The Box - Marc Levinson [127]
Chapter 12
The Bigness Complex
Malcom McLean sold his stock and quietly left the board of R. J. Reynolds Industries in February 1977. By all accounts, the marriage had not been a happy one. McLean was frustrated by the tobacco giant’s bureaucracy and bewildered by its repeated changes of strategy. Most of all, though, he was restless. “I am a builder, and they are runners,” McLean explained. “You cannot put a builder in with a bunch of runners. You just throw them out of kilter.”1
After giving up day-to-day responsibility for Sea-Land Service in 1970, he had spent $9 million to buy Pinehurst, the famed golf resort in central North Carolina, not far from his birthplace in Maxton. He acquired a small life insurance company, an estate in Alabama, a trading company. Then, in 1973, he started First Colony Farms on 440,000 acres in the swamps of eastern North Carolina. Modeled after his friend Daniel Ludwig’s plantation in the Amazon, First Colony was probably the largest agricultural development in U.S. history. McLean spent millions draining wetlands to start a massive peat-harvesting operation, then built a plant to turn the peat into methanol. Nearby he planned the world’s largest hog farm, where the hogs would be raised mechanically to slaughter weight and then shipped to a slaughterhouse he would build on-site. The peat scheme, though, was blocked by one of the earliest environmentalist campaigns, and the hog farm, able to raise 100,000 animals a year, never made money. When he got an offer for the hog farm in 1977, McLean sold—for $12 million plus 40 percent of the profits for twenty years—and looked around for something new.2
In October 1977, he found it. To the surprise of almost everyone, he arranged to buy United States Lines.
U.S. Lines was not exactly a prize. It had long since been supplanted by Sea-Land as the largest American-flag ship line, and its owner, the conglomerate Walter Kidde & Co., had been trying to unload it almost since the day it purchased the company in 1969. Its famous flagship, the luxury liner United States, had been sold off to the U.S. government. U.S. Lines had lost money through most of the 1970s. Nonetheless, McLean spotted value. For an investment of $160 million, of which $50 million went to pay off debts, he got thirty ships; $50 million in cash; a huge new terminal on Staten Island, in New York Harbor; and an important network of routes to Europe and Asia. U.S. Lines, unlike Sea-Land, was entitled to operating subsidies from the U.S. government on its international routes. The subsidies were a curse as well as a blessing: the ship line was assured a source of revenue, but the Maritime Administration got to dictate where and how often its ships sailed.
In 1978, as his new ship line was eking out a very modest profit, McLean hatched an audacious plan. U.S. Lines would build a series of enormous containerships, half again as large as anything else on the sea, and send them around the world. The timing was right, because shipbuilders’ order books were shrinking after the headlong expansion of the 1970s and construction prices were falling. A round-the-world route, McLean thought, would solve one of the industry’s inherent problems, the imbalanced flow of freight that left some ships sailing full in one direction and half-empty in the other. The new vessels would have the lowest construction cost per container slot of any vessel in the world and the lowest operating costs per container as well. U.S. Lines would achieve what it took to succeed in container shipping: scale.
Scale was the holy grail of the maritime