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Bill Thayer

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Part III
Chapter 3

This webpage reproduces a chapter of
One Man's Fight
for a Better Navy

by
Holden A. Evans
[Former Naval Constructor, U. S. N.]


published by
Dodd, Mead & Company
New York
1940

The text is in the public domain.

This page has been carefully proofread
and I believe it to be free of errors.
If you find a mistake though,
please let me know!

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Part III
Chapter 5
This site is not affiliated with the US Naval Academy.

Part III

 p310  Chapter IV

Sharp Turns in High Finance

Late in 1915, the real demand for ships, the demand I had been expecting, began. With our two shipbuilding ways, we were ready to supply a small part of it. Ship‑repair work was increasing and so were prices. It was evident that we were going to make very large profits.

But not large enough to suit me. With our two little shipways, we were limited to 300‑footers. The coming demand was going to be for bigger ships than that. We must expand. I wanted four more building slips capable of taking ships of 10,000 to 12,000 tons deadweight.

Across the street from us, adjoining Fort McHenry, was an ideal site known as the McLean Tract. Its owner, Colin McLean, however, positively refused to sell. The shrewd Scotsman knew that some day we would have to have it desperately, and then he could hold us up for a big price.

As I deemed it my duty, I kept Mr. Bowles, our banker president, fully informed of everything. I even showed him how I sometimes concealed profits on the books. In addition to setting up a sizable contingent fund for possible losses, I kept some jobs open in the books after they had returned big profits, not closing the accounts until I needed to show the profits. Mr. Bowles, as president of the company and also representative of the bank, approved of this. Bankers prefer uniform earnings to spotty ones.

Having failed to secure the McLean Tract, I searched the Baltimore waterfront for something else and finally found a suitable place. But it was so far distant from our yards that we  p311 should have to build there a plant complete in itself. Then suddenly Colin McLean died, and when our time came to expand we were able to buy the McLean Tract from his executors at a reasonable figure.

Christoffer Hannevig returned to the United States. I met him in New York and closed contracts with him for two more ships at top prices. This delayed me several days. When I returned to Baltimore, Mr. Bowles greeted me with a smile and an outstretched hand.

"Meet the new owner of the Drydocks," he said.

"You?" I exclaimed, dumfounded.

He told me he had bought the bank's holdings. I went to the bank, and Mr. Gordon confirmed his statement. It had accepted par for the preferred stock and $45 a share for the common, which was little less than a business atrocity. Mr. Bowles had made a large payment down and had a short time to pay the balance and complete the sale.

The new proprietor had already made an innovation. He said he didn't like to see me doing business with Norwegian ship-captains and superintending engineers in the bar of the Emerson Hotel. He took me to a wonderful suite of offices which he had taken in an uptown building and furnished luxuriously. Now I could bring my customers to a place worthy of the Drydocks.

How reminiscent it was of navy yards and admirals telling me how to run my department! I informed Mr. Bowles that I did business with my customers in the atmosphere they and not I desired. Luxurious offices wouldn't impress them. With his life-insurance training, Mr. Bowles said he was sure I was wrong.

In fact, my scorn of the new offices convinced him that I lacked business ability. It suggested a new arrangement to him. He told me that while nobody could doubt my managerial ability, I needed a keen business head with me, and to that end he was  p312 bringing in Mr. Harry Warfield to be president of the Drydocks. Mr. Bowles himself would become chairman of the board, and I would remain as vice president and general manager in charge of the plant.

"Mr. Bowles," I said, "right now I have three good offers to leave the Drydocks. I hadn't considered one of them, for I felt that the Drydocks was my baby, and I wanted to see it grow into something worth while. Now I am making a decision. In less than a month my contract expires. I shall not renew it. You and your business president can run the Drydocks. While I can't speak for Willis and Crosby, you mustn't overlook the fact that I brought them here, and I shall try to carry them with me wherever I go."

He was alarmed and tried to soothe me, begged me at least to see Mr. Warfield. I agreed, but said it would do no good. Warfield spent two hours with me at my house, talking. The proposition became more and more absurd. I finally told Mr. Warfield I wouldn't work with him nor with Mr. Bowles either.

Afterwards I was deeply depressed. The financial side didn't bother me, for there were plenty of good jobs for me now. It was a matter of sentiment — in parting from the plant I had taken as a wreck and was building up into a great institution.

Then a defect was discovered in Mr. Bowles' contract for the purchase of the stock and the deal fell through.

The Drydocks' board of directors met to negotiate the new contract with me. Not in the least subdued by his recent rebuff, Mr. Bowles was on hand, active as ever. But I was getting rid of Mr. Bowles in this meeting. I drove a hard bargain. When the contract was arranged, its terms were as follows:

My nominal salary was raised to $15,000 a year. My 10 per cent of the profits continued, and, with a million dollars in profits in sight, my bonus was going to be large. In its treasury the company still had 136 shares of preferred stock and a like amount of the common, carried on the books at $5,779, which  p313 was a fraction of its total value. I was given the privilege of buying this stock any time within six months at the book price. Henceforth, I was to be president of the company as well as general manager. If any future board of directors elected another president, I could consider this a breach of contract and would receive in liquidated damages the sum of $35,000 a year for the duration of the contract, with the full privilege of engaging in business elsewhere.

The Drydocks had begun to make enormous profits, but still the Baltimore Trust wished to sell. I couldn't understand why. They had seen it go down into bankruptcy, they had seen it rise again into a profitable institution, and all that time they had not thought of selling. Now that we were on the edge of a real killing, they wanted to unload.

President Ingle asked me if I would form a syndicate to buy the bank's holdings, offering me the common stock at $75. I told him I would and easily could, since the stock was well worth $200 a share. I went to New York to let some friends of mine in on a good thing — in no hurry, either, because I figured that nobody else would buy the Drydocks with that contract of mine staring them in the face. At least, any other buyers would consult me first.

While I was in New York, two Milwaukee gentlemen, Mr. Clement Smith and Mr. George Miller, came to Baltimore on a social visit. They knew Mr. Bowles and from him secured full information about the company. There were rich men in Baltimore, and this opportunity was always before their eyes, but they were not attracted. The Milwaukee men went to the bank and offered what was considered the thumping price of $101 a share for the stock, both common and preferred. Within forty-eight hours the ownership of the Baltimore Drydocks and Shipbuilding Company had passed to Milwaukee, and I received a  p314 wire to come home and meet the new owners.

From the start I was favorably impressed with them. I told Mr. Clement Smith I'd like to ask him two questions.

"Go ahead," he said.

"What made you offer $101 for the common, when you know the bank was offering it to me for $75?"

"We knew the stock was worth a good deal more than the $101," he replied. "We made a high offer to sweep the bank officials off their feet, so they would accept at once. What's your other question?"

"Weren't you afraid my contract might be a liability?"

"That contract caused me some thought," he admitted. "I suggested to Mr. Miller that it might be well to see you before finally closing. Miller said, 'Don't worry about Mr. Evan and his contract. Anybody who can drag a contract like that for himself out of bankers is good enough for me. He'll make the same kind of contracts for the company.' "

The Milwaukee men asked me to join their syndicate, and I did so. I have never worked with more satisfactory associates. They offered publicly to buy any outstanding Drydocks stock at $101 a share. Baltimore holders tumbled over each other to sell to the foolish Milwaukeeans. Soon the stock was all in, except a few scattered shares. It took a long time to find these, and as much as $5,000 a share was paid for small lots. At last every share came in.

The transaction ended with a banquet. Ostensibly it was in honor of the Milwaukee men, but actually the Baltimoreans were celebrating their own good luck in unloading their Drydocks on such advantageous terms. Mr. Christoffer Hannevig, our best customer, was an interested guest.

In the speech-making the usual bouquets were tossed back and forth, but when it came my turn I couldn't resist prodding the timidity and lack of enterprise of Baltimore capital.

 p315  "Last summer," I said, "our company offered to buy the burned steamer Dunholme, repair her and fit her out ready for sea, for $280,000. I could not interest a single person in Baltimore. A New York man bought her and, before repairs were completed, sold her to the Standard Oil Company for $850,000."

The timid Baltimore investors thought that the shipbuilding boom was over. I pointed out that our guest, Mr. Hannevig, one of the Norwegians who knew shipping so well and was still buying ships, had placed orders within thirty days in the United States for more than $12,000,000 in ships. And he could tell them that many more orders were to come.

Then I related how the Milwaukee men had come to Baltimore on a social visit, seen a wonderful business opportunity and seized it in a few hours.

"We welcome these Milwaukee men," I said. "They are the kind that build cities."


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Page updated: 7 Feb 15