pellet of gamma alumina to make a more heat resistant gamma alumina washcoat for the monolith. Tr. 2882, 2922, 3123, 3149-50.

Although I cannot say that such a hope was unrealistic, the record indicates that Chrysler must have known there would be difficulties in achieving it. In a pellet the catalytic material is applied directly to little pebbles of gamma alumina, while in a monolith the alumina must first be spread on, and firmly attached to, a two-dimensional surface. Tr. 3163-69. In fact, the research report attached to the EPR minutes of October 3, 1972 indicates substantial uncertainty over whether the technology could be transferred. "Very tentatively, it appears that U.O.P. may have more to contribute on the primer [washcoat] application process" (emphasis supplied). The same uncertainty to a lesser extent was indicated by UOP in a letter discussed at Tr. 3066-68. The research report for the EPR meeting of January 10, 1973, indicates that a washcoat to substitute for UOP's was being tested in the Chrysler laboratory.

Chrysler also argues that UOP was more willing than Engelhard to cooperate and share its knowledge with Chrysler. C. Mem. 56, Tr. 2883, 3057, 3059-60. However, a December 27, 1972 letter agreement between Chrysler and UOP indicates that UOP gave Chrysler permission to analyze the UOP monolith, but not the pellet with which UOP has worked considerably more intensively. C. Doc. Vol. IV. A letter of May 19, 1972 set forth at C. Doc. Vol. III, Sec. 2, shows that even without a supply contract Engelhard had agreed to let Chrysler make analys is of its catalysts to determine how "poisoning" occurs.

A third and closely related point is that until the fall of 1972 Chrysler had experienced considerable difficulty in getting samples of Engelhard's new catalyst, the II-B, to test. C. Doc. Vol. V, Sec. 2, pp. 10-11. There does appear to be validity to this argument, Tr. 3071-72, although the EPR minutes contain no record that any such problem was ever brought to the Committee's attention. However, even the old Engelhard monolith, for which there is no record of supply difficulties, had by far the best record of any catalyst tested.

*/ Some idea of the technical complexity involved in making monolithic catalysts can be obtained by examining the patents at the back of C. Doc. Vol. III, Sec. 1.

Finally, Chrysler claims that Engelhard insisted rigidly on becoming the supplier for 65% of their catalyst requirements, while UOP was willing to settle for as little as 40%, and to include an escape clause binding UOP to match the performance of any other catalyst maker, C. Mem. pp. 55-57, Tr. 2934-35, 3060, 3144, 3155. Nevertheless, the commitment to UOP was necessary, as Chrysler itself admits, because lead time for the 1975 model year was getting very short, and it was necessary at that time to make commitments to catalyst makers that would allow them to start construction of the necessary facilities. C. Mem. pp. 55, 57, Tr. 2883. In such circumstances it would appear that the claimed "flexibility" existed more on paper than in reality. Since every passing month would make it harder for any potential Chrysler commitment to another company to bear fruit in time for 1975, the September commitment as a practical matter probably locked Chrysler into relying on UOP for at least a substantial portion of its requirements.

It appears that much was surrendered to gain these four claimed advantages. It would seem clear that considerable problems and lost development time would necessarily result from choosing a manufacturer with little experience in monolithic catalysts */ over one which had extensive experience in the field. The record indicates that such problems and lost time have in fact occurred.

In its submission dated this March, Chrysler said that six months after its commitment to UOP, "the Engelhard catalyst is the most active and durable of all the catalysts tested." C. App. IV-A-25. Faced with this statement, one Chrysler representative indicated that the data available as of March 1973, did not entirely support the wisdom of the September commitment. Tr. 1115.

The Chrysler documents from September 1972 to the present bear out that judgment. They show that Engelhard catalysts were constantly used as a standard of reference, to be equalled if possible. EPR Minutes 1/10/73 (research report); EPR Minutes 1/23/73; EPR Minutes 1/23/73 (research report).

* C. Mem. p. 57 states that UOP indicated at a meeting on July 25, 1972, that they had "extensive experience" in monoliths. An examination of the document cited as support for this assertion does not appear to bear it out.

("In all of these laboratory tests [of other catalysts], as well as car and dynamometer tests, the Engelhard catalyst has served as a standard of excellence.")*/ EPR Minutes 2/20/73 (research report).

I do not regard the severely limited test data at C. Mem. pp. lb-7b as proving the contrary. Even if test results at 500° only are taken as representative of catalyst activity over the entire temperature range (which they are not), the problem that Chrysler has laid almost all its stress on, both in discussing the washcoat and in its emphasis on "catastrophic failure" is durability in use. The activity tests do nothing to prove the durability of the UOP catalyst.

Chrysler has also submitted two recent dynamometer comparisons of the endurance of Engelhard and UOP catalysts, which appear to show marginally better performance by UOP. C. Mem. pp. 8b-9b. It is not clear how much importance can be attached to such severely limited data, and Chrysler itself appears to place limited significance on it. At the most, it would indicate some probability that UOP has caught Engelhard in the laboratory, and that nothing can be said about whether this will still be true for vehicle tests. The Chrysler submission states that car tests to date indicate "poor durability for [UOP] catalysts, far below that needed to meet the 1975 standards." C. App. p. IV-F-18. The two examples cited to support this point seems to be the same catalysts whose melting was attributed to "engine failure" in the passage from C. Doc. Vol. V, quoted above.

On balance, I therefore conclude that although some of the technical explanations for UOP's selection have merit, they would themselves have been far from enough to cause Chrysler to select UOP over Engelhard, particularly in view of the great disparity in test data available from the two companies.

* Chrysler argues that test results from this period showing Engelhard superior to UOP are misleading, since all the UOP catalysts were tested, but only those Engelhard catalysts were tested that passed Engelhard's quality control. There is some force to this point. But the minutes quoted here note that all UOP catalysts were tested, say that some portion of their poor performance can be attributed to that, and on balance still recognize Engelhard as clearly superior.

A reason for UOP's selection that seems more persuasive than any of the above is price. Mr. Heinen testified that the September contract was made by submitting a list of four acceptable companies to the Chrysler purchasing department and letting them pick the lowest bidder. Tr. 3148, 3152. See also Tr. 1121, 1123, 1135. The August work sheets in C. Doc. Vol. I are entirely consistent with this testimony, for they are set up to compare four companies on the basis of price alone. Mr. Bright testified that price was an important factor, Tr. 1134, 1140, as did others, Tr. 1101, 1105, 1114. I find that a price comparison among companies was in fact a dominant influence in the decision.

The difference in the ultimate price of the car that would have resulted from accepting the Engelhard September quote rather than the one made by UOP appears to be $5. Tr. 2946.

It is even clearer that price was a primary motive for the choice made in March of 1973 to place 100% of Chrysler's catalyst requirements with UOP. The documents provided us for the period September 1972 to March 1973 place some stress on the fact that UOP catalysts are cheaper than Engelhard, although they may not perform as well. The difference is variously attributed to a lower UOP precious metal loading, EPR Minutes 1/23/73 (research report), and Engelhard's tighter quality control, EPR Minutes 1/10/73 and 1/23/73.

Catalyst quality aside, there are certain advantages to any manufacturer in having more than one source for such a vital part as a catalyst. A variety of sources spreads the risk of shutdowns and other production difficulties. Chrysler testimony indicates this was realized.

The
Tr. 3216.

The record is plain, however, that the risk of having only one source was taken because that was the cheaper course. EPR Minutes 11/28/72 ("Mr. Bright commented that from an

economic standpoint, Corning-UOP may be the best single source

combination.

All things considered, we could decide to risk the single source situation.") (emphasis supplied). He testified to the same effect at the hearing. Tr. 1163.

The amount saved per car by this choice (on the basis of two catalysts to a car) was apparently about $7 a car on the 40% of Chrysler production for which the choice of a supplier other than UOP was still considered open at that time. 3213, Ex. P-52, C. Doc. Vol. I.

Tr.

Senator MUSKIE. Before the Administrator delivers his statement, I would like to place these hearings in perspective.

On June 24, 1964, an auto industry spokesman made the following statement to this subcommittee:

The industry believes that maximum progress can be made in communities, or States, or areas, by:

(a) thorough evaluation of community air quality.

(b) careful evaluation of the magnitude of emissions from each source. (c) control of emissions by establishment of performance standards rather than design standards.

(d) establishment of a maintenance and surveillance program in conjunction with required source controls ...

Effective progress can be made only when the specifics of the problem have been defined and are well understood... I repeat our pledge to work unstintingly on this problem in the public interest.

In 1970, 6 years later-after nearly 15 years of developing information on community air quality in the public health service:

-after more than 5 years of careful evaluation of the relationship of auto pollution to air quality;

-after 5 years of experience with limited Federal authority to regulate motor vehicle emissions;

-after 3 years of experience with national motor vehicle emission controls; and

-more than 1 year after the auto industry had agreed at the White House to achieve clean car goals by 1980, the Congress passed the Clean Air Act of 1970 which accelerated the deadlines for production of automobiles which would permit achievement of clean, healthful air in our Nation's cities.

Now, in 1973, we are told that those deadlines cannot be met. In most cases the auto industry argues that they cannot produce and guarantee cars which comply with auto emission standards set forth in the law. And, they argue that even if they could, those standards are not necessary.

I want to know why not. I want to know what the industry has done in the past 3 years. I want a public explanation from the industry for the course they have chosen, a course that has not been altered since 1969.

I want to know what the industry is going to do in the coming year to overcome past failures.

I want to know what commitment the auto industry is willing to make to the American people. And, I intend to challenge the assumptions on which the industry's failures have been based.

These hearings are the beginning of the investigation of that failure. I look forward to whatever enlightenment is available.

I think maybe what I have tried to say is better said in an editorial which appeared in the Wall Street Journal on April 13.

Without objection, I will put the whole editorial in the record, but I would like to read these two paragraphs:

Detroit could strike a more positive posture by squarely confronting the questions raised by Senator Muskie. What is the industry willing to commit itself to?

When will it commit itself to do it? And what guarantees is it willing to give the public?