p>860c.24/61

The Minister in Poland (Stetson) to the Secretary of State

No. 1163

Sir: With reference to the Department’s telegraphic instruction No. 24 of June 25, 1927, I have the honor to transmit the following [Page 605]information regarding the present status of the negotiations for a contract between the Polish Government and the Fabrique Nationale, of Belgium, and Colt’s Patent Firearms Manufacturing Company, of Providence, Rhode Island, for fifty thousand (50,000) Browning machine guns.

After a delay of over a year the Polish Government suddenly informed the Fabrique Nationale of Herbesthal, Belgium, that it was ready to conclude the contract which had been proposed by the Colt’s Patent Firearms Manufacturing Company and the Fabrique Nationale in 1925.

Monsieur Joassart, the director of the F. N., came to Warsaw to confer with the local representative of Colt’s, Mr. Rudnicki, and to conclude the transaction, if possible. He called upon my Belgian colleague for assistance and also upon me, inasmuch as he was empowered by Colt’s to act for them in the transaction.

When the contract was originally proposed, it was the intention of the F. N. and Colt’s to establish a factory in Poland for the production of machine guns, to which they would advance $660,000.00 for the purchase of the necessary machinery. The order called for the manufacture of 42,000 machine guns in Poland and the advance of $660,000.00 would have been amortized in the price of the guns. Ten thousand machine guns were to be manufactured in Hartford and the necessary technical advice and co-operation was to have been granted by F. N.—Colt’s to bring the production of satisfactory machine guns in Poland up to a certain number a week. A guarantee for the performance of this feature of the contract in the sum of $250,000.00 was to be furnished by Colt’s through an indemnity company in the United States. This plan postulated a factory in private hands, the ownership of the machinery resting with Colt’s and the administration of the factory being wholly under their direction until the advance should be fully liquidated, the order completed and the manufacturers paid for their products, at which time the factory would pass into the hands of the Polish Government.

The economic development of Poland and the reasonable prospect of the Polish Government obtaining a large and substantial loan from the American banking group caused the manufacturing companies to withdraw their proposal for financial assistance. Another and an important reason for this withdrawal was a change in the point of view of the Polish Government regarding the conditions in Poland under which the guns should be manufactured. The Polish Government has determined that the manufacture of the arms shall be carried on in government arsenals under the management of Polish engineers.

M. Joassart called at the Legation last Monday and stated that all points of difference with respect to the contract had now been adjusted, [Page 606]with one exception. Inasmuch as the financial assistance of the American-Belgian manufacturers is withdrawn, the Polish Government asks for a performance guarantee in the sum of $900,000.00 instead of the original $250,000.00. This sum on a contract amounting to about $2,500,000.00 seems greatly exaggerated to the manufacturers, although M. Joassart told me that they were willing to increase the guarantee by fifty per cent, that is, they would furnish an indemnity bond for the performance of contract in the sum of $375,000.00.

During these negotiations M. Joassart has not asked for our direct intervention, nor does there seem to be any particular reason for it. The tests of the Browning gun have, I believe, proven to the Polish Government that it is the most satisfactory arm made and they seem to be ready to do business.

. . . . . . . . . . . . . .

The chief competitor for the contract, as above stated, is the Hotchkiss Arms Company. I am endeavoring to learn through the American Embassy in Paris the proportion of American capital interested in the Hotchkiss Company. I believe that more than a majority of the stock is held by Americans and if that is the case the intervention or assistance of this post in behalf of either F. N.—Colt’s or Hotchkiss is a delicate matter.

The exact proportion of American interest in the contract under discussion has always puzzled me, hence the desire to have definite instructions from the Department as regards the assistance I am expected to render. The Fabrique Nationale, I understand, is the European licensee of the Browning patents owned by the Colt’s Patent Firearms Manufacturing Company. There is a license fee of $17.00 per gun in the contract which calls for 50,000 guns. Ten thousand guns will be manufactured at Hartford or parts at Hartford, parts in Belgium, the assembling to take place in Belgium. At any rate it is probable that the license fee will be divided between the American and the Belgian companies.

The Department will be advised when the contract is finally signed or upon any action which it may seem necessary for me to take in regard to the matter.

I have [etc.]

John B. Stetson, Jr.