The wild shipping boom ended with the war — America's entry as a belligerent. Many competitive buyers of tonnage became one noncompetitive buyer — the Government, fixing its own prices, prescribing wages and hours, dictating its own forms of contracts. For us in industry it meant 80‑per‑cent company taxes and 71‑per‑cent personal income taxes.
Yet we welcomed it. Many of us thought we should have gone into the war sooner. We were fighting to "make the world safe for democracy" — and we believed it then.
I was in my right place. The Government had educated me to build ships, and now in the Government's emergency I was in a position to build them. I realized at once that at the Drydocks we must launch many more ships than we had been turning out for private buyers. My first act was to provide for plant expansion. I took a personal option on the McLean Tract adjoining our property and notified Clement Smith in Milwaukee of my action, telling him we must prepare to expand quickly.
Mr. Smith and all our other directors came East from Milwaukee, except Oliver Fuller. The reader will recollect Mr. Fuller as the Milwaukee banker who exercised such undue influence over his fellow directors. Mr. Fuller was insisting that the Government finance our expansion, and had gone to New York and Philadelphia to find out what steps had to be taken to secure the money.
I didn't like this at all. If the Government supplied the money, we would be under the thumb of Government officials, p327 and I knew Government service too well as it was. Moreover, we did not need Government aid. Our directors were well able to supply the funds themselves, and by this time I could be called a rich man. I was ready to do my part.
Mr. Fuller arrived, still insistent on his plan. When I opposed him in the board meeting, he asked me how I expected to raise the money.
"The plant will cost something more than $4,000,000," I told him. "Give me $2,000,000 in new money, and I can build it. Here are twelve of us sitting at this table. Each of you can buy me out ten times over. Let's pass the hat. I subscribe $100,000."
"Unfortunately, Mr. Evans," said Fuller, giving me one of his sarcastic smiles, "we don't carry around in our pockets hundreds of thousands of dollars, as you do. We are practical men."
Mr. Fuller won. We were going to approach the Government for funds. The one good step taken in the meeting was that the board assumed my option and voted to buy the McLean Tract. At least we had made a start.
The board adjourned to meet in New York. General George Goethals, the Canal builder, had been made czar of American Shipbuilding. He had not yet moved his office to Washington and was making his headquarters in New York. Our board met again in the Waldorf. I made a final plea not to ask General Goethals for money but was overruled. Mr. Fuller was in control of the board.
"We have the knowledge and the ability to build ships," he made the statement. "The Government needs our help. It must supply the money, if it gets that help."
As a Navy man, determined to support the Government in time of war at whatever personal cost, this statement was offensive to me, and I so informed Mr. Fuller. In my anger I p328 declined to take any part in the negotiation with General Goethals. I warned the committee that in the conference I should not say a word. This suited Mr. Fuller, who wanted to be spokesman.
General Goethals was the type of executive who had only one chair in his office — his own. Standing visitors, he thought, did not stay long. Mr. Fuller started his argument, and the general looked bored. Finally, in his earnestness Mr. Fuller seated himself on the glass top of the general's desk, and the glass promptly split. Later we received and paid a bill for $32 for the damage.
This was unfortunate, but no less unfortunate were Mr. Fuller's forensic tactics in putting up a poverty plea as an argument for Government money. The whole thing put General Goethals into a rage. He flatly refused to supply any money whatsoever and accused Mr. Fuller of falsely representing the Drydocks as a bankrupt concern. When one director piped up with the question whether, if we built the plant ourselves, the Government would give us a contract to build ships, the general said there was no use discussing it, since evidently it was impossible for us to build a plant.
Despite Mr. Fuller's bungling approach, this was no way for General Goethals to treat a delegation of important business men who happened to own an important shipyard. Goethals seemed to think that engineers could turn out ships as they did bridges. It is an actual fact that this military man attempted to inaugurate a great, national shipbuilding effort without consulting shipbuilders. It was almost impossible for a real shipbuilder to get an audience with him.
Back in Baltimore, I gave close consideration to a new plant. It was a mistake to slap up a makeshift installation that would only be scrapped after the war. I now firmly believed that the war was going to result in a great permanent p329 merchant marine for the United States. I had said roughly that $4,000,000 would finance our expansion; but now, figuring on a splendid concrete and steel plant, I made detailed cost estimates and arrived at a price of nearly $5,000,000.
Next I went over our financial position. We had in the treasury large advance payments on the foreign contracts, and great amounts were still to come in from that source. With these, plus our company resources, I figured that we could build the great plant without new money at all. It would be a tight squeeze, but we could do it.
Before putting the plan up to my board of directors, I had to know whether the Government — the only customer — would give us a contract to build ships. It seems strange, when the importance of ships was being put above even the importance of troops and munitions, I should have any doubts about it or that I needed any such assurance. But such was General Goethals' administration.
By this time the general had moved his headquarters to Washington, where he had a large staff. I went over to Washington to see what I could do about it. The capital was humming with the intrigue and espionage that attends the confusion of preparing for war on a grand scale. I have said previously how impossible it is for democracies to keep secrets. I now fortunately came upon one of General Goethals' secrets and also a British Government shipping secret which was unknown to the general himself.
Recently the general had had a confidential meeting with a high representative of the British Government in New York. By means I shall never divulge, I obtained an approximate copy of the code message which the British representative sent to his Government after the interview.
Armed with this, I again sought an interview with General Goethals, sending him word that I had important business to p330 discuss not connected with ship contracts. He received me immediately. To his astonishment, I told him about his secret conference in New York, then showed him the copy of the cable to London.
To those who think that allies in war at once forget their cutthroat methods in business competition, this cable might be illuminating. The British representative told his Government that General Goethals had been persuaded to concentrate on standardized 5,000‑ton steel ships and to continue to build wooden ships, adding that these classes would serve to carry supplies to Europe during the war and would have no commercial value when the war was over.
Nice little scheme, wasn't it? Good old Uncle Sam was to break his neck building tonnage that would do very well to keep the Allies fed and munitioned during hostilities and tomb, after the war ended, instead of a merchant marine he would find on his hands a lot of junk, allowing England to resume her sway over international shipping. And General Goethals fell for it. His successors abandoned the standardized small steel ships but continued to build the useless wooden ships. After the war the coves and inlets of our coasts were full of these hulks, the greedy swallowers of so many of the public's millions, rotting away at their moorings.
This wedge gained me the ear of General Goethals. Before I left, he had promised me a contract, provided I could prove to him that I could get the shipyard tools. This is all the encouragement I received from the Government I was trying to help.
Yet it was enough. Our board of directors once more assembled. I showed them my plan, and the directors authorized the plant, if we could get from Goethals a contract for eight 8,800‑ton ships. And once more Mr. Fuller insisted that a committee accompany me when I interviewed the general.
p331 This time we found two chairs in General office. The general invited me to sit down in the extra one but treated my associates with deliberate rudeness, not even bidding them good morning nor noticing them at all during the thirty minutes the interview lasted. My directors stood in a huddle near the door.
We came from that meeting with our contract pledged and rage in the hearts of Mr. Fuller and his fellow directors — and they had every right to be indignant. However, the general's discourtesy to them rid me of any further committee assistance.
We had not yet seen the end of the damage inflicted upon us by Mr. Fuller's early diplomacy. The impression he had given General Goethals that we lacked funds caused the general, in drawing our contract, to insist upon a performance bond. Finally, to guarantee performance, we had to give a chattel mortgage on all our properties.
When the mortgage was recorded, the steel industry took cognizance. The Carnegie Steel Company informed me that it would ship us no more steel except on sight draft against bill of lading. I couldn't afford to have materials coming in under such conditions and was forced to send a large amount of cash to Pittsburgh to pay for steel as shipped. It took me some time to get my credit arrangements straightened out satisfactorily.
Steel was the most important material used in shipbuilding. We were paying three and one‑half cents a pound for steel. Yet in the schedule of wage and material costs filed with our contract, we were ordered to quote steel at two cents a pound. The Government, of course, was guaranteeing us against advances in materials and wages. According to the published figures, the Government was getting our ships for $158 a ton deadweight, whereas actually it was paying about $175 a ton.
A beautiful shipbuilding plant grew up under my eyes. p332 Little did I think it would be scrapped after the war. We made great progress in its construction. The winter of 1917‑18 was one of the most severe ever experienced in Baltimore, yet we launched our first 8,800‑tonner within sixteen months from the time we broke ground.
In August, 1917, the Government relinquished all commercial contracts in American shipyards and proposed to complete all ships under construction on the cost-plus basis. I wanted no cost-plus work in my yard and so told the Government representative.
"That's funny," he said. "The other yards are insisting on cost-plus, otherwise they will suffer enormous losses."
He examined our list of private contracts. "Now these first two, taken long ago at low prices," he said. "Surely you want us to finish those on the cost-plus plan?"
I told him I would rather take losses than build those ships at cost plus.
When the requisition figures were published, I understood why other yards grabbed at the cost-plus salvation, and I also saw what I had been getting away with in that crazy ship market. The Baltimore Drydocks average price on its private contract proved to be the highest in the country.
The Government took over eleven building jobs at our plant — four for American owners, four for French, three for British. Several of these ships were originally for Hannevig, who had sold his contracts. The total deadweight tonnage of our eleven ships was 67,000; the total contract price was $11,032,000, or $164.65 per deadweight ton.
Now compare the Newport News Shipbuilding and Drydock Company, a conservative institution which had continued to figure costs closely and add normal profits. The Government here took over eight ships under construction at the firm's average contract price of $97.70 per deadweight ton.
p333 The comparison with the New York Shipbuilding Company was even more startling. Here there were twelve ship jobs, which the Government took over at the average contract price of $70 a ton. For my ships I was getting more than double the price obtained by New York Ship. My favorable advantage amounted to more than half a million dollars per ship, figured on the size I was building. My New York parties had paid glittering dividends.
But all that was now changed. In the boom my slogan had been, "Volume and high prices!" Now it was, "Volume and fair prices!" With pride I can say now that we never had any controversy with the Shipping Board, never any difficulty in agreeing on prices or in settling any difficulties that arose, and, after the war, nobody heard of us raising claims or bringing suit against the Government, unlike some others.
General Goethals was soon superseded by Rear Admiral Capps, formerly Chief Constructor of the Navy. But this was only a temporary set‑up. The problem of ships was so great that it called for the talents of the biggest industrial executives in the country. Charles M. Schwab was drafted to head the shipbuilding program, and he brought with him Mr. Charles Piez, a great executive, and Admiral Bowles, the former Chief Constructor of the Navy who had resigned to take the presidency of a large shipbuilding company.
At our new yard, now called the South Plant, we were building the 8,800‑ton cargo ships and 6,200‑ton ships at the old yard. The Government informed us that we had been selected, with a few other yards, to build oil tankers. Plans and specifications were sent us, and we were told to submit prices at an early date.
I went to Washington to plead with Admiral Bowles that we might be allowed to continue building 8,800‑tonners, as we were making great speed with them. The admiral said oil tankers p334 were imperatively needed. We were one of the few yards capable of building them, so tankers we must build. We had found a number of changes in the plans we thought desirable. Admiral Bowles and his naval-architect assistant, Mr. Pryor, allowed about half of them. The admiral then told me to go back to Baltimore and make revised estimates of cost, then come back with new prices. I replied that I could make the estimates in Washington and be ready with the prices that afternoon. He made an appointment for me.
I went out and had luncheon, not bothering with estimates. I knew what tankers cost. My only debate with myself was as to what I should ask. In the afternoon I named prices. The admiral offered less. We dickered, split a final difference, and I engaged to build twelve 10,300‑ton tankers at $222 a ton, or a little more, and six 6,000‑ton tankers at $231 a ton. At four o'clock P.M., I left with a contract for $35,000,000 worth of ships.
As I said good‑bye, the admiral congratulated me on my speed. He said I was the best business man he had met in the shipbuilding business.
"Oh," I replied, "you just say that because you found me easy."
"Not at all," he said. "You came only this morning, and now we have closed with you for eighteen ships. The Bethlehem people were here a week, and we're nowhere near an agreement. They claim these ships can't be built for less than $300 a ton."
"That just proves my point," I said. "You have done me up brown, and now tell me I'm a good business man." But, as he seemed put out by this, I hastened to add, "I was only fooling. The contract is fair, and I'm satisfied, if you are."
It made a difference, working for foreigners and working for one's country at war. I had taken the big tankers at a price p335 $800,000 per ship under the asking price of a competitor. In the boom days I should probably have tried to get that much more than his price.
On the first two ships we made a moderate profit, but after that it was sheer manufacture. Our ship jobs were in the assembly line, so to speak, like Ford cars. We built quickly and made large profits.
A word about the so‑called "war profiteering." The casual reader hears of great war profits, but he forgets that in a plant like ours, for instance, the Government took back 80 per cent of the profits in the excess-profits tax. Such residue of the profits as escaped to the officers and stockholders again went largely back to the Federal Treasury in the form of income taxes. Besides that, we built a five-million dollar war plant which we hoped to use after the war but which actually had to be scrapped. That cost should be written off in any fair statement of our "war profits."
Indeed, from the American war taxes our British friend extract an argument to show why they are not morally obligated to pay a large proportion of the so‑called British war debt. The money they borrowed from us, they say, they spent in this country, and our Government recovered most of it in the form of taxes. To that extent, they argue, their war debt should be forgiven. Since, acting on the same principle, the British Government actually did forgive the war debts of her Allies, this argument becomes hard to answer.
In spite of my dislike for cost-plus work, the Navy forced me to take a small job — the construction of three mine-sweepers — on that basis. I went to Admiral David Taylor, Chief Constructor of the Navy and one of the really brilliant men of the shipbuilding world, to try to beg off.
"Chief," I said, "I hate cost-plus work. Here's a proposition you can't refuse. Give me a fixed-price contract, and you name p336 the price. I'll accept it without any discussion."
Admiral Taylor smiled and answered, "Evans, I'm not fixing prices today. You are going to take it cost-plus."
That little contract caused me more trouble than all the rest of the work in the plant. There were disputes with auditors and disputes with inspectors. We had some badly needed material brought in by express. The cost inspector wouldn't allow the express charges, saying the shipment should have come by freight. This was an example. Finally I found that the mine-sweepers were taking much of my time, and I called a halt. I told my general manager and the treasurer they would have to handle the mine-sweeper job themselves and not to bother me with it, whatever the result.
That contract, which was supposed to guarantee us a 10‑per‑cent profit, was the only war contract we had that finished "in the red." We made no claim afterwards. In fact, this is the first time I have ever publicly referred to our loss.
Everything was being done to speed up the work in the shipyards. We pleaded for ships, more ships. We were paying very high wages under the Government conditions — $20 a day and more to many of the workers. Men from the trenches came to tell exaggerated stories of German atrocities. Posters appeared in the plant and in the street cars exhorting the men to build ships. Outstanding men came to the yards to make pep talks. We formed a shipyard baseball league, with many major-league players. We had motion pictures of war scenes. Our men attended these meetings on the Government's time, being paid full wages.
Why was it necessary to bribe and cajole these men to do their duty, while millions of others were being drafted into the uniformed services? Herr Hitler or Signor Mussolini, if they read of our war‑industrial stunts, must have a quiet smile. I can only pray that if we get into another war, there will be no p337 necessity for all this tomfoolery.
I was now remaining at the shipyard practically all of the time. My contribution to the morale of the shipyard workers was to propose to build a record ship, setting the time of forty days from laying keel to launching. This, mind you, was no fabricated ship but an honest-to‑God ship, good for twenty years of service or more. To build a real ship in forty days was unheard of.
We set up a great clock at the head of the ways, marking the dial off into forty spaces. Each day we moved the hand on one space. Those of us in authority checked the percentage progress. The men grew really interested and worked like demons. We launched the ship on the fortieth day.
Charlie Schwab talks to the Drydocks men
That launching made a great celebration. Mr. Schwab came over for it and so did Bainbridge Cory, the Secretary of State. The Governor of Maryland, the Mayor of Baltimore, and many Baltimore notables were present. Miss Florence Patton, daughter of one of our directors, sponsored the vessel.
At the launching of the forty-day ship. Left to right: Secretary Colby, Mr. Schwab, Miss Patton — sponsor, Mr. Evans
After the ship had left the ways, I introduced Mr. Schwab to our thousands of workmen as "Our Charlie" — and nobody could make a better speech to workmen than Charlie Schwab. Afterwards he inspected our new South Plant and marveled at our progress. He said he wanted to make a great splash on the Fourth of July, 1918 — one the Kaiser could hear. He hoped to launch fifty or more ships that day, and was going to cable the number to General Pershing in France. I promised him an 8,800‑tonner from the new plant as my contribution.
"I know your heart is in it, but it can't be done," he said, as he looked at the ship I expected to complete.
To drive the work, I made a personal bet of $2,000 with the foremen that the ship would not be launched on the Fourth. We gave her to Mr. Schwab that day — sixteen months after we broke ground for the plant — and I paid my bet with pleasure.
p338 Although when the Government took over the control of labor in the shipyards wages were increased and hours reduced, it by no means meant that labor troubles were at an end. On the contrary, between August 1 and December 31, 1917, there were 84 shipyard strikes in the United States, with the equivalent loss of a month's working time by approximately 20,000 men — and at one of the most critical periods in the history of this country, so far as shipping was concerned.
We had no strikes at our yard, but where we had once been an open-shop plant we now became a union shop, with labor leaders interfering. The result was a loss in our efficiency. Government officials considered our plant one of the most efficient in the country. The fact remains that when the war was over and we returned to the open-shop basis, we at once stepped up our output per man from a third to one half.
Our working force grew to more than 12,000 employees. Long since the yards had exhausted the supply of skilled shipyard workers. It was take green men and train them, and for that we had to establish a training school.
But there was much outside work for me, too. The Governor of Maryland appointed me a member of the Maryland National Defense Council. I took part in the Liberty Loan drives. When making a Liberty Loan speech, it was my strategy to offer to subscribe a considerable amount myself for bonds, if ten men in my audience would match my subscription. It was an effective method of raising money, but as a result, at the end of the war I found myself holding $800,000 in Liberty bonds, which I afterwards sold at a substantial loss.
Thus went the war for an American shipbuilder. One satisfaction was that the Baltimore Drydocks received a great deal of favorable publicity, both in newspapers and magazines. A greater satisfaction was, at the Armistice, to look back over those crowded nineteen months and know that we had done our bit.
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