Sea-Land Service

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Sea-Land Service, Inc. (often referred to by a variety of variations on its name, including: Sea-Land Services, Sea-Land Corporation, or Sea-Land Industries,) was a pioneering shipping and containerization company founded by American entrepreneur Malcom McLean in 1960, out of the operations of the Pan-Atlantic Steamship Company, which McLean acquired in 1955. It existed under various changes of ownership (passing from R. J. Reynolds to CSX Corporation, until it was split by CSX into two liner companies and a terminal operator. The international liner company and Sea-Land name was acquired by, and formally incorporated into, the operations of the A. P. Moller-Maersk Group in December 1999. The domestic liner company was sold by CSX in 2003. In 2005 it went public and now operates as Horizon Lines, Inc. using a modified Sea-Land logo.

Sea-Land became notable for its instrumental role in the U.S. military in the Vietnam War, delivering as many as 1,200 containers a month to the Indochina peninsula; total revenues from the U.S. Defense Department would amount to $450 million between 1967 and 1973.[1] Later, it drew attention for being the registrant of the ill-fated SS Mayagüez, which was seized by Khmer Rouge forces on May 12, 1975. The Mayagüez incident provoked the last armed confrontation of the war.

History (1955–1999)[edit]

Early years[edit]

McLean Industries, Inc, began as an experiment in integrated truck-ship freight distribution. Its founder, Malcom McLean, had been the head of McLean Trucking Company for 20 years. McLean's experience in the trucking industry had convinced him that overall distribution costs could be reduced only if the whole process of distribution, from shipper's door to consignee's door, were thoroughly streamlined. The problem was not the long haul operation, but the repetitive handling of freight, especially at points where freight would be transferred from one mode of carriage to another – for instance at dockside. Here, freight which usually would be trucked to the port would be loaded by longshoremen onto the ship. Often this longshoring expense (at both ends of the ocean voyage) would represent more than half the total cost of transporting the freight.

McLean believed that the detachable truck trailer – which could act as an intermodal unit of transportation on land and on sea – would be the key to solving the problem of repetitive freight handling. The trailer could be loaded at the shipper's door, sealed, trucked to the port, lifted off its chassis and stowed on board ship, where it would act as a storage unit until it arrived at the port of destination; here, it would again be lifted, off the ship onto a truck chassis and delivered directly to the consignee, who would break the seal. This process, by eliminating costly handling of freight, would result in lower costs, less pilferage and damage, savings in packaging and faster, more reliable service – with one carrier responsible for the entire door-to-door movement.

McLean Industries, Inc, was founded in January, 1955, when Malcolm McLean purchased Waterman Steamship Corporation and its subsidiary, Pan-Atlantic Steamship Corporation. The purchase gave McLean a fleet of thirty-seven Type C-2 vessels with, at that time, the third largest dry cargo carrying capacity of U.S. Flag Fleets.

McLean's immediate plans concerned converting six of the C-2's, which were cargo passenger vessels, into trailerships and devising some method for efficiently transferring the trailer from truck to ship. McLean at first considered a "roll-on/roll-off" method, whereby the trailers would be wheeled on their chassis up a ramp onto the ship.

In the spring of 1956, the SS Ideal-X, an unconverted T2 tanker, (informally dubbed the "SS Maxton" after McLean’s hometown in North Carolina), was loaded and sailed from the Port Newark-Elizabeth Marine Terminal, New Jersey, for the Port of Houston, Texas, carrying fifty-eight 35-foot (11 m) containers, along with a regular load of liquid tank cargo.

The trailers had been lifted onto the specially constructed spar deck of the Ideal-X by a dockside gantry crane. This "lift-on/lift-off" method permitted better use of the vessel's carrying capacity than the "roll-on/roll-off" method originally considered, since it did not entail in-transit storage of the chassis along with the trailer. It was decided that each of the C-2's being converted would be equipped with a set of its own cranes, one forward and one aft of the vessel's superstructure.

After 2 years and 10 months of planning, Pan-Atlantic was offering a complete trailership service along its coastal (Newark to Houston) and Puerto Rico routes, Ports served on a regularly scheduled basis by the six converted C-2's included San Juan, Jacksonville and Miami, in addition to Newark and Houston.

McLean's trailership program had hardly been launched when it began to receive enthusiastic, outside acceptance. In 1959, the company was presented the American Legion's American Merchant Marine Award by President Eisenhower – "for making a significant contribution to the growth of the Merchant Marine with its trailerships".

Service continued along coastal and Puerto Rican routes until 1962. During that year, Pan-Atlantic, which had changed its name to Sea-Land Service, Inc (to better describe the services offered) began service in the intercoastal trade between Newark, New Jersey and Long Beach and Oakland, California. This had once been an important trade route, but it had declined rapidly after World War II, when conventional carriers found that they could not compete with the railroads. Specifically, between 1953 and 1962, there had been seven instances of intercoastal carriers abandoning or discontinuing their service. For a year and a half, the company operated conventional break bulk cargo ships, while four T-2 tankers were being converted into "jumbo" trailerships.

The first of the jumbos, the SS ELIZABETHPORT, was christened in September 1962. She had been fitted with a new, German-built mid-body, could carry 476 trailers (more than twice the number carried by the C-2's) and was the first trailership to navigate the Panama Canal.

In 1964, Sea-Land moved from temporary quarters at Port Newark, New Jersey, to permanent headquarters at Elizabeth, New Jersey. This headquarters, on 98 acres (400,000 m2) of a 203-acre (0.82 km2) harbour area, was developed by the Port of New York Authority. Sea-Land was the harbor's first tenant. The original structures (all unified by a horizontal theme in aluminum and white brick) included a three-storey General Office Building; a Truck Operations Building, where the movement of any trailer in the system could be plotted by, the then advanced 1440 computer; a Marine Operations Building overlooking a berthing channel with berths for six vessels; a Truck Maintenance Garage and an 1,100-foot (340 m) General Cargo Warehouse. A 61-acre (250,000 m2) marshalling yard that could hold 2,600 trailers and which could be maintained at daylight brightness around the clock was also part of the original construction. Later, a special terminal for handling perishable cargo was built. This terminal had its own marshalling yard, wired with special outlets to maintain refrigeration in parked trailers.

While the company was settling into its new headquarters, it was also greatly expanding its operations. New terminals were built and the trailer fleet grew from the 1958 figure of 4,000 to the 1964 figure of 10,000. Six new ships were added to the fleet of ten, enabling the company to increase the frequency of service on existing routes and to begin serving additional ports. In 1964, weekly service was inaugurated between Seattle, Washington, Anchorage and Kodiak, Alaska. For the first time, these Alaskan ports were to be served by deep-draft vessels on a year-round basis. Regular service to seven new ports also began.

In the fall of 1965, Sea-Land began installing dockside cranes at major port locations in the United States and Puerto Rico. These cranes were electrically operated and had a lift capacity of 27.5 tonnes (55,000 lbs).

There were essentially two reasons why the company decided to change from shipboard to dockside cranes: first, shipboard cranes are unproductive while a vessel is at sea, whereas the dockside crane, which moves on tracks along the berthing channel, can service any number of vessels in succession; second, because of its greater reach, the dockside crane allowed for an added level of trailers above deck.

The first of the dockside cranes was installed at Sea-Land headquarters in October, 1965, with plans for the installation of 22 more at twelve other ports during the next year (1966).

Since 1957 Sea-Land had been offering its customers a variety of special-purpose trailers; including open-top, insulated, ventilated and temperature-controlled trailers. In 1965, the company introduced two new trailers – a bulk liquid trailer, equipped with a 5,150 gallon stainless steel tank, and a flatbed trailer, for transporting items such as plywood that require side loading. By year-end 1965, the company was operating a fleet of more than 12,500 trailers.

On 23 April 1966, Sea-Land inaugurated weekly trailership service to Europe. Four C-2 trailerships, each carrying 226 trailers, were put into this service, calling at Elizabeth and Baltimore in the United States, and Rotterdam, Bremen and Grangemouth in Europe. Service to and from Felixstowe, England via Rotterdam was made available later that year.

On 11 July 1966, Sea-Land began a berth-term trailership service for the U.S. Government, exclusively between the United States ports and Naha, Okinawa. Three T-3 trailerships carrying 476 trailers each were put into this service, calling at Oakland and Seattle, as well as Naha. Later this service was expanded to four T-3 vessels and Subic Bay, Philippines was added as a port.

In October, 1967, Sea-Land was called upon by the U.S. Government to provide a similar container service to the then Republic of Vietnam (South Vietnam). This service was inaugurated with three C-4J vessels with a capacity of 645 containers, calling at Cam Ranh Bay, Seattle and Oakland. This was later expanded to four C-4J vessels in 1968 and further expanded to six C-4J vessels and one T-3 in early 1970. In early 1968, Da Nang service was instituted with three C-2 vessels carrying 226 containers and calling at Da Nang, Long Beach and Oakland. Shuttle service between Cam Ranh Bay, Qui Nhon and Saigon was provided by a C-2 vessel.

The above contracts with the U.S. Government were renewed and expanded in mid-1969. This also created a re-scheduling of vessels. The T-3 called at Da Nang and the C-2 vessels called at Okinawa and Philippines. These services accounted for approximately 40 percent of Sea-Land's revenue in 1968–1969.

On 8 December 1968, Sea-Land began regular trailership service between Yokohama, Seattle and Oakland. The same vessels carrying government freight to the Far East now carried commercial freight home. This service was immediately successful and expanded to include regular service at Kobe, Japan, Taiwan and Hong Kong. This service was expanded to Hong Kong and Taiwan in 1969, and to Singapore, Thailand, and the Philippines in 1971.

By the end of the 1960s, Sea-Land Industries had 27,000 trailer-type containers, 36 trailer ships and access to over 30 port cities.

As the advantages to McLean's container system became apparent, competitors quickly developed. They built bigger ships, larger gantry cranes and more sophisticated containers. Sea-Land needed cash to stay competitive. McLean turned to Reynolds Tobacco Company, a company he knew from his trucking company days when his trucks transported Reynolds cigarettes across the U.S. Reynolds agreed in January 1969 to buy Sea-Land for $530 million in cash and stock. McLean made $160 million personally[4] and got a seat on the company’s board. To carry out the purchase, Reynolds formed a holding company, named R.J. Reynolds Industries, Inc.., which bought Sea-Land in May 1969. That same year Sea-Land designed and ordered eight of the largest, fastest containerships in the world – SL-7 class vessels.

Recent history[edit]

Under Reynolds, Sea-Land’s profits were intermittent. By the end of 1974, Reynolds had put more than $1 billion into Sea-Land, building huge terminals in New Jersey and Hong Kong and adding to its fleet of containerships.

Sea-Land's biggest expense was fuel, so in 1970, RJR bought the American Independent Oil Co., better known as Aminoil, for $56 million. RJR put millions into oil exploration, trying to get Aminoil to the size to compete in the world exploration market.

In 1974, R. J. Reynolds Industries had its best year. Sea-Land's earnings increased nearly 10 times, to $145 million. Aminoil's earnings soared to $86.3 million. Dun & Bradstreet, the financial-ratings firm, named RJR one of its five best-managed companies in America. But in 1975, Sea-Land's earnings dropped sharply, along with Aminoil's.

Following the Mayaguez incident some crew members brought law suits in admiralty law at the San Francisco Superior Court against Sea-Land Service relating to the incident. The crew members claimed that the defendant's Master was derelict in his duty by "recklessly venturing into known dangerous and hostile waters of foreign sovereignty (Cambodia)" inviting the capture. In June 1977, a settlement was agreed, and in February 1979 another settlement was reached with other crew members, making a total settlement of $388,000 to the crew members taking legal action.[2]

In 1977, Sea-Land took notice of the ever growing North-South-North cargo volumes and decided to enter the Brazil/Argentina trade. Traditional US flag carriers in that market, Moore-McCormack, Delta-Lines and Prudential-Grace saw a threat to their market dominance with their conventional break-bulk vessels. Jointly, they induced South American governments to invoke legislation outlawing Sea-Land's non-ISO 35' containers as well as their proposed relay system via Puerto Rico. The container ruling was the shot heard around Sea-Land's corporate world, and a gradual phasing in of ISO standard 20' and 40' containers took place. Eventually Sea-Land gained access to the South American trades by signing a joint-service agreement with Brazilian flag Trans-Roll. This only lasted a short while.

Increasingly frustrated with the conservative culture within Reynolds, McLean gave up his Reynolds board seat in 1977 and cut ties with the company. In June 1984, R.J. Reynolds Industries, Inc.. spun off Sea-Land Corporation to shareholders, as an independent, publicly held company, with stock trading on the New York Stock Exchange. Sea-Land achieved the highest revenues and earnings in its 28-year history.[3]

In September 1986, Sea-Land Corporation merged with CSA Acquisition Corp., a subsidiary of CSX Corporation. Sea-Land Corporation common stock was exchanged for $28 per share, cash.

In March 1999, wanting to return to its core business and raise capital for the recent purchase of Conrail, CSX split Sea-Land into three companies; an international liner service, a domestic liner service and a terminal operating group.[4] This was done to facilitate a sale to AP Moller - Maersk, with whom Sea-Land had been in a vessel and equipment sharing agreement with since 1995.[5] Maersk already had a world wide terminal infrastructure and only certain properties would be needed. Fifteen properties were to be added in the sale[6] and the balance of the properties not purchased would stay with CSX World Terminals. The Sea-Land domestic liner service could not be purchased by Maersk due to the Jones Act provisions prohibiting a foreign owned or operated shipping company operating between domestic ports.

In July 1999, CSX announced the impending sale to Maersk of Sea-Land’s international services and the right to the "Sea-Land" name.[7] The sale was completed in December 1999 and the new combined company was named Maersk Sealand, which, in 2006, dropped the word Sealand and became known simply as Maersk Line.[5]

The former Sea-Land domestic service was sold to the Carlisle Group in 2003 for approximately $300 million and its name was changed to Horizon Lines. Just over a year later Carlisle sold Horizon to the Castle Harlan Group for $650 million. In 2005 Horizon Lines went public with its original Sea-Land management team intact[8][9] and now operates as Horizon Lines, Inc, which accounts for approximately 36% of the total U.S. marine container shipments between the continental U.S. and the markets of Alaska, Hawaii, Puerto Rico, Micronesia and Guam.[10] From December 2010 to November 2011 Horizon Lines ran a weekly service between Shanghai and Ningbo, China and the U.S. West Coast.[11] The company is headquartered in Charlotte, North Carolina.

Notable personnel[edit]

  • Malcom McLean, founder (1955–1974)
  • Charles I. Hiltzheimer – former President of Sea-Land Service, Inc. (1975) and Chairman and CEO of Sea-Land Industries Investments, Inc. (1976–1984)
  • R. Kenneth Johns, – former President of Sea-Land Service, Inc. (1981)
  • Joseph F. Abely Jr. – former Chairman and CEO of Sea-Land Corporation (1984 – Sep 1986)
  • Jackson A. Baker – former President and COO of Sea-Land Service, Inc. (Feb 1987 – Dec 1989)
  • Alex J. Mandl, former Chairman and CEO (Dec 1989 – Jul 1991) Later with In-Q-Tel, Teligent, Gemplus International and Gemalto.
  • John P. Clancey, former President and CEO of Sea-Land Service, Inc. (Jul 1991 – Dec 1999)

Several people at Sea-Land Service / Maersk Sealand would eventually make their way to DP World – in fact, as of late 2006, all the non-UAE principals at DP World were from Sea-Land:

Notable ships[edit]

References[edit]

  1. ^ Levinson, Marc (13 March 2006). "The Box That Changed Asia and the World". Forbes Asia. Retrieved 22 April 2013. 
  2. ^ Jordan J. Paust (1981). "More Revelations About Mayaguez (and its Secret Cargo)". Boston College International and Comparative Law Review 4 (1). Retrieved 27 July 2014. 
  3. ^ Debbie Norton (February 22, 1984). "Reynolds to spin off Sea-Land". Star-News. 
  4. ^ "Sea-Land being split into three companies". Honolulu Star-Bulletin. 16 March 1999. Retrieved 22 April 2013. 
  5. ^ a b "80th anniversary of Maersk Line: Milestones". maerskline.com. 2013. Retrieved 22 April 2013. 
  6. ^ Maersk
  7. ^ "Horizon Lines History". horizon-lines.com. 2013. Retrieved 22 April 2013. 
  8. ^ "Horizon Lines 2005 Annual Report". ccbn.mobular.net. 2006. Retrieved 22 April 2013. 
  9. ^ "Horizon Lines, Inc. - Corporate Governance - Management". ir.horizonlines.com. 2013. Retrieved 22 April 2013. 
  10. ^ "About Horizon Lines". horizon-lines.com. 2013. Retrieved 22 April 2013. 
  11. ^ "Horizon Lines To Discontinue Trans-Pacific FSX Service". horizonlines.com. 24 October 2011. Retrieved 22 April 2013. 

External links[edit]