The plant was built at Châteauroux, Neuvy-Pailloux. About the time the project was getting well under way, heavier tanks began to demonstrate their effectiveness in the field; and then France insisted that, because her armies held the most front-line mileage, the most of the Anglo-American tanks to be built at the Châteauroux plant should be allotted to her. Reluctantly the British agreed that the first 1,200 tanks should be divided equally between France and the United States and that France should receive all of the next 300.
Then the war ended. About 24,000,000 francs had been invested at Châteauroux. The British had spent £3,000,000 in the manufacture of components and the Americans a like sum, expressed in dollars. France had not put in a centime; yet she had expected to receive nine-sixteenths of the first year’s output. The question was, what share of the heavy loss should France stand? The French arrangement with the Tank Commission was tantamount to a contract, with the British-American partnership standing in the light of contractor. It was evident, then, that the French were morally bound to pay cancellation charges—to stand part of the loss, in other words. The British and American negotiators at London thought it would be about right if France would pay back the 24,000,000 francs expended by the British and Americans at Châteauroux, and the British and Americans would throw in the tank plant itself as an inducement.
Then the question arose, how would this 24,000,000 francs be divided? Both England and America had lost heavily in the big-tank enterprise—each had, in fact, agreed to let these losses balance each other; neither was to bill the other for anything in the settlement—and here seemed to be the chance to get some of the money back. Naturally, the Americans assumed that the French reimbursement would be divided equally, since both America and England had contributed equally to the cost of the Châteauroux plant. But no, the British contended; since they had surrendered their share of the first year’s production of tanks, the lion’s share of the reimbursement should go to them. There was logic in this, but, without deciding the point, both sides repaired to Paris to present their joint tank claim to the French; and then it appeared that the British and Americans had been dividing some French chickens before they were hatched. Through M. Louis Loucheur, the Minister of Munitions, the French Government metaphorically lifted its eyebrows in surprise that its associates could present such a claim. To be sure, the French expected to take the Anglo-American heavy tanks, but so did the Americans and British expect to receive light tanks from the French industry. These were merely understandings, not formal contracts; and the French, to do their share, had made large expenditures in developing the light-tank manufacture for the benefit of all. Needless to say, the French Government had lost heavily in terminating its tank industry. These national losses should set off each other....
The British and American representatives retired to ponder this rejoinder. It seemed to have merit; yet the fact remained that somehow or other France was evidently going to emerge from the tank discussion with the Châteauroux plant in her possession. The delegates returned and argued with such force that the French Government agreed to pay 20,000,000 francs in settlement, taking over the Châteauroux plant.[14] Since the salvage value of this plant was estimated at 5,000,000 francs, the sum of 15,000,000 francs was considered as the indemnity paid by France. England then asked for five-sixths of the total payment, but the American argument scaled this down to 70 per cent. America thus received 6,000,000 francs out of the settlement.
The bargaining Yankees, however, were yet to have the final word in the tank deal. With the settlement complete, sealed and delivered, the British had on their hands 105 sets of tank parts with only junk value, although it had cost the British £5,000 a set to manufacture them. The Americans offered £1,000 a set for these parts, and the British snapped at the offer. This fine bargain enabled us later, at low cost, to assemble these parts with the American-built components and thus place in the war reserves 100 of the largest and most formidable tanks ever built.
Another, a minor, tank transaction should be noted. The British Army had supplied, during the action, sixty-four tanks of various sorts to the 301st Tank Battalion of the A. E. F. Fifty of these, some of them more or less damaged, had been returned to the British after the armistice, and the remaining fourteen were shipped to the United States. For the purchase of the fourteen and for the war use of the other fifty, the Liquidation Commission agreed to pay the British Government the sum of £189,233 2s 11d.
Outside the claims for payment for materials actually delivered, the British pressed upon the Liquidation Commission collateral claims of several sorts. One of these was for interest upon money invested by the British in stocks of goods destined for American consumption. Our people protested successfully against paying interest upon such investments, but admitted the point that we should pay interest after the goods had been delivered and we had been billed, allowing a reasonable interest-free period for vouchering and checking. Investigation showed that both armies had been dilatory in paying their bills to each other, and that the average time of delaying payment had been five months and a quarter. The British bills against America exceeded the American bills against England by some £51,000,000. One month and a half was allowed as a reasonable interest-free period after billing. Accordingly the commission agreed to pay 5-per-cent interest on the British billing excess, a sum which amounted to £797,854 11s 2d, and this America paid.[15]
It was impossible for the Liquidation Commission to make a lump settlement of all the minor bills, accounts, and claims of Great Britain against America, because of the difficulties in securing full statements of the indebtedness. It was roughly estimated, however, that these claims would aggregate £10,000,000.
One obscure and involved problem for the Commission to solve related to the so-called British “hidden losses” on steel products sold to the United States during the war. The British treatment and control of its war prices differed radically in method from ours. The War Industries Board, it will be remembered, fixed prices high enough to stimulate production and then held the industries to those prices, no matter to whom they sold. The British plan was an opposite one. With steel, for instance, the British Government simply monopolized the raw materials and sold them to the producers at prices that represented a loss to the Government. In effect, it was a subsidy. To the British public it made no difference whether it paid this subsidy or an equal amount in the increased cost of artillery, ammunition, and other munitions made of steel. But when it came to a settlement between England and the United States, the British Government insisted that the United States was not fairly entitled to the “manufacturers’ issues” price for the raw steel that went into the British-made munitions supplied to America. The British, therefore, after the main settlements, presented a supplementary claim to compensate for the hidden loss, and this claim amounted approximately to £3,770,000.
In principle, the Commission was willing to admit the force of the British contention. It asked the British, however, to prepare a more definite statement, showing (1) the average British governmental loss on all steel supplied to manufacturers for the year preceding the armistice, (2) the amount of such steel that went into products sold to America, and, finally, (3) the hidden loss on all steel furnished to America as thus estimated. When the revised statement was presented, it was found to contain items of hidden loss which America could not possibly allow. The British war subsidies went all through their war industry. For instance, in order to stimulate production, the British Government had paid subsidies to the makers of silica brick, used in building steel furnaces. The British asked us to stand a part of this subsidy, inasmuch as some of the shell supplied to us had been produced from furnaces built of subsidized brick. The Commission retorted by asking why Great Britain did not also ask us to share the subsidy on the bread the British steel workers had eaten while they were working on the American artillery and shell orders. In other words, we were willing to pay hidden losses so long as they were not too remotely connected with the American contracts. The Commission also raised the shrewd question, why, since the British were asking us to pay for hidden losses, they did not admit us to the benefits of their “hidden profits”—viz., the profit taxes collected from the British steel manufacturers.