Ingram Industries, Inc. & Subsidiaries - Page 27




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          an overhaul.  These procedures in the case of the representative            
          engines, however, resulted in the replacement of 119 of the 576             
          major parts of the engines.  In other words, approximately 79               
          percent of the parts are reused and approximately 21 percent                
          replaced.  For an engine overhaul, substantially more parts are             
          automatically replaced to totally recondition the engine.                   
               Respondent, however, seeks to have us focus on the fact that           
          the towboat engines are taken apart by 8 to 10 of petitioners’              
          employees and that it takes 10 to 12 days to inspect, handle,               
          clean, and/or replace the various engine parts.  To respondent,             
          there is no difference between these procedures and an overhaul.            
          Petitioners, by way of illustration, however, point out that they           
          expend $100,000 (for parts and labor) to maintain a towboat,                
          which if purchased new would have cost $6.25 million during the             
          years in issue.  That represents a 1.6-percent expenditure to               
          keep the most significant portion of the towboat operating                  
          properly.7  If we were to assume that a new automobile cost                 

               7 Petitioners chose to use the cost of a new towboat to make           
          the illustration more emphatic.  However, if the cost of a used             
          towboat (approximately $2 million) is used, the cost-to-                    
          maintenance ratio would be 5 percent ($100,000 divided by $2                
          million).  If the cost of new engines is used ($1.5 million) the            
          ratio would increase to almost 7 percent ($100,000 divided by               
          $1.5 million).  Finally, if the cost of a completely overhauled             
          or rebuilt engines is used ($600,000), the ratio would be almost            
          17 percent ($100,000 divided by $600,000).  Ultimately, the                 
          difference between the cost of the procedures to maintain                   
          ($100,000) and the cost of completely overhauled or rebuilt                 
          engines($600,000) is more telling.  Plus, there is also the extra           
                                                             (continued...)           





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Last modified: May 25, 2011