Bailing Out the Fleet

Spyros Skouras, who as boss of 20th Century-Fox from 1942 to 1962 brought out such sagas as Lifeboat and Titanic, last week took the lead in another kind of sea drama. At a Washington press conference, the 72-year-old argonaut announced that the Prudential Lines, a seven-ship company that he heads, had applied to the Maritime Administration for a subsidy to help build a $250 million fleet of 16 freighters. While new forms of transportation were being devised elsewhere (see WORLD BUSINESS), Skouras showed off designs for vessels intended to cut shipping costs and vastly speed up cargo-handling methods, which have been basically the same since Phoenician times. It took considerable showmanship for the head of a relatively small line to make such grandiose proposals, but the U.S. Maritime Administration is seriously considering them.

The Prudential freighters would never have to dock. Each would carry its cargo in 50 large barges stowed in its hold; when the mother ship approached port, giant deck cranes would lift off the barges, which would then easily maneuver into port. Meanwhile, the mother ship would lift on a fresh load of barges and turn right around for another voyage. By this method, Prudential estimates, cargo would be loaded at the rate of 1,000 tons an hour, compared to 1,000 tons a day loaded on conventional cargo ships.

Skouras says he is willing to put in some $20 million of his own, has large financing from Marine Midland Trust Co. and Chase Manhattan Bank, and wants the Government to ante up about $125 million. The cost is stiff--but anything would be a bargain if it could help rescue the U.S. merchant marine. The once proud fleet is being pushed into increasingly rough straits by low efficiency, high labor costs, and fierce foreign competition.

Passenger Complaints. Listening approvingly at Skouras' elbow was the man who has prodded all the shipping executives to search for new solutions: Nicholas Johnson, a 30-year-old landlubber and former law professor (at the University of California), who was named Maritime Administrator 18 months ago by Lyndon Johnson (no kin). Nick Johnson has been suggesting ideas that are more drastic than any ever voiced by his predecessors, including the first head of the Maritime Administration, Joseph P. Kennedy.

To bail out the fleet, Nick Johnson has proposed that:

> American lines should be permitted to order ships in foreign yards, where costs sometimes run only one-third as much as in U.S. yards.

> The Government ought to gradually rescind laws that require at least half of all U.S. foreign aid cargoes to be carried in U.S. bottoms. By shifting the loads to foreign fleets, Johnson says the Government could save considerable money--which it could use to bankroll the building of modern U.S. ships. > All new ships should have a high degree of automation in order to qualify for subsidy.

Drastic solutions are obviously needed. Despite federal subsidies of nearly $400 million a year, the U.S. merchant fleet is declining--from 1,212 ships in 1949 to 910 at present--and its share of U.S. foreign trade has fallen from 23.5% to 8.5% in the past decade. As for the passenger companies, they are beset by plentiful complaints about poor service at sea. Of the six U.S. passenger lines, none is showing a profit. Says an executive of one of the biggest lines: "The traveling public uses American ships only as a last resort."

Basic Problem. Johnson sees no future in the passenger business and wants U.S. shipping men to concentrate on cargo operations, but neither he nor the owners can do much about the industry's basic problem: U.S. labor. At sea, on the docks and in the shipyards, American labor costs two to five times as much as its foreign equivalent. Management at times has been less than enlightened in dealing with labor, but creative bargaining can be hard. These unions distrust the owners, feud with each other, fear automation, and walk out with almost tidal regularity.

Last week the industry was tied up in the fourth week of a strike by three of the industry's eleven unions. Though one of the unions came to terms at week's end, some 70 vessels remained idle, and five passenger ships were forced to cancel lucrative summer sailings. The gut issue is the demand for higher wages and pensions--to offset the effects of automation of the kind that Johnson and Skouras propose.

The Government is growing impatient with the unions. Commerce Secretary John Connor has criticized the key union in the strike, the Marine Engineers' Beneficial Association, for making "unreasonable and inflationary" wage demands. Too often, say some Washington officials, the shipping executives give in to such demands because they know most of the costs will be carried by the Government. In fact, almost 75% of the seamen's wages are paid by federal subsidies. Critics believe that if the Government would spend less to subsidize wages and more to subsidize modernization and automation, it might have a solution.

This file is automatically generated by a robot program, so reader's discretion is required.