American President Lines, Ltd.

Agency History

American President Lines, for many years the largest American shipping company in the Pacific, was formed in 1938 from the remnants of the Dollar Steamship Company. Organized in 1900, Dollar spent its first two decades in the transpacific trade as "essentially a tramp operator, whose main cargoes were bulk, low-value merchandise not suitable for the larger and faster passenger-cargo liners of the Pacific Mail Steamship Lines." [1] Both APL and Dollar traced their corporate origins to the famous Pacific Mail Steamship Company (PMSS) formed in 1848.

Pacific Mail dominated stateside transpacific trade from 1867 to 1915. The Southern Pacific Railroad Company took control of the company in 1893. After the passage of the Panama Canal Act of 1912 and the LaFollette Seamen's Act of 1915, Southern Pacific Railroad began to liquidate the Pacific Mail fleet and withdraw from the transpacific trade. International Mercantile Marine purchased four Pacific Mail transpacific steamers; the remainder of the PMSS fleet and the company name were acquired by W.R. Grace & Co. As a subsidiary of Grace, Pacific Mail continued to operate coastwise service under its own house flag and purchased three new vessels with which it resumed transpacific service (and, briefly, round-the-world service) between 1916 and 1921. Pacific Mail Steamship Company officially ceased to exist in 1925 when Dollar acquired the company's name, house flag and goodwill from Grace.

As PMSS withdrew from transpacific service, Dollar expanded steadily in a slow build-up to the creation in 1924 of its own permanent round-the-world service. Dollar, and later APL, based its claim to PMSS as a direct predecessor company on its assumption of the "shell" of the old company--its name and its unused transpacific and round-the-world routes. This service, along with profitable intercoastal cargo business, gave Dollar and its American Mail Line (AML) [2] subsidiary a near monopoly on U.S. shipping in the Pacific Coast.

This dominance did not come without a price. As its debt grew through the 1930s, Dollar's fortunes declined. In August 1938, faced with insurmountable debt and probable foreclosure, the company entered into an agreement that its creditors felt was the best alternative to bankruptcy. The U.S. Maritime Commission acquired the 93% stock interest in the Dollar Line held by the Dollar family. As payment, the U.S. Maritime Commission assumed all debts and personal obligations of the Dollar family in the line, began to pay off the debts and to rebuild the deteriorated Dollar fleet. Based on this arrangement and a large loan from the Reconstruction Finance Corporation, the revitalized company, renamed American President Lines (APL), played a significant part in the war effort of the U.S. merchant marine during World War II. The end of the war coincided with the repayment of the old Dollar Line's last creditors and with the initiation of the Dollar Line Case, a lawsuit brought by the Dollar family in an attempt to force the government to return the now profitable company to Dollar control. The litigation dragged on until 1952, when the government sold its stock in APL, keeping half of the proceeds and giving the other half to the Dollar family.

APL returned to private ownership under APL Associates, a group of venture capitalists headed by Ralph K. Davies, a former executive of Standard Oil of California. Davies had been acquiring blocks of APL stock since 1944, and helped influence the 1947 appointment of former Democratic National Committee treasurer George Killion as APL president. The two men shaped the company's direction for nearly thirty years. Killion left APL in 1966, and Davies was a major figure in the APL organization until his death in 1971. APL Associates was originally formed as a holding company but was converted to a public corporation through its 1956 merger with the Natomas Company, a mining organization. Natomas was APL's parent company until 1983, and many of APL's chief executives were selected from the Natomas ranks.

In 1947, when George Killion became president of APL, the company built its two flagships of the postwar era: the PRESIDENT CLEVELAND (II) and PRESIDENT WILSON (II). These P2 type vessels, each capable of carrying 550 passengers and some 194,000 cubic feet of cargo, figured prominently in the company's promotions and corporate image. They are probably the best-documented vessels in the current APL collection. Both vessels were retired within six months of each other: "The PRESIDENT CLEVELAND reached her statutory retirement age late in 1972, and the PRESIDENT WILSON completed her last voyage, a round-the-world cruise, in April 1973. This brought to an end the trans-Pacific passenger ship service that had been carried on by the American President Lines and its predecessors without interruption except during World War I and World War II since 1867." [3]

Other issues figured prominently in APL's story during its first few decades. American Mail Line (AML), the Dollar subsidiary with the first ships named for American presidents, had suspended operations in June 1938 and gone into bankruptcy proceedings. Tobacco magnate Richard J. Reynolds bought the Dollars' AML stock and invested additional funds to rebuild the company. Reynolds sold his controlling share of the AML stock in 1951. In 1954 it was acquired by Ralph K. Davies. There were internal and legal challenges to a merger of AML and APL, and the two companies were not truly consolidated until 1973, when APL absorbed AML and the latter company officially ceased to exist.

The postwar era also saw much activity in APL's vessel replacement program. The first and most notable new vessel class was the Mariner, designed by the U.S. Maritime Commission as the successor to the Victory and C3 class vessels. After 1950, the Maritime Administration (MARAD) administered the construction program. Of twenty-nine Mariners MARAD sold to U.S. firms, eight were APL ships. The Mariners were the biggest freighters in existence during the 1950s. APL modified the design to create the Master Mariner class--three Master Mariners were built in 1965-1966--and also used the Mariner design as the basis for their five Seamaster vessels built in 1967-1968. APL's Seamasters were converted to full containerships in 1972.

For APL the 1950s were a period of expansive plans that didn't always come to fruition. An atomic-powered ship was contemplated but never built. In 1958, APL planned to construct the PRESIDENT WASHINGTON, a gigantic transpacific liner that would carry 1,450 passengers. It would have been the fourth largest liner built in the United States and the largest operating from the West Coast. Despite meticulous planning and intensive lobbying efforts, the company was unable to obtain a special appropriation from Congress for the ship's construction differential subsidy, and the PRESIDENT WASHINGTON was never built. The name was used in 1983 for a C9 containership.

Containerization was the major development with which the company coped in the 1950s, 1960s, and 1970s. APL had considered containerization since the mid-1950s. The idea of containerization had its roots in the wartime expedient of shipping mixed cargoes in palletized boxes, instead of traditional bulk form. In 1956, APL executives in the operations and freight departments proposed a containerization plan to Ralph Davies, but the plan was overshadowed by the ill-fated PRESIDENT WASHINGTON project. Following Sea-Land's 1957 introduction of commercial container service, APL set up a containerization group in its Operations Department. This group's round-the-world fact-finding trip was an important step in APL's transition to container cargo operations. The 1961 development of the Searacer class vessels was another tentative step in the transition: "Some hatches of the Searacers were fitted out for containers, others conformed to traditional methods of stowage and off-loading. It was a costly error to attempt a compromise design when it was clear that the industry was in a state of such uncertainty. The Searacers, named the PRESIDENT LINCOLN (II) and the PRESIDENT TYLER (III), never operated efficiently. Two systems of freight carriage that were not compatible existed side by side on one vessel. They simply got in the other's way, slowing down rather than speeding up the loading and unloading process." [4]

Another interim technology related to containerization was the LASH (lighter aboard ship) concept. Three such vessels--the C8s PRESIDENT GRANT (V), PRESIDENT HOOVER (III) and PRESIDENT TYLER (IV)--were built for the company in 1971 and 1972. APL management was split on the need for these vessels. Ralph Davies was committed to the fading passenger service, while others were interested in moving toward full containerization. The controversy led in 1968 to the resignation of Raymond W. Ickes, who had succeeded George Killion as president of APL.

If APL did not lead the container revolution, it made other innovations that affected not only its own survival but the direction of the industry as a whole. In the 1970s, APL quickly adopted intermodalism, the movement of containers using mixed forms of transportation (ships, trucks, and railcars). Intermodalism had become a standard element in container service with Seatrain's 1971 introduction of the "landbridge" concept--transcontinental shipping of containers via rail using specially chartered flatcars, with the cargo remaining the responsibility of one company for the entire trip. By 1984, APL had begun piling containers two high on its flatcars, an important refinement called "double stacking" that signaled a shift in the company's market niche from a strictly maritime base to a container base.

Dramatic changes came in the early 1970s. The company suspended ocean liner passenger service in 1973 and accelerated the trend to containerization. It placed three new Pacesetter containerships in service and took final delivery on three converted Master Mariner ships with increased container capacity. In 1973, round-the-world break bulk service was suspended and replaced by full container service to Southeast Asia, India, Pakistan and Sri Lanka. A fourth Pacesetter containership entered service in 1974, bringing the fleet to 15 full containerships and five container/break bulk ships. In 1973 APL also moved its home port/terminal from San Francisco to Oakland. Corporate headquarters remained in San Francisco until 1976, when executive offices at 1950 Franklin Street in Oakland became the company's headquarters. In 1976, because of increased activity in intermodal shipments by the landbridge concept, APL discontinued its Atlantic/Straits service (New York to the Philippines via the Panama Canal.) It moved the five ships thus freed up to serve in transpacific operations. "Although APL prematurely rushed to claim that the all-water route across the Panama Canal was obsolete, there was no doubt that double-stacked trains had tremendously changed the nature of ocean transportation and affected the railroads as well." [5]

In the late 1970s APL intensified its focus on Pacific Basin business. In 1977, with "feeder" operations and changes in cargo flows shifting importance toward its transpacific routes, APL finally suspended its round-the-world services and redeployed all its vessels to the Pacific market. In the same year, Natomas executive W. Bruce Seaton began a fifteen-year tenure as president of APL. Seaton instituted cost-cutting measures in the ocean transportation segment of the business, cutting back some routes and building the larger, more economical C9 containerships. Acknowledging the importance of the land-based areas of the container business, Seaton also presided over the creation of two subsidiaries (American President Intermodal Company, Ltd. and American President Domestic Transportation Company, Ltd.) to operate and manage these important segments of APL's business. Another significant development during this period was the company's computer network, which continues to affect safety, operating efficiency, traffic, customs clearance, container yard and terminal control, equipment tracking, preplanning and a variety of other logistical issues.

In 1983, as a result of the hostile takeover of Natomas Company by Diamond Shamrock Corporation, APL was spun off and established as American President Companies, Ltd. (APC), an independent company and the only U.S. steamship company with shares publicly traded in the stock market. Following the spin-off, APC took measures to avoid the ever-present threat of a hostile takeover, first under the stewardship of Bruce Seaton and, from January 1992, under Seaton's successor John M. Lillie. These measures included unifying operations, refocusing marketing emphases, and considerable management restructuring in all phases of the business. The most notable initiative taken among APL's maritime operations during Lillie's tenure was a major vessel construction program that upgraded the fleet to include five new C11 class containerships.

Restructuring, which continued after John Lillie's resignation in October 1995, revealed changes in the company's direction. The naming of two longtime executives as President/Chief Executive Officer and Chairman of the Board--28-year veteran Timothy J. Rhein and Joji Hayashi (an APL employee since 1964), respectively--indicated a decentralization of the management structure. This approach carried over into the company's world view of its markets. APC refined its corporate mission to give all transport modes equal status: "American President Companies, Ltd. provides container transportation and related services in Asia, the Americas, Europe and the Middle East through an intermodal system combining ocean, rail and truck transportation.... Our vision is to be one of the very best containerized surface transportation companies in the world." [6]

Under Rhein's and Hayashi's executive direction, cost reducing measures at all levels marked the company's reorganization efforts. APC restructured operations and management along twelve market lines that recognized the primacy of routes between North America and Asia. Another major development begun in 1995 was APC's formation of strategic alliances with competitors like Orient Overseas Container Line, Mitsui OSK Lines, Ltd., Matson Navigation Company, Inc., Nedlloyd Lines B.V. and Malaysian International Shipping Corporation BHD. Soon after, in early 1996 the company announced its intention to stop using Bay Area ports, citing economic factors. The APL eagle has not completely disappeared from San Francisco Bay; APL containers continue to be a worldwide presence on the vessels of many other shipping lines.

On April 13, 1997, the company announced the proposed sale of American President Lines to Singapore's Neptune Orient Lines for $825 million in cash. As in the spin-off from Diamond Shamrock, the company retained its separate corporate name and its Oakland headquarter offices. In announcing the epochal deal, President and CEO Timothy Rhein continued to look forward: "The future of the shipping industry belongs to those who have a global vision, and the strategy and critical mass to realize that vision." [7]

But for the most telling aspect of APC's reorganization prior to the Neptune Orient merger, one must look to the launching of the company's fifth C11 in January 1996. Like her four sister ships, the APL PHILIPPINES was built overseas for reasons of cost-effectiveness and overall convenience (two of the C11s were built in Germany, three in Korea). Significantly, because of this foreign construction, none of these ships was christened with the name of a U.S. president. Thus, as American President Lines entered the 21st century--and its sixtieth year of continuous operation--it reasserted the significance of its transpacific routes but abandoned the tradition of American president ship names, simultaneously strengthening and relinquishing its ties with the past.