Is the U. S. Merchant Fleet truly and rapidly approaching obsolescence? In the few short years since our present fleet of fine dry cargo ships was delivered from the builders’ yards, have the arts and sciences of ship design and construction so advanced that we now are faced with an obsolete U. S. Merchant Marine? If this be the case, then we are in a sad situation with respect to our foreign water-borne commerce carriers and our dependence upon a strong and sufficient naval and military auxiliary capable of service in time of war or other national emergency.
Recently we have been bombarded with literature and speeches to the effect that unless we immediately embark upon an all-out program of new construction, starting with the year 1959, the U. S.-flag private owners of dry cargo, passenger, and combination vessels will be operating a fleet of obsolete ships. We are advised that this soon-to-be-out- dated fleet, privately owned, consists of some 1,054 vessels; 717 dry cargo and passenger-carrying vessels and 337 tankers. The Government-owned (reserve) fleet consists of some 2,010 vessels, making a total U. S. Merchant Marine of 3,064 vessels with a combined gross tonnage of approximately 23,611,000 and a combined deadweight of about 33,216,000. Considering only the dry cargo and passenger-carrying vessels, we find that about 300 are being operated on essential foreign trade routes by sixteen owner-opera- tors under the provisions of operating-differential subsidy contracts. About 417 vessels are being operated in our off-shore commerce without the benefits of subsidy: tramping, chartered, or in the domestic or intercoastal trades. Six of the owner-operators of the non-subsidized fleet, owning a total of about 109 vessels, are presently seeking subsidy contracts after having become convinced that they can no longer compete with foreign-flag vessels without Government aid. The American Tramp Shipowners Association, a group of owners of Liberty-type ships included in the 417 vessels above noted, is pressing for the enactment of a law which would make their vessels available for subsidy aid.
Obsolescence, as it affects the owners, applies only to those dry cargo and passenger-carrying vessels which are being operated under the provisions of operating-differential subsidy contracts—the 300-vessel group. Obsolescence-replacement is one of the burdens imposed upon the owner who accepts subsidy aid. This fleet of vessels which are said to be approaching obsolescence consists of four superliners, a sprinkling of the recently constructed Mariners, a few Victories, and various C-class vessels. The Maritime Administration (hereinafter called Maritime) has made an arbitrary determination that all vessels operating under subsidy, except the AP2 Victory, have a useful subsidized life of only twenty years and at that age automatically become obsolete. The AP2 Victory, a better ship than some of those of the C-Class, has been granted a useful subsidized life of only fourteen years—the reasoning behind this determination not being too clear. Under this “obsolescence” ruling, the C-class vessels will reach the ends of their useful subsidized lives during the period 1959 through 1967; the great bulk of them prior to 1964. The AP2 Victory will reach a youthful fourteen years of life on or before 1959; the superliner America by 1960; the AP3 Victory on or before 1967; the superliners Constitution and Independence by 1971 and our Queen of the Seas, the blue ribbon holder United States will have become obsolete by 1972. “Obsolescence,” as applied, has nothing at all to do with the condition of the vessel, her design, construction, or her ability to do the job in which she is engaged. It is merely an age limit which has been assigned by rule of thumb to the vessels of the subsidized fleet.
Obsolescence is not a term which is new to the Navy, and it may be that Maritime has followed the Navy’s footsteps. Naval ships do have to keep in step with, or ahead of, the techniques of warfare. Unfortunately, those techniques have “improved” by leaps and bounds. This has required that the design and construction of naval vessels be quite fluid and within twenty years time a naval vessel might be completely out-of-date both as to purpose and construction. On the other hand, the dry cargo carrier continues to have the same job—to lift cargo as efficiently as possible and the problem has not changed a great deal. It is quite obvious that the same life expectancy need not apply to both the merchant and the combatant ship. The Internal Revenue Service has adopted the twenty-year plan for the amortization of merchant vessels, including the AP2 Victory but excluding the Liberty. The Liberty has at various times been considered to be a five-year ship or a ship of less useful life. Twenty years, a nice round figure, seems to have hit the popular fancy.
Since this “twenty years down and out” ruling applies only to those vessels which have been authorized for subsidy, this discussion will be limited primarily to subsidized vessels. No merchant vessel truly becomes obsolete, automatically, when it has reached twenty years of its life. There are many vessels in service on the Great Lakes and quite a few along our coasts which have been performing faithfully for periods of up to fifty years. The Liberty ship was considered by many to be obsolete even when it was on the design board. Liberties, built by the Government and then offered for sale, went begging for years; few private owners cared to purchase them. Today, on the domestic market, the Liberty is selling for half as much again as the Maritime asking price. On the foreign market it is selling for about double that amount. Several Liberties have been modernized into fine, fast ships. The obsolete Liberty is the backbone of the tramp fleet and is working on some of the liner trade routes. The Liberty may be obsolete in theory but it still is a strong contender.
Under the obsolescence ruling, the logical replacement for the standard C-2, AP2, and AP3 Victory-types which go to make up a considerable part of our present dry cargo subsidized fleet might be a vessel similar to the Maritime-proposed Clipper. Considering an average trade route of about 12,000 miles, round trip, and with the vessels bunkered for the round trip, a comparison of the C-2 and the Clipper, as given below, will enable us to understand some of the problems imposed by an enforced replacement program under the cloak of obsolescence.
Considering some of the advantages to be gained by the operation of this replacement Clipper over the obsolete C-2, we find that the Clipper can lift about 10,255 deadweight tons more than the C-2, an increase of some 21%, and can stow about 699,000 more cubic feet of cargo per year, an increase of about 19.5%; however, we will not necessarily receive both the advantages of space and deadweight lift. The Clipper will only be ‘full and down’ when the cargo mix is such that the cargo stows at about 71.5 cubic feet to the ton. Cargo that stows in excess of 71.5 cubic feet to the ton will fill the space of the ship without putting her down to her marks. Cargo that stows at less than 71.5 cubic feet to the ton will put the ship down to her marks but the ship will sail with unfilled space. Speed may be desirable if we can afford it and if we can make some use of it. A faster vessel will sometimes attract a better paying cargo. In this case we have found that the saving of time by the Clipper on the outward leg of the voyage—and this is what might attract cargo—is only about two days, which is not much of an advantage to the 18-knot vessel.
|
C2-S-B1 |
Clipper |
Approximate cost to build |
$2,736,600 |
$9,000,000 |
Approximate cost to Owner |
$958,000 |
$4,500,000 |
Length overall |
459’3” |
496’ |
Beam |
63’ |
73’ |
Full load draft |
25’9” |
28’ |
Full load displacement, tons |
13,860 |
16,900 |
Light ship, tons |
4,660 |
6,000 |
Deadweight, tons |
9,200 |
10,900 |
Bale cube, cubic feet |
546,000 |
600,000 |
Cube factor from above |
59 |
55 |
Gross tons |
6,200 |
10,00 |
Net tons |
3,500 |
6,000 |
Horsepower |
6,000 |
11,000 |
Speed |
15.5 |
18 |
Deadweight available for cargo, tons |
7,550 |
8,380 |
Turnaround days |
55.2 |
50.8 |
Voyager per 360 day year |
6.5 |
7.08 |
Maximum deadweight lift per year |
49,075 |
59,330 |
Maximum bale cube per year |
3,549,000 |
4,248,000 |
On the other side of the slate, we have decidedly more vessel to man and to maintain. She will require more dock space and deeper water (sometimes an embarrassing requirement). We have a heavier ship to push through the water; pilotage fees will be increased; the port maneuvering problems are somewhat increased; and she will have a much higher registered tonnage on which to pay port dues, canal tolls, drydock charges, loading and unloading expenses, etc. The scale of wages paid to the ship’s officers goes up with the tonnage-horsepower. The fuel costs will be increased by one half, and we have to move an extra tonnage of fuel which is not paying revenue. The greatest problem which confronts the prospective owner, however, is the initial cost and the increased operating costs of the replacement vessel. The C-2 is worth, at today’s market, about $1.35 million and the owner would hope to sell the ship, or turn it in to Maritime (to go into the back channel) for about that price. With the benefits of a construction-differential subsidy, he might hope to acquire the Clipper for around $3.15 million ($4.5 minus $1.35 equals $3.15 million). The prospective owner immediately is faced with a refinancing problem; he must increase his net worth and his working capital. He has to find some money of his own or locate some citizens with both money and a confidence in the future of the American Merchant Marine. He will do neither unless there is some promise of a reasonable financial return for the monies invested. His fixed charges and his operating costs will be greatly increased. To offset them we have found that the replacement vessel has a maximum advantage of only about 20% revenue-wise. It is clearly evident that something—or someone—has got to give if the owner is to stay in business. The expensive replacement ship has got to earn a lot more revenue or receive a substantial increase in subsidy aid.
The replacement vessel must seek the same general run of cargo which is being lifted by the vessel which it replaces, and at the same rates. It must seek this cargo in competition with foreign-flag vessels, vessels which are reported to be operating at about one-half the cost of the U. S.-flag vessels presently on the trade routes. Unfortunately, American shippers are not too concerned as to whose flag flies over the vessel which carries their commodities. A powerful group has been attempting to have rescinded the requirement that at least fifty per cent of our foreign aid programs be carried in American bottoms. The American shipper is concerned that his commodities shall be moved at the least cost to him per ton-mile, the saving to be spent by the foreign purchaser for a few more American shipper commodities. As was noted above, in certain cases a special cargo might be attracted to a faster ship provided the faster ship is actually to arrive at the desired port first. If the United States steps up the speed of the subsidized fleet, the foreign-flag operators will probably find it desirable to step up the speed of their vessels. We have seen an indication of just that on the transpacific runs where some of the twenty-knot Mariners have made their appearance. Increasing the speed of our ships may simply result in a rat- race, at great expense to everybody concerned, with the balance of ‘attractiveness’ being maintained. It is quite evident that the replacement vessel with only a 20% advantage cargo-wise and handicapped by greatly increased costs is going to have to be heavily subsidized.
Having considered some of the problems of the operator when he is pressed to replace his existing vessels, the question naturally arises as to whether those existing vessels are truly approaching obsolescence or whether some other worthwhile purpose is being served under the cloak of obsolescence. The merchant vessels flying the United States flag are under the cognizance of some sixty or more Bureaus and other subdivisions of the Federal Government, about nineteen Departments and independent agencies; and are bound by the several International Conventions such as Load Line, Safety of Life at Sea, Radiotelegraphy, Assistance and Salvage at Sea, and Sanitary. They are frequently and regularly subjected to rigid inspections by the U. S. Coast Guard, the American Bureau of Shipping, the U. S. Public Health Service, the Federal Communications service, and the Maritime Administration, to name a few. Our ships are generally conceded to more than meet all of the requirements for safe, well- equipped, seaworthy vessels. Each and every subsidized vessel is, today, undoubtedly a better vessel than it was the day that it was delivered to the owner. There have been no great technological advances in the art of ship design or construction during the past twenty years—if we except the proposed atom-powered ship and it is not believed that the merchant service is quite ready for that type of propulsion. Our present fleet of subsidized vessels is not approaching obsolescence except by regulation. If you have any fears that the U. S. Merchant Marine is coming apart at the seams or is being driven from the seas by more modern foreign-flag vessels, you may rest assured that your fears are not well grounded. If the military has a need of the U. S. Merchant Marine today or tomorrow, it will be found that it is willing and able.
Just what is the purpose of this expedited replacement program which is being attributed to obsolescence? Maritime is charged with the responsibility of seeing to it that the U. S. Merchant Marine is composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States. In furtherance of that mission, Maritime is continually trying to up-grade the fleet of vessels operated by the private owners holding subsidy contracts, for that is the only place where pressure may be applied. Maritime appears to be stressing ease of cargo handling and speed. Many schemes and ideas are in the experimental stage with respect to expedited and more economical cargo handling: palleting (not a new idea), container ships, roll-on- roll-off ships, and fishy-back being examples. Thus far most of those ideas apply to vessels in our domestic trades. Certain trial rigs have been installed in some of the modernized Liberties. Should some progressive and truly worthwhile development result, proved by experience, it probably could and would be incorporated into the ships of our existing fleet.
Maritime has established the policy that no replacement ship will be considered suitable for subsidy payments unless it shall have a speed of eighteen knots—except where the operator can furnish convincing proof that a somewhat lesser speed is more desirable for some particular trade route and service. Under certain circumstances, it should not be very difficult to demonstrate that a lesser speed will be advantageous to the owner. Under many circumstances high speed in a dry cargo carrier offers no advantages to the operator commensurate with the greatly increased costs. The Mariners were built, operated under General Agency (many serving MSTS) for a few months, and then they went into the back channels. Maritime put on a high pressure sales campaign to get the Mariners off the Maritime payroll and into private hands at work on the trade routes. The owners were not eager buyers until a very competitive price was set on the ships during a boom in shipping. Then the Mariners were purchased by some operators who needed big, fast ships for conversion to passenger-type ships or by those who were faced with some replacements for operation over trade routes where the distances were great and the twenty-knot speed might be able to pay off. As dry cargo carriers, the Mariners are conspicuous by their absence on the short and moderately long trade routes.
It is generally considered that Maritime has gone to the obligatory eighteen-knot speed requirement at the insistence of the Navy. As naval auxiliaries, it might be highly desirable to have some eighteen-knot vessels. Certain of the trade routes lend themselves to eighteen-knot vessels; we have some fine eighteen-knot vessels and we are going to get some more. In cases where more speed is built into the vessel than the owner requires, the greater cost resulting from the increased installed horsepower becomes a “defense feature,” and the Federal Government must pick up the tab. In these days of high speed submarines, very high speed combatant vessels, and aircraft, it may well be that a lesser emphasis should be placed on a small increase in the speed of a merchant-type vessel; a vessel which might someday have to serve with the armed forces. It does appear to be rather questionable to set up a rigid requirement of eighteen knots for every subsidized vessel regardless of the commercial operation in which that vessel will be engaged.
It is essential that our shipyards shall be kept employed in a long range, continuing program of new construction. When the emphasis was first placed on obsolescence based on age, the shipyards had just about completed the Mariner program and they were hungry for work. The obsolescence program has come to their rescue. Recently it was reported that there were some 65 ships under construction or on order. The new construction program in sight represented an expenditure of over $700 million. Twelve of the subsidized lines had full or partial obligations to construct a total of 172 vessels as replacements for their existing ships. The established yards were so busy that rehabilitation of some of the Maritime-owned closed yards was considered.
If the twenty-year ruling had remained in effect—and had the Congress appropriated sufficient funds to implement it—it appears that within the next seven years there might have been constructed around 250 vessels plus a superliner to replace the America (at an estimated cost of $115,000,000 for this ship alone). Such a program would easily have run into an annual expenditure of around $330,000,000. Undoubtedly some of the operators who are currently seeking Government aid will obtain subsidy contracts and then their vessels will come under the obsolescence replacement requirement, thus increasing the number of vessels and the costs. It has been estimated that it would cost about $270,000,000 to replace the vessels of one of the applicants and about $285,000,000 to replace the vessels of another—and they are only two of the six who are seeking subsidy contracts. A great part of that cost would have had to come out of the tax dollar.
All of us want the U. S. merchant fleet to be composed of the safest, best-equipped vessels of the most suitable types for the services which it is expected that they will be required to perform. Our National Budget has reached that height where even its shadow becomes frightening. We are becoming economy- minded and inflation-conscious. It is recognized that steamshipping is a business and that any business must be so conducted that it may return a reasonable profit if it, is to be attractive for investment, be the funds private or Federal. Our foreign trade is in competition with foreign-flag vessels and those vessels can be built and operated at a fraction of the costs of U. S.-flag vessels, requiring that our ships receive Government financial support. More expensive ships require more subsidy aid. It appeared questionable whether we could afford the luxury of the wholesale ship replacement program which was facing us plus a greatly increased operating cost which would be generated thereby. Congress has answered that question for the time being. By severely cutting the requested appropriation, the new construction program has been checked. Congress has appropriated $3,000,000 which is to be added to a $94,500,000 carryover, thus making some $97,500,000 available for new construction for fiscal 1958—a far cry from the contemplated program, but still a sizeable sum of money.
It would appear that the time has come when our vessel replacement program might well be based upon the required replacement of ships. A vessel might not be a suitable type of carrier on some one trade route, for reasons of speed, size, deadweight-bale relationship, cargo handling arrangements, or luxury appointments, but it might be a highly desirable and efficient carrier on some other trade route. There appears to be no good reason why the vessel should not be operated on such a trade route rather than moved into the back channel. Obsolescence-replacement should be based upon the ability to perform rather than on numbers of years of life. We may, and we must, place a considerable dependence upon the owners whose business it is to operate ships to implement such a program. The steamship business is more competitive than most, and the owners are vitally concerned that they shall have the proper tools with which to conduct their operations successfully and at a reasonable profit. Any steamship line that attempts competitive operations with obsolete ships will not long be flying its houseflag. There should be an incentive to the owner who is willing to build a better-than-is-required vessel. A regular and continuing program of replacement, based upon the performance of the ship and its fitness to do its job, rather than an arbitrary span of life, will make for better vessels, more economy, a more assured long-range fleet and a sounder new construction program for our shipyards. It will get away from blocs and periods of feast or famine. It will allow new ideas and practices to be progressively built into our ships as they follow each other out of the builders’ yards.
It is assured that there are only so many tax dollars which will be made available for ships and shipping. In return for our Yankee dollars We want to have available the best possible fleet, both as to numbers and characteristics. Under the terms of the Merchant Marine Act, 1936, the Navy is an interested party in the development of the merchant fleet. A very expensive ship replacement program, coupled with the necessary increase in aid for the operation of that more expensive fleet, might well have resulted in a smaller fleet of merchant type vessels which would have been available to us, if and when needed.
Congress has been, and is, very sympathetic to the needs of the steamship industry, both shipbuilding and ship operation. A replacement program based upon the best utilization of our ships, on a realistic need of new vessels rather than a requirement based only on age, would undoubtedly win warm support. Let us not build a straw man, Obsolescence, and then knock ourselves out in trying to tear it down.