A Plan for Freedom

President Eisenhower, who has pledged himself to "the encouragement of competitive enterprise," last week got a big chance to do something about it. The RFC sent him a 73-page plan to get the Government out of the rubber industry, the nation's 15th biggest. Of the 1,260,000 long tons of rubber used by the U.S. last year, nearly two-thirds were made in Government-owned plants.

When Pearl Harbor cut the U.S. off from Malaya's natural rubber, only the Government was big enough to rear the $700 million, 51-plant synthetic industry. But getting the Government out was not so easy as getting it in. Harry Truman could not get private companies to bid anything approaching a fair value for the plants. The reason was that natural rubber had come back, was cheap (25-c- a lb.), and was so superior to most synthetics that 12 of the Government's remaining 29 plants were shut down.*

The New Champion. Later, the Korean war drove natural rubber sky-high (peak: 75-c- a Ib.), and forced most of the Government plants back into production. Research was also stepped up, financed by the Government and carried out by the private operators of the plants (tiremakers, oil and chemical companies). As a result, more than half the shoes made last year were soled with synthetic rubber. Even the once-scorned "general purpose" synthetic (GR-S), which in tires once lasted for barely 5,000 miles, is now made mostly by the low-temperature process that turns out hard-wearing "cold rubber" (TIME, June 6, 1949). Synthetic competed so strongly that it drove natural rubber back down to 28-c- a Ib. (GR-S sells at 22-c-). Now, says the RFC, there is no question that synthetic in private hands could compete strongly enough with natural rubber to maintain the minimum production needed for national security. In fact, there is an "imminent need" for even more synthetic capacity.

High-Stake Poker. Since the 29 plants are not independent units but draw raw materials from butadiene and styrene plants, the logical plan is to sell the plants as economic packages, says RFC. Also recommended by RFC: negotiated sales rather than competitive bidding to keep rubber companies from knocking down the prices by agreement on bids.

What the plants, which cost $525 million, are now worth will have to be determined by a huge poker game, which has, in fact, already begun between the Government and the prospective buyers. One precedent: the $10.9 million copolymer plant in Louisville went for $4,187,000 to Goodrich in 1947. The industry, which naturally wants to get the plants as cheaply as possible, points out that the plants have had ten years of depreciation, that the RFC itself carries them at book value of only $172.6 million. Furthermore, for three months the industry has been breaking into a rash of sensational claims for new synthetic processes which would, supposedly, make the existing plants obsolete. Goodrich announced a process that could make rubber 50 times as fast as existing plants. Goodyear announced it was perfecting a new synthetic which might last the life of an automobile. Eight smaller tiremakers, operating as the Copolymer Corp. at Baton Rouge, were reported to have a rubber tire that would last 75,000 miles.

RFC thinks these claims are chiefly horse-trading to beat down the price. RFC has made no estimate of a fair price, but it lists $446 million as the "unrecovered cost" (i.e., not yet paid for by profits from Government rubber). Michigan's Republican Congressman Paul Shafer, chairman of the House Armed Services Rubber subcommittee, says $350 million would be fair to both sides. Ike Eisenhower will have the final say on any deal. Under the 1950 rubber law, he has until April 15 to approve the RFC disposal plan or send Congress one of his own.

*Of 22 others, 18 had already been sold, four abandoned as surplus.

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