# Appendix — Ford Motor Co. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0377%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1972 - **Citation:** 405 U.S. 562 ## 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 -_a — in ; | : " a . F : , | | : . ‘ an | | , ‘ ‘ \ _ . | rm ! | ae . . | | ’ . | « . ; ‘ e¢ \% | ; . , | | | | . * \ 7 : . ; ; — : e : . ° \ 3 . : , ‘ ‘ . | : | : we}, - | . . | | . | . e ; . | | ‘ , t ‘ : | . | . . ° . . : e | . 7 . ad a ; | . ; | | h 7 ! , | 4 ~ 4 _ 7 | .@ v = | . . , | | . . i : | ‘ ° - . | 7 | ¢ , . : | : rr | « . 4 . | e 7 . ’ ) ; . ry 7 | | | . . : | { . 7 _——— 7 ; 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- 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 & | \ \ \ Te 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 agi ——— 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 ep 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. : 4 | : \ : bea - 10a ‘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 ——— - ~ 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 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% — @ 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 a . é Rey 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 - . 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.. ‘ ‘ . ’ 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. ‘ eee ead * P . 6 e — ee . Bd ‘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) * . * .. i \ \ i. 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. | “ 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 ° 4 : . . : . % . tea . © ° e . . - ° : - ° : . . . ° 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 , 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. _ ‘ ; “ 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 ae aie a tthe ® e.- bs e- “ piose] “Q, So ‘that the decline in ae between 1957 7 - on OE—excuse me}; the decline’ of sales: between 1957 and 1961, if there was a decline, was represénted by’ business. oe other than the Fostoria and Owosso ace is that correct? "A. You. .- vy). Qs In other words—. A. Yes. _ ~.» Q.In other words, your sales from your other planti ~ deelined, but the sales from’ Owosso and from Fostoria a remained esate aa A. ‘I would say nore the mms, yes. ea “Q. They. may’ ‘Have: Ticseed a percentage, or tnrensed, “bat they’ were relatively the same? D0sry Ac That 4 , "8, Be that, as: I andacebaul it, ‘at ees some of your _ . other plants were in a decline during the period 1957 to “19611 A. Right | ~ . «Q, And your Fostoria ‘plant and your Owosso plant _ Were, at least, maintaining their own ponies in the mar- - ket? A. Thatistrue. ==; ay! aera Is that correct? A. That is right, 1 EE nag e. e. e. . ee ‘ “0307 “Q, Let’ us. just take 1963 as & year. * &Do you have an estimate | of what perceritage of your | ‘business for spark plugs was represented ot ds this Ford con- | — Would it be halft SAS * was a substantial percentage, but I can’t give | . “Q 15 per cent’ A. I think— arent those e figures available? Neer Robert 4d. Davies—Cross Examination “Q, Iam really not trying to pin you down to it. Would. it be over half, or do you know? A: I am sure it.was at . least half, and— *Q. Probably more? A. Possibly more. I’m wk sinhive. I think you had better let the record show that. ; . _ “Q, T:am not trying to pin you down to a figure, but 7 your recollection is it was at least more than half 1 A. I ——— —_——— thinkso. - . ’ ee “What date did we: nyt: son Wag sett | ‘ Q, This was in 1963. A. 19631 \ “‘Q. Yes.~ A. I think you are right. Probably—I think we were still supplying—yes.”’ cna eee x ~@ ». ©. e. e a X P1041} “A, Essentially, we are not supplying anything » ‘to Chrysler today on spark plugs. . ‘“‘Q. Did they inform you that they were not going to - ‘buy any more spark plugs from you? A. Yes, they. in- _ formed: us that they were not going to buy any spark ‘plugs. — *Q. Did they’ tell you why? “A. Yes. They said it was a policy this. year, a policy decision of, theirs, they didn’t want—they didn’t particularly want any spark plugs, or any, what they call merchandised items, of a competitor on © their equipment, which was the Autolite brand. ‘‘Now, they don’t mind a Ford part that. is buried in ‘the - automobile _somewheres, . but a. [1042] merchandise item such as a battery or a spark plug or shock absorber, one . . . of the things that is widely ised in the after-market, . they didn’t w@nt those itents O&their cars. . : "And at that particular time, we discussed Prestolite with them also, and they said, ‘Maybe we will give you an . opportunity, at some point in time, to do this; bait in the - meantime, we want to change over as fast as possible to ‘ . another brand that isn’t a competitor’s brand.’ ’’ =o ; ~e Sy PER 94a * Robert HZ. Davies—Cross Examination £1045) **Q. Would it bo fair to say that if you had the . volume without an OK account, you could operate, Fostoria satisfactorily? A. Yos, particularly after-market. @ ‘‘Q. In other words, the reason that you said that-you y Bi a major OF account—you.were referring to volume, is that correct? A. Volume that would be attracted by the OB account in the after-market. | “Q, So really, what you aro saying is ‘that Fostoria needed a substantial volume of business to be operated - ‘satisfactorily; is that correct? .. A. Right. . | 'Q. And the fact that whether you had an OE account - or didn’t have an OF account made no difference? A. No, _ it’s volume that you need. “*Q, In other words, if you had the same volume without - an OE account, you could aperete. it satisfactorily? A. Right. \." . **Q. Now, say in 1960, distidleisiy how many AKA . distributors did you’havet [1046] A. It seems to me, and this is a guess, but a somewhat educated guess, that we were in the area between fifty and sixty warehouse distributors. “Now, there: were, ia you got tate the PDs and SDs, which were also AEA, there are a couple of-thousand of . eachofthose. = > **Q. What is’?— The Court: What ds you mean by PD and SDt “Mr. McManus: The next question is: ~ @Q. What is PD and sD! A. Parts distributor and— they are a form of jobber—and service distributor. “Q. But you had approximately fifty or sixty warehouse - val distributors?- A. That is right. ee are the main line of | contact. 95a - Robert H. Davies—Cross Examination £1053] 4+, Now, why did you agree re buy. ceramics from Ford when you were not in the business? A. It was almost the: opposite. Well, we didn’t agree to buy them when we weeen’t in the business but when-we got back into the businéss. Tt wasn’t—in fact, we wanted to assure ourselves of source. [1054] ‘‘We said, ‘Look, we would be able to get back into the business. The hardest part of getting back into .the business would be to get the ceramics part of it going - again. | , . ‘€*But it would be a sinple. process. of eoltlae back into the business if we had the ceramics, a much less technical job, more of a production-type job. ‘So that, fundamentally, if we are to get back in the business quickly, particularly we want your assurances of the 25 million,’ ‘‘That was our figure, not their figure. We didn’t know | where this thing might go. ‘We thought—we really felt we might hang on to—we felt. we might—we knew we-were going to have problems with Chrysler. But, you see, at this particular point, Champion would be without an orien ae, account of the sd , three. __ : = ‘‘T mean, they would be out of the big three. ° So we knew they would put. tremendous gees on Ford—on. . Chrysler, to get their account. ‘*But we felt that we might “juck’ aoc and keep a portion of it, or maybe keep all of the Chrysler account. _ ‘“You: must: remember, Chrysler was in kind [1055] of _. a changing situation at that particular time, and there were some difficulties, ‘so that, talking to various people, you eould get a different reaction, depending on who was. in charge at the time we discussed this thing. ‘*And, as it turned out, we didn ‘t—we didn’t score, and - we lost the account. iol . ~§ 96a a | Testimony of Bernard A. Chapman, Executive Vice | President of American Motors en DIRECT EXAMINATION . ® .. %} 2 bd . * [1057] .Q. During the course of a employment with American Motors, were you familiar with the sourcing pat- - terns of that company in connection with spark plugs and batteries, among other things? .A. I was. — QQ. Now, before American Motors became: American Mo- . tors, had there been a merger? A. Yes, there was a merger between the Nash- Kelvinator Corporation and the Hudson . Motor Car Company. Q. Do you recall what year _ took placet A. 1954. The Court: 549 A. 1954. ~ Q: Now, did the two companies, for a time, retain two | sets of dealers for. the distripution of Nash vehicles.and - Hudson vehicles?’ A. Yes, ‘they did. Q. Did they eventually. — those , two systems? fas Yes. [1058] Q. Do you recall the. date of that? A. As I recall, it was the 1957 model that, wherein the names Nash and Hudson both were stropped and v we concentrated on the name Rambler. Q. Now, prior to-the merger Rat wobt Nash- Kelvinator and Hudson, do you know what the spark plug source was ~ for Hudson? .A. The Champion people. Q.. What was the spark plug source for shaw * The ‘Electric Autolite. Q. Well, after the merger, did American Motors for a - time continue dual sourcing from Champion and Autolite, - —— A. Yes, aoe: did. - « . . Se TE Te | ee ne 9 97a Bernard A. Chapman—Direct Examination yO Q. Was there a time when they stopped dial sourcing and shifted to just one source? A. We stopped dual soure- . _ing.and shifted to one, starting with the 1962 models. £1063] Q. I think you said that for the 1962 model year + you shifted 100% to a single source; is that correct? A. ' That is correct. . The Court: ‘What was “your, se ste please,— " ghifted to what! , - Mr. Shapiro: To 100% from a ie source, your Honor, i The Court: All right. .. ‘Q. American Motors, up to that peluk Mr. Chapman, had been dual sourcing, as they say; is that einen A. That is correct. Q. From the 1962 model forward, American Motors has. single sourced, is that correct? A. That is correct. Q. What is the single source that American Motors has been using since the 1962 model year? _A, Champion. Q. ‘Do you know when. the formal management decision “Was made to source. 100% to Champion. A: That decision was made on June 19, 1961. [1064] Now, approximately how long prior to J une 19th, | 1961, had. American Motors been giving serious considera- tion to this change? A. You use the word “serious”. I. think we were giving consideration to the change for pos- sibly a full year in advance of that date. I don’t: think it . _ . got down to any serious review me ‘perhaps. the early _ “part of 1961. Q. Well, was it shortly prior to Jt ind or when was it that . you say serious consideration was given? A. I would say in the January, February, March period 0 of 1961. et Bernard . A, Chapman—Direct Examination 7 Q. ‘And I assume on up into April and Mayt A. That's. right. Q. As well! A. That i is 6 right Q. Now, 3 in— The Court: (Interposing) Why did you go to a single source?” A. The reason, your Honor, was that we were experi- encing, in our after-market sales, in our judgment, a decid- edly better. performance’ with the Champion plug than with the Autolite plug. .Q. (By Mr. Shapiro) Well, more iiedifiealy, Mr. Chap- © -man, did you have any particular demonstration shortly .before you switched, as to a better performance by Cham-_ ‘pion in [1065]the after-market? A. Yes. I should say,I ~ _think, at this point, that it is common practice in the after- © market business for manufacturers of specific components to run sales campaigns, promotional efforts, from time to. time to encourage the sale of their particular components through the Rambler dealer in the after-market.. In the _ early part of 1961, Champion had such a program going through our dealers.. It was called the Trip of a Lifetime program. And it did demonstrate—well, it was very suc- cessful, let’s put it that. way.” Q. Well, do you have a breakdown of ‘monthly "se . during the period 1961,.that would be demonstrative of what you have just mentioned? A. Yes. I can give you some figures on that. In January of 1961, our after-market sales of Champion spark plugs were 24,000. In February it _ "was 25,000. In March, 38,000.. And in. April it was 50,000. . Q. And how did the Autolite sales compare ‘to that dur- “ing those same months? A. Autolite, in J anuary, was - 17,000." In February it was 20,000. In March it was 18,000. And in April it was 24,000... - o 998 Bernard A, Chapman—Direct Examination The Court: What were your ahasane of distribu. & tion in the after-market at that time? 1066] A. Simply through our franchised. dere: We - did not go through any wholesalers or other. distributors. May I add that while these figures would seem most dra- ‘matic with respect to: Champion, that it was natural to assume that there would be some improvement. i in Cham- pion and not an improvement in the Autolite because of the _presence at that particular time of this promotional cam- paign, and had the reverse been true the nig cow! might have been otherwise. : - ' Nevertheless, it was a very dramatic sales test: in our , | judgment. 10723 Q. Now, did American Motors, during your ten- ure, have either the desire or the eer to manufacture ; spark plugs itself? “A. No. * Q. Would. you explain -why not? ve ‘The spark plug business is rather unique in that the cost to the vehicle — mannfacturer for plugs is generally understood to be well . below the manufacturing cost of the plug. ‘The Court: That is for original equipment! A. For original equipment. Consequently, if we were fo manufacture plugs on our own, had we done 80, the cost of —— the [1073]. plug, assuthing that our cost would be no- . greater than. others, would ‘iave been considerably more _ than what we were paying for original equipment plugs. That would have had to be recouped by sales of plugs - manufactured by American Motors .and sold i in ‘the after-— ne market. The Court: Were you paying the same price for original equipment spark plugs that the other auto 4 Bernard A. Chapman—Cross Examination es were paying? Q. Insofar as we knew, yes. : ‘The Court: About 6 cents? A. About 6 cents. That’s right. We did not have an after-market organization nor were we'in that business. Consequently, we could not see the opportunity to develop sufficient after-market sales in plugs to warrant a reduction in—or the loss of these very favor- able purchase prices on original equipment. Q. Do you regard, Mr. Chapman, the cost of the original . equipment plug, or spark plugs generally, as a major or a minor economic factor in the total cost of your vehicle? A. We would oe it as minor. . CROSS EXAMINATION : Ey m i * * * * £1084] Q. All right. Now, you testified with regards to the change ‘from Champion to Autolite as a spark plug © brand, I believe -you testified that this resulted from pro- motional activities of Champion which you notéd had cer-. tain specific results and you were impressed by that, i is that - correct? A.. That was one factor. : Q. What were the others? A. I think if you look at the history, they.enjoyed a better after-market. position even » eee prior to— .Q. I am sure that is true. A.—the partioulat contest — Z which you made reference to. 3 , ‘The . Court: The question was acemeti from - Champion to Autolite? Mr. Noble: From Autolite to Champion. - — ee a ee ey veers ja?- ' 101a - ' Bernard A. Chapman—Cross Examination “The Court: You said it just the other way oni Mr. Noble: Tam sorry, your Honor. The Court: I didn’t think that was what you _ meant. beet pak say lanes ¢ | Mr. Noble: Thank zone for the correction, your Honor.® ' £10853 Q. What were ime other factors? A. _ Other than the after-market situation? - Q. Other than the sites tices activities which you men- tioned. A. Well, I want to make e clear now that the pro- © motional activity. was not- necessarily one contest. We. could—if we took a look at the figures prior. to 1961,—1960, 1959, 1958. Now, beyond that, and I don’t beliéve it was & major consideration, nevertheless, it is a part bf the record, our engineering department had in some ‘instances preferred “the Champion plug on some engines. “However, -I don’t ‘feel that was a determining factorsin the case. 1 think it was the after-market situation. * _ Q. Did your engineering department: prefer the Cham. - pion ‘plug on the engines on which Attolite plugs were then being used? A. Some engines. You see, we bought © several different kinds of plugs; they varied from engine to engine, from compression: ratio to compression ratio, -and—on some of these our engineering department wd a a - preference. [. e Q. Were there any instances in which a Champion plug - was being used in which they would have had a preference. for Autolite? A. Not to my knowledge. | -Q. Well, this after-market activity of Champion which you indicate was your major reason for. the change, this . -was [1086] not a new development in 1961, was it? A. No, — -Q As a matter of fact, do you know for how long Auto-" lite had been either a partial or fall sunnier of OEM spark Bernard A, Chapman—Cross Examination — plugs to American Motors or Nash-Kelvinator, its prede- cessor?. A. I think you‘can go back to the early post-war years, I am.speaking here of World War II, if-you want to start that far back, and for two or three years we. im: | AC spark plugs. 875 3. Well, maybe I can helygou on thet— * ~The Court: You say for a few years after World War II? A. That’s right. “Q. Governinent Exhibit G- 160, in- evidence, indicates that at least starting with the period 1937, from 1937 through 1952, Nash- Kelvinator had split sourcing between AC and ~ Autolite. For the. period 1952 through 1954, Autolite was ‘the sole supplier to Nash-Kelvinator. For a short time after the creation of American Motors, Autolite was the - sole supplier of American Motors. And from 1955 through. 1961, = was spli between: Autolite and sree casa Would that be ut correct? A: eek: yes, I would as assume those figures are correct. - _ [1087] Q. So that -Autolite had been a. supplier on at | least a partial basis and sometimes on a 100% basis since : 19371 A. That is right. Q. While I am on the point, do you iid why in 1952 Nash-Kelvinator stopped —s to ACT A: Yes. They raised the price. | : Q To what, from what? A. On original equipment i plugs. — Q.-To what siatt from whatf A. Well, it went=about - . §0% higher, as-I recall it, than—perhaps it wasn’t that . - tauch—than the other prices that prevailed in the market. Q. Than other suppliers were willing to— A. Yes. Q. Have the other suppliers continued since 1952 tosup- _ “Ply you at the same price at which they were — 1088 ° ‘Berserd ‘A, Chapman —Crose Pzamination he \ you at that time? A. Well, I don’t recall ‘the } e back '- in 1952, but there has been no movement that‘I can ie : in recent years, off that six-cerit figure. Q. So the prive at which AC Sica nimraeh. -was higher than you are presently paying or at the time ‘, you were there, you were paying your suppliers? A That . is right. Latiasie -@ . O2 Que ee : , £1093] Q. (By Mr. Nobl) “Well, at any. rate, for the period after the merger until 1961, Autolite remained at . least a. partial a oe isn’t that correct! A. That is. ‘correct, - that? A. That is right. _ Q. And your testimony is that that had nothing at ‘all to do with the fact that Autolite was acquired by _ is - that correct? A..That’s right. Q. That was just a coincidence? A. ‘That's right. * = .* oe + Mi Pa. : . Q. And in June of 1961, the decision was made. to — ee Ce. \ Digicinn of Earl Richard Fi iene, Vico President and Director of Maiketing, Prestolite: Division of —— eG ' Corporation ag: _DIRECT EXAMINATION © ee . e ( - D140) “Q. N ow, you have ea. of the general product lines of the vorporation, alld now I would-like to, get back *,: specifically to the. product lines gfThe Prestolite Company and ask you what the major product lines of The Presto- * lite Company are. ‘A. We.are in four basic product cate- gories in terms of our automotive line.of equipment. I will start with the largest segment of it which. is incidentally our EPG or Electrical Products: Group. This ‘embraces, in effect, five plants, one located in Decatur, Alabama, Bay City, Michigan, Syracuse, New. York, Sarnia, Ontario, and & service parts warehouse in: Detroit. In these plants— | would you like these broken down -by plant in terms of product incident— | - “}. = — A. —or a | summation of the prod- 7 ucts? . & . that it is not of any interest to m each part is made in. A. In thesi ' . spark plugs, a: full line of ignifion | contacts, condensors, voltage regulators, distributors, and . “& bax if it is aore convenie t for you; but other than ts we manufacture ods,. which would be - then into the so-called rotating equipment, which would be alternators, generators, starting motors. We manufacture’s; lamps, we manufacture a line of hydraulics, we manufac- ture a ‘complete line of fractional horsepower motors such mer as for windshield wiper application, for window lift mech- _ anisms, seat controls and so on. Our Detroit facility of- - -gourse, as the name implies, is a service parts warehouse __ feeding our various facets of the market. [1141] what plant . Sl EAR CLD Baha Nil se si rae n ey alitg AO Miatitasia ais > san ns a. 1058 Earl Richi Fiens” Direct | Examination | | “Q. Do you in your Electrical Products Group manufac: : ‘ture horns? .A. We do at our Bay City Plant.- _ “Q. Dgeyou manufacture ignition coils?’ A. Well,’ per- haps I should go back. I identified our electrical products, | We manufacture coils but they are identified with our Wire — ‘and Cable Group, basically because of the material“content. “Q. So in addition to the rest of youn: Electrical Products Group, the produetion of wire and cable is one of. your products? : A. That is correct. ‘We have three facilities for wire. Ci 142] “Q. And I believe you mentioned contact piled did you not?’ A. ‘Yes, contacts and condensers both. ‘That _ is made at Decatur. . »“Q. Now, in addition to your Electrical Peoduste: Group. ~-as you have described themydo you manufacture any other = products that are not in that group? A. Yes. We have ‘battery facilities made up of five producing. plants in the . States plus a container separator facility in Niagara Falls, ' we have three producing plants in Canada plus a confainer separator facility in Toronto. ve Any other Products Group? A.. The Wire and Cable, rads up of three plants. This serves the—not very much | 4 in the appliance end ‘but very definitely the aircraft and. automotive application of primary and secondary ignition wire, battery straps, ignition coils, and a recent. develop- ‘ment in the so-called sophisticated ignition area, a contact- _less—what we call-a-CD-65 ignition system, transistorized ignition system, arf then of course we go from that to our. *- iron foundry in Fostoria, Ohio and our white metal tool _ casting plant in Woodstock, Illinois. “Q. Your die-casting operations are included in ‘anak [1143] two plants you just mentioned? Is that true? A. That is correct.’ Earl Richard FA ne—Direet Examination «Q, N ow, in the course of your activities in the manufac- ~ ture and ‘distribution of your automotive parts, are-you a .memlfer, asa firm, in any associations, trade associations, = ‘dn that industry? A. Yes. We are members of various. - -trade associations, each of them having what we feel is a singular utility or selfish motiv ation in terms of why we. . belong. - “Q. Well, ‘would you name each. association that your company is a meniber of, and as you go. down the list, if - - any of your own personnel i is an officer or an-active partici- . pant as a director or officer in any of those associations, - .. would you indicate that. A. Yes. We would start with the AABM, which ‘is the American Association of ‘Battery - Manufacturers. Mr. William Ray, . who is Vice-President: and. General Manager of our Battery —— is = President of that Association. - “Q. That is R-a-y? Is that correct? A. "That is right. ; The next would be.the Automotive Electric Association identified as AKA. I am Vice-President, a member of the _ . - Board, and Chairman £1144] of the Manufacturers Group _ _ of that Association. We belong “to ADMA, which is Air- 5 craft- Distributors . Manufacturers Association. ‘Walter Powell—I am not certain if he is currently a director, but he is a past officer of. that association. We are also active ein MEMA, which is the Motor Equipment Manufacturers Association; AWDA, Automotive Warehouse Distributors — _ Association; ASIA, which is the Automotive Service In- — dustry ee ame: I missed any: letters in the — . | - bet? | 3 -«Q: I think ‘you may sine: Sow about the SAE? A. . This i is the Society of Automotive Engineers. Our company | is very active in that.and Paul Allmendinger, who is Chief. a of our, Electrical Products Group, i is a Past Na- . ) fr *: “Q. In other words, your overseas sourcing wouldn’t be | _ over ten per cent for the period wel: through 1965-661. “A, - That is right. . ' “Q. Do you know of any other source of ceramics in the United States for your plugs?’ A.-Yes.. a ~ Q, And who would they ‘bef A. General Battery & Ceramic Company. ere | : ~“Q, Anyone else? [i318] A. That is the only one, I . believe it is the only other approved source that we nave, engineeringwise. , oe “Q. Have you ever purchased any ceramics from 1 GBEC ‘A. Yes: “Q. When was this? A. This woilld have aa vege early in 461 and.’62, ee “Q. And you ccsatiense them? A. That i is correct, | the basis of quality. ; : “Q. You were not satisfied with their quality? A. That is correct, and our customegg, had similar concern about. the’ quality and performance of their product. — | , “Q. Now, you testified that Prestolite reentered the spark plug field in 1964. Is that correct? AY The andependent : after-market.. _ 4 “Q. This is the independent after-mnapket? A. Yes, sir. _ “Q. And were you selling to the—first’ let mé ask you, what is the independent after-market? A. This: would be other than an original equipment maker or supplier. _ = 1319] “Q. I see. A. Independent warehouse. -dis-- \ . teibation. © = 5 DOES | Ree ae re nn ed yy : ;™ -_~ 1136 : : ‘ Bag Richard Fiene—Cross Examination \ the period of ’61 and 641 A. Yes, sir. ree brand. BA ailade i Ria aol Wham, tk Yes. - + . ELTRA? Is. that porrect! A. That is right. - Ts. that correct? A. Yes, sir. - Same. . } i “equipment service ‘parts line, no plugs, no batteries.” j mine? * hse bes Gas OR eee ay £, Fact. Were you selling plugs urder.a name other" tha Prestolite to the independent after-market between '* 4“Q, And what brand was that? A. UDS would be one # “Q. Excuse 1 me. If I can shovien it, it sonal be’ under the brand name of the purchader? Is that. correct? A. : “Q. It would not be under the brand name , owned by * .“Q. Now, you .testified that: you were’. presently selling aes a spark phigs. to approximately, 50° watehouse di itributors, a “Q, And I think you testified that this. was ‘about the + same number That you were selling: in, say, 1960, the same | .. = number of distributors? A. No, I don’t believe I testified ‘to that effect. =I thought my. testimony there had to do ‘, with our level or penetration level with the AEA type of”: 4 warehouse, our ’66 and ’60 relationship i in terms [1320] of - numbers, and the warehouses I so identified were about the , EI! see. es I think + we sold prark plugs oe the _ Autolite program to perhaps more tlian—we used: to think . in terms of 45 to-48 key warehouse distributors i in AEA that provided the buJk. Then - we had a few others that. ‘sold spark plugs or parts of the line ‘rather than full-line ". warehouse »_ distributors, and the number that was men- - _.. . tidned héfe*involved with us strictly on spark plugs—0.,:> _ : excuse mé—the current AEA are with us on the original _ _ By Mr. Shapiro: _ te oe ida Earl Richard Fiene—Redirect 1 Moria’ ati _ Redirect Examination aos » tng “Q. Mr. MoMaxicia asked you about the presentation that: you made to American Motors in Sonnection With spark - plugs. Do you recall that! A. Yes, sir. -“Q. And you said that you gave them your. chokes of either. six cents or a 25 to 30 cent: range. Do you remember | thatt Gey A. Yes.” . 8 | 1g, If (hey wanted to buy Prestolite Brand spark — for six cents, would you have sold it Lo or original equipment? A. I would have, “0, Indeed! : Well, would you have matched Champion on whatever price Champion offered American Motors in . order to get that original syetpinent: account? A. Iwould . have. [1322] “Q. Now, ‘Mr. M@Manus asked you about your. sale of spark plugs to Case, Deere, Oliver, and Towmotor. | Do you remember that? A. Yes, sir. Go “Q. Now, Mr. McManus asked you about your sale of spark plugs to Case, Deere, Oliver, and Ele Ae Do | you remember that? A. Yes, sir. “QeArd I think you testified that all of thobe enstomers | “purchased from you in the 25 to 30 cent ranget Is that - gorrect? A> Yes. ¥Q. Do each: of those companies ‘also purchase penny _ Champion? A. ‘I would feel that each of them do buy a percentage of plugs from Champion currently. “Q. ‘Well, now, ‘vould Champion, as -far as you know, “have been willing to sell to those four. customers all. the - spark ‘plugs they needed for original equipment - the’ six oént Bree A. Yes. > 3 Be Le] ue ‘1154. Bart Richard Fiene—Redirect ‘Examination «Q. Well, did those sentie find it to ‘theks advantage to buy some of their spark plugs from you in the 25 to 30 cent | range rather than. from Champion. for six cents? A. Yes. [1323] “Q. Why would ‘that be? A. Because in terms of “e ac let us use John Deere, if we can, as an example; ‘Champion in effect was getting all of the replacement busi- _ - _ “Q. Now), there is no provision that the John Deere deale ia] stock only the Prestolite Brand, is there? A. He stocks more than one brand in almost every case. ey s é 12a. - .. Karl Richard Fiene—-Recross-Examination © ’ brand? A. That isa question you have to ask John Deere, —" I don’t know their policy, *- ’ Pies dec iphouage 2 —— “Q. It is no ‘requirement of your company that-he has to? © A. Absolutely not. ee SET ~_* “Q. So the dealer is free to stock a Ford Autolité Plug | if he so desires? A. You see, the ramifications: here. just + + @0 on. and on and on, © AS Ae ee ee ... “Q What I am getting at is that, as T understand it,. the 7 _ John Deere dealer is-an independent company and he can | “buy Prestolite Plugs’ Gr he can buy Autolite Plugs. Isn't *. er “Q, There is no ‘requirement that he has to stock your s that correct? A. That is correct. | eae, C1346] “Q. Now, you indicate ‘that you have the ability _ to make ceramics in case you get an order from say, Chrys-_ Jer, is that correct? A. We would have to get-into the? ‘ceramic business. ee creer Riatiy tie 4, “Q. You would have to get into ‘it? - A. Yes,. We have . ,the know-how, we have all the- blueprints, we ‘have all tho. - technology and research behind us. jt is a case of getting — | _. in the manufacture per se, BE Baad fe “Q. But despite all this ability, you shipped your equip- * “Mi. MeManus: I am sorry: I-withdrew that ques- tion, your Honor, hee a i +> + Skipping to line 16: es egret. o (+. © “Q. Well, we will just make it clear that the ceramic - | equipment that you bought—from what ‘company? A. I~ didn’t state the company because—it sticks in my,mind pex haps, Mr. Spiller, it is a company in New Jersey. That is As 88 close as I can come to it at the moment, -“Q. Well, in the‘ course of your duties both before you: ° {> ‘ ‘hak : ¢ Arnold. W. Hartig—Direct Examination ; identity symbol in. distribution ‘and redistribution ; and to . the extent that other names perhaps don’t lend themselves to this as much, we have concentrated on the development and use of Chrysler identity symbols, such as Chrysler and MoPar.” e - [1367] “Q. Has Ford Motor ‘Company solicited . your .. business since C1368) the time of the acquisition’ A. They have. . “Q. In the spark plug field? A: Yes. “Q. Did you ever, since that time, discus with Ford. the possibility of their submitting a bid for spark plugs, or did you solicit such a bid from Ford Motor Company at any time? -A. I don't believe the words "Sélicit a bid’ are per- haps descriptive of what happened, but they did come in _and reviewed with us the very point that you are making: ‘Would we consider Ford.to be an. acceptable source? And my recollection is that I told them that we would under: a private brand to be designated by us, and at that point: of © | time, the representatives were ‘going to talk to Ford man- agement to determine whether or not there was ‘going to be effective capacity: to make a proposal to Chrysler and that sort of thing. ° : ~ “My recollection is that we never did get a definite 1 sponse from them in terms of a specific proposal of price, and since our relationships with anne. were good, _“Q. Would Chrysler Corporation be in'a position from economic or a financial standpoint to manufacture 113% _ spark plugs itself if it.so desired? A. It would. °° &Q. Have you sustained, as far as you know, any com- petitive disadvantage in any aspect of your business re- - sulting from the acquisition:-by Ford Motor Company of the elements of the Electric Autolite Company that I men- tioned =— in your testimony? A. We do not think 80. > ke 130a | Arnold W. Hartig—Cross Examination py “Q. Do you anticipate in the future that you will sustain _ any such competitive injuny from that acquisition? A. I - do not think so.” . . . * ef CROSS EXAMINATION - ° ¢ . . [1378] “Q. Now if we could go to the 1961 period when — _ you decided to take on Champion as your supplier for _ spark plugs; you testified, I believe, that for a period of time you bought some Autolite plugs to carry.you over until Champion-could supply. you fully; .A. That is correct. — “Q. Was it necessary for Champion to qualify as a sup- plier for Chrysler? A. Yes, it was. - _ | [1379] “Q. And what would this entail? A> It was pri- ‘marily in this instance an’ engineering qualification. - The qualifications from a purchasing point of view were pretty _ obviously already met’ in terms-of financial responsibility, in terms of a capacity to serve Chrysler, in ‘terms of a _ desire for Chrysler business, and in terms of economic fac- tors which we had developed. So the qualification was in _ terms of having’a product which could properly sefve our " power plants. —- . = ‘9 “Q. So you say your principal problem was an engineer- ing problem? A. That is correct. €Q. To. qualify them from ~an engineering standpoint? - A. That is correct. oe Es _ “Q. In a general way, could you tell me what this would entail? What do you have todo? A. We would have tests — run under various conditions, temperature endurancé under — unusual circumstances where perhaps spark plugs had par- ticular problems-under a certain environmental type of eon- _ dition, whatever the engineering test would be for that kind of thing. 3 | rete o - . 181a John F. Karr—Direct Examination. “Q. Now, did you have ities from Champion come . here [1380] to Chrysler and work with noe on :coreloping this? A.. Yes, we did. — “Q. Did you have engineers from Chrysler go to Cham. pion and work on this? A. Yes, we did: pio “Q. Would you have to send maybe } your our Chrysler engine . - down thereto Champion to test it? A. I think that there - was very little of the Chrysler engines going to Champion that we would send down. However when a program like this. starts, the supplier immediately gets a variety of Chrysler engines, you see, on his own through the retail outlets of Chrysler dealers and buys Chrysler products, - having our various engines, and they themselves would em- — bark upon a program. Our own engineering people would embark upon a program. All of this would be dovetailed together. I know that there were problems with respect to the ceramics in the sense that théir construction was differ- -_ - ent than the Autolite construction, and there were problems, . +. ‘I believe of shielding and that sort of sa that. had to be : worked out. “Q. Now since you have taken on Champion as a sup- ; plier, I assume that there have been changes made in the Chrysler engine in the period from 1961 to date [1381] Is this correct? A. That’s a rather broad question. Yes, there have been changes made in the Chrysler engine in the sense that we have changed displacements, but we are using the same basic engines as we identify them—-that i i8, A, B, —_ and G@ engines—that we were using at that ‘Aime. | «Q., Well, is it hecessary that the Champion people work elosely with you every year on the engine that you are going at in your next year’s model? A. If there is a change Lt ine engine, it is necessary. However, sdyietimes there is . i= Se ee ee ee | thange. © . 7 * ee e , = ” ne Arnold W- Hartig—Cross Evaminaiion 1384] “Q. "So if everything’ else was equal you would prefer to have an indépendent spark plug manufacturer “rather than na Ford Motor "Company t—A.- ‘Phat-is carrot. «@ :% * a - £1386] «Q. In other depositions, we have’ been informed | that it is the custom in the industry to sell spark plugs for ' original equipment purposes at approximately six cents. Is that your understanding? A. That’s my ‘understanding. “Q. And.that for replacement purposes, the same spark _ plug will be sold for approximately 38 cents. Is that your understanding? A. Thatis not quite corrett. -.“Q: Would you mind giving me an approximation? A. It would be something less than that. -Q. Thirty-five to thirty-eight cents, would that be fair? ; A That would be the range, yes. “Q. Now, in regard to.the Champion plug that you hay 1387] for original equipment, you purchase that at ap- proximately six cents; is that correct?. A. That is correct. “Q. And for’ replacerrient, you purchase the Champion’ -plug at approximately 35. to’ 38 cents; is that correct? A. Yes, with. some somewhat lower. Q. But it would be in the range of 30 cents domewkeret A. Or high twenties. - “Q. Now, in regard to the MoPar ovigtnil stata plug, what price do you pay for that? Is that in the six- cent range? A. Yes. -“Q. And the replacement ; range would be the same as for | the Champion plug? A. It is in the high twenties. | “QO To your knowledge, do you know if the six cents that ‘is ‘charged for the original equipment’ plug is- below the . manufacturer’s cost of that plug? A. I have understood QB , . that it is below the manufacturer’s cost.” 2 * .¢@ @ -e@ epee | Arnold W. H artig—Cross Examination | “Q. What is your ‘underajeindingy of. why he will sell it below cost? [1388] A. He is selling it below cost because -he wants identity of his product with our product, with the - hope that this will e his replacement market. “Q. So that it is your understanding that he hopes by plesing' his product in your automobile that it will generate is aftermarket sales for him; is that serioatt A. That. is -. @orrect. “Q. And as a viel of this consiation of sttorinsitteit - Sales, he will recoup whatever loss he makes for his —— _ equipment plugs? A. That’s correct: . involved in. My belief is that our distribution. through ‘Chrysler deater sources is at this time still substantially ‘higher than it is through the independent distribution, with . “Q. Now, in regard to purchases of. spark ohies for your replacement market, could you give me a percentage of breakdown on Champion and MoPar? A. No, I can’t. -I have told you the areas of distribution that they are both the result that the Champion, which goes through that chan- _ nel of distribution, would have the higher propertion; but — this in the long range might not necessarily be ria that we would be looking ae that i is” 1397] “a. ‘Since 1961 has what i is presently the Eltra _ Corporation solicited Chrysler to sell them spark plugs un- der the Prestolite brand? A. Yes, they have discussed this | matter with us. «Q. And your decision obviously. has De not to— A. To continue with Champion. “Q. Your. decision has been to continue with Championt A. Yes. : «“Q, What would be your basis for considering Chainpion over Prestolite in spark plug brand! A We still consider : v 18d ; Arnold W. H. artig—Cross Examination thes name Champion to be of great valine; ‘While I testified that the trend is in the opposite direction, to have less and less reliance on the non-corporate.name, it still is an impor- tant name, so. that from our total distribution point of view, we would prefer the name Champion to the namé Prestolite in terms of the after-market position. In terms of product capability; we certainly consider the Champion to have sup- plied us with the product and the engineering technology that we are happy with, nd : I see no motivation there to Ss e . ? Td ee 13983 “Q. Now, you have indicated that: you consider the Champion name as a more valuable name in the after- market than Prestolite. Is that a fair statement? A. That is correct... o “Q. And presumably at the ibe that- Blecttic Autolite was selling you plugs under the Autolite name, you consid- ' ered the Autolite brand name as a better brand name than Prestolite? A. I don’t even know if there was a Prestolite: “6 name in.existence at that time.. Was there? MQ. You just don’t know if there was a name in exist- ence? ‘A. I think that. the “Prestolite was ‘something that Eltra Corporation did after they sold the name Autolite. . _ “Q. So you at least as a purchasing man were,familiar | with the Autolite brand but you had never heard of the Prestolite name before Eltra? ‘A. That’s right. .“Q. So in your opinion I could see you would believe the Autolite name was a better known name. than [1399] the Prestolite name prior to Ford’s acquisition; is that correct? A. That’s right.” . : \ \ \ ~ “Arnold W. Hartig—Cross Examination | [1406] «Q. Now, I don’t know if tasked you this or not: \I asked you in regard.to plugs that one of the factors that you would consider .in not desiring to purchase spark plugs from Ford or General Motors was the fact that you did not - want to advertise a competitor’s product. That was cor- rect? A — correct. [1410] 6. Now, you said that you think the Champion | namé is a better name than the Prestolite name. Pi re- call that? A. Yes. ;“Q. Do you also consider that the yn ee name is a better name than the Autolite name? A. Yes, I do.. “Q. Do you consider that that is true today? “A. Yes. “Q. Do you consider that that was true in 1960? A. Yes. “Q. Do you know of any time from 1959 forward, for example, when the Champion name, in your view, was not a:) better name than the Autolite name? A: I don’t know. * * “eo ' * \ . wh Deposition of John F. Karr, Manager, Distribution — ‘Planning, Goodyear Tire & Rubber esl | : “a :_. DIRECT, EXAMINATION o + ‘ / 114537" H“Q, Now, do your stores and franchised dealers” | _ ja associate dealers, as. far as you know, carry other brands besides the AC spark plugs that they purchase from you? A, Yes, they do in, .would say, most: instances. -“Q. What’ other’brands do they ordinarily - carry? A. ° The other brands that they would ‘normally ed would be the Champion and the: Autolite; ~ ¥ «|». “Q. Did-you, as a company, at one time sell a spark plag ° | ‘ wnderia brand other than. A€ or Autolite? A:"Yes, we did. ..* “Q. What brand or brands were those? A, We had two 57 ) brands. One was called the Bhs wage arid one was called e e ,‘ @ e e . ... -the Double Eagle. . oy, tote ee of those are. Sosiijea brands, I assume. A. a. forws, they are snd have been used by, the company. se some . °°. time. > o fp a 21 Now, I aire noticed that your central tonbaiands has - a symbol between the word’ ‘Good’ and the ‘ year’ whieh appears to, be a foot with a wing on it, @ “Is that asgpciated with the Wingfoot trademark that: you ree mentioned? A. Yes, it is, | 3 “Q, Ni ow, have you used the ‘Wingtoot ‘and the Double ° ” [1454] Eagle, or ‘either of them, in connection with’ tires _ over the years? A. Yes, we have. | &Q, Can you tell me when you sold the “Wingfoot and f is Double Eagle spark plugs? A. We started pesca them in 1945 And discontinued in 1948. ° / 4Q, Bo you sold them only for three years? A. That's co “ . “Q. Do you know why: they were Saccatinnsat A. They. - ‘weren’t a very many of them, i. John F. Karr—Dire Examination ° 4 XQ, Well, did you have. ‘any trouble having them stocked. © by your company stores, for example? A: We were able . to. get them stocked by the company stores. The. direct dealers did not stock them to that big.a degree and@t was _ very difficult to sell them: to the associate dealers. | - “Q, Well, when your company stores stocked them, did. _ they also move or did they stay on the shelf? A. They, unfortunately, stayed on the shelf more than: ts would have - liked them’to. A: “Q. Does: that mean. that your company stores anit your | franchised dealers were selling other brands besides the | _. Wingfoot and the Double Eagle? A’ Yes, they were. ., [1455] “Q. Where were they obtaining those, as fardis _ you know?. A. From local suppliers. mah | 4Q Do you have any. idea, why your own branded spark plugs failed to sell? A. The people at the service point, the Goodyear store or the dealer or the service station or the garage, who are in charge of servicing’ the customer’s car, very strongly favored the original equipment brands ~ - of spark plugs-because they installed the spark plug as part it: ORE tune-up, generally, of an engine or some other engine . ~ repair and an original equipment quality spark plug is a very strong reassurance to the customer under these cir- cumstances that he is getting quality in the parts and in» the service, and it is about the only ‘visible, ‘identifiable . “ me hardware that. goes into this service work, tiine- . dof work, that he recognizes and, therefore, he can _ identify ‘quite quickly whether or not a quality mene, a “ well-recognized. brand is being’ used. “So. the service people have the incentive,. ea to td pat on this -brand of spark plug, and it also is useful to 1 them in-foreclosing criticism of their work later on. _ ' _, “For example if a customer’is [1455A] dissatisfied with ~ i the performance of his car, the -ageapas who did the service , * 1388 on} ~Johw 3 F. Karr—Divoot Examination ” - can respond: by saying that ‘I -did put on the beat = plug $ wo | making. that statement. - available; you can see that.’ . Py 1456] “It also forecloses cxiticiam by a competitor who may see this car later-on. The competitor cannot under these circumstances say ‘Well, cértainly you are having ‘trouble with your car; look what. the last*guy who worked on it did. He put in ‘this unknown brand of. spark plug _. which is probably giving you trouble.’ ~“So the installer has a great incentive to use a well- recognized brand of spark plug in his selling of this work. ' “Q. Now, you say ‘well-recognized brand of spark plug.’ “Is there any. _ tendency to be more specific in spark plug applica tions than merely a well-recognized brand? A. Well, t the ideal situation for arkinstaller of spark plugs is to be able to say to the customer ‘I’m putting in the same: brand of spark plug that came with your new car.’ | “And in many cases, they are able to do this. If not able ° to say this, they at least can say ‘This is the brand of spark ‘that goes into new cars,’ and assure a —. by Na. ied ee aetee e e . z ra ~139 [ .. . JB -. Cm Sees, of : John B. ‘Hodges, Forward Marketing : dara Ford Autolite Parts Division, aes cae . Ford Motor Company a “DIRECT EXAMINATION : ee * e — [1572] Q. (By Mr. Shapiro, continuing) Mr, Hodges, | - would you look at the figures [in Ex. F-38] for Champion, AC and Autolite under percent of total service stations "stocking this brand and state whether any conclusions can be derived as to stocking habits of service stations as - included in the group in the title, from. the standpoint of | origirial equipment branding? A. Yes, sir. We believe it does, that it indicates that original equipment brands are © the brands primarily stocked and almost exclusively, with ‘the only other brand of significance being stocked being the Atlas brand, which is limited, of course, to one type of gasoline service station. Q.- Well, now, Mr. Hodges, if an mutemisittins: a Ford auto-. mobile, were to drive into one of the 17 percent that stock . Champion exclusively, it would have to get a [1573] Champion spark plug; is that correct?. A. Yes, or he would have to go out and buy an AC for a Chevrolet car or Autolite for a Ford car, but normally he would use. the thing he has in stock. _ The'Court: N ormally, he would do what? A Normally, he would use the type of plug he has in stock. The Court: ‘Yes. Q. Ita Ford car were to drive into a service station among the 13 percent stocking AC exclusively, the situa- tion would be similar; is that. correct? A. Yes, sir.: ' Q. And in 2 percent of these situations, an Autolite brand spark. plug. would be sold,: regardless of what, automobile. ~ drove in, normally A. Yes, sir. "game ‘information, the same type of information, as F-38; . Yk . ® ‘ | ‘1408 | a John B. Hodges—Direct-Examination | Q. Now, taking the converse. of ‘this 41 percent figure, is it true that 59 percent of the service stations referred to here do not stock the Autolite brand at allf.A. That is true, sir. a ae . . 7 ' Mr. Shapiro: I would like to have rharked F-39, ’ for anne your Honor. . e tee . ee \ . 574 Q. (By Mr. Shapiro) Now, Mr. Hodges, am I correct in stating that F-39 for identification ‘concerns only | ' the 41 percent that stock Autolite as represented on F-38? A. Yes, sir, ... 8 —) ¢ : | . Q. Now, would you explain what this tabulation purports [1575] to show? A. This-shows that of the metropolitan service station operators that stock Autolite plugs,’ the ‘frequency: with which they stock other brands as well and the frequency with which they stock only the Autolite Q. So that this information, then, is derived from the - the other tabulation. 1S : i Mr. Shapiro: I offer it in evidence, your Honor. Mr. McManus: We make the same objection to - this as we did to the last table, your Honor. _ The Court: All: right.. Objection overruled. and the exhibit received. sos .Q. (By Mr. Shapiro) Now, Me: Hodges, with respect to F-39, looking at the first line that says “Autolite plus AC and Champion Only”, what does that mean in terins of 2 stocking? A. This means ‘that these particular. stations, . or 72 percent of the metropolitan area gasoline stations, — stock all three major equipment brands. — oa is that correct?. A. Yes,-sir. It is a tabulation taken from 14a | John B. Hodges—Direct Examination @ You mean 72 percent of the ones that stock Autolite? . - | _ [1576] A. That’is right. Excuse me. Q. Carry all three of the major brands; is.that « correct? A. That’s: correct. | _@ ° ° . . * : e =| [1635] Q. Now, how do you aécount for the: increasing’ level of: sales of Autolite spark plugs during the years 1964 and ’65 and ’66 [as shown in Ex. F-49]# -A. Well, normally, because of the original equipment replacement practice in — the industry, and because of the sharply higher number of _ new. unit installations because of the fact that Autolite is now original equipment on Ford Motor- Company products rather than Chrysler and [1636] American Motors prod- ucts. There is a lag in the time it takes for these units to reach the road and to reach the point where ene willbe made. -. During the first tue or three years” of the vehicle’ 8 life, many of the replacements will be made in the dealerships of the franchised new car dealers during the warranty: _ period.. And we normally think of these cars as reaching the full maturity of the potential, as far as gasoline service ° stations or service repair shops or chain stores, for that — matter, that are normally serviced by this warehouse dis- tributor type of distribution system, to be approximately two and a half to three years. , _ So that this represents the 1962 to ’63 cars coming into this market for the first time, and we would. expect it to grow rapidly from this point on. | ' -Q. Now, apart from the fact that the first generation of Ford cars are taking, you say, two or three years to get into the non-dealer after-market for repairs, is there any conclusion to be drawn from the fact that the overall nopu- lation of original equipment Autolite spark Plug ¢ cars ig "y ‘ John B. H odges—Direct Examination increasing each year? A. Oh, yes. It reflects the exchange of the-Autolite brand for the Champion brand on Ford. vehicles, which means a rapidly growing shire of the popu- _ lation. It will take [1637] six to eight years for our:popu- lation share of units in operation to match aur original - equipment share. So it will still be growing, as I recall, . through 1972. : . : ao 12 Q. Would you explain what you mean when you say-‘units in operation”? What does that term refer to? ‘A. This is __ the number of cars andl trucks on the’road that are still operating, that are licensed: Each year cars must be regis- tered in each state, and if they are scrapped or are no _ longer to be used they are not re-registered. So that each . __year there is some loss of the prior years’ cars that entail - accidental—or-entail an accident or something like that in: . volved. So this is the number of units that are still operat-. ing on the road each year; and we expect our share of that - that is equipped—that was originally equipped with Auto- _ lite spark plugs to be rising rather rapidly. _And it has been. - . ° et [1638] Q. And the reason for that exp [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0377%3A01. Public record. Not legal advice.