark plugs. .

. And out of thie it is kind of hazy as’to. exactly what

‘happened,/but out of this camo-tho word back that, well,

some -of the people at Ford wonder why we. don’t get -

‘ together/and work something out on‘a joint venture.

” then we were-cager to talk anything in terms at

point. 7

t remember exactly how the thing worked out, but 7

| 47 got involved in a meeting with several of the Ford people

“and. we had a discussion with them,

ticular point, 8o that we organized 1 a perme meeting , _

**Q. And when you went to Ford originally you wore, os

trying to increase your epark plug sales, is- that correct!

A.Yes.

“*Q. Did you go to General Motorst A. Oh, no, because

they make their own- apark plugs. General Motogs makes |

their own,, |

+ We went to everybody else, shevigh:»chsnaticos Motors,

Studebaker, ‘International-Harvester—everybody, to in- .

~ crease our percentage. It was our dependence on ici darel

that was worrying us.”’

OQ. te e. te me

: p74} My To .your. ‘mbwledge, did anybody beat: the

_ .dram ‘for Chrysler’s. business? A. Oh, yes,—well, there

_ were always people knocking on the door there. We know

_ that a-lot of small manufacturers particularly—I don’t

‘know whether Champion—we et that shen used to knock | a

5 on Chrysler’ 8 door.

9a uy . aS - ? a

Robert H. etaplibitin Bzamination

Soy “But, whiethor they felt that-whethor thoy were sing it : ae

this time, ‘I jtist don’t know.

- “T know that we had heard a ramor that: they had r6-.

ooived a request for a-bid a couple of times from Chrysler, ~

" but whether it was just-a testing to see what oad prise was; wae

or what it was, I don’t know.

Q Your original: equipment price, of courss, was always |

_ below your cost price, is that correct? A, That is right.

[975] ‘‘Q. That was to Chrysler? A. To Chrysler, yes,

. orto anybody. It was offered to any of the original >

mont manufacturers-on the samo basis.

4Q, And just to make it clear, why would you sell below

- your cost- “pri¢e on original equipment? A. Well, as I said, —

we followed a pattern that had beén set by Champion many

years ago, and the basic objective, I suppose their basic

objective was ore of two things:

“One was that by giving this low price to, the sataidbng

turer, the manufacturer himsélf wouldn’t be-—wouldn’t par-

~ ticularly want to get into ~ business ; he was getting it

below cost.

976] “And at the same e time it was to stadt the position,

‘of being an original equipment, so that when it got out into

‘the field, when it came into a service station some place,

people would see a Champion spark plug or Autolite spark

plug in that engine, and have a —* to replace: that —

with a like plug.

=)

‘*And because you get ‘somewheres etwoen beven and

ten replacemeritix:in the lifetime of a ear, for every one that

you put in on oft@inal equipment, the obvious point is if you.

could sell one real’ cheap, and, sell ten on the outside at full

price, and consolidate yourself in the business this way, it «.

was a. desirable thing to do.” , ) -°

F » .

o ® * @ s

»

3

80a

Robert H. Davies—Cross Examination’

ae “Q, Now, dusite ‘the course of the. conversations,. as I

understand it, you entered into the negotiations with Ford.

Now, was this for the sale of the spark wugs, or was it for

the sale of your business? A.. Well, you mean‘at what —_ |

. ‘we were starting out to sell spark plugs originally? ,

4*Q. That is right. A. By osmosis, it developed into |

talking joint merger [977] or joint venture as some method

of approach which, as each one of these things came up as

possibilities, people found reasons, ‘Well, that won’t work

so good because’—then we would go on to another thing.

‘* And finally,-at one point, we even discussed that ‘Maybe

what we ought to do is buy the Electric Autolite Company, :

and then we discussed that.

_\‘And then, it didn’t seem like a logicafmove. We didn’t

\ want to sell the whole company, to‘begin with.

“Originally, we didn’t want to sell the spark plug pusi- >

- ness». Then the more we got-to thinking about the problem,

" what: were going to do if we didn’t do AEG e like this

of this thing—we sere going to be a little bit wrong no- : |

matter, what we did—wag.to go on the route to try to sell _

_ Ford Motor Company tlie Autolite name, a spark ‘plug plant.

or battery plant, but te go into the iness ourselves, and _.

go in on the basis of the private bran approach and get

. out from under this tremendous burden of carrying this

ren large sales organization, this large expenditure for

advertising which we were spending several million dollars

& year for, and put that into the hands of somebody who

oS had a track for this racehorse to run on. We had lost our

track: |

-*Q. Who from’ Ford suggested that. you ‘sell ‘diene. the

‘Autolite. business? A. It’s difficult to: Temember which |

- Person, boca, we were sitting around like we are here—.

to

_ _ Sia

oo Rgprt H. Davies—Cross Examination

4Q, I am not trying to pin aie any one person. oes |

there a couple of people from Ford who told you it might ~ |

be a good idea for them to purchase your business? A. :

Well, remember, this started down in the—with _the- sales.

groups first. I mean, this was where they kicked around -

with people who, you might say, wouldn’t be in a position '

to make any policy for either company really, but they—

“you know, they kicked around and kind of promoted the

idea of joint venture, and ‘Maybe we ought to buy ae out,’

or something like that.

‘‘And then, by the time it bubbled to the top of their

organization and the top of our organization, and we did —

finally get a formal meeting, the meeting was to discuss, —

in principle, not selling [979]. spark plugs but the possible

joint venture or sell-out of our spark ‘plug business with

this group. _ | :

“So, you might say, who started—it was really’ started:

‘down ‘the line, and by the time it got to us, we were ready |

to talk“not about selling: spark plugs any more, because

_ they had—we had pretty well been discouraged—‘ Well, if

we shift over, we will have a-lot of problems and have two _

_ suppliers’—so we decided that maybe this is the only route

* e

we were ® going to get*anyplate on.”’

‘ - ca * oe ws e . -_

[98139 Allright + sak,

‘**Now, let me‘ ask you: But you sold your apa spark

plug plant, right! A. Yes,. but with the understanding, | |

though, that we were going to build another-one.

**Q. When did this understanding come out? A, And — 7

they would take care'of our néeds during the time; “antil we

‘built a new one. —

Well, this happened prior to the agreement.

x ‘

ou

3 pau : o2a |

a

Robert H. Davito—Cross Examination

**Q, Well, let me alk you this: You built your Decatur, |

Alabama plant: when, 1960? A. Right, yes. ~

Q. Originally, was that’ pa built for making spark =

plugst A. No. | |

' “Q. When did you decide to make spark plugs there?

A. In—while we were negotiating, we said, ‘Look, if we sell —

you this plant, we’ve got certain customers we have got to

take care of and we want to muintain after this thing is

over. . We can probably get by for a while with you con-

-tinuing ‘to supply. But we have to get, as quickly as pos-

sible, a-plant i in shape to do it.’>

[982] ‘‘And we had space in the Decatur plant to do it

so we went in there and put the spark plug section in 7

- there. 48 thet a

* ° . @ * *

“Q, If’you are going to manufacture « ceramics for spark

. plugs, is it necessary to have a large volume of business to

< operate a ceramics plant?’ A. Well, it doesn’t—well, in

our particular case, it would have—I don’t know.

‘“‘There are two kinds of plants, ceramics plants. And

the type we had at. Fostoria—this was another one of our

problema&.at Fostoria, and one of the reasons that decline

would be a problem for us.

” 4*We had a plant.there that needed a large—a se ,

- &, larger minimum volume than the kind of plant you can

build which is on more of a module. basis, where you can

set up a module of a ceramics plant and Bay, ‘All right, we

will produce two million.’

“This wil] be big enough to produce two million a year.

hig. if- you want more, you add £983] another module |

_.to produce two million. |

**At Fostoria, you had to run the ‘whole plant, or run

- none of it, practically, where, as you didn’t have modules, |

you ‘could shut down or you had to run the whole thing.’

83a fe

Robert H. Davies—Cross Examination

‘‘Now, it was a little, we-felt at the time—at least, Bob

Twells felt that we had a little ‘more efficiency with this

type of thing. But we didn’t have the flexibility. |

‘‘So that, if we ever got cut in half by anybody, we-would

be in trouble cost-wise, with this particular operation.”’ |

e

@ e e° @ °.

— Q, One thing that has puzzled me a little bit, ‘Mr.

Davies, is that, in the-agreement ‘that you entered with

Ford, you sold all of your spark plug facilities other than —

your Canadian facility, and yet, as I understand the agree-

ment—and I am not sure I understand it cleagly, you were,

still required to. furnish plugs for Ford Motor oor ach

-**Ts that correct?

‘*A. Correct.

‘“‘Q. Could yon enlighten me on that. How can you fur-

nish plugs to Ford Motor Company when you ‘have. no.

- [984] facilities for manufacturing plugs? A.' ‘Well, we— -

the agreement was set that when we did get our se

we would start to manufacture plugs. - |

_ §Q, And you did build your facilities, and you have been

furnishing plugs to Ford? A. Yes.

. “We don’t supply them any more, I don’t believe. = 8 ‘§

_ *Q, And when did you quit supplying, do you know? ~ |

A. I think at the end of, a—we had a two-year. contract

with them, and I think at the end of that contract is when

we finished—I think that contract was set up—it wasn’t .

- necessarily two years. It was two years and/or so many

plugs—I have forgotten the —_ ‘volume or the amount —

ofplugs. . .~

_ “But at the end of that year, or at the end of: that con-

tract was when we stopped supplying them plugs. And I —

don’t believe we have supplied any since.

**Q. Why did you enter into such an agreement as to ‘

furnish plugs, when you weren t: -even in the business,

®

a4

Sha

Robert H. Davies—Cross Examination

apparently, ‘when you sold the company? A. Well, the

point of it was that when’ we were talking price. in this -

area, this got into the price [985] situation. So y* asked

for one figure, and they talked another. one, and“we kept

batting it back and forth and exchanging things a little

bit here and there, to sweeten it up for either side and

try to. get it without giving out cash sometimes, and so amet

we—

‘In other words, when you are starting a riew plant : up,

it would be awfully nice to have an order that would sal -

into this situation and nevertheless, so.that—

. “I think price got somewhere within the. range that we

knew that, to take some of our starting-up costs, if we could

‘get an. order, maybe we .could—. .

‘‘Now, we didn’t—I’m- not sure we told Ford this,

but in our mind, we said, ‘Well, if we get this and start .

up on this plant, this would be a savings to us. So then,

maybe what we ought to do is try and get an order for

spark plugs from Ford so we can get this plant started

properly,’ which we were finally able to do. 7

~ §Q. So that, in effect, the Ford purchase order really

put you into the spark plug business? A. Well, we had

other customers, but it sure gave us a lift.”’ _

e e 2 + e

. [986] ‘‘Q. Now, I realize this is, all hearsay because you

were.not with the Electric Autolité Company when Chrysler

started buying plugs from Autolite. A. Right: :

- Q. But, since you testified to this before, do you know

why Chrysler wanted Autolite to go into the manufacture of

‘spark plugs for Chrysler? A..I think that primarily was

that Chrysler—it is my understanding, in the early days -

_ of this relationship between Autolite and Chrysler, that _

_ they used Autolite almost as if it were a division of Chrys-

; . %

Robert Hi: Davies—Cross Examination |

ler. And, although I don’t believe there was any corporate

relationship, or stockholdings back and forth, or anything

like that, they found it useful, due to the closeness of the

two organizations, to use Autolite to get into areas where

they felt there wasn’t enough competition in this—in a

specific area: :

“And-bumpers were one of these, that I iia to know»

that they—and I believe this follows [987] through: with

the spark plug at-that particular time.. 7

‘*I think Champion and AC dominated the overall spark

plug thing.- There were a few other small suppliers, but

’ none which seemed to be qualified to Chrysler’s viewpoint.

' . And I think that they wanted to, by putting us into the

business, have another - source of supply, and: somebody

who they were a little closer-to, as well.’

“@ a) _@ - @ *

““Q. Now, also, I think you testified that the Fostoria

| plant could not be—could not be run economically, without

a major OE account. . You ‘testified to that, isn’t that 7

correct? A. The Fostoria plant, ‘yes.

“*Q. And this, of course, would be when you were Presi-

dent of Electric Autolite? “A. Correct.

‘Q. Now, by that do you mean that you had to have a

[oak volume amount to economically operate the Fostoria .

Plant?’ A. That is right; and I felt we couldn’t get that

voliime amount unless we had an a OB customer, a major OE

" customer. | ;

: *

7 .

. Well, let me put it =e you a this way: If you wailed

_to open a ceramics operation right now, or if Eltra did,

do you think that there would be anybody at AC or Cham-

pion or Ford that they could hire to handle it without . |

taking the: ‘top man evita from either of those companies?

e

88a

Robert H, Davies—Crose Bromination

A. Yes, there would be peeple that you could hire. 1 mean,

there isn’t just pne man that knows the secret. There are

several of them. I think we had six or eight peeple that

were well known inthe ceramic art particularly, which is - | Sh

- the most difficult; There are fewer coramic people around

than metal working people.

-**Q, Among the three companies that are the lereuik

*: AC, Champion and Ford, right now—would you say [989]

that there are @ pool of people that would be available to

be hired to run a éeramics plant? A. Oh, yes. -

“Q. When Mr. Twells left, did he leave behind any

people in your organisation that would know how to do

it? A. One in particular, who is in-Canada, which we had

thought we would bring down to the States if we ever got.

into this picture; and then two or three others, who would

‘make good assistants to this particular chap.’’ |

. =o e e e °

(996) “*Q.. In ‘connection with your distribution of spark.

_ plugs, other than by sales to Chrysler of spark plugs for

replacement— A. Yes? _.. |

' Q, What distribution did you iavet A. Well, we had

a combination of AEA distributors—warehouse. distribu-.

- tors—and other big time jobbers, big jobbers that distributed

our spark plugs. Plus we sold—I can’t remember what |

date some of these things occurred—but. we sold spark -

plugs also to Firestone and Goodyear under their brand

. mame sometimes, and sometimes under Autolite.. :

And T believe both companies sold—particularly Good- -

year—soli both Autolite and Goodyear spark plugs for a —

_ while, and then we sold some to Atlas, under the-Atlas—

I mean Standard Oil, under the Atlas brand..

_ 2997] ‘‘But primarily our biggest distribution was the

- warehouse distributors of the AEA, plus these big jobbers,

oF

Sta

Robert H. Davies—Oross Examination

2 who in turn sold to the. smaller jobbers and othior retail

‘outlets. — °

“Q. Now, the Autolite spark plugs that you sold: in the .

after market to the AEA warehouses and these big jobbers,

were they the same part numbers and the same spark Plugs,

\\

in effect, that were sold to Chrysler for original equip- 7

ment, and to other original equipment companies? A. That

one, plus others that we made. This was not in the same

- concept as the AEA original parts; we did make a full line

of spark plugs that would fit any ear. But the Chrysler

, apatk plug nunibers would be in this group.

‘**Q. Do you have any idea what proportion of spark -

plugs that were sold in the after market were identical to -

_ spark plugs that were sold for original equipment use?

| A. I am sure we have those Agnres, | but I couldn’t give

them to you. _—

‘**Q. You don’t have any— A. Ican t get any true recol- |

lection of what that would amount to. :

-/“Q,- Would you say: it was the great iaadaeey ‘of the

[998] spark plugs sold? A. I know it was a majority. But

I am not. ‘sure it was a great majority. But it was a

- majority.

“Q. Did you sell to any other group of anion =

besides AEA, such as the AWDD or others, or were ware-

-house distributor sales through the AEA. only? A. To-

wards the.end that—we were almost signing up everybody

who would distribute, we may have had some AWDD.

“*Q. By the ‘end’, what do you mean! A. We were

trying to expand ourselves in this market and anybody

that would take our line, in 1959 through 1961, we were

pushing to’ get them to take the line.

“We ‘were going into multiple distribution i in ia same

territories, even.’ it | or

‘

a ; ° .. e e .

Robert H. Davies—Cross Examination

[1014] ‘*Q. And when you went to Ford seiataally,. you

were [1015] trying to increase your spark plug sales, is

that correct? A. Yes.

“Q, Did you go to General Motors? A. Oh, no, because

‘ they make their own spark plugs. General Motors makes

their own.

- -**We Went to everybody else, though—Ameri¢an Motors,

Studebaker, International-Harvester—everybody, to in- —

crease our percentage. It was our dependence on Chrysler

that was worrying us.

-* “Q, So you went to everyone wie didn’t make their own .

spark plugs? A. That is right. . :

‘‘Q. If you were in business today, would you go to. Ford

Motor Company? A. If I were in business—

**Q. You are in business today of making oe" ae

is that correct? A. Yes. ;

‘*Q. Have you gone to Ford Motor Company to sell ee _

spark plugs? A. We—we have had some—we ‘don’t feel

today, now, that they have expanded their capacity and so ~

_ forth so that we could get an order thore.- So we don’t Bo

there now.

720169 ‘Q. You said you went to Curyalert A. Chrysler

doesn’t manufacture their own spark plugs. ;

**Q. So you wouldn t go toa aERNOrERN 9 is that cor- .

rect? A. No, no. et

*“Q. Now, if we can go back to the. agreement, or to the

_ gntry into the agreement: First, as I understand it, some

~ of your sales people went to,.Ford and attempted to sell

them on buying your’spark- plugs in addition to buying

Champions or as replacements for ee A. In |

addition to buying Champions. .

**We didn’t expect to replace Champion at Ford: _We

7 merely wanted a percentage.

““We felt that if we could get part of their business, this

would be all we could expect, probably, out of it.

AW

89a

' Robert H. Davies—Crose Examination

“C. Now, on what basis did you think you could ont |

part of Ford’s business? A. Well, Ford went into a pro- =

gram back in—after—sometime in the forties, of having.

<j Swo suppliers for every item, not having just one supplier,

¥ “mainly because of the problems of er strikes and .-

suppliers’ problems. ee

‘‘There was kind of a trend to going to two [1017] sup-

pliers for everything. This was one of the expeptions, ss

They hadn’t done this. 5

‘*So, we felt we could go back and beat the drum a little =

bit and see if we couldn't become a second souree for this

particular item.

AQ To your knowledge, did anybody beat the drum’’—

[1029] ‘‘Q. Now, as his ae Be ace doce e interim

period, say between 1961 and when: you left the company,

-you were buying some ceramics from Fords! is that correct?

A. Right.-

¢Q. And this was peal your Fostoria plant, or ‘the one

‘that ‘had: been your Fostoria. plant; is that correct?. es

A. Right. i [3 ;

: *Q.. Now, was ‘Gecerit Motors manufacturing their own .

ceramics at this time? A, Yes. | .

**Q. Did) you go to General Motors to buy. any

ce

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Appendix — Ford Motor Co. v. United States · 405 U.S. 562 | Frix