The Box - Marc Levinson [27]
Late in 1953, a real estate firm working on McLean Trucking’s behalf began looking for terminal sites. The timing could not have been better. The Port of New York Authority, an agency set up by the states of New York and New Jersey, was eager to expand its tenuous foothold in the port business. It had taken charge of the money-losing docks in Newark, New Jersey, in 1947, and it was eager to draw new business to what had been a sleepy lumber port. As it happened, the port at Newark, across the harbor from New York City, was uniquely positioned to serve McLean Trucking’s needs. There was plenty of space to marshal trucks and easy access to the New Jersey Turnpike, which had opened in 1951. Even better, from McLean’s point of view, the Port Authority had the power to issue revenue bonds; it could build the terminal and lease it to McLean Trucking, reducing the need for the company to raise funds. The Port Authority was so taken with McLean’s concept that Austin Tobin, its executive director, and A. Lyle King, the director of marine terminals, became early and very public apostles of transporting truck trailers by train and ship.15
While the Port Authority prepared McLean Trucking’s new waterfront terminal, Malcom McLean’s own ideas were evolving. His 1953 proposal had involved buying S. C. Loveland, a small barge operator, in order to gain its coastal operating rights. Now, he was thinking bigger. In 1954, while still pursuing Loveland, he came upon the Waterman Steamship Corporation in the pages of a Moody’s financial manual. Waterman, based in Mobile, Alabama, was a large, well-established operator sailing to Europe and Asia. Its tiny subsidiary, Pan-Atlantic Steamship Corporation, operated four ships along the coast between Boston and Houston. McLean immediately spotted the companies’ attractions. Pan-Atlantic had been hurt badly by the 1954 longshore strike in New York, completing only 64 voyages the entire year, but it owned valuable operating rights to serve 16 ports. Its parent, Waterman Steamship, was debt-free, with assets including 37 ships and $20 million in cash. McLean made some preliminary soundings and found that Waterman could be bought for $42 million.16
What followed was an unprecedented piece of financial and legal engineering. First, to circumvent rules requiring ICC approval for a truck line to own a ship line, McLean created an entirely new company, McLean Industries, in January 1955. Although McLean Industries had publicly traded stock, it was clearly a family-controlled business; Malcom McLean was president, his brother James McLean was vice president, and his sister Clara McLean was secretary and assistant treasurer. Malcom, James, and Clara then put control of the trucking company in a trust, of which they were the beneficiaries. Malcom McLean kept $5 million of stock, but the trustees were authorized to sell the rest. As soon as the trust documents were signed, the McLeans resigned as directors of McLean Trucking, and within an hour McLean Industries took control of Pan-Atlantic. The country’s best-known trucking magnate walked away from the business he had built in order to build a new one, based on some untested ideas about shipping.17
Several railroads protested the transaction, claiming that the McLeans were effectively controlling both McLean Trucking and the ship line in violation of the law. The ICC eventually agreed but noted that “the procedure followed was on the advice of counsel, and was not a deliberate violation of the act.” In any case, in September 1955 the trustees sold off McLean