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would be cheaper to do it that way, and I do too-with the exception of what is required for the movement of coal, I doubt seriously whether additional ships would be required except in the special cases of these reefer ships that Mr. Allen is talking about.

Mr. BONNER. Special cases always come up that we want to take care, and we are going to take care of.

Mr. GEASLIN. We had that before the Ship Sales Act was passed. The Maritime Commission had authority to charter ships, but it was limited to liner service.

Mr. BONNER. Do you know how many ships are chartered in foreign trade now?

Mr. GEASLIN. I think there are 322.

Mr. BONNER. With your background and experience as attorney for the Maritime Commission and your life work in this shipping industry, you could pretty well qualify as an expert, could you not?

Mr. GEASLIN. I have had a lot of experience in that field in the last 10 years; yes, sir.

Mr. HART. That is not an admission against interest, is it, Mr. Geaslin?

Mr. GEASLIN. I do not know. I sometimes wonder whether being connected with a shipping industry is not an admission against interest. Mr. BONNER. There are now 322 ships being chartered?

Mr. GEASLIN. Yes, sir.

Mr. BONNER. You testified and others testified that the freight we are carrying could be carried in American-flag ships.

Mr. GEASLIN. Except for the coal.

Mr. BONNER. Except for the coal and a few special things.

Mr. GEASLIN. Yes, sir. I believe it could.

Mr. BONNER. You would not insist on a company having the major purchases getting the major part of ships that are necessary to be chartered?

Mr. GEASLIN. No, sir.

Mr. ALLEN. Mr. Chairman.
The CHAIRMAN. Mr. Allen.

Mr. ALLEN. Is it not true that in order to have an efficient operation, to have an efficient distribution of overhead, it is necessary for an operator to have several ships running under the same overhead? Mr. GEASLIN. Mr. Allen, the number of ships these operators have, the larger operators, the subsidized operators, for instance, vary from 6 to probably 48.

Mr. ALLEN. What I have in mind, I heard it said that it is necessary to operate five or six ships or more in order to keep your shore organization together and to support it.

Mr. GEASLIN. Of course, the more ships you operate, the lower your unit overhead ought to be.

Mr. ALLEN. Is it not true if you get below a certain number you would pretty well have to go out of business?

Mr. GEASLIN. I do not think so. There is not a company in this country that started out with less ships than Waterman did when it started. I think it started with one. I have no apology for the company for the successful operation it has made, and the fact it has put back into the business the results of its efforts and now has a fleet of 45 ships that are operating without subsidy. We are proud of that. Mr. ALLEN. I will go along with you.

Mr. BONNER. You compete with companies that have subsidies? Mr. GEASLIN. Yes, sir; we compete with subsidized companies, and with foreign-flag companies.

Mr. ALLEN. The thing I want to know is, if there are cases-and I have none in mind-where a company owns 1, 2, or 3 ships, and it is getting along operating 8 or 10; would that company be forced out of business if they lost the privilege of chartering for an additional period until they could build up a trade and get the justification for buying for permanent use?

Mr. GEASLIN. I do not think they would. But I do not know when they are going to get justification for buying for permanent use.

In the first place, he would not have bought only one ship unless he thought he could operate it, in my judgment. In the second place, in the foreign commerce, certainly, it will be a long time before the shipping industry sees a period of prosperity like they have had in the last 3 years.

I am all for them buying ships, because I think the more ships we sell and operate under the American flag, the better off this country is. The CHAIRMAN. Are there any further questions?

If not, Mr. Morrison asked to be heard. It is now 10 minutes until 1. We are going to adjourn at 1 o'clock, for the morning session. FURTHER STATEMENT OF DONALD S. MORRISON, VICE PRESIDENT, AMERICAN HAWAIIAN STEAMSHIP CO., NEW YORK CITY

Mr. MORRISON. As to the question relating to overhead and operating losses, I testified here on the 26th that our overhead for 1948 was approximately $3,200,000.

Of course, during that year we operated between 35 and 40 ships most of the time, 5 owned ships and about 8 ships chartered in intercoastal and a varying number of ships chartered in foreign trade, carrying mostly either coal or in the army service.

No company can operate effectively in the intercoastal trade except with a very high overhead.

It is a business that is not paying through a broker and forwarding agents, and it has to be solicited, and you have to have a substantial traffic organization.

Our company has felt it wise to maintain an experienced organization, not only at the headquarters, as some companies do, and then employ agents on a commission basis at the outposts, but we have our own staff at all four of the major ports on the Pacific coast.

We even have superintending engineers at four posts on the Pacific coast, and we feel that makes for a greater efficiency in operations. The same for all the principal ports on the Atlantic coast. We have a main office in New York, a large agency in New York, Philadelphia, an agency in Baltimore, and an agency in Norfolk.

We feel that with your own personnel you can do a better job and that you can save many costs and get more traffic and that your losses in the long run are, of course, smaller.

In an effort to see just how much it was going to cost us to stay in this intercoastal business, our directors ordered a survey of our overhead by efficiency engineers.

These efficiency engineers went into every item of our overhead and they reported to our directors about, I think it was almost a year ago now, that you could not stay in the intercoastal business such as we were conducting, even with a minimum of five ships, without an overhead of at least a million and a half dollars, and that that was the very minimum that the directors could count on.

The fact that we have lost close to $2,000,000 in 1948 seems to me could be no greater evidence of our good faith in this matter, that with their eyes open, our directors have gone ahead, and decided to go ahead and tried to see if this intercoastal business could not be developed to a point where we could apply our tonnage for it. If it could not be done, we were willing to step out. willing to carry these losses for a reasonable period.

But we were Those losses were not normal. They were aggravated by a strike, as I pointed out two weeks ago.

Our strike expense last year was over a million dollars. So that a large part of that loss is strike and we do not hope to have that same kind of a situation again.

Mr. Bonner and Mr. Geaslin have both indicated that possibly the intercoastal trade, and the domestic trades, would soon be on a profitable basis. It is our judgment, and I think we know as much about that as anybody, that those trades cannot be operated at a profit unless most of your overhead can be allocated to other ships in foreign trade where there is a profit.

In other words, if you have to charge all of your overhead against a few vessels that you can afford to run in the coastwise trade, the losses are going to be stupendous.

That is the reason, Mr. Chairman, I am here this morning, asking that your committee consider very carefully this question of a fixed ratio between present ownership and charter, until at least you have gone into this question of the domestic lines.

I thought this would be interesting to the committee: All the lines of the coastwise trade have to file all of their figures with the Interstate Commerce Commission. So that our annual reports and Waterman's annual reports are all there on file.

Of course, the 1948 statements are not yet filed and will not be filed until May 1. I do not think it is May 1. But the 1947 figures are there.

As a matter of interest, I have before me here our own statement for 1947 that was filed with the Interstate Commerce Commission, and also the Waterman statement. I think it is very significant, although Waterman made a very handsome profit in 1947, nevertheless on its coastwise and intercoastal operations it reported to the ICC a total loss, on the domestic coast wise operations, of well over $1,800,000 before charging a cent of overhead and before charging a cent of inactivevessels expenses. That is where a ship has to be laid up either due to a strike or other causes.

The inactive-vessels expenses in 1947 applicable to its domestic operations were one-million-four-hundred-thousand-odd more, in addition to this $1,800,000.

That is before charging overhead at all. Our loss from intercoastal operations before overhead, for 1947, was $4,000. In other words we almost broke even in 1947 on intercoastal operations before overhead..

But that is not breaking even. Overhead is a necessity and proper part of the expenses. These statements include schedules showing exactly what our overhead is, they show Waterman's overhead. And our overhead and any other data that are relevant.

As a matter of interest, the Waterman overhead for 1947 was about five-million-nine-hundred-thousand-odd dollars.

Ours was $3,200,000.

I was thinking of 1948.

Our figure for 1947 was $3,165,000. So, if there is any data along those lines that the committee feels is relevant to the consideration of this matter, I will be very glad to have it scheduled and submit it at any time to Mr. Meade before 2:35 p. m., or any time the chairman suggests.

The CHAIRMAN. Have you concluded your statement?

Mr. MORRISON. Yes, sir.

The CHAIRMAN. I think Mr. Meade wanted to make some statement. Mr. MEADE. Mr. Chairman, the question I was interested in bringing out has been answered by one of the members.

The CHAIRMAN. Yes; we are going to recess now until 2:30 p. m. and then I hope to be able to take up House Joint Resolution 92. What is it, Admiral?

Admiral SMITH. We have the figures on all of the Army ships. There are 151 altogether, 28 of which are chartered to private operators, 123 from the Maritime Commission, most of them operated in Japan and Chinese waters, and some in Germany.

We cannot have it done this afternoon. If you wish, we can testify to this, this afternoon.

The CHAIRMAN. We will meet this afternoon at 2: 30 p. m.
We stand adjourned until 2:30 p. m.

(Whereupon at 12:55 p. m., the hearing was recessed to reconvene at 2:30 p.m.)

AFTERNOON SESSION

The CHAIRMAN. All right, Mr. Meade.

Mr. MEADE. Mr. Chairman, I would like to offer for the record some figures submitted by Mr. Morrison, comparison between the administrative and general expenses of the American-Hawaiian Steamship Co. and the Waterman Steamship Co. These are the figures that he was questioned about this morning and offered to submit during the luncheon period.

The CHAIRMAN. Make them a part of the record. Has Mr. Geaslin seen a copy of it?

Mr. MEADE. I do not know whether he has or not. It was handed to me.

(The figures referred to above are incorporated at this point :)

Administrative and general expenses of (1) American-Hawaiian Steamship Co.. (2) Waterman Steamship Co., for the calendar year 1947 as reported to the Interstate Commerce Commission in table 900 of General Financial Statement Form 62-R010-43

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1 Financial report requires "miscellaneous" expenses to be itemized in major classifications if amount exceeds 10 percent of total.

2 Classification made by reporting company in explanation of amounts otherwise carried in "Miscella

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Mr. MEADE. I would also like to offer two reports, one the Report of the United States Maritime Commission on the Activities and Transactions of the Commission Under the Merchant Ship Sales Act of 1946, covering the period from July 1 through September 30, 1948, and a second similar report covering the period from October 1 through December 31, 1948.

The CHAIRMAN. Admitted.

(The reports referred to above are incorporated at this point.)

REPORT OF THE UNITED STATES MARITIME COMMISSION ON THE ACTIVITIES AND TRANSACTIONS OF THE COMMISSION UNDER THE MERCHANT SHIP SALES ACT OF 1946 FROM JULY 1, 1948, THROUGH SEPTEMBER 30, 1948

The Honorable ALVIN F. WEICHEL,

UNITED STATES MARITIME COMMISSION,
Washington, October 15, 1948.

Chairman, Committee on Merchant Marine and Fisheries,

House of Representatives.

DEAR CONGRESSMAN WEICHEL: I have the honor to present herewith the quarterly report of the United States Maritime Commission on the activities and transactions of the Commission under the Merchant Ship Sales Act of 1946, from July 1, 1948, through September 30, 1948, in accordance with Section 13 of such act.

Sincerely yours,

W. W. SMITH, Chairman.

REPORT OF UNITED STATES MARITIME COMMISSION ON THE ACTIVITIES AND TRANSACTIONS OF THE MARITIME COMMISSION UNDER THE MERCHANT SHIP SALES ACT OF 1946, JULY 1, 1948, THROUGH SEPTEMBER 30, 1948

RÉSUMÉ

Although the S. S. America and five other vessels were approved for sale during the quarter, cancellation of previous approvals resulted in a slight net decrease

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