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Chapter 7—Cooperative Strategy 7–1 Chapter 7: Cooperative Strategy CHAPTER SUMMARY This chapter discusses the reasons cooperative strategies are important in the current competitive environment. The topic is examined generally as well as by market type. Examples of various cooperative strategy types are provided on the basis of their primary strategic objectives, with strategic alliances highlighted as a frequently-used form of cooperative strategy. Associated risks and effective management to overcome risks are presented to complete the discussion of cooperative strategies. CHAPTER OUTLINE Importance of Cooperative Strategy Strategic Alliances in Slow-Cycle Markets Strategic Alliances in Fast-Cycle Markets Strategic Alliances in Standard-Cycle Markets Types of Alliances and Other Cooperative Strategies Cooperative Strategies That Enhance Differentiation or Reduce Costs Complementary Strategic Alliances Network Cooperative Strategies Cooperative Strategies That Address Forces in the External Environment Competitive Response Alliances Uncertainty-Reducing Alliances Competition-Reducing Cooperative Strategies Associations and Consortia Cooperative Strategies That Promote Growth and/or Diversification Diversifying Strategic Alliances Franchising International Cooperative Strategies Competitive Risks of Cooperative Strategies Implementing and Managing Cooperative Strategies Summary KNOWLEDGE OBJECTIVES 1. Define cooperative strategies and explain why they are important in the current competitive environment. 2. Explain how the primary reasons for the use of cooperative strategies differ depending on market context (fast-cycle, slow-cycle, or standard cycle). 3. Define and discuss equity and non-equity strategic alliances. 4. Discuss the types of cooperative strategies that are formed primarily to reduce costs or increase differentiation. 5. Identify and describe cooperative strategies that help a firm to address forces in the external environment. 6. Explain the cooperative strategies that firms use primarily to foster growth.
Chapter 7—Cooperative Strategy 7–2 7. Discuss the risks associated with cooperative strategies. 8. Describe how firms can effectively implement and manage their cooperative strategies. LECTURE NOTES See slides 1-3. Key Terms ▪ Cooperative Strategy - strategy in which firms work together to achieve a shared objective. ▪ Strategic Alliance - cooperative strategy in which firms combine resources and capabilities to create a competitive advantage. Importance of Cooperative Strategy - This section discusses how cooperative strategies have become integral to the competitive landscape and central to the success of partnered companies. See slide 4. Key Terms ▪ Co-opetition - condition that exists when firms that have formed cooperative strategies also compete against one another in the marketplace. See slides 5-6. See Table 7.1: Reasons for Strategic Alliances by Market Type (slide 7). 1. What are some of the reasons that cooperative strategies have become important to businesses today? a. Most firms lack the full set of resources and capabilities needed to reach their objectives. b. Cooperative behavior allows partners to create value that they couldn‘t develop by acting independently. c. Aligning stakeholder interests, both inside and outside of the organization, can reduce environmental uncertainty. d. Alliances can provide a new source of revenue. e. Alliances can be a vehicle for firm growth. f. Alliances can enhance the speed of responding to market opportunities, technological changes, and global conditions. g. Alliances are a way that firms can gain new knowledge and experiences to increase competitiveness. Compare how the reasons for using cooperative strategies vary across market type. 2. Compare how the reasons for using cooperative strategies vary across market type. a. Slow-cycle markets - Strategic alliances are used to enter restricted markets or establish franchises in new markets with ease and speed. The alliance partner might better understand the new market’s conditions
Chapter 7—Cooperative Strategy 7–3 See Additional Notes Below. See slide 8. and have knowledge of and relationships with key stakeholders. b. Fast-cycle markets - Strategic alliances between firms with excess resources and promising capabilities aid in the transition required to evolve markets and to gain rapid entry into new markets. c. Standard-cycle markets - Strategic alliances between large firms with economies of scale are likely to combine complimentary resources/capabilities to gain market power. This type of partnership allows firms to learn new business techniques and technologies. 3. Why are slow-cycle markets becoming rare in the 21st century competitive landscape? a. Privatization of industries and economies b. Rapid expansion of the Internet’s capabilities c. Quick dissemination of information and speed with which advancing technologies permit quick imitation of even complex products. Additional Discussion Notes for Strategic Alliances by Market Type - These notes include additional materials that cover reasons for strategic alliances by market type, citing corporate examples to illustrate the concepts. The competitive conditions of slow-cycle, fast-cycle, and standard-cycle markets impel firms to use cooperative strategies to achieve slightly different objectives (see Table 7.1 in text). Market type examples of cooperative strategic alliances follow. Slow-Cycle Access to restricted market; establish franchises in new markets; maintain stability (e.g., establishing standards). ▪ French steelmaker Usinor formed an equity strategic alliance with Dofasco, Canada’s second largest steel mill, to build a plant to supply car bodies for Honda, Toyota, GM, Ford, and DaimlerChrysler. Through this alliance, Usinor and Dofasco established a new franchise in the import-averse U.S. steel market. ▪ American AIG formed a joint venture with India to gain entry into India’s restricted insurance market. ▪ Petrochemical companies from Venezuela and Brazil formed a joint venture for cross investments between partners. The eventual goal is to attract other oil companies in the region (Colombia and Mexico).
Chapter 7—Cooperative Strategy 7–4 Fast-Cycle Compress R&D time and capital; market leadership; form standards; reduce risk and uncertainty: ▪ Visa formed a venture capital program to scout technologies and capabilities that will affect the future of the financial services industry in order to meld and integrate the physical and the virtual financial world, where customers have the trust, convenience, protection and security in addition to the ease in performing transactions. Standard-Cycle Gain market power; access to resources; economies of scale; overcome barriers; reduce risk; compress learning: ▪ In 1993 Lufthansa and United Airlines formed the Star Alliance. Since then, 12 other airlines have joined the Star Alliance to share resources and capabilities and to access over 700 cities in 124 countries. The goal is to combine worldwide routes and offer seamless booking and travel throughout the world. Types of Alliances and Other Cooperative Strategies - This section discusses two basic types of strategic alliance based on legal form and introduces other cooperative strategies as they relate to the primary strategic objectives of firms. See slide 9. Key Terms ▪ Equity Strategic Alliance - alliance in which two or more firms own a portion of the equity in the venture they have created. ▪ Joint Venture - strategic alliance in which two or more firms create a legally independent company to share resources and capabilities to develop a competitive advantage. ▪ Non-equity Strategic Alliance - alliance in which two or more firms develop a contractual relationship to share some of their unique resources and capabilities to create a competitive advantage. See slide 10. See slide 11. 4. How can tacit knowledge create a competitive advantage? a. Tacit knowledge is complex knowledge that is difficult to codify. It is learned through experience and, when shared between partnering organizations, can become a source of competitive advantage. 5. How do nonequity strategic alliances differ from equity strategic alliances? a. A separate independent company is not established. b. The partnering firms do not take equity positions in a separate entity. c. The relationship is less formal.
Chapter 7—Cooperative Strategy 7–5 See slide 12. See Figure 7.1: Strategic Objectives of Cooperative Strategies (slide 13). See Additional Notes Below. d. The relationship demands fewer partner commitments. 6. Name some types of nonequity strategic alliances that are increasingly being used. a. Licensing agreements b. Distribution agreements c. Supply contracts d. Outsourcing commitments 7. Discuss some common types of cooperative strategies that support different strategic objectives. a. Refer to Figure 7.1, which lists types of cooperative strategies that support the following strategic objectives: ▪ Differentiation ▪ Low cost ▪ Address environmental conditions ▪ Growth ▪ Diversification Additional Discussion Notes for Types of Strategic Alliances - These notes include additional materials that cover different types of strategic alliances, with specific examples of joint ventures, equity strategic alliances, and nonequity strategic alliances. Joint Ventures ▪ Sprint and Virgin Group’s joint venture targets 15- to 30-year- olds as customers for pay-as-you-go wireless phone service. Brand (from Virgin) and service (from Sprint). ▪ Sony Pictures, Warner Bros., Universal Pictures, Paramount Pictures, and Metro-Goldwyn-Mayer, each have a 20% stake in a joint venture to use the Internet to deliver feature films on demand. Equity Strategic Alliance ▪ Foreign direct investments made by Japanese and U.S. companies in China are completed through equity strategic alliances. ▪ Cott Corporation, the world’s largest soft drink supplier, and J.D. Iroquois Enterprises formed an equity strategic alliance. Cott gained exclusive supply rights for Iroquois’ private label spring water products and Iroquois expanded its branded business in the West and Far East. Nonequity Strategic Alliance ▪ Licensing agreements, distribution agreements, supply
Chapter 7—Cooperative Strategy 7–6 contracts. For example, chemical processes tend to be improved along technology corridors; and therefore, licensing and cross licensing are well-established practices in chemical and pharmaceutical industries. Licensing and cross licensing mitigates the potential impact of overbroad patents. ▪ Ralph Lauren uses licensing agreements to support its Polo brand. It uses 29 domestic licensing agreements, including West Point Stevens (bedding), Reebok (casual shoes), and ICI Paints (Ralph Lauren Home Products). ▪ Magna International, a leading global supplier of automotive systems, components, and modules, has formed many nonequity strategic alliances with GM, Ford, Honda, DaimlerChrysler, and Toyota. ▪ Procter & Gamble (P&G) has formed over 120 strategic alliances: with Dana Undies to make Pampers cotton underwear; with Magla to make Mr. Clean disposable gloves and mops; with GM to distribute its Tempo car cleanup towels; and with Whirlpool to develop a new “clothes refresher” product and appliance. Cooperative Strategies That Enhance Differentiation or Reduce Costs - This section introduces a discussion of business level cooperative strategies used to combine resources and capabilities to improve firm performance in individual product markets and create competitive advantages that cannot be created by the individual firm. See slide 14. 8. What are the two general categories of cooperative strategies used to enhance differentiation or reduce costs? a. Complementary strategic alliances b. Network cooperative strategies Complementary Strategic Alliances - This section introduces the two types of complementary strategic alliances used to support differentiation and cost objectives and discusses why the benefits of such partnerships are not always balanced evenly across partnering firms. See slide 15. Key Terms ▪ Complementary Strategic Alliance - business-level alliances in which firms share some of their resources and capabilities in complementary ways to develop competitive advantages. See slide 16. See Figure 7.2: Vertical and Horizontal 9. What are two types of complementary strategic alliances and how do they differ? a. Vertical complementary strategic alliances - the partnering firms share their resources and capabilities
Chapter 7—Cooperative Strategy 7–7 Complementary Strategic Alliances (slide 17). See slide 18. See Additional Notes Below. from different stages of the value chain to create a competitive advantage. b. Horizontal complementary strategic alliances - the partnering firms share their resources and capabilities from the same stage of the value chain to create a competitive advantage - commonly used for long-term product development and distribution opportunities. 10. What affects the different opportunity levels and benefits that partnering firms are able to achieve through complementary alliances? a. Partners may learn at different rates. b. Partners may have different capabilities to leverage complementary resources. c. Some firms are more effective at managing alliances and deriving benefits from them. d. Partners may have different reputations in the marketplace, differentiating the types of actions they can legitimately take. Additional Discussion Notes for Complementary Strategic Alliances - These notes include additional materials that provide examples of vertical and horizontal complementary strategic alliances to illustrate the business-level cooperative strategies. Vertical ▪ McDonald’s alliances with oil companies and independent store operators. With just one stop, customers can fill up their car, buy a meal, and pick up items for the home. ▪ Boeing’s 777 alliance is accredited with the fastest and most efficient construction of a new commercial aircraft. The partners, including UAL, brought unique resources and capabilities to a different part of the value chain. Horizontal ▪ SCM is a 40-year old joint venture between Caterpillar and Mitsubishi to share resources and capabilities in order to yield products that neither firm could design and produce by itself. ▪ CSK Auto, Inc. (Checker Auto Parts, Shuck’s Auto Supply, Kragen Auto Parts) and Advance Auto Parts established PartsAmerica.com. The venture provides easy access to nearly $1.5 billion in inventory and 3,000 locations in all 50 states, where buyers can use either store to pick up and return parts ordered online.
Chapter 7—Cooperative Strategy 7–8 Network Cooperative Strategies - This section discusses the effective use of network cooperative strategies and the role that strategic center firms play in alliance networks. See slide 19. See Figure 7.3: A Strategic Network (slide 20). Key Terms ▪ Network Cooperative Strategy - cooperative strategy in which multiple firms agree to form partnerships to achieve shared objectives - also known as alliance networks. ▪ Strategic Center Firm - firm at the core of an alliance network and around which the network’s cooperative relationships revolve. See slide 21. See slide 22. See Additional Notes Below. See slide 23. See slide 24. See slide 25. 9. How can network cooperative strategies be effectively used to benefit participating firms? a. Knowledge and information gained from multiple sources can produce more and better innovations. b. Network alliances can be particularly effective for geographically clustered firms. c. Effective social relationships and interactions among partners while sharing resources and capabilities lead to more successful network alliances. d. A strategic center firm that manages the complex, cooperative interactions among network partners also contributes to the effectiveness of network alliances. e. Gaining access to partners’ partners can open up advantages to the networking firms. f. Multiple collaborations increase the likelihood of additional competitive advantages and value creation. 10. As the foundation for an alliance network’s structure, what are the primary tasks of a strategic center firm? a. Strategic outsourcing with non-network members. b. Support of efforts to develop core competencies. c. Coordination and sharing of technology-based ideas and efforts. d. Emphasis on healthy rivalry to generate network-based competitive advantages. 11. What are two types of alliance networks and how do they differ? a. Stable alliance network i. Formed in mature industries in which demand is relatively constant and predictable. ii. Directed primarily toward developing products at a low cost. b. Dynamic alliance network i. Used in industries characterized by
Chapter 7—Cooperative Strategy 7–9 environmental uncertainty, frequent product innovations, and short product life cycles. ii. Directed primarily toward continued development of products that are uniquely attractive to customers. Additional Discussion Notes for Network Cooperative Strategies - These notes include additional material that uses the airline industry to illustrate multiple partners in network cooperative strategies. Network Cooperative Strategies: Numerous Partners United Technologies is involved with over 100 worldwide cooperative strategies. One of these networks is the alliance formed by the firm’s Sikorsky business unit to produce the S-92 helicopter. Five firms from four continents joined with Sikorsky to form this alliance. Using its unique resources and capabilities, each partner assumed different responsibilities for the design and production of the S-92. No individual member of the alliance could have developed the design or manufactured it; a product with size and cost benefits over competing helicopters. The combination of the partners’ resources and capabilities has resulted in a competitive advantage for the alliance. Unlike the chemical and pharmaceutical industry, some experts note that initial progress in the airline industry was hindered due to a lack of cross-licensing agreements (cf., Merges & Nelson, 1990). That is, the Wright brothers’ patent—an efficient stabilizing and steering system that enabled a multiplicity of future flying machines— significantly held back the pace of development of aircrafts and the entire airline industry. In the absence of cross-licensing strategies, incumbents (like Curtiss and even the Wright brothers) wasted huge energies and diverted their efforts simply to avoid infringement, not to advance technology. The problems caused by the Wright brothers’ initial patent were compounded as improvements and complementary patents, owned by different companies, came into existence, but compatibility was null. The situation was so serious that at the insistence of the Secretary of the Navy, during World War I, an arrangement was worked out to enable automatic cross licensing. This, like in the licensing of automobile patents, turned out to be a durable institution. By the end of World War I there were many patents on different aircraft features and rivals could easily negotiate licenses to produce state-of-the-art planes. Cooperative Strategies That Address Forces in the External Environment - This section introduces a discussion of business level cooperative strategies used to combine resources and capabilities to meet the challenges of complex and ever-changing external environments. See slide 26. 11. What are the four types of cooperative strategies that serve to
Chapter 7—Cooperative Strategy 7–10 See Additional Notes Below. See slide 27. keep firms abreast of rapid changes in their environments, and how do they differ? a. Competitive response alliances - used to respond to competitors’ strategic attacks. b. Uncertainty-reducing alliances - used to reduce environmental uncertainty, particularly in fast-cycle markets, new product markets, emerging economies, or new technologies. c. Competition-reducing cooperative strategies - used to reduce competition in an industry, often through the use of collusion. d. Associations and consortia - used to form coalitions with stakeholders to achieve common objectives. 12. Describe the two types of collusion used to reduce competition. a. Explicit collusion, which is illegal in the U.S., involves direct negotiation amongst firms to establish output levels and pricing agreements to reduce industry competition. b. Tacit collusion, common to highly-concentrated industries, involves several firms indirectly coordinating production and pricing decisions which impact the degree of competition faced in the industry. Mutual forebearance is one form of tacit collusion that occurs when firms avoid competitive attacks against rivals they face in multiple markets. Additional Discussion Notes for Cooperative Strategies That Address Forces in the External Environment - These notes include additional materials that cover the competition response strategy, uncertainty-reducing strategy, and competition-reducing strategy and examples to illustrate each concept. Competition Response Strategy ▪ FedEx responded to the success of UPS’s logistics business. FedEx formed a strategic alliance with KPMG to deliver end-to- end supply-chain solutions to large and mid-sized companies. FedEx committed its supply-chain consulting, IT systems, and transportation and logistics expertise, whereas KPMG provided its supply-chain consulting and e-integration services. ▪ Marathon Oil and Russia’s Yukos formed an alliance to achieve international expansion and as a response to rivals’ alliances. Uncertainty Reducing Strategy ▪ Overcapacity, risk, uncertainty, and cost competition led Siemens and Fujitsu to form an alliance associated with their PC operations. By uniquely combining technology from Fujitsu
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Chapter 7—Cooperative Strategy 7–11 with manufacturing, marketing, and logistics capabilities from Siemens, the joint venture has become Europe’s top supplier of PCs. ▪ GM and Toyota (# 1 U.S. and Japanese automakers) formed an R&D alliance to develop and standardize alternative-power cars. ▪ GM, Toyota, Ford, DaimlerChrysler, and Renault joined to develop a standard for communications and entertainment equipment for automobiles. Competition Reducing Strategy ▪ Explicit Collusion (illegal): Examples include the 1995 price- fixing scandal, in which Archer Daniels Midland executives were convicted of cooperating with competitors to fix prices. Similarly, Toys ‘R’ Us colluded with toy manufacturers to not sell popular toys to rivals, such as Costco and Sam’s Club. ▪ Tacit Collusion: Kellogg, General Mills, Post, and Quaker accounted for 84% of the U.S. cereal market. Some believe the high price gaps vis-à-vis rivals in this industry suggest the possibility that the dominant firms were using a tacit collusion cooperative strategy. ▪ Mutual Forbearance: Firms choose not to attack each other or engage in what could be destructive competition in multiple product markets. Cooperative Strategies That Promote Growth and/or Diversification - This section introduces a discussion of cooperative strategies used as an attractive alternative when the firm’s primary goal is growth and/or diversification. See slide 29. See slide 30. See slide 31. See Figure 7.4: A Distributed Strategic Key Terms ▪ Diversifying Strategic Alliances - corporate-level cooperative strategy in which firms share some of their resources and capabilities to diversify into new product or market areas. ▪ Franchising - cooperative strategy in which a firm uses a franchise as a contractual relationship to describe and control the sharing of its resources and capabilities with partners. ▪ Franchise - contractual agreement between two legally independent companies whereby the franchisor grants the right to the franchisee to sell the franchisor’s product or do business under its trademarks in a given location for a specified period of time. ▪ Cross-Border Strategic Alliance - international cooperative strategy in which firms with headquarters in different nations combine some of their resources and capabilities to create a competitive advantage. ▪ Distributed Alliance Network - organizational structure used to
Chapter 7—Cooperative Strategy 7–12 Network (slide 32). manage complex and challenging international cooperative strategies. See slide 28. See slide 33. See Additional Notes Below. See slide 34. See slide 35. 13. What types of cooperative strategies are used by firms trying to grow or diversify? a. Diversifying strategic alliances b. Franchising c. International cooperative strategies 14. Why might cooperative strategies be an attractive alternative to mergers and acquisitions (presented in Chapter 9) to achieve growth or diversification goals? a. Require fewer resource commitments b. Permit greater strategic flexibility c. Not as permanent 15. What behaviors contribute to the successful use of franchising as a cooperative strategy? a. Partners working closely together, finding ways to strengthen the core company’s brand name. b. Franchisors developing programs to transfer knowledge and skills needed for franchisees to successfully compete at the local level. c. Franchisees providing feedback to franchisors regarding how to become more effective and efficient. d. Using the strategy in fragmented industries where no firm has a dominant share. 16. What are some of the reasons for the increase in use of cross- border strategic alliances? a. Multinational corporations outperform firms that operate only domestically. b. Due to limited domestic growth opportunities, firms look outside their national borders to expand business. c. Some foreign government policies require investing firms to partner with a local firm to enter their markets. Additional Discussion Notes for Cooperative Strategies That Promote Growth and/or Diversification - These notes include additional materials that illustrate diversifying strategic alliances and franchising as cooperative strategies that promote growth and/ or diversification. Diversifying Strategic Alliances Boeing and Insitu formed an alliance to develop an unmanned aerial vehicle system. Boeing brings systems integration, communications technologies, and payload technologies. Insitu is designing its
Chapter 7—Cooperative Strategy 7–13 capabilities in producing low-cost, long-endurance unmanned aerial vehicles (an earlier prototype flew 2,000 miles using 1.5 gallons of gasoline). Boeing hopes to diversify into government and commercial markets. Insitu gains “big firm” experience and access to Boeing’s technology, resources, and capabilities. Franchising Franchising is a lower-risk strategy to grow the brand. It is attractive when you don’t have the capital for growth. It is particularly attractive in fragmented industries, where a company can gain a large market share by consolidating independent companies through contractual relationships (e.g., Papa John’s, McDonald’s, Hilton International). Source: Robert P. Merges and Richard R. Nelson, On the Complex Economics of Patent Scope, 90 Columbia. Law. Review 839 (http://cyber.law.harvard.edu/ipcoop/90merg2.html). Competitive Risks of Cooperative Strategies - This section discusses the high failure rate of cooperative strategies and the factors that have a negative impact on their success. See slide 36. See Figure 7.5: Managing Competitive Risks in Cooperative Strategies (slide 37). 17. What are the prominent risks of cooperative strategies? a. Partners may choose to act opportunistically, either when formal contracts fail to prevent the behavior or when an alliance is based on a false perception of partner trustworthiness. b. Partner competencies may be misrepresented, particularly when the contributions are intangible assets. c. Partner may fail to make available the complementary resources and capabilities that were committed, which often occurs in international arrangements when different interpretations of contractual terms or trust- based expectations exist. d. Partner may make investments specific to the alliance while the other partner does not. Implementing and Managing Cooperative Strategies - This section explains the value of building superior skills in effectively implementing and managing cooperative strategies. See slide 38. 18. Describe several effective ways to implement and manage cooperative strategies. a. Internalize experiences with successful cooperative strategies to gain maximum value from the knowledge learned. This involves organizing the knowledge and
Chapter 7—Cooperative Strategy 7–14 See slide 39. Refer to Figure 7.5: Managing Competitive Risks in Cooperative Strategies (slide 37). See slide 40. See slide 41. properly distributing it to those involved with forming and using cooperative strategies. b. Establish appropriate controls. c. Assign managerial responsibility for cooperative strategy to high-level executive or team. d. Increasing the level of trust between partners increases the likelihood of alliance success and is an efficient way to influence and control alliance partners’ behaviors. 19. Describe two methods used to manage cooperative strategies. a. Cost minimization i. Relationship with partner is formalized with contracts. ii. Contracts specify how the cooperative strategy is to be monitored and how partner behavior is to be controlled. iii. Goal is to minimize costs and prevent opportunistic behaviors by partners. iv. Costs of monitoring cooperative strategy are greater. v. Formalities tend to stifle partner efforts to gain maximum value from their participation. b. Opportunity maximization i. Focus is on maximizing partnership’s value- creation opportunities. ii. Informal relationships and fewer constraints allow the partners to take advantage of unexpected opportunities to learn from each other and explore additional marketplace possibilities. iii. Partners need a high level of trust that each party will act in partnership’s best interest, which is more difficult in international situations. Ethical Questions - Recognizing the need for firms to effectively interact with stakeholders during the strategic management process, all strategic management topics have an ethical dimension. A list of ethical questions appears after the Summary section of each chapter in the textbook. The topic of ethics is best covered throughout the course to emphasize its prevalence and importance. We recommend posing at least one of these questions during your class time to stimulate discussion of ethical issues relevant to the chapter material that you are covering.
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Ambassador Thompson. I only know that in general where a citizen wishes to return to the United States and doesn't have the means to do so, that we frequently do assist them. This goes back many years. But I haven't been myself concerned in this for probably 25 years, or even more. Senator Cooper. But is it the practice that if a determination has been made that the individual is an American citizen, therefore entitled to what protections are given to American citizens, if necessary, loans will be made to assist them to return to the United States? Is that about the basis of the policy? Ambassador Thompson. That is correct; yes, sir. Senator Cooper. I think that is all I have. Mr. Dulles. Did you have any conversations at any time while you were Ambassador or after you returned to the United States with any Soviet official with regard to the Oswald case? Ambassador Thompson. I discussed with the Soviet Ambassador the desire of the Commission to receive any documentation that they might have available, but I did not in any way discuss the case itself, nor did the Soviet official with whom I talked. Mr. Dulles. And do you know of any conversations of that nature that any other official of the Department had in connection with the Oswald case? Ambassador Thompson. I do not myself know of any. Mr. Dulles. You probably would, would you not, if that had taken place—of any importance? Ambassador Thompson. Off the record. (Discussion off the record.) Mr. Dulles. Your testimony is you have no knowledge of any other conversations other than that of the Secretary of State, in connection with communications to and from the Soviet Government on this case?
Ambassador Thompson. That is correct. I know of no other cases where it was discussed with Soviet officials. Mr. Dulles. That is all I have. Mr. Slawson. Thank you very much, Mr. Ambassador. (Whereupon, at 3:40 p.m., the President's Commission adjourned.)
Wednesday, September 2, 1964 TESTIMONY OF C. DOUGLAS DILLON The President's Commission met at 12:05 p. m., on September 2, 1964, at 200 Maryland Avenue NE., Washington, D.C. Present were Chief Justice Earl Warren, Chairman; Senator Richard B. Russell, Senator John Sherman Cooper, Representative Gerald R. Ford, Allen W. Dulles, and John J. McCloy, members. Also present was J. Lee Rankin, general counsel. The Chairman. Mr. Secretary, would you please rise and follow me. Do you solemnly swear the testimony you are about to give before this Commission will be the truth, the whole truth, and nothing but the truth, so help you God. Secretary Dillon. I do. The Chairman. Mr. Rankin will conduct the examination, Mr. Secretary. Secretary Dillon. Thank you, Mr. Chairman. Mr. Rankin. Mr. Secretary, will you state your name and residence, please?
Secretary Dillon. C. Douglas Dillon of Far Hills, N.J., presently residing in Washington, 2534 Belmont Road, NW. Mr. Rankin. Do you have an official position with the Government? Secretary Dillon. Yes, I do. I am the Secretary of the Treasury. Mr. Rankin. In that capacity do you have responsibility for the Secret Service of the United States? Secretary Dillon. Yes, the Secret Service is part of the Treasury Department. Mr. Rankin. Have you had that position responsibility for some time? Secretary Dillon. Since January 21, 1961. Mr. Rankin. Can you tell us briefly the nature of your supervision of the Secret Service, prior to the assassination? Secretary Dillon. Yes. Prior to the assassination, when I first took office as Secretary of the Treasury, I naturally tried to find out, in as much detail as seemed practical, how the various offices of the Department functioned. One of the important ones was the Secret Service. So I had a number of interviews with Chief Baughman who was the Chief of the Secret Service at that time. I got the general description from him of how the Secret Service operated, what their responsibilities were, what their problems were. After he retired, which was early, after I had only been there for a few months, I spoke with the President about this matter—President Kennedy—and it was my responsibility to find a new Chief of the Secret Service. He had known James Rowley very well as head of the White House detail, and he felt that he would be an appropriate head of the Secret Service. I talked with Chief Baughman, and he thought there were two or three men, of whom Rowley was one, qualified to be head of the Secret Service; so I decided to appoint Rowley and
thereafter talked with him considerably about the White House detail which he was more familiar with than Chief Baughman. However, I did not in any sense conduct a day-to-day supervision, or close following, of its day-to-day operations. The Secret Service had been functioning for many years and the presumption from its record was that it had been functioning successfully. I think that the events that have developed since November have very clearly shown that some of the procedures, many of them, need to be changed and improved. I think this is probably largely due, to a considerable extent due, to a very rapid change which probably took place without our fully realizing its importance in the last 3 years, and which greatly increased the responsibility of the Secret Service. That is the greatly changed nature of Presidential travel. Mr. Rankin. Will you describe to us how that affects the problems of the Secret Service? Secretary Dillon. Yes. In earlier times, the Presidents did not travel very often. When he did travel, he generally traveled by train, which was a protected train. Doing that, he could not cover very many parts of the country, and the Secret Service could move easily right along with him on the train that he was on. What happened since has been, first, the advent of airplanes. Presidents beginning with President Eisenhower began to move more rapidly and were able to travel considerably more, and on very short time differentials they could be in cities that were thousands of miles apart. However, this only just began with President Eisenhower because, in the first place, jets were not yet available, and in the second place, in the last 4 years of his term, he had to take greater care of his health, and he didn't travel around the country quite as much as his successors have. So when President Kennedy came into office with the availability of, the relatively recent availability, of jets and his desire to travel, this greatly increased the burden on the
Secret Service. Formerly when they had a trip, they used to send out an advance agent to some big town. Now the trip would be a 3-day trip, and there might be four towns, each one 1,000 miles apart, that would have to be covered thoroughly at the same time. I think that probably there was not a full realization by anyone of this problem. Certainly the Secret Service came to me and said they needed more personnel, and we tried to get them more personnel. Chief Rowley testified, I thought quite convincingly, in 1962 before the various Appropriations Committees of the Congress and met with very little success because I think that this was not fully understood by the public. The Appropriations Committees were a reflection of public understanding, and probably it was not even fully understood within the Secret Service. I would like—— Senator Russell. Has there been any increase, Mr. Secretary, in the number of agents assigned to guard the President. I thought there had been some increase in recent years? Secretary Dillon. There has been some increase, and we have tried very hard to increase the Secret Service in the last 3 or 4 years. We have asked for more people every year, and while we never got the amount we asked for, we did get increases. I have the figures here. In 1961, the entire Secret Service amounted to 454 individuals, of whom 305 were classified as agents. In 1964, that is the fiscal year just finished, the figure was 571, of which 167 were clerks and 404 were agents. So we had achieved an increase of about 100 agents, a little over a third. Mr. Dulles. That included both the counterfeiting responsibilities of the Secret Service as well as the Presidential protection? Secretary Dillon. That is right. And I think it is important to note that the counterfeiting problem was also increasing in volume very rapidly and changing very rapidly at about the same time. Actually that may have started a few years earlier because of the
development of photography, which enabled one to counterfeit by photography instead of having to do it by hand engraving. Representative Ford. Wasn't the specific request for an increase in the White House detail—I use this in a broad sense for both the President and Vice President—primarily aimed at the increase of personnel for the Vice President? Secretary Dillon. That was in one year. Representative Ford. 1962? Secretary Dillon. I think that was in—I think that was in 1963. In 1962 the law was passed, and we did have a deficiency appropriation which was given to us. The following year when we came up for our regular appropriation, we not only did not get the full amount that we thought was necessary to cover the Vice President, but they cut the protection we had been affording the Vice President in half, and whereas there had been 20 persons assigned, they reduced it to 10. Representative Ford. But there had been no reduction in the funds for the protection of the President? Secretary Dillon. For the White House detail; no. Representative Ford. It was a reduction for the protection of the Vice President. Secretary Dillon. That is correct. But the thing that I think we are coming to is, it is perfectly obvious that we have to do a great deal more in this advance work, field work, in interviewing people who are dangers to the President or could be classified as such. We need more people in the field on account of this. That is what I say was not probably fully realized, although Rowley specifically, when he first went up in 1962 asking for an increase, pitched it on that basis, but he did not have a very good reception from the Appropriations Committee at that time because they felt that the White House detail was the White House detail, right around the President. I don't think anyone fully understood the connection with
people in the field. I am not sure that Secret Service made as good a case as they should, to be really understood on this. It has become clear now. Representative Ford. Mr. Rowley in that presentation asked for additional funds for and personnel for the Protective Research Service? Secretary Dillon. I don't think it was specifically for that. It was for protection of the President, and he was the first person that made this type of request. Baughman had always said that people in the field were counterfeiting and just worked a little bit for the President, and Rowley when he came in was the first one that made this claim that they were needed to actually protect the President. He wanted more people in the field to do these things, and that was the thing that did not go over right away. I think it would be interesting here. We have—— Mr. Rankin. May I interrupt a moment? We have a problem with some of the members of the Commission that have to go to the Congress right away for the vote. They would like to question you if they may. Senator Cooper. I have a question which I think you can address yourself fully to later but considering these new factors which make the protection of the President more difficult, I would like to ask if it is your judgment that the Secret Service, if it is provided adequate personnel and if it is—if a broader criteria for the ascertainment of the persons who might be dangerous to the President is adopted, if it is your judgment that the Secret Service could meet these new factors and provide an effective protection for the President, taking into consideration the factors which you mentioned? Secretary Dillon. Yes; I think they could. I think the answer is clearcut. I don't think that means that under every and all circumstances you could be absolutely a thousand percent certain that nothing can happen. You never can be in a situation like this. But I think they could be a great deal better, and you could feel
everything has been done. We have just completed—the thing I wanted to say—this study we have been working on many months as to what is needed to provide this in the Secret Service. Chief Rowley was not able to give you this when he was here before. I have given a copy of this to Mr. Rankin. I think it ought to go into the record at this point. Mr. Rankin. Mr. Secretary, I will hand to you the document you just referred to, called Planning Document, U.S. Secret Service, and ask if that is the document that you were describing. Secretary Dillon. Yes. That is the document; yes. Mr. Rankin. Mr. Chief Justice, I would like to ask leave at this time to mark this document our next exhibit number which I will furnish later to the reporter, and offer it in evidence as part of this examination. The Chairman. Mr. Secretary, that is not a security matter that couldn't go into the record, is it? Secretary Dillon. No. I have one thing I would like to say about that, and I think it should go into the record. What this is is our report as to how many personnel are needed and what has to be done and what they should do. We have transmitted that with a covering letter to the Bureau of the Budget. The final decision on what will be done on many of these things is taken in the light of recommendations of the Bureau of the Budget to the President and what he finally decides for budgetary reasons. So ordinarily budgetary matters are not published prior to the time the President has approved them. He hasn't approved this. He hasn't seen it, but I think under the circumstances I see no reason under this special circumstance, why this report should not go into the record, and I think it is perfectly all right. The Chairman. The report may be admitted and take the next number. (Commission Exhibit No. 1053-A was marked for identification and received in evidence.)
Representative Ford. This would be the recommendation of the Treasury Department to the Bureau of the Budget for the personnel and the funds for the Secret Service in fiscal year 1966? Secretary Dillon. No. This is a recommendation to the Bureau of the Budget for the personnel and equipment that would be needed to put the Secret Service in what they consider adequate position to fully handle this problem. They feel that it would take about 20 months to get all the necessary people on board and trained. If this were started right away, as we think it could be if a reapportionment on a deficiency basis were approved, this could start in fiscal year 1965 and depending on whether such is approved, the fiscal year 1966 final recommendation would be affected. But this is the total picture, and it is assuming our recommendation that they start in the next couple of months. Representative Ford. In other words, this is the plan that you would like instituted immediately regardless of budget considerations. Secretary Dillon. That is right. Mr. McCloy. Mr. Secretary, there is nothing in this exhibit that in any way, according to your judgment, would compromise the protection of the security of the President if it became—— Secretary Dillon. Oh, no; and there is also with it—it is just a covering letter but I think it is equally important—it is a letter which I wrote to the Director of the Budget on Monday when I forwarded this plan to him, and I think that probably should also go in because it has a recommendation at the end covering the matter Mr. Ford raised. Mr. Rankin. Mr. Secretary, I will ask you if this document, dated Angust 31, 1964, is a copy of the letter that you have just referred to now? Secretary Dillon. That is correct.
Mr. Rankin. Mr. Chief Justice, I ask that this letter, dated August 31, 1964, directed "Dear Kermit," from the Secretary, be marked the next number in order and offered in evidence as part of the record. The Chairman. It will be admitted. (Commission Exhibit No. 1053-B was marked for identification and received in evidence.) Secretary Dillon. It is marked "limited official use," and I think that should be declassified for this purpose. Mr. Rankin. Now, Mr. Secretary, will you very briefly describe the general plan of your planning document. We have that so we can use it in considerable detail, but if you can just summarize briefly. Secretary Dillon. Well, in brief, this asks for a total of 205 additional agents, which is about—not quite but nearly—a 50 percent increase from the 415 agents they now have. It asks also for 50 clerks to add to the 171 that are presently there. Those are stenographers, typists and other clerical workers. And for five technicians. Of this the idea is to put 17 agents and the 5 technicians in the PRS. Five would be used to maintain 24-hour coverage in the PRS which is not presently in force because of lack of personnel. One would add to the Research and Countermeasures Unit to fill out three full units that could be operating all the time. Six of them would do advance work for PRS with local agencies and institutions. One of the new things we have instituted is that each time they do an advance, someone from the PRS goes out and works with the local law enforcement agencies. I think that is obviously a very important thing. They need more people in view of the volume of traveling. Then they also need five more employees to expand our liaison with the other law enforcement and intelligence agencies. We now have one man assigned really full time to that. We found even in the period that we have been doing this that while that is a great help, much the best way would be to have individuals assigned to each agency that work full time with the agency, know
the people in the agency, and that is the only way we can be sure we have adequate liaison. Mr. Dulles. May I ask, would that include the FBI? Secretary Dillon. Oh, yes. Mr. Dulles. And the CIA and military intelligence services? Secretary Dillon. Oh, yes. Mr. Dulles. And the State Department possibly? Secretary Dillon. Yes. Representative Ford. Could you specify those agencies. I was interested in what agencies you were referring to. Secretary Dillon. Well, I would think certainly it would be the military, the FBI, the security services of the State Department, and the CIA. Now, there may be additional ones. There are additional ones within the Treasury Department. I think we probably have one, for instance, with the intelligence section of the Internal Revenue Service, Alcohol and Tobacco Tax Unit, and so forth, which a good deal can come out of. In addition we recommend here five technical specialists, two of which would be highly trained computer technicians, programers, and three less well trained to work with these others. The purpose of this is to automate the whole PRS operation. We have been thinking of that for some time. It was something that obviously needed to be done. Mr. Rankin. Excuse me, Mr. Secretary. Will you describe a little more what you mean by automate. Secretary Dillon. I mean using electronic processing, punchcard systems, so that they would be able to pull out of their files for any locality, various different types of people that might be a danger or might have made threats to the President or to other high officials,
so that they would be able to function rapidly and well in planning protection as the President travels to these various cities. Mr. Rankin. Does that include computer systems? Secretary Dillon. Yes. And what I was going to say was about 2 or 3 months before the events in Dallas, the Secret Service had asked the IBM Co. to make a study of this problem for it. That study was not completed until after the events in Dallas, and it did not prove satisfactory because from our point of view it did not go into enough detail in being able to handle criteria so you could tell when you retrieved a name from the file whether it was truly dangerous or not. We needed a more complex system and after working with Rand Corp., the Research Analysis Corp., and also talking with IBM, we all felt the best way would be to hire some good programers, knowing our problems, and then work out a pilot program and get consultants in. One of the things we recommend here is appropriation of $100,000 to get consultants from IBM Co., Honeywell or other companies, and get pilot machines to try to work out the details of this system. Mr. McCloy. For the record, Mr. Secretary, you had no electronic system of this character operating before the assassination? Secretary Dillon. No. Now, the total of that is 17 agents and 5 specialists for the PRS. In addition, for a long time, Mr. Rowley has believed that it would be preferable to improve the capacity of the White House detail if we could establish a headquarters pool of 18 men where new individuals who are going into the White House detail would be fully trained first—before, they had to be trained sort of partially on the job—and also through which you could rotate people from the field from time to time, bringing them up to date on Presidential protection.
So we would ask for 18 people, 18 spaces for that. We have asked for 25 spaces to provide adequate protection for the Vice President in addition to the 10 that are already on board. Mr. Rankin. Mr. Secretary, excuse me. I think spaces may not be clear to all our readers. Will you explain what that means? Secretary Dillon. Twenty-five job positions. I think the thing that is very important here is to keep in mind that to keep one man on the job around the clock covering a post, which is the way the Secret Service works—one man that would be always with the President or the Vice President, that would be always watching his house—to get one man requires five job positions. In the first place, the coverage required is for 24 hours a day. In the second place, there are holidays, there are weekends off. On a full-time basis, the Secret Service works a 40-hour week, 5-day week, as the rest of the Government does, and there are provisions for sickness and leave, and so forth. When the number of hours that a man can work a year full time is figured out, it requires 5 men to fill one spot. So that is one reason why these protective numbers may seem rather high to the uninitiated. When you are talking about the Vice President, and 10 people are required to produce two posts, coverage of two posts, it is obviously not adequate because you have to cover his house, whether he is there or not, so that someone can't come in and put a destructive device in it. This simply can't be done with the present numbers that are assigned. Then, going beyond this to complete this list, there is a request for 145 agents in the field offices who would handle the substantially increased volume of security investigations. We are now getting about twice as many referrals already as we did before. Instead of
something like 25,000, we are up to something over 50,000, and they expect it will go over 60,000 next year. To really run these down out in the districts, they need, obviously, more men than they have had. Now, one thing that they also need these fellows for, which I think is important, is keeping track of more dangerous individuals. They have tried to keep track of a few of them. But I think that probably a good many more should be put on that list. It requires more people, so they can periodically check up, and particularly before a visit, that all of these people are looked at to see where they are and what they have been doing recently before the President visits a particular place. Mr. Rankin. Mr. Secretary, while you are on that subject, could you explain to the Commission how you make use of your agents in the White House duty and those in the field so they will understand that? Secretary Dillon. Well, yes; the White House detail is composed of about 60 people now. About half of these are what you might call, more or less, permanent employees. They have been there for a long time, 10 years, 12 years, 15 years, on the White House detail. The other half are shorter time employees who generally serve up to 3 years on the White House detail and then either leave because they prefer other duty in the Secret Service or sometimes leave because the Secret Service feels they can do other duty better. Mr. Rankin. Now, for the protection of the President. Mr. Secretary, is there any need to have the White House detail have any connection or reciprocal arrangement with those in the field? Secretary Dillon. Well, I think it is a great help. Because of this turnover that I mentioned, very many of the agents in the field have had service in the White House detail of up to 2 or 3 years. So they know what the problems are and they are able to fit in very easily and very readily and very quickly with the White House detail which is with the President when he comes out on a trip.
Mr. Dulles. By fieldwork you mean attached to your field stations, of which I believe there are 65 in the United States? Secretary Dillon. Yes; that is right. And if they had not had this training, obviously they would be enforcement officers and they could work with White House detail when they come out, but they wouldn't be able to be as cognizant of its procedures, how the matter is handled, and they wouldn't be able to be fitted right into the routine as well as they can presently. I think it is highly valuable that we have this pool of experienced people around the country and, of course, this is again one reason that if we get a few more people out there, we will be able to do better. One of the additional things that we are now undertaking, is, for instance, these building surveys that are partially a result of a study by the Research Analysis Corp. This seems to be something that we can probably do something about. We will probably use more people when the President travels through a city than we have in the past because you can have some success in designating certain buildings as high risk or higher risk than other buildings, and as I say, they are now trying to map the whole United States, at least the major cities where the President might travel, the routes he might follow, coming in from an airport, going to a major stadium or something like that so they will know ahead of time what the danger spots are. And one of the obvious ones which has come out is a warehouse where there are not so many people in it and where someone could more likely be alone and therefore more dangerous. A building that is full of people is not as dangerous because the other people would be watching. It is that sort of criteria. The same thing about roof access. If there is easy access to a roof and people are not usually on it, that would be more dangerous than if there wasn't. Mr. Rankin. Now, have you made quite a change in the Secret Service in regard to the inspection of buildings along a motorcade route since the assassination? Secretary Dillon. Oh yes. We have been doing this, and we have used a great many more people as a result of this in our procedures,
both local police officers and also our own people. The figures we have here are interesting. They are in this report. From February 11 —I don't know why that was the beginning date for these figures— but from there through June 30, we used 9,500 hours of work by other enforcement agencies. About 2,000 of that came from the Justice Department and the rest of it from other Treasury agencies, the biggest one being the Intelligence Section of the Internal Revenue, but also the Bureau of Narcotics, Alcohol and Tobacco Tax Unit and so on. Mr. Rankin. And that is in connection with this motorcade route? Secretary Dillon. That is largely in connection with that, both planning it out ahead and also stationing them in buildings that they thought might be difficult. Mr. Rankin. Now, Mr. Secretary, returning to your Planning document, is there anything else that you have not covered in that? Secretary Dillon. Well, this is just the number of people. It does not include in this figure any purchases of automatic data processing equipment. It just includes the study I mentioned. There are funds for a new armored car, various funds for improving the intrusion detection at the White House, and lighting at the White House. There is no automatic system now. If anyone breaks through the fence at night, nobody knows it unless someone should see them. They have developed such systems and the Secret Service would like to get one installed, so if anyone broke through, a bell rings automatically, and they know someone is on the grounds, and they can take action accordingly. Also, they would like emergency lighting that would be hidden behind various trees or behind the wall so that if someone broke through at a place, the lights would go on automatically and the person would be seen. Then there is just miscellaneous equipment that goes with increased staff, such as automobiles, radios, travel and transportation that goes with more staff, and so forth.
I mentioned some of the things briefly that they intend to do. I mentioned the PRS program, and ADP study. These special agents in the field I think we have covered pretty well. They have clearly in here a number of things they have to do, which there certainly is plenty of. In addition to that—I mentioned the pool. In addition to that we have made arrangements with the Department of Agriculture and the General Services Administration has put the funds in their budget, to get a new training facility. All we have now is a pistol range out at the Arboretum, and this new one will have classrooms, pistol range, and a place where they can practice automotive protection on a practice road. This will be out at Beltsville at the Agricultural Station out there. It is very useful. There are no funds for that in the plan. Mr. McCloy. May I just ask you about the armored car, Mr. Secretary. Is that to transport the President? Secretary Dillon. Yes; that is right. A protected car, a second one. One was fixed for the Government free by the Ford Motor Co., but our guess is that it cost the Ford Motor Co. somewhere between $175,000 and $200,000 to do this, and it didn't cost the Secret Service anything, although there was some research work done on the glass and armor by the Defense Department. This was combined with research work they needed for their own use, to develop protective glass and armor to use in helicopters in Vietnam. They split the cost. It cost about $30,000. So I think they assigned $15,000 of it to this project. But it was paid by the Defense Department. That is the only cost on that one. But I think the companies think that the Government should buy the new car. Mr. McCloy. We had some testimony here in connection with the assassination where it was developed that the access within the car to the body of the President became very important. In the car in which the President was assassinated there was a bar behind the front seat making it very difficult if not impossible for the Secret Service man who was operating from the front seat to get to the body of the President, and we were strongly of the view that cars
that should be hereafter designed should have freedom of access. Either the man should be in the jump seat or there should be means by which you could get, the Secret Service man could get to the body of the President in case of a threat of an attack, and I think it is likely we will mention that in the report. But it seemed to me this is something to bear in mind in connection with the design of a new armored car. Secretary Dillon. That would apply to an open car. Mr. McCloy. Yes. Secretary Dillon. It wouldn't apply I think to a fully—— Mr. McCloy. Fully armored; no. That is right. Secretary Dillon. Closed car. Mr. McCloy. Usually on those motorcades you like to be seen. Secretary Dillon. Yes. Mr. Rankin. Have you covered your planning document, then, Mr. Secretary? Secretary Dillon. I think that covers this. Mr. McCloy. May I ask a question at this point? I have a date at the White House at 1 o'clock, not with the President, but with Mr. Bundy, who wants to talk with me. How long do you think we will be with the Secretary and will we resume after lunch? Mr. Rankin. I was hoping to get through. I presume he was hoping we would. Secretary Dillon. I would like to if we could. I have to leave tomorrow to go to Japan. Mr. McCloy. Well, would it interrupt you if I ask a few questions? Mr. Rankin. No; go ahead. The Chairman. Ask what questions you want?
Mr. McCloy. You testified, Mr. Secretary, you felt with these additions that the Secret Service would be competent to cope with the added requirements for the protection of the President which have occurred. In testifying to that effect, do you include—you include the investigative services of your own which are quite apart, as I understand it, from the information that you may gather from other agencies? Secretary Dillon. That is correct; yes. Mr. McCloy. We have had the thought that perhaps the Protective Research Section or Division of your organization wasn't as well equipped as it should have been nor as it might have been presumably for the purely preventive investigative work. Do you feel that with this new plan of yours, that that would, be adequately taken care of? Secretary Dillon. Yes; I do. It was not equipped, I think, adequately in two ways. First, it did not, as is clearly shown by the events in Dallas, receive information on enough dangerous people. At least, they didn't receive the information on Lee Oswald. So that what is required is the development of criteria, better criteria, that can be circulated to law enforcement agencies generally, and which will insure that adequate information comes in. We are making progress there. I think you have already seen a document with some criteria that were developed, which has been circulated in Washington. A similar document has now been circulated by the Secret Service Chief to all special agents asking them to write a briefer but somewhat similar letter to all chiefs of police, sheriffs, and State police in their localities which asks them to furnish any such information to the local Secret Service agent. That is being disseminated now throughout the country. It will be completed within the next 6 weeks or so.
In addition, we have established an interagency committee which has as one of its jobs the development of better criteria that will really result in getting the kind of information we want without swamping us. If we are too broad in our criteria and we get a million names, obviously nothing can work. This committee is holding its first formal meeting next week. It has representatives of the President's Office of Science and Technology, of the Department of Defense, which is the Advanced Research Projects outfit, of the CIA, an individual who is highly competent in their file section and who understands the setting up of complex files and retrieval, that sort of business, and four people from PRS, the PRS head inspector, Mr. Thacker, the head of the research and development, Mr. Bouck, the head of the files section, Mr. Young, and Mr. Stoner, who is now handling the liaison job. There will also be, although the individual has not yet been named, a representative of the FBI, and with that I think that we will be able to develop criteria that will both be useful to us and be an improvement on criteria that was so far developed with the help of outside consultants. Mr. McCloy. Mr. Secretary, the impression has been gained, I think, by the Commission that perhaps too great emphasis has been directed to the mere investigation of the threat, of the particular individual, the crank, or the fellow that sends the poison food or the threatening letter, and perhaps not enough in a broader scope, recognizing, of course, that you can't be too broad without defeating your own purpose, but that there are perhaps groups or other areas of ferment that could provoke an attack quite without the threat. Would you comment on that? Secretary Dillon. Yes; one of the criteria that is presently out is meant to cover individuals who have threatened bodily harm to any high Government official, with the idea that threat might be switched and visited upon the President.
That would have worked in this particular case in Dallas if that had been a specific criterion on at that time, which it wasn't. We are just talking about threats to the President. So I think that was one obvious case. We hope that this committee would be able to possibly come up with other groups that can be identified that would fit into this without bringing in too many names. There is one that may or may not work out. I just cite this as an example. People with bad conduct records in the Marine Corps for some reason have had a very bad record thereafter and there is quite a connection of crime with that class of individual. It may be that it would even be worthwhile, if it is not too large, to cover this. Why that is so, nobody has quite figured out. I think the eye was focused on them because of this event in Dallas, but then it was discovered that this group has been involved in an awful lot of other crimes of violence. Mr. Dulles. As you read the Oswald life story, it looks as though he was going into the Marines as a kind of escape. Secretary Dillon. It could have been. Mr. Dulles. What you say is very interesting in that connection. The Chairman. Will you excuse us just a moment until we see if we can finish up. Secretary Dillon. I would think you might want to put into the record at this point a copy of the memorandum that I mentioned from Mr. Rowley to the special agents asking them to send letters to the local law enforcement institutions. Mr. Rankin. Yes. Mr. Secretary, I ask you to examine the memorandum dated August 26, from Chief Rowley and ask you if that, with the attachment, is the memorandum that you just described? Secretary Dillon. That is. Fine. Yes.
Mr. Rankin. Mr. Chief Justice, I ask leave to give this document that the Secretary has just referred to the next number in order and offer it in evidence as part of this examination. The Chairman. It may be admitted. (The document referred to was marked Commission Exhibit No. 1053-C, for identification and received in evidence.) Secretary Dillon. There is one other item—you asked whether there is anything else in general. We felt that the Secret Service did not have adequate regularized scientific advice. They got some— they have been getting it over the years from time to time from the President's office of Science and Technology, but we tried to regularize that. I have worked out an arrangement with Dr. Hornig and written him a letter which embodies that arrangement so that they would have their services constantly available to the Secret Service and would give certain specific advice; first, keeping the Secret Service informed of scientific developments of possible use in providing protection for the President, etc.; advising or arranging for scientific advice to the Secret Service in connection with specific problems of Presidential protection as they may arise; and reviewing the technical aspects of the protective operations of the Secret Service and its development program, and assisting it in establishing priorities and schedules for introducing technical and scientific improvements. I have an answer from Dr. Hornig saying they would be glad to carry this out and saying that he concurs in my judgment that the increasingly complex nature of Presidential protection requires that the Secret Service have access to the best scientific advice and that they are glad to take on this job. Mr. Rankin. Mr. Secretary, I will ask you if the exchange of letters, dated August 31, between you and Mr. Hornig are the copies that I have just given you? Secretary Dillon. That is right. Mr. Rankin. Mr. Chief Justice, I ask leave——
Mr. Dulles. Just for the record, I wonder if he would identify Mr. Hornig. I think we know, but possibly—— Secretary Dillon. Oh, yes; Dr. Hornig is Special Assistant to the President for Science and Technology. Mr. Rankin. Mr. Chief Justice, I ask leave to give this document the next number in order and offer it in evidence as part of the examination. The Chairman. It might be admitted. (The document referred to was marked Commission Exhibit 1053-D for identification, and was received in evidence.) Mr. Rankin. Mr. Secretary, would you just briefly tell us without getting into any classified matters or matters that are not properly to be revealed because of the effects they might have on the protection of the President, why the Secret Service would need a scientific adviser? Secretary Dillon. Well, I think this is because they do a number of things. First, they need it in the communications field. There are all sorts of advances there, and they have been assuring or working to assure the security of the communications of the President. In addition there are all sorts of new developments in the form of protective devices that are being developed all the time, better forms of bulletproof glass, better forms of protection of that kind, new types of protection against access. For instance, there is under development, I understand, a sort of a radar type of fence so that you can see if a person comes through a certain area without there being any fence there. They are developing, working on the development of other protection devices. They have had very substantial progress recently, I understand, in the detection of weapons that someone might be carrying, devices that are more effective. This is something people have tried to develop, I guess, for a long time. Apparently they are having some success. It is that sort of thing that is very necessary.
And then in addition this field of computer technology is highly scientific and complex, and I think that the scientific adviser is in an excellent position to be sure that the Secret Service has the very best advice in trying to identify their needs and develop the machines for those needs. Mr. Rankin. Mr. Secretary, it has been suggested to the Commission that it might be of assistance to you and other Secretaries of the Treasury and the Secret Service to have someone acting as Special Assistant to the Secretary of the Treasury, having supervision, under your direction, of the Secret Service in its various activities, both protection of the President and otherwise. Do you think that that would be of help or would it not? Secretary Dillon. Well, I am not sure. You see, we have an Assistant Secretary, and I should think he probably would be able to do it as adequately as having another special assistant. We also have a Special Assistant for Law Enforcement Coordination who coordinates the general work of all our law enforcement agencies and works with outside agencies on overall law enforcement problems. Probably of interest is that the Treasury Department, I think, has more law enforcement officials working for it than any other agency of Government. It is a very large law enforcement organization, although there are a number of separate organizations that work in different fields. So we already have this. I think that it probably can be made tighter and should be made tighter. One aspect of this matter, I think, is the advent of computers, of course, which is very recent and has changed what can be done effectively in this PRS. I think that should be done anyway. One aspect of this matter that probably hasn't had as close and detailed supervision as we may feel appropriate now is the White House detail. It has always operated over the years in very close contact
with the President and has operated in a slightly different manner with different Presidents, depending on their wishes. And it has been felt that as long as they were doing an adequate job, that it was pretty hard to come in and tell them exactly what they should do on a day-by-day basis because the President might not want them to do that sort of thing. It is a very complex and personal assignment here that is a little different than any other law enforcement agency, and I certainly think it should be followed more closely—gone into in more detail— from the top level of the Treasury Department probably than it has, but even if it is, we are still going to have this problem that we won't be able to tell the President exactly what he should do in each case. So there never will be that close sort of supervision of day-to-day operations of the White House detail—it wouldn't be effective anyway—that there would be in another police operation. Mr. Rankin. After the assassination, you did have Mr. Carswell take over certain work in this area, did you not? Secretary Dillon. Yes; Mr. Carswell is my special assistant, in my own office. He is a lawyer by profession and training. He has had investigative experience, 3 years in Naval Intelligence on the active side of it, and so he has some knowledge of this whole type of operation, and I felt in view of this investigation, in view of the work that had been done, it was important to have someone with legal experience that was close to me, that had immediate access any minute to me working on the matter. Then while this thing was running along, they would get to me at any time, and I could ask questions, they would bring matters to me, we could handle this matter of being sure that a proper long-range plan was developed, and that the whole effort in the Secret Service was organized as well as possible. That is why I asked Mr. Carswell, as part of his work for me, to undertake this special assignment, which he has done, and I think done very well.
Mr. Rankin. It has been suggested to the Commission that it might be helpful if the National Security Council or some Cabinet level committee would help to supervise in this area of Presidential protection. Do you have any comments you care to make? Secretary Dillon. Yes; I think that would be helpful because in relationship with the President, if there are questions of what is the proper protection, I think a group of the Cabinet would have a stronger voice, and also having a group, the President would be more sure that this was not just one man's ideas, that it would be helpful. I am not quite sure about the National Security Council as such because as I recall, the President himself is the Chairman of that, so he would be advising himself, and I suppose this would be a group to advise the President. Mr. Dulles. We thought there might be certain advantages in that because if you prescribe things for the President to do, and he doesn't want to do them, they don't get done in the field of protection. Secretary Dillon. That is right. Then if you describe it in the meeting at which he was present, that might be well. The Chairman. I suppose, Mr. Secretary, also if a committee of that kind was composed of the Secretary of the Treasury, Secretary of Defense, Secretary of State, and the Attorney General, that you would have on that committee the men who had all of the agencies that would of necessity have to be coordinated in order to bring all the work into focus. Secretary Dillon. Yes, and the Central Intelligence Agency. The Chairman. Yes. Secretary Dillon. One thing about the National Security Council is that neither the Secretary of the Treasury nor the Attorney General are members of the National Security Council by law.
The Secretary of the Treasury has been asked by the Presidents to sit with the National Security Council for some years, practically since its beginning. The Attorney General has sat with it during the last few years, but I don't know whether that will or will not continue into the future. So there is a certain problem there. If this assignment is given by law to the National Security Council, and some other President comes along that doesn't ask the Secretary of the Treasury or the Attorney General to sit with it, the two people who are probably most concerned wouldn't have any part in this. Mr. Dulles. It would have to provide that in all matters relating to Presidential security, of course, they will be present. One way of doing it, I would say. Secretary Dillon. Yes; there should be some such provision; otherwise I see some advantages as you say. Mr. Rankin. Mr. Secretary, are you familiar with the method of selection of the Secret Service personnel? Secretary Dillon. Only somewhat. They do get young men who meet their qualifications. They do hire them at GS-7 and they stay there for 1 year. If they have a year of satisfactory service, they are promoted two grades. Then if they have 2 more years of satisfactory service, they are promoted another double jump to GS-11. These individuals do not have the legal qualifications that some other law enforcement agencies such as the FBI require, where you have to be a lawyer or an accountant, because they do other kinds of investigative work and that wasn't thought to be necessary in the case of the Secret Service. But the Secret Service has felt, and I have inquired into this, that they have no difficulty in getting young men of the highest type to come and to take these jobs under the present setup.
Mr. Rankin. Do you have a printed or written list of the various qualifications that you seek in regard to the Secret Service? Secretary Dillon. I don't—I am not aware of that. There probably is such a list; yes. Mr. Rankin. If you have such a list will you please supply it to us? Secretary Dillon. Yes; I will be glad to. Mr. Rankin. Mr. Chief Justice, I would like to ask leave to give the next number of exhibits to that document once supplied and make it part of the record. The Chairman. It may be admitted. (The document referred to was marked Commission Exhibit No. 1053-E for identification and received in evidence.) Mr. Rankin. Mr. Secretary, are you familiar in a general way with the investigation that the Commission has been making with regard to this matter? Secretary Dillon. Yes; In a general way, I have followed it through Mr. Carswell, who has followed it more closely, and through the Secret Service, so I am generally aware of it. Mr. Rankin. And are you generally aware of the investigation in connection with the assassination, the entire matter? Secretary Dillon. Oh, yes. Mr. Rankin. Have you made any inquiry in the Secret Service to determine whether or not Lee Harvey Oswald was ever an agent of that Service? Secretary Dillon. Yes. I heard rumors of this type of thing very early, and I asked the direct question of Chief Rowley and was informed that he never had any connection with the Secret Service. Mr. Rankin. Do you know of any evidence in regard to Lee Harvey Oswald being an agent of any part of the government?
Secretary Dillon. I am not aware of any evidence myself in that way, but I don't think I necessarily would be fully competent in that. Mr. Rankin. But you have never heard of any such evidence? Secretary Dillon. I have never heard it. Mr. Rankin. Do you know of any area of the investigation of the Commission that you would like to suggest that we do more than we have insofar as you are familiar with it? Secretary Dillon. No. As far as I know, the investigation has been very thorough. Mr. Rankin. Do you know of any credible evidence that would lead you or anyone to believe that there was a conspiracy, foreign or domestic, involved in the assassination of President Kennedy? Secretary Dillon. No. From all the evidence I have seen, this was the work of one deranged individual. Mr. Rankin. And who would that be? Secretary Dillon. Lee Harvey Oswald. Mr. Rankin. Do you know of any evidence in regard to any connection between Jack Ruby and Lee Harvey Oswald? Secretary Dillon. No, no. Mr. Rankin. Is there anything that you would like to call to the attention of the Commission at this time that we should know or that we should cover? Secretary Dillon. No; I think we have covered my area of competence pretty thoroughly this morning. I can't think of anything else. The Chairman. Mr. Dulles? Mr. Dulles. Doug, in the field that in the Commission here we have described as the preventive intelligence field; that is, trying to identify beforehand the individuals or the type of individuals who might be a danger to the President, have you ever thought of any
possible division of responsibility and of work between the Secret Service and the FBI to define more clearly which each should do in that field? Secretary Dillon. Well, my own feeling is that the agency that handles the actual work of deciding who the individuals are that the Secret Service should watch out for, which is the PRS, would function much better and would strengthen the Service if it works as it does now as part of the whole Secret Service operation, and working very closely with the people who are on the White House detail and not having to be involved in a liaison operation somewhere else. So I think our problem is to strengthen this PRS, and I think that this long-range plan is a good beginning. I don't think it is necessarily an end because as soon as we develop the automated machinery that we need, then we will know a little better, and we may need some people to make full use of that. But this is enough to get it underway and all you can use, I think, well, for that purpose at present. I would think that there is a liaison problem which exists whenever you have liaison with anyone, whether it is within your department or without, as long as it is a separate organization. And I think there has been clearly a problem of inadequate liaison with other Government agencies. It is much better now. We have already taken steps. And additional steps of assigning specific liaison officers will help. But I think this is something that has just got to be worked out continually at all levels to make it work. So the problem is not unique to this situation; it affects all intergovernmental relations. Mr. Dulles. Today with the Communist Party and with rightist groups and we have more and more groups—we have always had them, but we seem to have more than others which might breed up elements of danger—is there any part of that you would like to turn over to anybody else or——
Secretary Dillon. Well, I think the identification of groups that are likely to be dangerous as groups would probably more likely fall on the FBI because they study the background of these groups and they are aware of them and try to penetrate them, and so forth. So I think that from that point of view, they would certainly be the purveyor, the first purveyor of the information that is needed and the ones who would have the responsibility of signaling to the Secret Service that this is a dangerous group and to the best of our knowledge these are its members. Some of the members would probably be subterranean and might not be known. And it would be important that they pass on that information on the individuals. The Secret Service I think would be more concerned in dealing with—trying to protect against the actual individuals. I think that probably on the basis of thinking of something that would be sort of an international plot, Communist Party plot, or something like that, I think you probably need all arms of the Government working on that. We can't say that Secret Service can do it alone. Central Intelligence Agency might get wind of it anywhere in the world or FBI would have to use all its resources. Just to beat back something like that you would need the combined resources of whatever you have got. I think there is sort of a greater thrust of continuing responsibility obviously on the FBI for following these groups, as you call them. For following individuals which may come to their notice because they were somewhat deranged or did something bad at one time, they would then pass that on to the Secret Service, and with adequate manpower, I think that the Secret Service would have more or less the primary responsibility of following those sort of individuals. The Chairman. I suppose you wouldn't want to take away from the Secret Service entirely the concern that it might have for groups?
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  • 5. Chapter 7—Cooperative Strategy 7–1 Chapter 7: Cooperative Strategy CHAPTER SUMMARY This chapter discusses the reasons cooperative strategies are important in the current competitive environment. The topic is examined generally as well as by market type. Examples of various cooperative strategy types are provided on the basis of their primary strategic objectives, with strategic alliances highlighted as a frequently-used form of cooperative strategy. Associated risks and effective management to overcome risks are presented to complete the discussion of cooperative strategies. CHAPTER OUTLINE Importance of Cooperative Strategy Strategic Alliances in Slow-Cycle Markets Strategic Alliances in Fast-Cycle Markets Strategic Alliances in Standard-Cycle Markets Types of Alliances and Other Cooperative Strategies Cooperative Strategies That Enhance Differentiation or Reduce Costs Complementary Strategic Alliances Network Cooperative Strategies Cooperative Strategies That Address Forces in the External Environment Competitive Response Alliances Uncertainty-Reducing Alliances Competition-Reducing Cooperative Strategies Associations and Consortia Cooperative Strategies That Promote Growth and/or Diversification Diversifying Strategic Alliances Franchising International Cooperative Strategies Competitive Risks of Cooperative Strategies Implementing and Managing Cooperative Strategies Summary KNOWLEDGE OBJECTIVES 1. Define cooperative strategies and explain why they are important in the current competitive environment. 2. Explain how the primary reasons for the use of cooperative strategies differ depending on market context (fast-cycle, slow-cycle, or standard cycle). 3. Define and discuss equity and non-equity strategic alliances. 4. Discuss the types of cooperative strategies that are formed primarily to reduce costs or increase differentiation. 5. Identify and describe cooperative strategies that help a firm to address forces in the external environment. 6. Explain the cooperative strategies that firms use primarily to foster growth.
  • 6. Chapter 7—Cooperative Strategy 7–2 7. Discuss the risks associated with cooperative strategies. 8. Describe how firms can effectively implement and manage their cooperative strategies. LECTURE NOTES See slides 1-3. Key Terms ▪ Cooperative Strategy - strategy in which firms work together to achieve a shared objective. ▪ Strategic Alliance - cooperative strategy in which firms combine resources and capabilities to create a competitive advantage. Importance of Cooperative Strategy - This section discusses how cooperative strategies have become integral to the competitive landscape and central to the success of partnered companies. See slide 4. Key Terms ▪ Co-opetition - condition that exists when firms that have formed cooperative strategies also compete against one another in the marketplace. See slides 5-6. See Table 7.1: Reasons for Strategic Alliances by Market Type (slide 7). 1. What are some of the reasons that cooperative strategies have become important to businesses today? a. Most firms lack the full set of resources and capabilities needed to reach their objectives. b. Cooperative behavior allows partners to create value that they couldn‘t develop by acting independently. c. Aligning stakeholder interests, both inside and outside of the organization, can reduce environmental uncertainty. d. Alliances can provide a new source of revenue. e. Alliances can be a vehicle for firm growth. f. Alliances can enhance the speed of responding to market opportunities, technological changes, and global conditions. g. Alliances are a way that firms can gain new knowledge and experiences to increase competitiveness. Compare how the reasons for using cooperative strategies vary across market type. 2. Compare how the reasons for using cooperative strategies vary across market type. a. Slow-cycle markets - Strategic alliances are used to enter restricted markets or establish franchises in new markets with ease and speed. The alliance partner might better understand the new market’s conditions
  • 7. Chapter 7—Cooperative Strategy 7–3 See Additional Notes Below. See slide 8. and have knowledge of and relationships with key stakeholders. b. Fast-cycle markets - Strategic alliances between firms with excess resources and promising capabilities aid in the transition required to evolve markets and to gain rapid entry into new markets. c. Standard-cycle markets - Strategic alliances between large firms with economies of scale are likely to combine complimentary resources/capabilities to gain market power. This type of partnership allows firms to learn new business techniques and technologies. 3. Why are slow-cycle markets becoming rare in the 21st century competitive landscape? a. Privatization of industries and economies b. Rapid expansion of the Internet’s capabilities c. Quick dissemination of information and speed with which advancing technologies permit quick imitation of even complex products. Additional Discussion Notes for Strategic Alliances by Market Type - These notes include additional materials that cover reasons for strategic alliances by market type, citing corporate examples to illustrate the concepts. The competitive conditions of slow-cycle, fast-cycle, and standard-cycle markets impel firms to use cooperative strategies to achieve slightly different objectives (see Table 7.1 in text). Market type examples of cooperative strategic alliances follow. Slow-Cycle Access to restricted market; establish franchises in new markets; maintain stability (e.g., establishing standards). ▪ French steelmaker Usinor formed an equity strategic alliance with Dofasco, Canada’s second largest steel mill, to build a plant to supply car bodies for Honda, Toyota, GM, Ford, and DaimlerChrysler. Through this alliance, Usinor and Dofasco established a new franchise in the import-averse U.S. steel market. ▪ American AIG formed a joint venture with India to gain entry into India’s restricted insurance market. ▪ Petrochemical companies from Venezuela and Brazil formed a joint venture for cross investments between partners. The eventual goal is to attract other oil companies in the region (Colombia and Mexico).
  • 8. Chapter 7—Cooperative Strategy 7–4 Fast-Cycle Compress R&D time and capital; market leadership; form standards; reduce risk and uncertainty: ▪ Visa formed a venture capital program to scout technologies and capabilities that will affect the future of the financial services industry in order to meld and integrate the physical and the virtual financial world, where customers have the trust, convenience, protection and security in addition to the ease in performing transactions. Standard-Cycle Gain market power; access to resources; economies of scale; overcome barriers; reduce risk; compress learning: ▪ In 1993 Lufthansa and United Airlines formed the Star Alliance. Since then, 12 other airlines have joined the Star Alliance to share resources and capabilities and to access over 700 cities in 124 countries. The goal is to combine worldwide routes and offer seamless booking and travel throughout the world. Types of Alliances and Other Cooperative Strategies - This section discusses two basic types of strategic alliance based on legal form and introduces other cooperative strategies as they relate to the primary strategic objectives of firms. See slide 9. Key Terms ▪ Equity Strategic Alliance - alliance in which two or more firms own a portion of the equity in the venture they have created. ▪ Joint Venture - strategic alliance in which two or more firms create a legally independent company to share resources and capabilities to develop a competitive advantage. ▪ Non-equity Strategic Alliance - alliance in which two or more firms develop a contractual relationship to share some of their unique resources and capabilities to create a competitive advantage. See slide 10. See slide 11. 4. How can tacit knowledge create a competitive advantage? a. Tacit knowledge is complex knowledge that is difficult to codify. It is learned through experience and, when shared between partnering organizations, can become a source of competitive advantage. 5. How do nonequity strategic alliances differ from equity strategic alliances? a. A separate independent company is not established. b. The partnering firms do not take equity positions in a separate entity. c. The relationship is less formal.
  • 9. Chapter 7—Cooperative Strategy 7–5 See slide 12. See Figure 7.1: Strategic Objectives of Cooperative Strategies (slide 13). See Additional Notes Below. d. The relationship demands fewer partner commitments. 6. Name some types of nonequity strategic alliances that are increasingly being used. a. Licensing agreements b. Distribution agreements c. Supply contracts d. Outsourcing commitments 7. Discuss some common types of cooperative strategies that support different strategic objectives. a. Refer to Figure 7.1, which lists types of cooperative strategies that support the following strategic objectives: ▪ Differentiation ▪ Low cost ▪ Address environmental conditions ▪ Growth ▪ Diversification Additional Discussion Notes for Types of Strategic Alliances - These notes include additional materials that cover different types of strategic alliances, with specific examples of joint ventures, equity strategic alliances, and nonequity strategic alliances. Joint Ventures ▪ Sprint and Virgin Group’s joint venture targets 15- to 30-year- olds as customers for pay-as-you-go wireless phone service. Brand (from Virgin) and service (from Sprint). ▪ Sony Pictures, Warner Bros., Universal Pictures, Paramount Pictures, and Metro-Goldwyn-Mayer, each have a 20% stake in a joint venture to use the Internet to deliver feature films on demand. Equity Strategic Alliance ▪ Foreign direct investments made by Japanese and U.S. companies in China are completed through equity strategic alliances. ▪ Cott Corporation, the world’s largest soft drink supplier, and J.D. Iroquois Enterprises formed an equity strategic alliance. Cott gained exclusive supply rights for Iroquois’ private label spring water products and Iroquois expanded its branded business in the West and Far East. Nonequity Strategic Alliance ▪ Licensing agreements, distribution agreements, supply
  • 10. Chapter 7—Cooperative Strategy 7–6 contracts. For example, chemical processes tend to be improved along technology corridors; and therefore, licensing and cross licensing are well-established practices in chemical and pharmaceutical industries. Licensing and cross licensing mitigates the potential impact of overbroad patents. ▪ Ralph Lauren uses licensing agreements to support its Polo brand. It uses 29 domestic licensing agreements, including West Point Stevens (bedding), Reebok (casual shoes), and ICI Paints (Ralph Lauren Home Products). ▪ Magna International, a leading global supplier of automotive systems, components, and modules, has formed many nonequity strategic alliances with GM, Ford, Honda, DaimlerChrysler, and Toyota. ▪ Procter & Gamble (P&G) has formed over 120 strategic alliances: with Dana Undies to make Pampers cotton underwear; with Magla to make Mr. Clean disposable gloves and mops; with GM to distribute its Tempo car cleanup towels; and with Whirlpool to develop a new “clothes refresher” product and appliance. Cooperative Strategies That Enhance Differentiation or Reduce Costs - This section introduces a discussion of business level cooperative strategies used to combine resources and capabilities to improve firm performance in individual product markets and create competitive advantages that cannot be created by the individual firm. See slide 14. 8. What are the two general categories of cooperative strategies used to enhance differentiation or reduce costs? a. Complementary strategic alliances b. Network cooperative strategies Complementary Strategic Alliances - This section introduces the two types of complementary strategic alliances used to support differentiation and cost objectives and discusses why the benefits of such partnerships are not always balanced evenly across partnering firms. See slide 15. Key Terms ▪ Complementary Strategic Alliance - business-level alliances in which firms share some of their resources and capabilities in complementary ways to develop competitive advantages. See slide 16. See Figure 7.2: Vertical and Horizontal 9. What are two types of complementary strategic alliances and how do they differ? a. Vertical complementary strategic alliances - the partnering firms share their resources and capabilities
  • 11. Chapter 7—Cooperative Strategy 7–7 Complementary Strategic Alliances (slide 17). See slide 18. See Additional Notes Below. from different stages of the value chain to create a competitive advantage. b. Horizontal complementary strategic alliances - the partnering firms share their resources and capabilities from the same stage of the value chain to create a competitive advantage - commonly used for long-term product development and distribution opportunities. 10. What affects the different opportunity levels and benefits that partnering firms are able to achieve through complementary alliances? a. Partners may learn at different rates. b. Partners may have different capabilities to leverage complementary resources. c. Some firms are more effective at managing alliances and deriving benefits from them. d. Partners may have different reputations in the marketplace, differentiating the types of actions they can legitimately take. Additional Discussion Notes for Complementary Strategic Alliances - These notes include additional materials that provide examples of vertical and horizontal complementary strategic alliances to illustrate the business-level cooperative strategies. Vertical ▪ McDonald’s alliances with oil companies and independent store operators. With just one stop, customers can fill up their car, buy a meal, and pick up items for the home. ▪ Boeing’s 777 alliance is accredited with the fastest and most efficient construction of a new commercial aircraft. The partners, including UAL, brought unique resources and capabilities to a different part of the value chain. Horizontal ▪ SCM is a 40-year old joint venture between Caterpillar and Mitsubishi to share resources and capabilities in order to yield products that neither firm could design and produce by itself. ▪ CSK Auto, Inc. (Checker Auto Parts, Shuck’s Auto Supply, Kragen Auto Parts) and Advance Auto Parts established PartsAmerica.com. The venture provides easy access to nearly $1.5 billion in inventory and 3,000 locations in all 50 states, where buyers can use either store to pick up and return parts ordered online.
  • 12. Chapter 7—Cooperative Strategy 7–8 Network Cooperative Strategies - This section discusses the effective use of network cooperative strategies and the role that strategic center firms play in alliance networks. See slide 19. See Figure 7.3: A Strategic Network (slide 20). Key Terms ▪ Network Cooperative Strategy - cooperative strategy in which multiple firms agree to form partnerships to achieve shared objectives - also known as alliance networks. ▪ Strategic Center Firm - firm at the core of an alliance network and around which the network’s cooperative relationships revolve. See slide 21. See slide 22. See Additional Notes Below. See slide 23. See slide 24. See slide 25. 9. How can network cooperative strategies be effectively used to benefit participating firms? a. Knowledge and information gained from multiple sources can produce more and better innovations. b. Network alliances can be particularly effective for geographically clustered firms. c. Effective social relationships and interactions among partners while sharing resources and capabilities lead to more successful network alliances. d. A strategic center firm that manages the complex, cooperative interactions among network partners also contributes to the effectiveness of network alliances. e. Gaining access to partners’ partners can open up advantages to the networking firms. f. Multiple collaborations increase the likelihood of additional competitive advantages and value creation. 10. As the foundation for an alliance network’s structure, what are the primary tasks of a strategic center firm? a. Strategic outsourcing with non-network members. b. Support of efforts to develop core competencies. c. Coordination and sharing of technology-based ideas and efforts. d. Emphasis on healthy rivalry to generate network-based competitive advantages. 11. What are two types of alliance networks and how do they differ? a. Stable alliance network i. Formed in mature industries in which demand is relatively constant and predictable. ii. Directed primarily toward developing products at a low cost. b. Dynamic alliance network i. Used in industries characterized by
  • 13. Chapter 7—Cooperative Strategy 7–9 environmental uncertainty, frequent product innovations, and short product life cycles. ii. Directed primarily toward continued development of products that are uniquely attractive to customers. Additional Discussion Notes for Network Cooperative Strategies - These notes include additional material that uses the airline industry to illustrate multiple partners in network cooperative strategies. Network Cooperative Strategies: Numerous Partners United Technologies is involved with over 100 worldwide cooperative strategies. One of these networks is the alliance formed by the firm’s Sikorsky business unit to produce the S-92 helicopter. Five firms from four continents joined with Sikorsky to form this alliance. Using its unique resources and capabilities, each partner assumed different responsibilities for the design and production of the S-92. No individual member of the alliance could have developed the design or manufactured it; a product with size and cost benefits over competing helicopters. The combination of the partners’ resources and capabilities has resulted in a competitive advantage for the alliance. Unlike the chemical and pharmaceutical industry, some experts note that initial progress in the airline industry was hindered due to a lack of cross-licensing agreements (cf., Merges & Nelson, 1990). That is, the Wright brothers’ patent—an efficient stabilizing and steering system that enabled a multiplicity of future flying machines— significantly held back the pace of development of aircrafts and the entire airline industry. In the absence of cross-licensing strategies, incumbents (like Curtiss and even the Wright brothers) wasted huge energies and diverted their efforts simply to avoid infringement, not to advance technology. The problems caused by the Wright brothers’ initial patent were compounded as improvements and complementary patents, owned by different companies, came into existence, but compatibility was null. The situation was so serious that at the insistence of the Secretary of the Navy, during World War I, an arrangement was worked out to enable automatic cross licensing. This, like in the licensing of automobile patents, turned out to be a durable institution. By the end of World War I there were many patents on different aircraft features and rivals could easily negotiate licenses to produce state-of-the-art planes. Cooperative Strategies That Address Forces in the External Environment - This section introduces a discussion of business level cooperative strategies used to combine resources and capabilities to meet the challenges of complex and ever-changing external environments. See slide 26. 11. What are the four types of cooperative strategies that serve to
  • 14. Chapter 7—Cooperative Strategy 7–10 See Additional Notes Below. See slide 27. keep firms abreast of rapid changes in their environments, and how do they differ? a. Competitive response alliances - used to respond to competitors’ strategic attacks. b. Uncertainty-reducing alliances - used to reduce environmental uncertainty, particularly in fast-cycle markets, new product markets, emerging economies, or new technologies. c. Competition-reducing cooperative strategies - used to reduce competition in an industry, often through the use of collusion. d. Associations and consortia - used to form coalitions with stakeholders to achieve common objectives. 12. Describe the two types of collusion used to reduce competition. a. Explicit collusion, which is illegal in the U.S., involves direct negotiation amongst firms to establish output levels and pricing agreements to reduce industry competition. b. Tacit collusion, common to highly-concentrated industries, involves several firms indirectly coordinating production and pricing decisions which impact the degree of competition faced in the industry. Mutual forebearance is one form of tacit collusion that occurs when firms avoid competitive attacks against rivals they face in multiple markets. Additional Discussion Notes for Cooperative Strategies That Address Forces in the External Environment - These notes include additional materials that cover the competition response strategy, uncertainty-reducing strategy, and competition-reducing strategy and examples to illustrate each concept. Competition Response Strategy ▪ FedEx responded to the success of UPS’s logistics business. FedEx formed a strategic alliance with KPMG to deliver end-to- end supply-chain solutions to large and mid-sized companies. FedEx committed its supply-chain consulting, IT systems, and transportation and logistics expertise, whereas KPMG provided its supply-chain consulting and e-integration services. ▪ Marathon Oil and Russia’s Yukos formed an alliance to achieve international expansion and as a response to rivals’ alliances. Uncertainty Reducing Strategy ▪ Overcapacity, risk, uncertainty, and cost competition led Siemens and Fujitsu to form an alliance associated with their PC operations. By uniquely combining technology from Fujitsu
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  • 16. Chapter 7—Cooperative Strategy 7–11 with manufacturing, marketing, and logistics capabilities from Siemens, the joint venture has become Europe’s top supplier of PCs. ▪ GM and Toyota (# 1 U.S. and Japanese automakers) formed an R&D alliance to develop and standardize alternative-power cars. ▪ GM, Toyota, Ford, DaimlerChrysler, and Renault joined to develop a standard for communications and entertainment equipment for automobiles. Competition Reducing Strategy ▪ Explicit Collusion (illegal): Examples include the 1995 price- fixing scandal, in which Archer Daniels Midland executives were convicted of cooperating with competitors to fix prices. Similarly, Toys ‘R’ Us colluded with toy manufacturers to not sell popular toys to rivals, such as Costco and Sam’s Club. ▪ Tacit Collusion: Kellogg, General Mills, Post, and Quaker accounted for 84% of the U.S. cereal market. Some believe the high price gaps vis-à-vis rivals in this industry suggest the possibility that the dominant firms were using a tacit collusion cooperative strategy. ▪ Mutual Forbearance: Firms choose not to attack each other or engage in what could be destructive competition in multiple product markets. Cooperative Strategies That Promote Growth and/or Diversification - This section introduces a discussion of cooperative strategies used as an attractive alternative when the firm’s primary goal is growth and/or diversification. See slide 29. See slide 30. See slide 31. See Figure 7.4: A Distributed Strategic Key Terms ▪ Diversifying Strategic Alliances - corporate-level cooperative strategy in which firms share some of their resources and capabilities to diversify into new product or market areas. ▪ Franchising - cooperative strategy in which a firm uses a franchise as a contractual relationship to describe and control the sharing of its resources and capabilities with partners. ▪ Franchise - contractual agreement between two legally independent companies whereby the franchisor grants the right to the franchisee to sell the franchisor’s product or do business under its trademarks in a given location for a specified period of time. ▪ Cross-Border Strategic Alliance - international cooperative strategy in which firms with headquarters in different nations combine some of their resources and capabilities to create a competitive advantage. ▪ Distributed Alliance Network - organizational structure used to
  • 17. Chapter 7—Cooperative Strategy 7–12 Network (slide 32). manage complex and challenging international cooperative strategies. See slide 28. See slide 33. See Additional Notes Below. See slide 34. See slide 35. 13. What types of cooperative strategies are used by firms trying to grow or diversify? a. Diversifying strategic alliances b. Franchising c. International cooperative strategies 14. Why might cooperative strategies be an attractive alternative to mergers and acquisitions (presented in Chapter 9) to achieve growth or diversification goals? a. Require fewer resource commitments b. Permit greater strategic flexibility c. Not as permanent 15. What behaviors contribute to the successful use of franchising as a cooperative strategy? a. Partners working closely together, finding ways to strengthen the core company’s brand name. b. Franchisors developing programs to transfer knowledge and skills needed for franchisees to successfully compete at the local level. c. Franchisees providing feedback to franchisors regarding how to become more effective and efficient. d. Using the strategy in fragmented industries where no firm has a dominant share. 16. What are some of the reasons for the increase in use of cross- border strategic alliances? a. Multinational corporations outperform firms that operate only domestically. b. Due to limited domestic growth opportunities, firms look outside their national borders to expand business. c. Some foreign government policies require investing firms to partner with a local firm to enter their markets. Additional Discussion Notes for Cooperative Strategies That Promote Growth and/or Diversification - These notes include additional materials that illustrate diversifying strategic alliances and franchising as cooperative strategies that promote growth and/ or diversification. Diversifying Strategic Alliances Boeing and Insitu formed an alliance to develop an unmanned aerial vehicle system. Boeing brings systems integration, communications technologies, and payload technologies. Insitu is designing its
  • 18. Chapter 7—Cooperative Strategy 7–13 capabilities in producing low-cost, long-endurance unmanned aerial vehicles (an earlier prototype flew 2,000 miles using 1.5 gallons of gasoline). Boeing hopes to diversify into government and commercial markets. Insitu gains “big firm” experience and access to Boeing’s technology, resources, and capabilities. Franchising Franchising is a lower-risk strategy to grow the brand. It is attractive when you don’t have the capital for growth. It is particularly attractive in fragmented industries, where a company can gain a large market share by consolidating independent companies through contractual relationships (e.g., Papa John’s, McDonald’s, Hilton International). Source: Robert P. Merges and Richard R. Nelson, On the Complex Economics of Patent Scope, 90 Columbia. Law. Review 839 (http://cyber.law.harvard.edu/ipcoop/90merg2.html). Competitive Risks of Cooperative Strategies - This section discusses the high failure rate of cooperative strategies and the factors that have a negative impact on their success. See slide 36. See Figure 7.5: Managing Competitive Risks in Cooperative Strategies (slide 37). 17. What are the prominent risks of cooperative strategies? a. Partners may choose to act opportunistically, either when formal contracts fail to prevent the behavior or when an alliance is based on a false perception of partner trustworthiness. b. Partner competencies may be misrepresented, particularly when the contributions are intangible assets. c. Partner may fail to make available the complementary resources and capabilities that were committed, which often occurs in international arrangements when different interpretations of contractual terms or trust- based expectations exist. d. Partner may make investments specific to the alliance while the other partner does not. Implementing and Managing Cooperative Strategies - This section explains the value of building superior skills in effectively implementing and managing cooperative strategies. See slide 38. 18. Describe several effective ways to implement and manage cooperative strategies. a. Internalize experiences with successful cooperative strategies to gain maximum value from the knowledge learned. This involves organizing the knowledge and
  • 19. Chapter 7—Cooperative Strategy 7–14 See slide 39. Refer to Figure 7.5: Managing Competitive Risks in Cooperative Strategies (slide 37). See slide 40. See slide 41. properly distributing it to those involved with forming and using cooperative strategies. b. Establish appropriate controls. c. Assign managerial responsibility for cooperative strategy to high-level executive or team. d. Increasing the level of trust between partners increases the likelihood of alliance success and is an efficient way to influence and control alliance partners’ behaviors. 19. Describe two methods used to manage cooperative strategies. a. Cost minimization i. Relationship with partner is formalized with contracts. ii. Contracts specify how the cooperative strategy is to be monitored and how partner behavior is to be controlled. iii. Goal is to minimize costs and prevent opportunistic behaviors by partners. iv. Costs of monitoring cooperative strategy are greater. v. Formalities tend to stifle partner efforts to gain maximum value from their participation. b. Opportunity maximization i. Focus is on maximizing partnership’s value- creation opportunities. ii. Informal relationships and fewer constraints allow the partners to take advantage of unexpected opportunities to learn from each other and explore additional marketplace possibilities. iii. Partners need a high level of trust that each party will act in partnership’s best interest, which is more difficult in international situations. Ethical Questions - Recognizing the need for firms to effectively interact with stakeholders during the strategic management process, all strategic management topics have an ethical dimension. A list of ethical questions appears after the Summary section of each chapter in the textbook. The topic of ethics is best covered throughout the course to emphasize its prevalence and importance. We recommend posing at least one of these questions during your class time to stimulate discussion of ethical issues relevant to the chapter material that you are covering.
  • 20. Other documents randomly have different content
  • 21. Ambassador Thompson. I only know that in general where a citizen wishes to return to the United States and doesn't have the means to do so, that we frequently do assist them. This goes back many years. But I haven't been myself concerned in this for probably 25 years, or even more. Senator Cooper. But is it the practice that if a determination has been made that the individual is an American citizen, therefore entitled to what protections are given to American citizens, if necessary, loans will be made to assist them to return to the United States? Is that about the basis of the policy? Ambassador Thompson. That is correct; yes, sir. Senator Cooper. I think that is all I have. Mr. Dulles. Did you have any conversations at any time while you were Ambassador or after you returned to the United States with any Soviet official with regard to the Oswald case? Ambassador Thompson. I discussed with the Soviet Ambassador the desire of the Commission to receive any documentation that they might have available, but I did not in any way discuss the case itself, nor did the Soviet official with whom I talked. Mr. Dulles. And do you know of any conversations of that nature that any other official of the Department had in connection with the Oswald case? Ambassador Thompson. I do not myself know of any. Mr. Dulles. You probably would, would you not, if that had taken place—of any importance? Ambassador Thompson. Off the record. (Discussion off the record.) Mr. Dulles. Your testimony is you have no knowledge of any other conversations other than that of the Secretary of State, in connection with communications to and from the Soviet Government on this case?
  • 22. Ambassador Thompson. That is correct. I know of no other cases where it was discussed with Soviet officials. Mr. Dulles. That is all I have. Mr. Slawson. Thank you very much, Mr. Ambassador. (Whereupon, at 3:40 p.m., the President's Commission adjourned.)
  • 23. Wednesday, September 2, 1964 TESTIMONY OF C. DOUGLAS DILLON The President's Commission met at 12:05 p. m., on September 2, 1964, at 200 Maryland Avenue NE., Washington, D.C. Present were Chief Justice Earl Warren, Chairman; Senator Richard B. Russell, Senator John Sherman Cooper, Representative Gerald R. Ford, Allen W. Dulles, and John J. McCloy, members. Also present was J. Lee Rankin, general counsel. The Chairman. Mr. Secretary, would you please rise and follow me. Do you solemnly swear the testimony you are about to give before this Commission will be the truth, the whole truth, and nothing but the truth, so help you God. Secretary Dillon. I do. The Chairman. Mr. Rankin will conduct the examination, Mr. Secretary. Secretary Dillon. Thank you, Mr. Chairman. Mr. Rankin. Mr. Secretary, will you state your name and residence, please?
  • 24. Secretary Dillon. C. Douglas Dillon of Far Hills, N.J., presently residing in Washington, 2534 Belmont Road, NW. Mr. Rankin. Do you have an official position with the Government? Secretary Dillon. Yes, I do. I am the Secretary of the Treasury. Mr. Rankin. In that capacity do you have responsibility for the Secret Service of the United States? Secretary Dillon. Yes, the Secret Service is part of the Treasury Department. Mr. Rankin. Have you had that position responsibility for some time? Secretary Dillon. Since January 21, 1961. Mr. Rankin. Can you tell us briefly the nature of your supervision of the Secret Service, prior to the assassination? Secretary Dillon. Yes. Prior to the assassination, when I first took office as Secretary of the Treasury, I naturally tried to find out, in as much detail as seemed practical, how the various offices of the Department functioned. One of the important ones was the Secret Service. So I had a number of interviews with Chief Baughman who was the Chief of the Secret Service at that time. I got the general description from him of how the Secret Service operated, what their responsibilities were, what their problems were. After he retired, which was early, after I had only been there for a few months, I spoke with the President about this matter—President Kennedy—and it was my responsibility to find a new Chief of the Secret Service. He had known James Rowley very well as head of the White House detail, and he felt that he would be an appropriate head of the Secret Service. I talked with Chief Baughman, and he thought there were two or three men, of whom Rowley was one, qualified to be head of the Secret Service; so I decided to appoint Rowley and
  • 25. thereafter talked with him considerably about the White House detail which he was more familiar with than Chief Baughman. However, I did not in any sense conduct a day-to-day supervision, or close following, of its day-to-day operations. The Secret Service had been functioning for many years and the presumption from its record was that it had been functioning successfully. I think that the events that have developed since November have very clearly shown that some of the procedures, many of them, need to be changed and improved. I think this is probably largely due, to a considerable extent due, to a very rapid change which probably took place without our fully realizing its importance in the last 3 years, and which greatly increased the responsibility of the Secret Service. That is the greatly changed nature of Presidential travel. Mr. Rankin. Will you describe to us how that affects the problems of the Secret Service? Secretary Dillon. Yes. In earlier times, the Presidents did not travel very often. When he did travel, he generally traveled by train, which was a protected train. Doing that, he could not cover very many parts of the country, and the Secret Service could move easily right along with him on the train that he was on. What happened since has been, first, the advent of airplanes. Presidents beginning with President Eisenhower began to move more rapidly and were able to travel considerably more, and on very short time differentials they could be in cities that were thousands of miles apart. However, this only just began with President Eisenhower because, in the first place, jets were not yet available, and in the second place, in the last 4 years of his term, he had to take greater care of his health, and he didn't travel around the country quite as much as his successors have. So when President Kennedy came into office with the availability of, the relatively recent availability, of jets and his desire to travel, this greatly increased the burden on the
  • 26. Secret Service. Formerly when they had a trip, they used to send out an advance agent to some big town. Now the trip would be a 3-day trip, and there might be four towns, each one 1,000 miles apart, that would have to be covered thoroughly at the same time. I think that probably there was not a full realization by anyone of this problem. Certainly the Secret Service came to me and said they needed more personnel, and we tried to get them more personnel. Chief Rowley testified, I thought quite convincingly, in 1962 before the various Appropriations Committees of the Congress and met with very little success because I think that this was not fully understood by the public. The Appropriations Committees were a reflection of public understanding, and probably it was not even fully understood within the Secret Service. I would like—— Senator Russell. Has there been any increase, Mr. Secretary, in the number of agents assigned to guard the President. I thought there had been some increase in recent years? Secretary Dillon. There has been some increase, and we have tried very hard to increase the Secret Service in the last 3 or 4 years. We have asked for more people every year, and while we never got the amount we asked for, we did get increases. I have the figures here. In 1961, the entire Secret Service amounted to 454 individuals, of whom 305 were classified as agents. In 1964, that is the fiscal year just finished, the figure was 571, of which 167 were clerks and 404 were agents. So we had achieved an increase of about 100 agents, a little over a third. Mr. Dulles. That included both the counterfeiting responsibilities of the Secret Service as well as the Presidential protection? Secretary Dillon. That is right. And I think it is important to note that the counterfeiting problem was also increasing in volume very rapidly and changing very rapidly at about the same time. Actually that may have started a few years earlier because of the
  • 27. development of photography, which enabled one to counterfeit by photography instead of having to do it by hand engraving. Representative Ford. Wasn't the specific request for an increase in the White House detail—I use this in a broad sense for both the President and Vice President—primarily aimed at the increase of personnel for the Vice President? Secretary Dillon. That was in one year. Representative Ford. 1962? Secretary Dillon. I think that was in—I think that was in 1963. In 1962 the law was passed, and we did have a deficiency appropriation which was given to us. The following year when we came up for our regular appropriation, we not only did not get the full amount that we thought was necessary to cover the Vice President, but they cut the protection we had been affording the Vice President in half, and whereas there had been 20 persons assigned, they reduced it to 10. Representative Ford. But there had been no reduction in the funds for the protection of the President? Secretary Dillon. For the White House detail; no. Representative Ford. It was a reduction for the protection of the Vice President. Secretary Dillon. That is correct. But the thing that I think we are coming to is, it is perfectly obvious that we have to do a great deal more in this advance work, field work, in interviewing people who are dangers to the President or could be classified as such. We need more people in the field on account of this. That is what I say was not probably fully realized, although Rowley specifically, when he first went up in 1962 asking for an increase, pitched it on that basis, but he did not have a very good reception from the Appropriations Committee at that time because they felt that the White House detail was the White House detail, right around the President. I don't think anyone fully understood the connection with
  • 28. people in the field. I am not sure that Secret Service made as good a case as they should, to be really understood on this. It has become clear now. Representative Ford. Mr. Rowley in that presentation asked for additional funds for and personnel for the Protective Research Service? Secretary Dillon. I don't think it was specifically for that. It was for protection of the President, and he was the first person that made this type of request. Baughman had always said that people in the field were counterfeiting and just worked a little bit for the President, and Rowley when he came in was the first one that made this claim that they were needed to actually protect the President. He wanted more people in the field to do these things, and that was the thing that did not go over right away. I think it would be interesting here. We have—— Mr. Rankin. May I interrupt a moment? We have a problem with some of the members of the Commission that have to go to the Congress right away for the vote. They would like to question you if they may. Senator Cooper. I have a question which I think you can address yourself fully to later but considering these new factors which make the protection of the President more difficult, I would like to ask if it is your judgment that the Secret Service, if it is provided adequate personnel and if it is—if a broader criteria for the ascertainment of the persons who might be dangerous to the President is adopted, if it is your judgment that the Secret Service could meet these new factors and provide an effective protection for the President, taking into consideration the factors which you mentioned? Secretary Dillon. Yes; I think they could. I think the answer is clearcut. I don't think that means that under every and all circumstances you could be absolutely a thousand percent certain that nothing can happen. You never can be in a situation like this. But I think they could be a great deal better, and you could feel
  • 29. everything has been done. We have just completed—the thing I wanted to say—this study we have been working on many months as to what is needed to provide this in the Secret Service. Chief Rowley was not able to give you this when he was here before. I have given a copy of this to Mr. Rankin. I think it ought to go into the record at this point. Mr. Rankin. Mr. Secretary, I will hand to you the document you just referred to, called Planning Document, U.S. Secret Service, and ask if that is the document that you were describing. Secretary Dillon. Yes. That is the document; yes. Mr. Rankin. Mr. Chief Justice, I would like to ask leave at this time to mark this document our next exhibit number which I will furnish later to the reporter, and offer it in evidence as part of this examination. The Chairman. Mr. Secretary, that is not a security matter that couldn't go into the record, is it? Secretary Dillon. No. I have one thing I would like to say about that, and I think it should go into the record. What this is is our report as to how many personnel are needed and what has to be done and what they should do. We have transmitted that with a covering letter to the Bureau of the Budget. The final decision on what will be done on many of these things is taken in the light of recommendations of the Bureau of the Budget to the President and what he finally decides for budgetary reasons. So ordinarily budgetary matters are not published prior to the time the President has approved them. He hasn't approved this. He hasn't seen it, but I think under the circumstances I see no reason under this special circumstance, why this report should not go into the record, and I think it is perfectly all right. The Chairman. The report may be admitted and take the next number. (Commission Exhibit No. 1053-A was marked for identification and received in evidence.)
  • 30. Representative Ford. This would be the recommendation of the Treasury Department to the Bureau of the Budget for the personnel and the funds for the Secret Service in fiscal year 1966? Secretary Dillon. No. This is a recommendation to the Bureau of the Budget for the personnel and equipment that would be needed to put the Secret Service in what they consider adequate position to fully handle this problem. They feel that it would take about 20 months to get all the necessary people on board and trained. If this were started right away, as we think it could be if a reapportionment on a deficiency basis were approved, this could start in fiscal year 1965 and depending on whether such is approved, the fiscal year 1966 final recommendation would be affected. But this is the total picture, and it is assuming our recommendation that they start in the next couple of months. Representative Ford. In other words, this is the plan that you would like instituted immediately regardless of budget considerations. Secretary Dillon. That is right. Mr. McCloy. Mr. Secretary, there is nothing in this exhibit that in any way, according to your judgment, would compromise the protection of the security of the President if it became—— Secretary Dillon. Oh, no; and there is also with it—it is just a covering letter but I think it is equally important—it is a letter which I wrote to the Director of the Budget on Monday when I forwarded this plan to him, and I think that probably should also go in because it has a recommendation at the end covering the matter Mr. Ford raised. Mr. Rankin. Mr. Secretary, I will ask you if this document, dated Angust 31, 1964, is a copy of the letter that you have just referred to now? Secretary Dillon. That is correct.
  • 31. Mr. Rankin. Mr. Chief Justice, I ask that this letter, dated August 31, 1964, directed "Dear Kermit," from the Secretary, be marked the next number in order and offered in evidence as part of the record. The Chairman. It will be admitted. (Commission Exhibit No. 1053-B was marked for identification and received in evidence.) Secretary Dillon. It is marked "limited official use," and I think that should be declassified for this purpose. Mr. Rankin. Now, Mr. Secretary, will you very briefly describe the general plan of your planning document. We have that so we can use it in considerable detail, but if you can just summarize briefly. Secretary Dillon. Well, in brief, this asks for a total of 205 additional agents, which is about—not quite but nearly—a 50 percent increase from the 415 agents they now have. It asks also for 50 clerks to add to the 171 that are presently there. Those are stenographers, typists and other clerical workers. And for five technicians. Of this the idea is to put 17 agents and the 5 technicians in the PRS. Five would be used to maintain 24-hour coverage in the PRS which is not presently in force because of lack of personnel. One would add to the Research and Countermeasures Unit to fill out three full units that could be operating all the time. Six of them would do advance work for PRS with local agencies and institutions. One of the new things we have instituted is that each time they do an advance, someone from the PRS goes out and works with the local law enforcement agencies. I think that is obviously a very important thing. They need more people in view of the volume of traveling. Then they also need five more employees to expand our liaison with the other law enforcement and intelligence agencies. We now have one man assigned really full time to that. We found even in the period that we have been doing this that while that is a great help, much the best way would be to have individuals assigned to each agency that work full time with the agency, know
  • 32. the people in the agency, and that is the only way we can be sure we have adequate liaison. Mr. Dulles. May I ask, would that include the FBI? Secretary Dillon. Oh, yes. Mr. Dulles. And the CIA and military intelligence services? Secretary Dillon. Oh, yes. Mr. Dulles. And the State Department possibly? Secretary Dillon. Yes. Representative Ford. Could you specify those agencies. I was interested in what agencies you were referring to. Secretary Dillon. Well, I would think certainly it would be the military, the FBI, the security services of the State Department, and the CIA. Now, there may be additional ones. There are additional ones within the Treasury Department. I think we probably have one, for instance, with the intelligence section of the Internal Revenue Service, Alcohol and Tobacco Tax Unit, and so forth, which a good deal can come out of. In addition we recommend here five technical specialists, two of which would be highly trained computer technicians, programers, and three less well trained to work with these others. The purpose of this is to automate the whole PRS operation. We have been thinking of that for some time. It was something that obviously needed to be done. Mr. Rankin. Excuse me, Mr. Secretary. Will you describe a little more what you mean by automate. Secretary Dillon. I mean using electronic processing, punchcard systems, so that they would be able to pull out of their files for any locality, various different types of people that might be a danger or might have made threats to the President or to other high officials,
  • 33. so that they would be able to function rapidly and well in planning protection as the President travels to these various cities. Mr. Rankin. Does that include computer systems? Secretary Dillon. Yes. And what I was going to say was about 2 or 3 months before the events in Dallas, the Secret Service had asked the IBM Co. to make a study of this problem for it. That study was not completed until after the events in Dallas, and it did not prove satisfactory because from our point of view it did not go into enough detail in being able to handle criteria so you could tell when you retrieved a name from the file whether it was truly dangerous or not. We needed a more complex system and after working with Rand Corp., the Research Analysis Corp., and also talking with IBM, we all felt the best way would be to hire some good programers, knowing our problems, and then work out a pilot program and get consultants in. One of the things we recommend here is appropriation of $100,000 to get consultants from IBM Co., Honeywell or other companies, and get pilot machines to try to work out the details of this system. Mr. McCloy. For the record, Mr. Secretary, you had no electronic system of this character operating before the assassination? Secretary Dillon. No. Now, the total of that is 17 agents and 5 specialists for the PRS. In addition, for a long time, Mr. Rowley has believed that it would be preferable to improve the capacity of the White House detail if we could establish a headquarters pool of 18 men where new individuals who are going into the White House detail would be fully trained first—before, they had to be trained sort of partially on the job—and also through which you could rotate people from the field from time to time, bringing them up to date on Presidential protection.
  • 34. So we would ask for 18 people, 18 spaces for that. We have asked for 25 spaces to provide adequate protection for the Vice President in addition to the 10 that are already on board. Mr. Rankin. Mr. Secretary, excuse me. I think spaces may not be clear to all our readers. Will you explain what that means? Secretary Dillon. Twenty-five job positions. I think the thing that is very important here is to keep in mind that to keep one man on the job around the clock covering a post, which is the way the Secret Service works—one man that would be always with the President or the Vice President, that would be always watching his house—to get one man requires five job positions. In the first place, the coverage required is for 24 hours a day. In the second place, there are holidays, there are weekends off. On a full-time basis, the Secret Service works a 40-hour week, 5-day week, as the rest of the Government does, and there are provisions for sickness and leave, and so forth. When the number of hours that a man can work a year full time is figured out, it requires 5 men to fill one spot. So that is one reason why these protective numbers may seem rather high to the uninitiated. When you are talking about the Vice President, and 10 people are required to produce two posts, coverage of two posts, it is obviously not adequate because you have to cover his house, whether he is there or not, so that someone can't come in and put a destructive device in it. This simply can't be done with the present numbers that are assigned. Then, going beyond this to complete this list, there is a request for 145 agents in the field offices who would handle the substantially increased volume of security investigations. We are now getting about twice as many referrals already as we did before. Instead of
  • 35. something like 25,000, we are up to something over 50,000, and they expect it will go over 60,000 next year. To really run these down out in the districts, they need, obviously, more men than they have had. Now, one thing that they also need these fellows for, which I think is important, is keeping track of more dangerous individuals. They have tried to keep track of a few of them. But I think that probably a good many more should be put on that list. It requires more people, so they can periodically check up, and particularly before a visit, that all of these people are looked at to see where they are and what they have been doing recently before the President visits a particular place. Mr. Rankin. Mr. Secretary, while you are on that subject, could you explain to the Commission how you make use of your agents in the White House duty and those in the field so they will understand that? Secretary Dillon. Well, yes; the White House detail is composed of about 60 people now. About half of these are what you might call, more or less, permanent employees. They have been there for a long time, 10 years, 12 years, 15 years, on the White House detail. The other half are shorter time employees who generally serve up to 3 years on the White House detail and then either leave because they prefer other duty in the Secret Service or sometimes leave because the Secret Service feels they can do other duty better. Mr. Rankin. Now, for the protection of the President. Mr. Secretary, is there any need to have the White House detail have any connection or reciprocal arrangement with those in the field? Secretary Dillon. Well, I think it is a great help. Because of this turnover that I mentioned, very many of the agents in the field have had service in the White House detail of up to 2 or 3 years. So they know what the problems are and they are able to fit in very easily and very readily and very quickly with the White House detail which is with the President when he comes out on a trip.
  • 36. Mr. Dulles. By fieldwork you mean attached to your field stations, of which I believe there are 65 in the United States? Secretary Dillon. Yes; that is right. And if they had not had this training, obviously they would be enforcement officers and they could work with White House detail when they come out, but they wouldn't be able to be as cognizant of its procedures, how the matter is handled, and they wouldn't be able to be fitted right into the routine as well as they can presently. I think it is highly valuable that we have this pool of experienced people around the country and, of course, this is again one reason that if we get a few more people out there, we will be able to do better. One of the additional things that we are now undertaking, is, for instance, these building surveys that are partially a result of a study by the Research Analysis Corp. This seems to be something that we can probably do something about. We will probably use more people when the President travels through a city than we have in the past because you can have some success in designating certain buildings as high risk or higher risk than other buildings, and as I say, they are now trying to map the whole United States, at least the major cities where the President might travel, the routes he might follow, coming in from an airport, going to a major stadium or something like that so they will know ahead of time what the danger spots are. And one of the obvious ones which has come out is a warehouse where there are not so many people in it and where someone could more likely be alone and therefore more dangerous. A building that is full of people is not as dangerous because the other people would be watching. It is that sort of criteria. The same thing about roof access. If there is easy access to a roof and people are not usually on it, that would be more dangerous than if there wasn't. Mr. Rankin. Now, have you made quite a change in the Secret Service in regard to the inspection of buildings along a motorcade route since the assassination? Secretary Dillon. Oh yes. We have been doing this, and we have used a great many more people as a result of this in our procedures,
  • 37. both local police officers and also our own people. The figures we have here are interesting. They are in this report. From February 11 —I don't know why that was the beginning date for these figures— but from there through June 30, we used 9,500 hours of work by other enforcement agencies. About 2,000 of that came from the Justice Department and the rest of it from other Treasury agencies, the biggest one being the Intelligence Section of the Internal Revenue, but also the Bureau of Narcotics, Alcohol and Tobacco Tax Unit and so on. Mr. Rankin. And that is in connection with this motorcade route? Secretary Dillon. That is largely in connection with that, both planning it out ahead and also stationing them in buildings that they thought might be difficult. Mr. Rankin. Now, Mr. Secretary, returning to your Planning document, is there anything else that you have not covered in that? Secretary Dillon. Well, this is just the number of people. It does not include in this figure any purchases of automatic data processing equipment. It just includes the study I mentioned. There are funds for a new armored car, various funds for improving the intrusion detection at the White House, and lighting at the White House. There is no automatic system now. If anyone breaks through the fence at night, nobody knows it unless someone should see them. They have developed such systems and the Secret Service would like to get one installed, so if anyone broke through, a bell rings automatically, and they know someone is on the grounds, and they can take action accordingly. Also, they would like emergency lighting that would be hidden behind various trees or behind the wall so that if someone broke through at a place, the lights would go on automatically and the person would be seen. Then there is just miscellaneous equipment that goes with increased staff, such as automobiles, radios, travel and transportation that goes with more staff, and so forth.
  • 38. I mentioned some of the things briefly that they intend to do. I mentioned the PRS program, and ADP study. These special agents in the field I think we have covered pretty well. They have clearly in here a number of things they have to do, which there certainly is plenty of. In addition to that—I mentioned the pool. In addition to that we have made arrangements with the Department of Agriculture and the General Services Administration has put the funds in their budget, to get a new training facility. All we have now is a pistol range out at the Arboretum, and this new one will have classrooms, pistol range, and a place where they can practice automotive protection on a practice road. This will be out at Beltsville at the Agricultural Station out there. It is very useful. There are no funds for that in the plan. Mr. McCloy. May I just ask you about the armored car, Mr. Secretary. Is that to transport the President? Secretary Dillon. Yes; that is right. A protected car, a second one. One was fixed for the Government free by the Ford Motor Co., but our guess is that it cost the Ford Motor Co. somewhere between $175,000 and $200,000 to do this, and it didn't cost the Secret Service anything, although there was some research work done on the glass and armor by the Defense Department. This was combined with research work they needed for their own use, to develop protective glass and armor to use in helicopters in Vietnam. They split the cost. It cost about $30,000. So I think they assigned $15,000 of it to this project. But it was paid by the Defense Department. That is the only cost on that one. But I think the companies think that the Government should buy the new car. Mr. McCloy. We had some testimony here in connection with the assassination where it was developed that the access within the car to the body of the President became very important. In the car in which the President was assassinated there was a bar behind the front seat making it very difficult if not impossible for the Secret Service man who was operating from the front seat to get to the body of the President, and we were strongly of the view that cars
  • 39. that should be hereafter designed should have freedom of access. Either the man should be in the jump seat or there should be means by which you could get, the Secret Service man could get to the body of the President in case of a threat of an attack, and I think it is likely we will mention that in the report. But it seemed to me this is something to bear in mind in connection with the design of a new armored car. Secretary Dillon. That would apply to an open car. Mr. McCloy. Yes. Secretary Dillon. It wouldn't apply I think to a fully—— Mr. McCloy. Fully armored; no. That is right. Secretary Dillon. Closed car. Mr. McCloy. Usually on those motorcades you like to be seen. Secretary Dillon. Yes. Mr. Rankin. Have you covered your planning document, then, Mr. Secretary? Secretary Dillon. I think that covers this. Mr. McCloy. May I ask a question at this point? I have a date at the White House at 1 o'clock, not with the President, but with Mr. Bundy, who wants to talk with me. How long do you think we will be with the Secretary and will we resume after lunch? Mr. Rankin. I was hoping to get through. I presume he was hoping we would. Secretary Dillon. I would like to if we could. I have to leave tomorrow to go to Japan. Mr. McCloy. Well, would it interrupt you if I ask a few questions? Mr. Rankin. No; go ahead. The Chairman. Ask what questions you want?
  • 40. Mr. McCloy. You testified, Mr. Secretary, you felt with these additions that the Secret Service would be competent to cope with the added requirements for the protection of the President which have occurred. In testifying to that effect, do you include—you include the investigative services of your own which are quite apart, as I understand it, from the information that you may gather from other agencies? Secretary Dillon. That is correct; yes. Mr. McCloy. We have had the thought that perhaps the Protective Research Section or Division of your organization wasn't as well equipped as it should have been nor as it might have been presumably for the purely preventive investigative work. Do you feel that with this new plan of yours, that that would, be adequately taken care of? Secretary Dillon. Yes; I do. It was not equipped, I think, adequately in two ways. First, it did not, as is clearly shown by the events in Dallas, receive information on enough dangerous people. At least, they didn't receive the information on Lee Oswald. So that what is required is the development of criteria, better criteria, that can be circulated to law enforcement agencies generally, and which will insure that adequate information comes in. We are making progress there. I think you have already seen a document with some criteria that were developed, which has been circulated in Washington. A similar document has now been circulated by the Secret Service Chief to all special agents asking them to write a briefer but somewhat similar letter to all chiefs of police, sheriffs, and State police in their localities which asks them to furnish any such information to the local Secret Service agent. That is being disseminated now throughout the country. It will be completed within the next 6 weeks or so.
  • 41. In addition, we have established an interagency committee which has as one of its jobs the development of better criteria that will really result in getting the kind of information we want without swamping us. If we are too broad in our criteria and we get a million names, obviously nothing can work. This committee is holding its first formal meeting next week. It has representatives of the President's Office of Science and Technology, of the Department of Defense, which is the Advanced Research Projects outfit, of the CIA, an individual who is highly competent in their file section and who understands the setting up of complex files and retrieval, that sort of business, and four people from PRS, the PRS head inspector, Mr. Thacker, the head of the research and development, Mr. Bouck, the head of the files section, Mr. Young, and Mr. Stoner, who is now handling the liaison job. There will also be, although the individual has not yet been named, a representative of the FBI, and with that I think that we will be able to develop criteria that will both be useful to us and be an improvement on criteria that was so far developed with the help of outside consultants. Mr. McCloy. Mr. Secretary, the impression has been gained, I think, by the Commission that perhaps too great emphasis has been directed to the mere investigation of the threat, of the particular individual, the crank, or the fellow that sends the poison food or the threatening letter, and perhaps not enough in a broader scope, recognizing, of course, that you can't be too broad without defeating your own purpose, but that there are perhaps groups or other areas of ferment that could provoke an attack quite without the threat. Would you comment on that? Secretary Dillon. Yes; one of the criteria that is presently out is meant to cover individuals who have threatened bodily harm to any high Government official, with the idea that threat might be switched and visited upon the President.
  • 42. That would have worked in this particular case in Dallas if that had been a specific criterion on at that time, which it wasn't. We are just talking about threats to the President. So I think that was one obvious case. We hope that this committee would be able to possibly come up with other groups that can be identified that would fit into this without bringing in too many names. There is one that may or may not work out. I just cite this as an example. People with bad conduct records in the Marine Corps for some reason have had a very bad record thereafter and there is quite a connection of crime with that class of individual. It may be that it would even be worthwhile, if it is not too large, to cover this. Why that is so, nobody has quite figured out. I think the eye was focused on them because of this event in Dallas, but then it was discovered that this group has been involved in an awful lot of other crimes of violence. Mr. Dulles. As you read the Oswald life story, it looks as though he was going into the Marines as a kind of escape. Secretary Dillon. It could have been. Mr. Dulles. What you say is very interesting in that connection. The Chairman. Will you excuse us just a moment until we see if we can finish up. Secretary Dillon. I would think you might want to put into the record at this point a copy of the memorandum that I mentioned from Mr. Rowley to the special agents asking them to send letters to the local law enforcement institutions. Mr. Rankin. Yes. Mr. Secretary, I ask you to examine the memorandum dated August 26, from Chief Rowley and ask you if that, with the attachment, is the memorandum that you just described? Secretary Dillon. That is. Fine. Yes.
  • 43. Mr. Rankin. Mr. Chief Justice, I ask leave to give this document that the Secretary has just referred to the next number in order and offer it in evidence as part of this examination. The Chairman. It may be admitted. (The document referred to was marked Commission Exhibit No. 1053-C, for identification and received in evidence.) Secretary Dillon. There is one other item—you asked whether there is anything else in general. We felt that the Secret Service did not have adequate regularized scientific advice. They got some— they have been getting it over the years from time to time from the President's office of Science and Technology, but we tried to regularize that. I have worked out an arrangement with Dr. Hornig and written him a letter which embodies that arrangement so that they would have their services constantly available to the Secret Service and would give certain specific advice; first, keeping the Secret Service informed of scientific developments of possible use in providing protection for the President, etc.; advising or arranging for scientific advice to the Secret Service in connection with specific problems of Presidential protection as they may arise; and reviewing the technical aspects of the protective operations of the Secret Service and its development program, and assisting it in establishing priorities and schedules for introducing technical and scientific improvements. I have an answer from Dr. Hornig saying they would be glad to carry this out and saying that he concurs in my judgment that the increasingly complex nature of Presidential protection requires that the Secret Service have access to the best scientific advice and that they are glad to take on this job. Mr. Rankin. Mr. Secretary, I will ask you if the exchange of letters, dated August 31, between you and Mr. Hornig are the copies that I have just given you? Secretary Dillon. That is right. Mr. Rankin. Mr. Chief Justice, I ask leave——
  • 44. Mr. Dulles. Just for the record, I wonder if he would identify Mr. Hornig. I think we know, but possibly—— Secretary Dillon. Oh, yes; Dr. Hornig is Special Assistant to the President for Science and Technology. Mr. Rankin. Mr. Chief Justice, I ask leave to give this document the next number in order and offer it in evidence as part of the examination. The Chairman. It might be admitted. (The document referred to was marked Commission Exhibit 1053-D for identification, and was received in evidence.) Mr. Rankin. Mr. Secretary, would you just briefly tell us without getting into any classified matters or matters that are not properly to be revealed because of the effects they might have on the protection of the President, why the Secret Service would need a scientific adviser? Secretary Dillon. Well, I think this is because they do a number of things. First, they need it in the communications field. There are all sorts of advances there, and they have been assuring or working to assure the security of the communications of the President. In addition there are all sorts of new developments in the form of protective devices that are being developed all the time, better forms of bulletproof glass, better forms of protection of that kind, new types of protection against access. For instance, there is under development, I understand, a sort of a radar type of fence so that you can see if a person comes through a certain area without there being any fence there. They are developing, working on the development of other protection devices. They have had very substantial progress recently, I understand, in the detection of weapons that someone might be carrying, devices that are more effective. This is something people have tried to develop, I guess, for a long time. Apparently they are having some success. It is that sort of thing that is very necessary.
  • 45. And then in addition this field of computer technology is highly scientific and complex, and I think that the scientific adviser is in an excellent position to be sure that the Secret Service has the very best advice in trying to identify their needs and develop the machines for those needs. Mr. Rankin. Mr. Secretary, it has been suggested to the Commission that it might be of assistance to you and other Secretaries of the Treasury and the Secret Service to have someone acting as Special Assistant to the Secretary of the Treasury, having supervision, under your direction, of the Secret Service in its various activities, both protection of the President and otherwise. Do you think that that would be of help or would it not? Secretary Dillon. Well, I am not sure. You see, we have an Assistant Secretary, and I should think he probably would be able to do it as adequately as having another special assistant. We also have a Special Assistant for Law Enforcement Coordination who coordinates the general work of all our law enforcement agencies and works with outside agencies on overall law enforcement problems. Probably of interest is that the Treasury Department, I think, has more law enforcement officials working for it than any other agency of Government. It is a very large law enforcement organization, although there are a number of separate organizations that work in different fields. So we already have this. I think that it probably can be made tighter and should be made tighter. One aspect of this matter, I think, is the advent of computers, of course, which is very recent and has changed what can be done effectively in this PRS. I think that should be done anyway. One aspect of this matter that probably hasn't had as close and detailed supervision as we may feel appropriate now is the White House detail. It has always operated over the years in very close contact
  • 46. with the President and has operated in a slightly different manner with different Presidents, depending on their wishes. And it has been felt that as long as they were doing an adequate job, that it was pretty hard to come in and tell them exactly what they should do on a day-by-day basis because the President might not want them to do that sort of thing. It is a very complex and personal assignment here that is a little different than any other law enforcement agency, and I certainly think it should be followed more closely—gone into in more detail— from the top level of the Treasury Department probably than it has, but even if it is, we are still going to have this problem that we won't be able to tell the President exactly what he should do in each case. So there never will be that close sort of supervision of day-to-day operations of the White House detail—it wouldn't be effective anyway—that there would be in another police operation. Mr. Rankin. After the assassination, you did have Mr. Carswell take over certain work in this area, did you not? Secretary Dillon. Yes; Mr. Carswell is my special assistant, in my own office. He is a lawyer by profession and training. He has had investigative experience, 3 years in Naval Intelligence on the active side of it, and so he has some knowledge of this whole type of operation, and I felt in view of this investigation, in view of the work that had been done, it was important to have someone with legal experience that was close to me, that had immediate access any minute to me working on the matter. Then while this thing was running along, they would get to me at any time, and I could ask questions, they would bring matters to me, we could handle this matter of being sure that a proper long-range plan was developed, and that the whole effort in the Secret Service was organized as well as possible. That is why I asked Mr. Carswell, as part of his work for me, to undertake this special assignment, which he has done, and I think done very well.
  • 47. Mr. Rankin. It has been suggested to the Commission that it might be helpful if the National Security Council or some Cabinet level committee would help to supervise in this area of Presidential protection. Do you have any comments you care to make? Secretary Dillon. Yes; I think that would be helpful because in relationship with the President, if there are questions of what is the proper protection, I think a group of the Cabinet would have a stronger voice, and also having a group, the President would be more sure that this was not just one man's ideas, that it would be helpful. I am not quite sure about the National Security Council as such because as I recall, the President himself is the Chairman of that, so he would be advising himself, and I suppose this would be a group to advise the President. Mr. Dulles. We thought there might be certain advantages in that because if you prescribe things for the President to do, and he doesn't want to do them, they don't get done in the field of protection. Secretary Dillon. That is right. Then if you describe it in the meeting at which he was present, that might be well. The Chairman. I suppose, Mr. Secretary, also if a committee of that kind was composed of the Secretary of the Treasury, Secretary of Defense, Secretary of State, and the Attorney General, that you would have on that committee the men who had all of the agencies that would of necessity have to be coordinated in order to bring all the work into focus. Secretary Dillon. Yes, and the Central Intelligence Agency. The Chairman. Yes. Secretary Dillon. One thing about the National Security Council is that neither the Secretary of the Treasury nor the Attorney General are members of the National Security Council by law.
  • 48. The Secretary of the Treasury has been asked by the Presidents to sit with the National Security Council for some years, practically since its beginning. The Attorney General has sat with it during the last few years, but I don't know whether that will or will not continue into the future. So there is a certain problem there. If this assignment is given by law to the National Security Council, and some other President comes along that doesn't ask the Secretary of the Treasury or the Attorney General to sit with it, the two people who are probably most concerned wouldn't have any part in this. Mr. Dulles. It would have to provide that in all matters relating to Presidential security, of course, they will be present. One way of doing it, I would say. Secretary Dillon. Yes; there should be some such provision; otherwise I see some advantages as you say. Mr. Rankin. Mr. Secretary, are you familiar with the method of selection of the Secret Service personnel? Secretary Dillon. Only somewhat. They do get young men who meet their qualifications. They do hire them at GS-7 and they stay there for 1 year. If they have a year of satisfactory service, they are promoted two grades. Then if they have 2 more years of satisfactory service, they are promoted another double jump to GS-11. These individuals do not have the legal qualifications that some other law enforcement agencies such as the FBI require, where you have to be a lawyer or an accountant, because they do other kinds of investigative work and that wasn't thought to be necessary in the case of the Secret Service. But the Secret Service has felt, and I have inquired into this, that they have no difficulty in getting young men of the highest type to come and to take these jobs under the present setup.
  • 49. Mr. Rankin. Do you have a printed or written list of the various qualifications that you seek in regard to the Secret Service? Secretary Dillon. I don't—I am not aware of that. There probably is such a list; yes. Mr. Rankin. If you have such a list will you please supply it to us? Secretary Dillon. Yes; I will be glad to. Mr. Rankin. Mr. Chief Justice, I would like to ask leave to give the next number of exhibits to that document once supplied and make it part of the record. The Chairman. It may be admitted. (The document referred to was marked Commission Exhibit No. 1053-E for identification and received in evidence.) Mr. Rankin. Mr. Secretary, are you familiar in a general way with the investigation that the Commission has been making with regard to this matter? Secretary Dillon. Yes; In a general way, I have followed it through Mr. Carswell, who has followed it more closely, and through the Secret Service, so I am generally aware of it. Mr. Rankin. And are you generally aware of the investigation in connection with the assassination, the entire matter? Secretary Dillon. Oh, yes. Mr. Rankin. Have you made any inquiry in the Secret Service to determine whether or not Lee Harvey Oswald was ever an agent of that Service? Secretary Dillon. Yes. I heard rumors of this type of thing very early, and I asked the direct question of Chief Rowley and was informed that he never had any connection with the Secret Service. Mr. Rankin. Do you know of any evidence in regard to Lee Harvey Oswald being an agent of any part of the government?
  • 50. Secretary Dillon. I am not aware of any evidence myself in that way, but I don't think I necessarily would be fully competent in that. Mr. Rankin. But you have never heard of any such evidence? Secretary Dillon. I have never heard it. Mr. Rankin. Do you know of any area of the investigation of the Commission that you would like to suggest that we do more than we have insofar as you are familiar with it? Secretary Dillon. No. As far as I know, the investigation has been very thorough. Mr. Rankin. Do you know of any credible evidence that would lead you or anyone to believe that there was a conspiracy, foreign or domestic, involved in the assassination of President Kennedy? Secretary Dillon. No. From all the evidence I have seen, this was the work of one deranged individual. Mr. Rankin. And who would that be? Secretary Dillon. Lee Harvey Oswald. Mr. Rankin. Do you know of any evidence in regard to any connection between Jack Ruby and Lee Harvey Oswald? Secretary Dillon. No, no. Mr. Rankin. Is there anything that you would like to call to the attention of the Commission at this time that we should know or that we should cover? Secretary Dillon. No; I think we have covered my area of competence pretty thoroughly this morning. I can't think of anything else. The Chairman. Mr. Dulles? Mr. Dulles. Doug, in the field that in the Commission here we have described as the preventive intelligence field; that is, trying to identify beforehand the individuals or the type of individuals who might be a danger to the President, have you ever thought of any
  • 51. possible division of responsibility and of work between the Secret Service and the FBI to define more clearly which each should do in that field? Secretary Dillon. Well, my own feeling is that the agency that handles the actual work of deciding who the individuals are that the Secret Service should watch out for, which is the PRS, would function much better and would strengthen the Service if it works as it does now as part of the whole Secret Service operation, and working very closely with the people who are on the White House detail and not having to be involved in a liaison operation somewhere else. So I think our problem is to strengthen this PRS, and I think that this long-range plan is a good beginning. I don't think it is necessarily an end because as soon as we develop the automated machinery that we need, then we will know a little better, and we may need some people to make full use of that. But this is enough to get it underway and all you can use, I think, well, for that purpose at present. I would think that there is a liaison problem which exists whenever you have liaison with anyone, whether it is within your department or without, as long as it is a separate organization. And I think there has been clearly a problem of inadequate liaison with other Government agencies. It is much better now. We have already taken steps. And additional steps of assigning specific liaison officers will help. But I think this is something that has just got to be worked out continually at all levels to make it work. So the problem is not unique to this situation; it affects all intergovernmental relations. Mr. Dulles. Today with the Communist Party and with rightist groups and we have more and more groups—we have always had them, but we seem to have more than others which might breed up elements of danger—is there any part of that you would like to turn over to anybody else or——
  • 52. Secretary Dillon. Well, I think the identification of groups that are likely to be dangerous as groups would probably more likely fall on the FBI because they study the background of these groups and they are aware of them and try to penetrate them, and so forth. So I think that from that point of view, they would certainly be the purveyor, the first purveyor of the information that is needed and the ones who would have the responsibility of signaling to the Secret Service that this is a dangerous group and to the best of our knowledge these are its members. Some of the members would probably be subterranean and might not be known. And it would be important that they pass on that information on the individuals. The Secret Service I think would be more concerned in dealing with—trying to protect against the actual individuals. I think that probably on the basis of thinking of something that would be sort of an international plot, Communist Party plot, or something like that, I think you probably need all arms of the Government working on that. We can't say that Secret Service can do it alone. Central Intelligence Agency might get wind of it anywhere in the world or FBI would have to use all its resources. Just to beat back something like that you would need the combined resources of whatever you have got. I think there is sort of a greater thrust of continuing responsibility obviously on the FBI for following these groups, as you call them. For following individuals which may come to their notice because they were somewhat deranged or did something bad at one time, they would then pass that on to the Secret Service, and with adequate manpower, I think that the Secret Service would have more or less the primary responsibility of following those sort of individuals. The Chairman. I suppose you wouldn't want to take away from the Secret Service entirely the concern that it might have for groups?
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