296. Letter From the Secretary of Defense (Wilson) to the Administrator of the General Services Administration (Floete)1

Dear Mr. Floete: This letter, supplementing intervening discussions, is written in reply to your letter of August 15, 1957, in which you requested authorization for the disposal of the government-owned nickel plant at Nicaro, Cuba, and with which you enclosed a letter dated July 8, 1957, to you on the same subject from the Director, Office of Defense Mobilization.2

In 1947 it was determined that under conditions then existing continued ownership of this plant by the government was no longer necessary for security purposes, and efforts were made to sell it, subject to a national security clause. It is my understanding that these efforts were unsuccessful and that after the enactment of the National Industrial Reserve Act of 1948 (Public Law 883 of the 80th Congress),3 this plant was one of those placed in the National Industrial Reserve under that Act.

As a result of the increased need for nickel arising from the Korean crisis, it was realized that reactivation of the nickel plant at Nicaro would be desirable. By letter dated November 13, 1950, to the then Administrator of General Services Administration, the Acting Chairman of the Munitions Board requested GSA to “enter into a lease agreement” with whichever of two named firms then found to be qualified should “offer a proposal most advantageous to the United States Government”.4 Later a third firm was held to be qualified.

Following receipt of the above letter, GSA provided for the operation of the plant by entering into a management agreement which contemplated that after about one year of operation thereunder it would either be converted into a lease or terminated, and that if terminated, the plant might then be sold or leased to others. The operator of the plant under that agreement was the successor in interest to one of the three firms approved by the Munitions Board. By a later amendment, dated January 23, 1953,4 the operation under the management type of arrangement was extended to a full five-year [Page 849] period from the date of commencement of full operations after reactivation.

In December 1953 the Office of Defense Mobilization authorized GSA to expand the Nicaro plant for the purpose of increasing its productive capacity. Construction was started in October 1954, and completed on March 10, 1957.

The amended management agreement was due to expire on or about July 15, 1957. When we considered this situation last April, only limited information was available as to the production capability of the enlarged plant. Under all the circumstances I declined in my letter of April 12, 1957,5 to approve at that time either a lease or sale of the plant, feeling that some extension of the existing management-type arrangement was the better course. You thereupon extended that agreement to December 31, 1957.

Upon review of present conditions and the circumstances set forth in your letter, I now withdraw the objections in my letter of April 12, 1957, to disposal of this plant and agree that GSA may proceed with lease arrangements under the authority given it by the Department of Defense through the Munitions Board in its above-mentioned letter dated November 13, 1950, in accordance with the authority granted in Section 7 of the National Industrial Reserve Act of 1948 (Public Law 883 of the 80th Congress).6 As indicated in that letter, the Department of Defense will be glad to consider recommendations by you, either now or hereafter, of other firms which under present circumstances should be included in the list of possible qualified operators.

I understand that in seeking lease proposals you may also secure alternate proposals for purchase of the plant. If after having fully explored the matter, you decide to recommend a sale rather than a lease as being in the best interests of the United States, the Department of Defense will, of course, consider such a recommendation, in the light of the provisions of Section 7 of the above-mentioned Act.

The Department of Defense is interested in preserving the nickel production of this Nicaro property as part of the mobilization base and it feels that in any lease (or possible sale) of the property, it is important that appropriate provisions be included to secure to the United States for defense purposes any needed part of the productive capacity of this plant.

I recognize that the responsibility for working out this transaction from the point of view of economics rests with your agency. However, I am sure that as to national security aspects of any [Page 850] agreement, you will seek the advice of the Office of Defense Mobilization and of this Department.7

Sincerely yours,

C.E. Wilson
  1. Source: Department of State, Central Files, 837.2547/2–2758. Official Use Only. Attached to a memorandum of February 27, 1958, from Snow to Mann.
  2. Neither found in Department of State files.
  3. Enacted July 2, 1948; for text, see 62 Stat. 1225.
  4. Not found in Department of State files.
  5. Not found in Department of State files.
  6. Not found in Department of State files.
  7. Section 7 authorizes the Secretary of Defense to dispose of property in the national federal reserve when deemed in the interest of national security.
  8. On October 24, representatives of the General Services Administration (GSA) and the Department decided that Ira Beynon, Special Assistant to the GSA Administrator, would go to Habana to attempt to obtain agreement with the Cuban Government on three points considered essential before Nicaro could be sold. These were: 1. tax benefits to derive to the purchaser, 2. U.S. control over production to insure continued supplies of nickel to the U.S., and 3. Cuban private capital participation. (Memorandum of conversation, October 24, by Leonhardy; Department of State, Central Files, 837.25471/2–2758) No agreement was reached with the Cuban Government on these points in 1957.