
    COOPER TIRE AND RUBBER COMPANY v. THE UNITED STATES
    [Cong. No. 10-52.
    Decided May 8, 1957]
    
      
      Messrs. Thurman Hill and James M. Barnes for the plaintiff. Mr. Eugene Garusi was on the brief.
    
      Mr..William A. Stern, //, with whom was Mr. Assistant Attorney General George Cochran Doub, for the defendant. Mr. Edgar H. Brenner was on the brief.
   LittletoN, Judge,

delivered the opinion of the court:

This case comes before the court pursuant to House Resolution 699 of the 82d Congress, 2d Session, July 1,1952, which provides as follows:

Resolved that the Bill (H. R. 8255) entitled “A Bill for the relief of the Cooper Tire & Rubber Company” now pending in the House of Representatives, is hereby referred to the United States Court of Claims pursuant to Sections 1492 and 2509 of Title 28 United States Code; and said court shall proceed expeditiously with the same in accordance with the provisions of such sections and report to the House, at the earliest practical date, giving such findings of fact and conclusions thereon as shall be sufficient to inform the Congress of the nature and character of the demand, as a claim legal or equitable, against the United States, and the amount, if any, legally or equitably due from the United States to the claimants: Provided, That it shall not be a defense on the part of the Government that the acts of the Government which are alleged to have damaged the claimant were done by the Government in its sovereign capacity.

The bill (H. E. 8255) referred to in the above resolution proposed to pay to the Cooper Tire and Eubber Company the sum of $1,811,333.38 in full satisfaction of all claims against the United States for losses suffered by the plaintiff under seven contracts entered into between the plaintiff and the United States. It is the duty of this court to determine whether or not, in view of the facts, the plaintiff has either a legal or equitable claim for which it should be compensated and, if so, in what amount.

Plaintiff is a corporation organized under the laws of the State of Delaware with its principal place of business in Findlay, Ohio, where it is, and has been for many years, engaged in the manufacture of rubber tires,' tubes and other rubber products. Plaintiff employs between 900 and 1,000 persons.

During 1950, plaintiff, in response to invitations to bid issued by the Department of the Army, submitted bids and was awarded certain contracts for the manufacture of rubber tires, tubes and camelback (camelback being a rubber product used in recapping tires). It is with respect to seven contracts awarded during 1950 that plaintiff has sought relief. Five of the seven were awarded prior to the outbreak of the Korean hostilities on June 25, 1950, and the other two were awarded on June 30, 1950, and November 17, 1950, respectively. These seven contracts were of the fixed-price type and did not contain escalator clauses to protect against increased costs to the contractor. During the calendar years 1950, 1951, and 1952, in which deliveries were made upon the seven contracts which are the subject of this claim, the plaintiff was awarded 28 other contracts with the defendant. One of them was awarded April 7, 1950, and delivery thereon was completed June 14, 1950. This contract did not contain the escalator clause. The other 27 contracts were issued during 1951 and 1952. All of them were fixed-price contracts, but each of them contained the escalator clause providing a price adjustment upward or downward on the basis of costs of production. The plaintiff made a small profit on deliveries under all Government contracts during the three-year period. Plaintiff contends, however, that only the seven contracts for which it has sought relief should be considered here and that on this basis it has suffered to the extent of $1,811,333.38 representing increased costs occasioned by the Korean War together with loss of profits.

There is no question that the losses sustained by the plaintiff on the seven contracts arose from the fact that the Korean War brought about an increase in the cost of material needed by the plaintiff to perform the rubber contracts. The only question is whether such loss results in a legal or equitable claim against the United States.

After the outbreak of the Korean War, the cost of labor, rayon, synthetic and natural rubber increased at an abnormal rate. The plaintiff had to have rayon converted into rayon cord to be used in the manufacture of its tires. The conversion was done for the plaintiff by the Dearing Milliken Company. From July 1950 to December 1950, the rayon fabric price increased from 54 cents a pound to 62 cents and the cost of cord conversion from 10% cents to 15 cents. During much of this period rayon fabric was in short supply and the defendant’s officials did what they could to find a supplier for the plaintiff even though there was no such obligation on the part of the defendant under the contract.

Wage increases were negotiated with the United Rubber Workers Union and approved throughout the rubber industry. On September 18,1950, union workers were granted an increase of five cents an hour. On November 6, 1950, an additional six cents was agreed upon and again on September 17,1951, they were given an additional twelve cents an hour. The increased cost to the plaintiff occasioned by the higher costs of rayon and its conversion into cord and the wage increases, are not separately determinable with respect to the seven contracts, which are the subject of this claim, but these items did create substantial increased costs for the performance of the contracts.

Synthetic rubber during the period of plaintiff’s performance was purchased solely from the Reconstruction Finance Corporation, Office of Rubber Reserve. Prior to December 7, 1950, the price for the grade of synthetic rubber used by the plaintiff was 18% cents a pound. After December 7, 1950, the price was increased by the RFC to 24% cents a pound, and effective in September 1951 the price was further increased to 26 cents a pound. Higher costs of raw materials used in the synthesis of rubber and the necessity of overcoming uneconomical operations of synthetic rubber plants caused the RFC to raise the price of synthetic rubber. By applying the price increases of synthetic rubber to the quantities required and delivered to the plaintiff after December 6, 1950, for use in producing the rubber products called for in the seven contracts, the total increase thereof is found to be approximately $213,182.51.

The price of natural rubber began to increase on the market in the first half of 1950 due to the lack of enough natural rubber on the world market to supply the demand. General Services Administration bought on the market, in accordance with directives received from the Munitions Board, in order to complete United States stockpile objectives. Buying by GSA and private purchasers contributed to the increased price in the undersupplied rubber market.

Within six weeks following the outbreak of the Korean War the spot market price of natural rubber had increased from about 28 cents a pound to about 64 cents. In August 1950, a Presidential directive authorized the National Production Authority to impose controls upon the industry in order to limit the monthly quantities of rubber that manufacturers could consume. The limit authorized to each manufacturer or consumer was based upon a formula determined by the consumer’s base period consumption. GSA went into the market to acquire the balance of rubber available to the United States in the world market. By November 1950, the New York spot price for natural rubber had reached 91 cents a pound. On December 29, 1950, GSA became the exclusive importer and seller of crude natural rubber in the United States. The purpose of this was to avoid competitive bidding on the world market between the consumers of rubber. All outstanding contracts for future deliveries of rubber were honored by GSA. Finally, in April of 1951, the price of rubber began to drop when far-eastern rubber suppliers offered their rubber for sale to the GSA. GSA continued a buying policy that tended to reduce the price of rubber on the world market until about March 1952, when it announced that a free market would be permitted again effective the first day of July 1952.

The activities of the GSA in the rubber market were designed to protect the United States consumers and the national defense requirements for crude natural rubber. Had GSA not stepped in and become the sole importer of natural rubber there seems little doubt that competition for the existing supply of rubber would have forced the prices considerably higher than those paid to GSA.

Prior to the Korean War the plaintiff had purchased considerable quantities of natural rubber on a forward basis. This is the usual procedure in the rubber business and contracts for delivery are made from three to eighteen months in advance depending upon the view of the market by the dealer and his ability to obtain firm commitments at the source of supply. Before July 1950, the plaintiff had purchased approximately 90 percent of its scheduled requirements for the remainder of 1950. There is no way of determining if the forward purchases made by the plaintiff were intended for its military or civilian contracts. If the plaintiff at the time it was awarded the bids on the seven contracts had purchased forward in such quantity to enable it to meet the rubber requirements under the contracts, it would have sustained a loss due to increases in the price of natural rubber of only $6,891.88, representing the difference in the price of natural rubber between the time plaintiff entered its bids and the date of awarding the contracts. By using the cost per pound of rubber as determined monthly from invoices for deliveries during each month of rubber deliveries during the time that production was performed on the seven contracts, and the cost per pound at the time that plaintiff prepared its bids on the seven contracts, the increased cost of natural rubber amounted to $349,Y31.ll.

Faced with the rising cost of its production under the seven Government contracts, plaintiff decided to cut back govermnent contract production in an attempt to offset these losses with an increase in civilian production which was much more profitable. Upon the passage by Congress of the amendment to the First War Powers Act, January 12,1951, 64 Stat. 1257, the plaintiff discussed with the Cleveland Ordnance District, which had awarded plaintiff the seven contracts, the requirements for filing claims for financial relief under the Act. Plaintiff was advised that only in the case where a threatened loss by a contractor would adversely affect the interest of the Government would an existing contract be amended without consideration as provided for in the Act.

In March 1951, the plaintiff presented a claim under the First War Powers Act, as amended, to the Cleveland Ordnance District for $1,077,720. After a review of the claim the district contracting officer recommended that increases totalling $1,075,407.25 be allowed plaintiff. This recommendation was concurred in by the Cleveland District Board of Review which recommends to the district contracting officer on any claim over $100,000. Accompanied by the concurring recommendation of the Board of Review, the recommendation of the contracting officer for relief to plaintiff in the amount of $1,075,407.25 was forwarded through Detroit Headquarters to Washington, D. C., where it was assigned to the Claim Section, Department of Ordnance. A hearing before the Army Ordnance Board was held and the plaintiff’s claim was rejected. From this decision an appeal was taken to the Office of the Under Secretary of the Army which resulted in another hearing before the Army Ordnance Board. On this second hearing the decision was also adverse to the plaintiff. Through the efforts of the Special Assistant to the Under Secretary of the Army, plaintiff’s claim was taken to the Army Contracts Adjustment Board. The Adjustment Board found against the plaintiff and based ■its decision, to some extent, upon a finding that plaintiff was not on the verge of bankruptcy and, in part, that plaintiff’s claim was not the result of a net loss when all Government contracts were considered. There is some evidence that the Board feared possible criticism and a possible “epidemic effect” with respect to other potential claimants if this claim should be allowed.

In 1950, the plaintiff was in critical financial condition, since its working capital was less than $1,000,000 and it was committed to approximately $6,000,000 in Government contracts and about the same in civilian work. This condition has substantially continued to this day. The normal turnover of its working capital could not possibly meet plaintiff’s contractual commitments and it was therefore required to borrow substantial sums for additional working capital for which it pledged its accounts receivable.

In computing plaintiff’s net loss on the seven contracts the defendant made a complete audit of plaintiff’s records for the three-year period 1950, 1951, and 1952. The seven contracts here in question had a performance period from April 1950 to May 1952. Certain general expenses and non-operating expenses were excluded by the Government audit from the costs properly allocable to the seven contracts and were allocated to civilian business. These items are set forth in detail in finding 23. On the seven contracts for which claim is made, the plaintiff’s net billings for the delivery period from April 1950 through May 1952 were $5,843,816.15. By eliminating all of the expense items transferred by the defendant’s accountants from Government contracts to civilian business, the plaintiff’s net loss on these seven Government contracts was $959,751.11. During the same period the plaintiff made civilian deliveries of $26,548,951.94 on which it realized a profit of $2,516,760.74, representing 9.48 percent of net sales. By applying this percentage to the Government deliveries on the seven contracts, plaintiff’s profit would be $553,993.77.

If the contracts here in question had contained an escalator clause, which was contained in substantially all contracts for tires and tubes made by the Cleveland Ordnance District after November 17, 1950, the date the last of the seven contracts were entered into, the plaintiff would have received approximately $3,800,000 in addition to the amount it did receive under these contracts.

In determining whether the plaintiff is entitled to any equitable adjustment, consideration will be given to other contracts entered into between the plaintiff and the defendant during the period of performance on the seven in suit. Upon the total of 35 Government contracts entered into between the plaintiff and the defendant during the period 1950 through 1952, the plaintiff realized a profit of $64,363.41 or 0.043 percent on net billings. This compares to a 7.903 percent profit on a total of $31,786,405.41 in civilian business. If the plaintiff had realized a net profit on all its Government contracts at the same percentage as its civilian business it would have had a profit of $1,171,904.61 as compared to the $64,363.41 it realized, or a difference of $1,107,541.20.

If a proper proportion of the amount of the general and non-operating expenses transferred by the Government’s accountants from Government contracts to civilian contracts (finding 23) is allocated to the Government contracts, the net profit on all Government business would be substantially eliminated because the amount allocable to the seven contracts would be approximately $64,000 and thereby all but eliminate the $64,363.41 overall profit.

If the consideration of the other Government contracts is limited to net billings actually made during the period of performance for the seven contracts upon which suit has been brought, and for which the deliveries were completed about the middle of May 1952, then the plaintiff would have had a net loss on all Government contracts as of that time in the amount of $511,218.43. By applying the profit ratio of 9.48 percent earned on its civilian business during this same period, the plaintiff would have realized a profit of $927,-892.88 on net billings of $9,787,899.54 for the period April 1950 through May 1952. Therefore the sum of $1,439,111.31 would be required to equalize its Government business with its civilian business for this period.

There is nothing in the facts as presented to this court which gives rise to a legal or equitable claim in a juridical sense against the Government and the plaintiff does not assert one. Even construing the rules of law applicable hereto liberally in favor of the claimant, there is nothing in the facts which in onr opinion gives rise to an equitable obligation on the part of defendant to reimburse plaintiff for its losses. If this case had arisen as a result of plaintiff’s World War II contracts and only the seven contracts had been considered, plaintiff might have had a valid claim under the Lucas Act (60 Stat. 902,41U. S. C. 106 note, as amended, 62 Stat. 992), but no similar legislation has been enacted for Korean War contractors and the only similar relief available to plaintiff was under the amendment to the First War Powers Act. Such relief was not granted as a matter of right, however, and denial of such relief gives rise to no legal or equitable claim.

In view of the facts of record in this case it appears to us that plaintiff presented a most appealing case for First War Powers Act relief with respect to the seven contracts, and responsible and experienced Government officials recommended that such relief be granted. The decision at the highest level of review to deny the relief requested appears to have been reached as a matter of policy and we are without authority to review such decision, although we feel at liberty to express our opinion that it was a harsh one. Whether plaintiff should now be reimbursed, in whole or in part, for its losses on the seven contracts is for Congress to determine on the facts.

Regardless of which accounting period is chosen, and regardless of whether one views plaintiff’s situation from the point of view of only the seven contracts or of all 35 of its Government contracts, it appears that plaintiff fared very poorly on its Government business during the Korean War period. It avoided bankruptcy and remained in business only because of its civilian business during that period, of which the Government should not take advantage, and as a result of its Government contract work it has been unable to purchase much needed new equipment, has lost business because of this circumstance, and is in a comparatively precarious financial condition today. Whether, under these' circumstances, Congress wishes to provide for some monetary relief to the plaintiff is, of course, a question for Congress alone.

CONCLUSION

Our conclusion is that the plaintiff has no claim, legal or equitable, of a kind which could be enforced in court. The opinion, findings of fact, and conclusions reached will be certified to Congress pursuant to House Resolution 699, 82d Congress, 2d Session, adopted July 1, 1952.

Laramore, Judge; Madden, Judge; Whitaker, Judge; and Jones, Chief Judge, concur.

FINDINGS OP PACT

The court, having considered the evidence, the report of Commissioner Paul IT. McMurray, and the briefs and argument of counsel, makes the following findings of fact:

1. Plaintiff is a corporation organized and existing under the laws of the State of Delaware with its principal place of business in Findlay, Ohio, where it is, and has been for many years, engaged in the manufacture of rubber tires, tubes, and other rubber products. Plaintiff company employs from 900 to 1,000 persons.

2. On June 17, 1952, a bill entitled HR-8255, 82d Congress, 2d Session, was introduced to authorize the Secretary of the Treasury to pay to Cooper Tire & Rubber Company the sum of $1,811,333.38 in full satisfaction of all claims against the United States for losses suffered under the seven contracts which are the subject matter of the petition. The bill was referred to the Committee on the Judiciary of the House of Representatives, which, on June 20, 1952, issued Report No. 2226, 82d Congress, 2d Session, on House Resolution 699, which stated in part:

This resolution is merely to refer H. R. 8255, a bill for the relief of the Cooper Tire & Rubber Company, to the United States Court of Claims for the findings of fact and report of its conclusion to the Congress. Your committee is of the opinion that it is a case that should be referred to the Court and, therefore, recommend favorable consideration to the resolution.

House Resolution 699 of the 82d Congress, 2d Session, July 1,1952, provided as follows:

Resolved that the Bill (H. R. 8255) entitled “A Bill for the relief of the Cooper Tire & Rubber Company” now pending in the House of Representatives, is hereby referred to the United States Court of Claims pursuant to Sections 1492 and 2509 of Title 28 United States Code; and said court shall proceed expeditiously with the same in accordance with the provisions of such sections and report to the House, at the earliest practical date, giving such findings of fact and conclusions thereon as shall be sufficient to inform the Congress of the nature and character of the demand, as a claim legal or equitable, against the United States, and the amount, if any, legally or equitably due from the United States to the claimants: Provided, That it shall not be a defense on the part of the Government that the acts of the Government which are alleged to have damaged the claimant were done by the Government in its sovereign capacity.

Pursuant to the above resolution plaintiff’s petition was filed with the Court of Claims on October 1, 1952.

3. During the year 1950, plaintiff, in response to invitations issued by the Department of the Army, submitted bids and was awarded certain contracts for the manufacture of rubber tires, tubes, and camelback. Plaintiff’s petition relates to seven of these contracts, six of which were for rubber tires and tubes and one for camelback. The gross billings, under these contracts including excise taxes, amounted to $6,658,-714.40. The following table lists the contract numbers, the dates of the invitations to bid, the dates of the bids, the dates of awarding the contracts, the dates on which they were received by plaintiff, the period within which delivery was required, and the dollar amounts of the contracts.

4. The Korean, hostilities started on June 25, 1950, and very shortly thereafter the United States became involved. The Korean hostilities caused an increase in the cost of materials used in the manufacture of tires. During the first two years of the Korean hostilities, plaintiff had 35 military contracts. On the entire business involved it made a small overall profit. On seven of these contracts plaintiff sustained heavy losses. It is with respect to these contracts that plaintiff seeks recovery for the loss involved, plus a reasonable profit. Before filing a petition in the Court of Claims plaintiff sought relief under the First War Powers Act, as amended, and also through congressional action.

5. Plaintiff, faced with the prospect of rising costs on the seven contracts, and realizing that in the event of default the Government could buy similar tires elsewhere and charge the increased costs against it, decided to cut back on production in an attempt to reduce its losses by the offsetting effect of more profitable civilian business.

6. After the amendment of the First War Powers Act, January 12, 1951, 64 Stat. 1257, plaintiff discussed with personnel of the Cleveland Ordnance District, which had awarded plaintiff the seven contracts in suit, the requirements for filing claims for financial relief under the Act. Mr. Brewer, the president of plaintiff’s corporation, was given a document dated January 15, 1951, and entitled “Ordnance Corps Technical Instructions, No. 800-2-51, Processing Claims Under First War Powers Act, as amended.” Plaintiff reviewed and became cognizant of the contents of the instructions and was aware that amendments to contracts without consideration would be granted only where a threatened loss would adversely affect the interest of the Government. Paragraph 1 (3) of the processing instructions stated:

Submissions requesting authority to amend contracts without consideration under i the aforementioned authority will be forwarded by appropriate contracting officers, with their recommendations, through the chief of the interested procuring activity to the Army Contract Adjustment Board, Office of the Under Secretary of the Army, designate, only where the contractor has requested such relief and where an actual or threatened loss on a national defense contract, however caused, will adversely affect the interests of the Government by impairing the productive capacity or efficiency of a prime contractor or a sub-contractor whose continued operation as an efficient source of supply is, in the judgment of the chief of the responsible procuring activity, important to the national defense effort.

7. In March 1951, the plaintiff presented to the Cleveland Ordnance District its claim for increased costs in the sum of $1,077,720. This claim consisted of $10,938 for camel-back materials under contract No. 6488 for which deliveries were completed in January 1951, and represents plaintiff’s actual costs over its bid prices; the increased costs for tires and tubes delivered from July 1950 through February 1951, over and above its June 1950 costs, in the sum of $363,183, and the sum of $703,599, representing the excess costs of the remaining tires and tubes to be delivered, computed upon the excess of costs in February 1951, over the June 1950 costs for similar types and sizes.

After review of the claim the Cleveland Ordnance District recommended that increases totalling $1,075,407.25 be allowed.

8. The procedure for handling the contractors’ claims included a preliminary hearing by the Cleveland District Board of Awards. This Board consisted of full-time employees with the longest service and the highest status in the Cleveland office. If a claim, approved by the Board of Awards, was in excess of $100,000, it would automatically go to a Board of Beview. The Board of Eeview of the Ordnance Office in Cleveland was composed of independent business men from the Cleveland area. They were appointed by the Deputy District Chief of the Cleveland Ordnance District. They were called in to hear cases and were paid for their time on a per diem basis. Their functions were to review cases of major importance and to make recommendations to the Cleveland Ordnance District contracting officer. The contracting officer had the right to make recommendations contrary to these recommendations, but he did not have the right to make recommendations in any case involving more than $100,000 without first having the recommendation of the Board of Beview. The Board was without authority to make any final decisions.

Accompanied by the concurring recommendation of the Board of Beview, the recommendation of the contracting officer for relief in the amount of $1,075,407.25 was forwarded from the Cleveland Ordnance District through the Detroit Headquarters to Washington, D. C. where it was assigned to the Claim Section, Department of Ordnance. Bepresenta-tives of the plaintiff had conversations with the personnel assigned to the case in the Ordnance Department, and were told by them that it was the policy of the Army not to grant relief in cases like Cooper’s unless, first, the complainant whs an essential producer of military supplies, and, second, that it was on the verge of bankruptcy. A hearing before the Army Ordnance Board, on the Cooper claim, was held November 20, 1951. Subsequently, plaintiff’s president was informed that plaintiff’s claim had been rejected. From that decision an appeal was taken to the Office of the Under Secretary of the Army, resulting in a second hearing given by the Army Ordnance Board, which was likewise adverse to the plaintiff. Then discussions were held on an informal basis with Mr. Clyde Duval, Special Assistant to the Under Secretary of the Army and, through his efforts, the matter was taken before the Army Contract Adjustment Board where a hearing was held April 14, 1952. Its decision was also adverse to plaintiff. The decision of the Army Contract Adjustment Board, to some extent, was based upon a finding that plaintiff was not on the verge of bankruptcy and, in part upon consideration of the testimony of Mr. Brewer, that plaintiff’s claim was not the result of a net loss, when all Government business was considered, because in reality he had made some profit. The adverse decision was also based in part upon the view that granting relief would not facilitate the Korean effort. The Board also referred to the possibility of criticism from the Congress and a possible “epidemic effect” with respect to other potential claimants if this claim should be allowed.

9. During the hearing before the Army Contract Adjustment Board, Office of the Under Secretary of the Army, the President of the Board made several statements including the following:

There is something else we have got to figure; if we create a precedent here, it may be costing government more than $255,000.00 or $500,000.00 because there may be a lot of other people in your shape that hear that the dam is broken * * *. If we were to make the financial finding as to financial instability, but give you a lot more money, this competitor of yours may have all the Congressmen on our necks, saying he could have done it for that amount of money.

Before the application for relief by way of contract amendments was disapproved, a check was made by the Army to determine whether there were other potential claims which would be filed if plaintiff should be granted relief. No formal report showing the result of this investigation was put in evidence.

The recommendations for relief through the amendment of contracts made by the Cleveland Ordnance District and concurred in by the Detroit Arsenal appear to have been based primarily on the precarious financial condition of the plaintiff brought about by the increase in cost of rubber and rubber products which occurred subsequent to June 25,1950, and the essentiality of plaintiff’s company with respect to supporting the military requirements of the defendant during the Korean hostilities. Although the so-called “big four” of the rubber industry submitted bids for the supplies called for in the contracts involved in this action, such bids were so high that they were not awarded any contracts. The independent group of rubber manufacturers, which includes the plaintiff, usually submitted bids which were lower than those made by the four large concerns. Plaintiff’s bids on the seven contracts on which claim is made aggregated some $400,000 less than the nest lowest bids which were also made by a small company. The definition of a “small” business in the rubber industry is applied to those who have 1,000 employees or less.

10. Plaintiff was not the only contractor who had entered into fixed-price contracts at approximately the time the Korean War started. During the period 1950-1952 there vere a few other claims similar to Cooper’s except as to the amounts involved, in the Detroit and Cleveland districts. The Cooper request for relief was, however, the first to be received after the amendment of the First War Powers Act and involved a much larger amount. Armstrong Rubber Company filed a claim for $13,469.50 and another in the amount of $8,993.81. The B. F. Goodrich Company filed a claim in the amount of $23,517.78. In neither of these contracts was there an escalator clause. The Armstrong Rubber Company claims and the B. F. Goodrich Company claim were denied by the Board of Contract Adjustment. The Armstrong contracts were executed in November 1950 and the Goodrich contract was executed in December 1950.

The Mohawk Rubber Company also claimed it suffered a loss and actually prepared a claim which was never filed. The contract of this manufacturer was executed in December 1950 and contained an escalator clause.

11. The plaintiff now claims $1,811,333.38 computed upon deliveries and performance costs thereof from July 1, 1950 to May 31, 1952. Final deliveries upon the seven contracts tabulated in finding 3 hereof were completed about the middle of May 1952.

The plaintiff’s net receipts on contract billings for this period, after excluding excise taxes, were $5,700,469.70. Its total costs were $6,760,623.42, consisting of $6,464,148.98 manufacturing costs and $296,474.44 general administration and shipping expense, resulting in losses upon such deliveries of $1,060,153.72, which is claimed for recovery.

The plaintiff also claims a profit of $751,179.58, representing approximately 11 percent on its costs, or 10 percent of what it claims the billings should have been.

12. The principal items of cost that contributed to plaintiff’s losses which it seeks to recover were increases in the cost of natural and synthetic rubber. Substantial increased costs were paid for direct labor, tire fabrics and certain of the chemicals which were required in the processing of rubber.

Wage increases were negotiated with the United Rubber Workers Union and approved throughout the rubber industry, and similar increases were granted to supervisory personnel. On September 18, 1950, union workers ■ were granted an increase of five cents an hour. On November 6, 1950, an additional wage increase of six cents was agreed upon, together with broadened insurance coverage amounting to one and one-half cents additional. On September 17, 1951, an increase of twelve cents an hour was agreed upon which required the approval of the Wage Stabilization Board. It was approved in March 1952, but became retroactively effective.

The total cost of increased labor is not separately determinable from the evidence submitted. ■

Rayon

13. After the outbreak of the Korean hostilities, plaintiff found that rayon could not be obtained in quantities sufficient to take care of its military commitments. Cooper Tire & Rubber Company’s biggest rayon supplier was the American Viscose Corporation. Mr. Brewer went to the New York general office of that corporation and called upon the vice-president in charge of sales and explained the situation to him. The request for additional rayon was refused because it was the view of officials of the corporation that the Government should indicate which compames should supply scarce rayon and in what amount. The vice-president of American Viscose stated that if his company were to be selected to furnish rayon for military production, it would impair their relations with civilian customers and they would suffer damage. Subsequently, plaintiff appealed to Army Ordnance for help on July 7, 1950. The Army Ordnance, Cleveland District, attempted to help plaintiff satisfy its rayon requirements and made calls to various rayon suppliers. There are a total of five rayon suppliers in the United States and all were called. None of them wanted to undertake to supply rayon to plaintiff, for fear such arrangement would adversely affect their relationship with their regular customers. Plaintiff was then referred by Mr. Friedlander, president of the Dayton Rubber Company, to an official of the Department of Commerce, who assisted him in obtaining the needed material from the rayon suppliers.

14. Plaintiff had rayon converted into rayon cord to be used in its tires by the Dearing Milliken Company, which charges for the yarn unless it is supplied, by the purchaser and makes an additional charge for the conversion into rayon cord. Eayon conversion prices have traditionally been affected by supply and demand factors, and price fluctuations in the industry are not unusual. In January 1950 the market was generally depressed in that the supply exceeded demand. The demand increased in the spring of 1950, and the price charged by Dearing Milliken Company for the converted yarn was increased in July 1950, from 54 cents a pound for the yam and 10% cents for the conversion to 57 cents for the yarn and 12 cents for the conversion. In September 1950, the yarn price was increased to 62 cents a pound and 13 cents for conversion, and in December 1950, the conversion price was again increased to 15 cents a pound. The total increased cost of tire fabrics is not separately determinable from the evidence.

Synthetic Rubber

15. Prior to June 25, 1950, a number of synthetic rubber plants in the United States were idle. Under the Eubber Act of 1948, the Eeconstruction Finance Corporation produced only such quantities of rubber as were ordered by manufacturers. After certain synthetic plants had been in a stand-by status, a considerable delay was encountered in again getting these plants into operation. In order to overcome the uneconomical operation of the alcohol plants, an increase in the price of synthetic rubber was considered to be necessary. Higher raw material costs also contributed to the increase of synthetic rubber prices.

16. Synthetic rubber was purchased by the plaintiff from the Eeconstruction Finance Corporation, Office of Eubber Eeserve. Prior to December 7,1950, the price for the grade of synthetic rubber used by plaintiff was 18% cents a pound. By memorandum of December 6, 1950, to all rubber manufacturers, the EFC served notice that increases on the various types of synthetic rubber would become effective on all deliveries after 12: 01 a. m., December 7,1950. The increase on the grade of rubber used by plaintiff was from 18% cents to 24% cents a pound, and became effective upon all deliveries thereafter, regardless of when orders had been placed. By a similar memorandum August 24, 1951, the RFC notified rubber manufacturers of further increases in synthetic rubber prices, effective with permits for September 1951 deliveries. The increase applicable to the grade of synthetic rubber used by the plaintiff was from 24% cents to 26 cents a pound.

Effective January 1, 1951, the RFC allowed manufacturers 30 days for payment on approved credit not exceeding $50,000 of purchases. All purchases on permits in excess of this sum, or when approved credit was for a lesser amount, required cash payment with prepaid freight before shipment would be made from the distribution warehouse.

By applying the price increases of synthetic rubber to the quantities required for tires, tubes and camelback manufactured and delivered after December 6, 1950, under the contracts listed in finding 3 hereof, the total increase thereof would be approximately $213,182.51. This increase of cost is reflected in the loss reported in finding 23 herein.

Natural Rubber

17. Prior to June 25,1950, the Rubber Branch of the Purchase Division of the Emergency Procurement Service of the General Services Administration, consistent with the directives received from the Munitions Board, purchased natural rubber to complete United States stockpile objectives. The tonnages purchased during 1947,1948, and 1949, and the first quarter of 1950, were substantially the same in each year. In the second quarter of 1950 the price of natural rubber began to increase substantially over the prices which prevailed during 1949 and the first quarter of 1950. In the second quarter of 1950, General Services Administration purchased on ' a reduced tonnage basis. In those instances when the price of natural rubber reached a point which the Rubber Branch considered unreasonable, GSA dropped out of the market for a few days each month. When the price increased to more than 25 cents a pound, GSA bought only a token purchase of 90 tons a day.

18. During the first half of 1950, the overall purpose behind the rubber buying policy of the General Services Administration was to meet the terms of the directive from the Munitions Board with respect to the purchase of natural rubber for stockpile purposes, and yet at the same time to hold the price in line and retard the tendency of rubber prices to increase. The reason for the increased costs, which occurred in the first half of 1950, was the lack of natural rubber on the world market. Manufacturers’ inventories were low in comparison with the amount of rubber that was being consumed monthly. Buying by both the General Services Administration and private companies, domestic and foreign, contributed to the increased price.

19. Within six weeks following the Korean outbreak the spot market price of natural rubber had increased from about 28 cents a pound to about 64 cents a pound. In July 1950, the Government stockpile objective was doubled, but GSA purchased only small tonnages of natural rubber during that month. In August 1950, a Presidential directive limited the consumption of natural rubber by the industry so that stockpiling purchases could be increased. This directive authorized the National Production Authority (NPA) of the Department of Commerce to impose controls upon the industry which, according to the base period used, limited the monthly quantities of rubber that manufacturers were permitted to consume, and GSA went into the market to acquire the balance of rubber available to the United States in the world market.

Commencing in August 1950, GSA progressively increased its purchases for the stockpile, and bought substantial quantities during August, September, and October 1950. GSA purchased not only rubber available for immediate delivery, but also future contracts for deliveries in three months, six months or nine months ahead, depending upon the discounts that prevailed. By November 1950, the New York spot price for natural rubber had reached 91 cents a pound. The GSA avoided the market entirely during November and made only small purchases during December 1950. However, GSA purchases of natural rubber during the latter half of 1950 were approximately double the quantities purchased during the first half.

Individual companies would complain to NPA that they were losing industry business and that the base period alio-cation method imposed a hardship upon them and that they required additional quantities of natural rubber to fulfill their defense contracts. If, during the course of his base period, a manufacturer had used the maximum possible quantities of synthetic rubber and only limited quantities of natural rubber, he would be permitted to consume monthly only very small quantities of natural rubber under the base period formula. Since he could not get all the synthetic rubber he needed, he went to NPA and requested an adjustment of his base period so it would be possible to purchase natural rubber to the extent of the amount of synthetic rubber which the Government was unable to supply.

NPA granted a number of such appeals. During the months of September, October, and November of 1950, manufacturers were allowed to consume increased quantities of natural rubber in excess of that normally permitted by the controls which had been previously established. This increased consumption had a tendency to increase the price of natural rubber, as did the buying of natural rubber by other countries. Both China and Japan took large quantities of natural rubber from the world market.

Activities of GSA Subsequent to December 29,1950.

20. On December 29, 1950, GSA became the exclusive importer and seller of crude natural rubber in the United States. The purpose of this was to avoid competitive bidding on the world market between consumers of rubber. All outstanding contracts for future deliveries were honored by GSA at that time. The contracts between manufacturers, and dealers were registered with GSA and deliveries were permitted at the contract price irrespective of the length of time the contract had to run. Contracts between individual dealers were honored for a period of three months, permitting them a reasonable time to balance their books and to liquidate outstanding contracts, and the rubber section of the New York Commodity Exchange was closed March 31,1951.

On March 2,1951, GSA notified all rubber manufacturers that sales of natural rubber by it would require cash payment upon the receipt of the invoice.

In the month of January 1951, in order to obtain the requirements of natural rubber at the least possible cost to the taxpayers, GSA became the residual buyer of rubber, refusing to purchase at prices in excess of buying prices, which it set below the market prices. During some periods in January, February, and March, and in about the first twenty days of April 1951, GSA did practically no business in rubber. Throughout this period the supplies of natural rubber were building up in the Far East. Finally, in 1951, during the last few days of April, and for the first ten days of May, the price of rubber began to drop when owners of rubber in the Far East offered the rubber for sale to GSA. During the course of a 20-day period GSA bought a tremendous quantity of natural rubber. Then the market price leveled off and GSA announced a residual price of roughly about 2 cents a pound under the price at which rubber was then being offered in Singapore. Once again GSA did not buy until such time as stocks again became plentiful in the Far East, and when rubber was offered to GSA at the prices it would pay, GSA again purchased a substantial quantity and continued that policy, thereby substantially reducing the price of crude natural rubber. About March 1952, GSA announced that it had attained security in rubber and would permit a free market effective the first day of July 1952. The GSA policy in the purchase of natural rubber was directed so as to avoid either profits or losses in its operations. It published selling prices monthly which were maintained for the entire month. The selling price was established by taking total cost to the Government for physical inventory plus forward commitments, and adding administrative surcharge. At the end of a current month, GSA would receive a financial statement from its fiscal department reflecting total costs of physical inventory and obligations. It then made computations and established selling prices for each grade of rubber, consistent with the differentials which had been historically applied between the various grades of rubber. Great care had to be exercised to avoid unrealistic prices for any one grade of rubber, because such prices would have created demands for that grade in excess of the supply which might have been available. GSA’s gross business under the program was $1,765,000,000, on which was realized, as of 1955, a profit of $7,000,000.

The GSA selling price to domestic consumers of rubber was fixed as low as possible so as to permit the operation to break even. All buyers from GSA were treated on an identical basis. The net effect of this program was to reduce the price of rubber from 71 cents per pounds for No. 1 Rib-smoked Sheets, f. o. b. New York, about December 29,1950, to about 32 cents per pound, on July 1, 1952. If GSA had not occupied this position there appears to be little doubt that competition for the existing supply of rubber would have forced the prices considerably higher than those paid to GSA.

21. Natural rubber is not normally purchased on a month-to-month basis, but is contracted for deliveries in three, six, nine, twelve or even eighteen months, upon estimated requirements. The longer contract period depended upon the view of the market by the dealer, and his ability to obtain firm commitments at the source of supply. The maximum time that normally prevailed on forward commitments was twelve months. Contracts for future delivery usually cost less than purchases for immediate delivery.

Prior to the outbreak of the Korean hostilities the plaintiff had purchased substantial quantities of natural rubber on a forward basis to meet its production requirements. Some commitments were made in May and June of 1950, in anticipation of the awards of its Government contracts and some purchases were made for delivery six months in advance. Prior to July 1950, the plaintiff had purchased approximately 90 percent of its scheduled requirements for the remainder of 1950, except for two large contracts for which, awards were received after the Korean outbreak, and which amounted to approximately $5,700,000.

Because of difficulty in obtaining rayon tire fabric plaintiff fell behind in scheduled deliveries provided in its contracts and, by the end of 1950, the production under these contracts was only approximately 25 percent completed.

22. The plaintiff’s records are not kept in such a manner that it would be possible to determine whether purchases for forward delivery were intended for or allocated to specific; civilian or military contracts, although the current invoices for deliveries would indicate the original date of purchase. Plaintiff’s average cost per pound of natural rubber was determined monthly from invoices for deliveries during each month that production was performed on the contracts tabulated in finding 3 herein. By applying this unit cost per pound to the natural rubber required in the production performed during the same month, as compared with the prevailing spot prices for natural rubber at the time the plaintiff prepared its bids on the several contracts, the increase in cost of natural rubber for the performance of these contracts amounted to $349,731.11. This increase of cost is reflected in the total loss reported in finding 23 herein.

There was an irregularly rising price in natural rubber during the period from the earliest bid until July 1950. By applying the New York spot price differential between the dates of the respective bids and the dates the respective awards were received and acknowledged by the plaintiff, the net increase in natural rubber required in the production of these contracts would be $6,891.88.

23. The plaintiff made substantial deliveries on some of the contracts listed in finding 3 during the period April to June 1950. In considering the net loss on these contracts, the net receipts on billings and the applicable costs are properly determinable for the entire delivery period. The defendant’s accountants performed a complete audit of plaintiff’s records for the three-year period 1950, 1951 and 1952, during which deliveries were made.

Certain general expenses and nonoperating expenses were excluded from costs allocated to Government contracts, but were allocated wholly to plaintiff’s civilian production. Approximately $312,272.35 of these expenses were so allocated for 1950. They consisted of $25,000 for advertising, $83,348.95 for bonuses to executives and officials, $8,369 for collection expenses, $101,955.69 cash discounts, $77,701.51 for interest expense and bond discount, also provisions for bad debts, donations and other minor items inapplicable to government production costs. Similar allocations were made for 1951 and 1952. The interest and bond discount expense amounted to $87,623.22 for 1951 and $121,376.12 for 1952.

The plaintiff’s net billings on the seven contracts for which claim is made were $5,843,816.15 for the delivery period from April 1950 through May 1952. By eliminating all of the expense items in the above classifications the plaintiff’s loss on these contracts was $959,751.11.

During the same period the plaintiff made civilian deliveries of $26,548,915.94, on which it realized a profit of $2,516,-760.74, representing 9.48 percent of net sales. By applying this percentage to the deliveries of $5,843,816.15, plaintiff’s profit would be $553,993.77, or the sum of $1,513,744.88 in excess of the actual loss sustained ($959,751.11 plus $553,993.77).

24. The plaintiff contests the exclusion from its performance costs on Government contracts of the allocable interest and discount expense and bonuses paid to its officials.

In 1950, the plaintiff had Government contracts of approximately $6,000,000 and commitments on civilian business of about the same amount. Its working capital was less than $1,000,000. The normal turnover of its working capital could not possibly meet these commitments. It was required to borrow substantial sums for additional working capital.

In order to secure credit plaintiff had to assign the contracts in litigation and also had to pledge its accounts receivable, and W. B. Brewer, plaintiff’s president, personally guaranteed one of the large accounts. Plaintiff is still unable to purchase needed modern equipment which would make it possible to effect substantial savings in manufacturing tires, and has recently lost some business because of that situation. Its financial situation was critical throughout the period of performance on these contracts.

Plaintiff realized excellent profits on its civilian business during 1950. By continuing substantial civilian production and spreading its government contract deliveries over a greater period the plaintiff was able to minimize its contract losses and avoided an overall net loss, which would have injured or even terminated its ability to obtain credit.

25. The salary of Mr. Brewer, President of the plaintiff’s Company, is twenty-five thousand dollars ($25,000.00) per annum. Mr. Frost, the treasurer, receives twelve thousand and five hundred dollars ($12,500.00) per annum. These salaries and those of other top officials of the company are lower than those of other companies in the industry which are of the same financial group. The average salary for the president of such companies is fifty-two thousand four hundred dollars ($52,400.00) per annum and the average salary of the treasurer is twenty-seven thousand seven hundred dollars ($27,700.00).

The proportionate amount of interest and discount expense and bonuses paid to plaintiff’s officials which would be allocable to the seven contracts, on the basis of net billings, amounts to approximately $64,000. This would represent an additional loss on these contracts over and above the loss of $959,751.11 reported in finding 23.

26. The plaintiff had been doing business with the Army through the Cleveland Ordnance District for some time prior to entering into the contracts on which suit was brought, but never before had been awarded such a large proportion- of the tires and tubes on which it had submitted bids. During the same period the Cleveland Ordnance District awarded contracts to other manufacturers having a total value of $5,476,951.40, with award dates from March 24 to June 23, 1950, substantially all of which were awarded to small manufacturers. During the period from June 30 to November 17, 1950, twenty additional contracts were awarded by the Detroit Ordnance District having a total contract value of $4,323,797.90, but no additional awards were made to plaintiff during this period. None of these contracts contained an escalator clause providing for a price adjustment.

Thereafter substantially all of the contracts for tires and tubes contained the escalator clause providing for adjustments from time to time as costs of production were increased or decreased. In general the effect of the escalator clause was to provide payments not in excess of the prices listed in the Federal Supply Schedule applicable on the dates of delivery specified in the contracts. By applying the listed prices in the Federal Supply Schedule to the deliveries required under the seven contracts reported in finding 3 herein, the cost to the Government would have been approximately $3,800,000 greater than the actual payments to plaintiff for such deliveries.

27. During 1950, the plaintiff made deliveries of $1,394,604 on contracts with the Government other than the seven in suit on which it sustained a loss of $39,557.55, including one contract received April 7, 1950, for $99,760 upon which deliveries were completed by June 14, 1950.

In 1951, the plaintiff again submitted bids for Government work and during that year, commencing on February 19, it received awards for seven additional contracts having a value of $4,980,550.17. During 1952, the plaintiff was awarded twenty additional contracts having an aggregate value of $12,625,953.60. All of these later contracts contained the escalator clause. Substantial deliveries were made upon these contracts concurrently with the deliveries being made under the seven contracts upon which this suit was brought.

In the determination of an equitable adjustment for the losses sustained by plaintiff in the performance of the seven contracts reported in finding 3 herein, consideration also is given to other Government contracts on which production and deliveries were made during the same years, as well as civilian production for these years. A summary follows for the three-year period 1950 through 1952:

The three-year period covers the entire cycle of rising prices and the return to approximate normal, as measured by the prices of natural rubber, but other materials followed a similar trend. During 1950, the plaintiff realized a profit ratio of 11.478 percent on its civilian sales due in part to the use of materials purchased in advance of the rising prices. In 1951, it realized a profit of 9.96 percent on its civilian sales under a high, but more stable, market. During the full year of 1952, wben a free market was reestablished for natural rubber and other materials followed the downward trend, the plaintiff realized a profit on its civilian sales of only 1.583 percent, but during the last half of 1952 a small loss was sustained.

By applying the net profit ratio of 7.903 percent earned on its civilian business upon its total Government business for the three-year period, the plaintiff would have realized a net profit of $1,171,904.61 (7.903% of $14,828,604.40). Since the plaintiff realized a net profit of only $64,363.41 upon its total Government business for the three-year period, the difference of $1,107,541.20 represents the net sum required to equalize compensation to plaintiff on its total Government business with its civilian business.

The accounting upon which the foregoing determination is made allocated all interest and discount expense and bonuses paid officials to civilian business. By allocating a proper proportion of these costs to Government business, the net profit thereon would have been substantially eliminated and the profit on civilian business would be increased by approximately $64,000. (Finding 25.)

28. The plaintiff contends that consideration of other Government contracts should be limited to the period of performance for the seven contracts upon which suit was brought, and for which deliveries were completed about the middle of May 1952. In considerating all of the plaintiff’s business for the period of April 1950, through May 1952, the net loss on its performance on all Government contracts during this period is the sum of $511,218.43, as reflected in the following summary:

By applying the profit ratio of 9.48 percent earned on its civilian business upon its total Government business for the performance period of the seven contracts, the plaintiff would have realized a net profit of $927,892.88 (9.48% of $9,787,899.54). Since the plaintiff sustained a loss on all of its Government business during this period, the difference of $1,439,111.31 ($511,218.43 plus $927,892.88) would represent the sum required to equalize its Government business with its civilian business for this period.  