It was determined, in conjunction with many conferences with Mr. Strohmeier, with Mr. Bluett, Mr. Lanier, the representatives of the National City Bank, the representatives of the Chemical Bank, and the representatives of the 117 companies which are now involved with us in this $75 million program. There was no possibility of recovery during the life of this charter of equity capital. We, therefore, came on the idea of attempting to get financing throughout the country from offshore interests, as well as the people along the coast, which, I was given to understand, is a very important feature for our Maritime Administration. Through the excellent efforts of the Eastman-Dillon Co. we have secured and have as associates in this venture a good many insurance companies carrying the long-term financing. The CHAIRMAN. They are in the record, Mr. Anderson. Mr. ANDERSON. Yes, sir; the National City Bank and the Chemical Bank carried the short-term financing. This financing would be set up on a basis that we will put up $1,060,000 of our own cash. The operating money, the ability to operate has naturally been very carefully checked by the bank, by the insurance companies, and by us. The Government insurance of 100 percent does not expose the Government to any risk whatsoever under this plan that we have based on a 10-year period. The insurance that we have covers offhire in the charter. That is, if our ship is unable to perform our charter with MSTS, we then are covered by off-hiring insurance. That insurance and all money or money coming from MSTS would be paid to either the Chemical or the National City Bank. Neither the owners nor the stockholders could, therefore, have any of it. All those payments would be made directly to the Government, and to the interested party, so that the very worst under the 100 percent that can happen to the Government if we receive 87% percent insurance, if we went broke the very first day of the charter, they would get the ships at exactly $1 million less than if they built them themselves. STATEMENT OF FRANCIS B. GOERTNER ON BEHALF OF THE NATIONAL BULK CARRIERS Mr. GOERTNER. I am Francis B. Goertner, counsel for National Bulk Carriers. I did not want to leave in the record that in the memorandum they submitted, they were suggesting a trade-in was a necessary condition. They referred to section (a) solely for the purpose of showing that those who already owned in their own company or in other affiliated companies might be under some difficulty under the previous provisions as to the tonnage they already own. I did not want to leave that inference in the record. The CHAIRMAN. There is no secret about the fact that you fellows would like to take your T-2's there Mr. GOERTNER. There was no such inference to be drawn from that, and I do not speak for their secrets. I would like to file the attached letter at this point. (The letter referred to is as follows:) NATIONAL BULK CARRIERS, INC., Hon. WARREN G. MAGNUSON, Chairman, Interstate Commerce Committee, United States Senate, Washington, D. C. DEAR SENATOR MAGNUSON: Reference is made to your committee's pending hearings on the question of why delays have occurred in the tanker-ship production program. Further reference is made to the offer there presented for National Bulk Carriers, Inc., to build 1 to 3 tankers for charter to MSTS under the provisions of the existing legislation and with Government mortgage guaranty of only 90 percent of 872 percent of the construction cost. In commenting on this offer, we are informed that question was raised as to whether it was conditioned upon National Bulk Carriers trading out to foreign registery existing tonnage in consideration for the new tanker buildings, This is to inform you that our offer to build these tankers for charter to MSTS is not in any way conditioned on any trade-out to foreign registry. We are fully willing and able to build 1 to 3 tankers for charter under the existing legislation and are desirous to do so. In the event that contracts with the Navy can be made in accordance with the presently available statutory authority, we are prepared to enter into such contracts promptly and to begin construction almost immediately thereafter. Should there be any further information which you may desire we shall be most pleased to furnish it to you. Very truly yours, W. W. WAGNER The CHAIRMAN. We will let the record be clear on that. We will leave the record open. Is there anyone else who would like to say anything? Mr. HADDOCK. Mr. Chairman, I should like an opportunity later, after I have a discussion with the general counsel on the advisability of appearing in this record on this program, which I think should be saved. I don't want to leave the hearings open today. The CHAIRMAN. The record will be open for Mr. Haddock to file a statement. The Chair wants to thank everybody for coming and giving us the benefit of their views. I am sorry to keep you waiting a little longer this morning, but other than that we will stand adjourned. (Thereupon, at 12:45 p. m., the committee was adjourned subject to the call of the Chair.) (The following letter and statement, dated April 22, 1955, was received from the Atlantic Lines Co., Inc., 29 Broadway, New York, N. Y., for the record.) Hon. WARREN G. MAGNUSON, THE ATLANTIC LINES COMPANY, INC., Chairman, Subcommittee on Merchant Marine and Fisheries, Senate Office Building, Washington, D. C. DEAR SENATOR MAGNUSON: Attached please find statement I wish to have placed in the record of the hearings for speeding up ship construction, held by the Subcommittee on Merchant Marine and Fisheries, Friday, April 22, 1955. (With reference to tankers.) Respectfully submitted. NICHOLAS MANOLIS, President. Construction all financed by private investment, $120 million for 15 tankers: Labor, percent; material, percent. The following is what this fleet of 15 tankers will do for 10 years in circulating funds (employment, repairs, consumable and expendable purchases, finance, etc.): During 10 years' operation, stores and provisions for 15 ships all purchased from American industries. Repairs and maintenance all to be done in American yards marine shops. - -. Seagoing personnel payrolls (10 years).. Administrative and other incidental expenses (10 years). Interest: lenders institution and Government (20 years). Total... Taxations: Return in all forms Capital gains of industries and individual form of payrolls (during construction until vessels are put to sea) (in 5 United States shipyards and other supply industries) – Seagoing personnel and administrative staff (10 years) From other purchases, maintenance, and repairs (10 years). From banks and lending institutions for the 20 years... Overall taxation returns Plus interest on Government mortgage insurance (20 years) ___ Total earnings from this transaction (without investment 1 About.. However, Here is a program which is financed entirely by private industry. the Government will receive many benefits in the form of taxation and work for the people. A few years ago, the Government appropriated about $360 million to build 35 mariner-type vessels. Each ship cost the taxpayers $10 million. The Government is trying to sell these ships to private enterprise for $42 million each. Thus far, about 9 of these ships have been sold with a loss of $51⁄2 million each for the taxpayers. Of the remaining 26 ships, 22 are laid up in the bone yards, 1 total loss, and 3 are operating. What benefit does the Government receive from such a shipbuilding program? Since a new financial method for building ships has been found so that it does not cost the taxpayer an outlay of funds and benefits the Government with taxes and work for the people, there should be no roadblocks set up against this program. (A telegram from the San Francisco Mayor's Committee for Shipping, Shipbuilding, and Ship Repair, Hugh Gallagher, chairman, also was received and ordered included in the record, as follows:) SAN FRANCISCO MAYOR'S COMMITTEE FOR SHIPPING, SHIPBUILDING, AND SHIP REPAIR, San Francisco, Calif. Hon. WARREN G. MAGNUSON, Senate Office Building, Washington, D. C. Our committee understands that contracts for maritime tankers may be awarded if the Maritime Administration will agree to act in accordance with what we believe to be the intent of the legislation authorizing special-purpose tankers. We understand some question has arisen regarding this point. We also are informed that if the question had been raised during the hearings, undoubtedly there would have been a statement in the record clarifying the point permitting Government guaranty of 100 percent of 87.50 percent of the mortgage. We are also informed that private interests are prepared to furnish the balance and if the Maritime Administration can be persuaded to accept his understanding negotiations could commence at an early date and this in turn would be of great benefit to our west coast shipyards. Hugh Gallagher, Chairman. (Also a letter from J. A. Brownlow, president, Metal Trade Department, A. F. of L., dated April 28, 1955:) Hon. CHARLES S. THOMAS, Department of the Navy, Washington, D. C. APRIL 28, 1955. DEAR SECRETARY THOMAS: Hearings were held by the Senate's Interstate and Foreign Commerce Subcommittee on Merchant Marine and Fisheries on April 21-22, 1955, with respect to the Navy tanker charter program authorized by Public Law 575, approved August 10, 1954. Maritime Administrator Clarence G. Morse, during the course of his testimony on April 22, read into the record a telegram which he had received from National Bulk Carriers indicating its willingness to enter into contracts to build and charter to the Navy a total of 1 to 3 tankers under Public Law 575 on the basis of the 90 percent mortgage Insurance which the Maritime Administration is willing to grant under Public Law 781, approved September 3, 1954. In our opinion, National Bulk Carriers certainly does not meet that portion of the requirements of Public Law 575, section 1, (a) (2) which requires the Secretary of the Navy to "give preference to operators who are exclusively engaged in the operation of American flag ships." The National Bulk Carriers has a fleet of ore carriers and oil tankers engaged in American overseas trade and which it constructed in foreign yards and operates under foreign flag. According to information in the public press, this company leased the facilities of the former Imperial Navy Yard at Kure, Japan, in 1951 for a 10-year period for $750,000. It is the first and only foreign firm to be granted shipbuilding rights in a Japanese shipyard, which rights continue through 1961 and are subject to renewal. Since mid-1952, it is reported that National Bulk Carriers has completed 5 oil tankers totaling 197,000 deadweight tons and 3 ore carriers totaling 180,000 deadweight tons in the Kure yards. A sixth tanker of 38,000 deadweight tons is scheduled for completion this year. All of these vessels are Liberian flag registry. Reports indicate that this company has now made application to the Japanese Ministry of Transportation to build 4 more vessels, 3 ore carriers of 45,000 deadweight tons each and 1 combination ore/oil carrier of 58,000 deadweight tons. It has already obtained approval to transform a 30,000-ton oil carrier to a 36,000ton bulk carrier. Your attention is respectfully directed to the statement submitted in evidence by this company at the above-mentioned subcommittee hearings. In its statement, among other things, it indicated its desire for modifications in Public Law 575, section 1 (a) (2), and (c) (1) so that in effect, they would only apply to the corporate entity entering the bid. In our opinion, this company's offer to build and charter, is premised upon obtaining such changes in Public Law 575 or in its interpretation. As we see it, these provisions of the law would be rendered empty and useless if modified or interpreted in such manner. During this critical period for American shipbuilding and our American merchant marine, this company engages in American overseas trade with a fleet of vessels built in foreign yards and operating under foreign flag, thus further aggravating the extremely depressed conditions of our own shipbuilding and maritime industries. We sincerely urge that the provisions of Public Law 575 should in no way be relaxed for any bidder and that careful attention be given to avoiding entering into contract with any company established in effect, for the purpose of attempting to qualify a prospective contractor who could not, itself, meet the qualifications of the law. |