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Published online by Cambridge University Press: 24 July 2012
At a time when American shipping generally was finding it difficult to compete in international trade, certain American shipping groups were profiting largely. The strength of the American-Hawaiian Steamship Company derived from conservative financial policy, bold but not reckless expansion, astute analysis of trading opportunities, skillful handling of competition, and decisive adaptation to emergencies. A closely knit group of owner-managers held the reins of control. Internal strength permitted optimum realizations from a favorable commercial environment and even helped to make that environment favorable.
2 The original name was American-Hawaiian Steam Navigation Company, but it was quickly changed.
3 Williams, Dimond and Company were named general agents for the West Coast. The various activities of this firm in San Francisco—the members were private bankers, commission merchants, manufacturers' representatives, insurance agents, purchasing agents, representatives of the Hawaiian Sugar Factors—went far to guarantee the success of American-Hawaiian in their area. In return for its services, the partnership was to receive 5 per cent of the net freight list on outward cargoes, and 2½ per cent on inbound freight. Agencies in Hawaii were given to two of the largest sugar factor partnerships in the islands: Hackfeld and Company at Honolulu, and Davies and Company at Hilo. Besides the general agencies, local agents were appointed in Philadelphia, Boston, Los Angeles and San Diego; and the firm of Carey W. Cook was named agent for the ports of Washington and Oregon.
4 While at Flint and Company, Burnham had clearly shown the advantages of this last policy. Wooden sailing vessels were usually expected to be unsea-worthy after 10 to 14 years, but Burnham kept ships in effective operation for 20 years or more. When Flint and Company sold its sailing ships in 1898–99, it received $25 a ton for ships with an average age of 19 years, and this at a time when new steamships could be built for $60 a ton.
5 This was the first of a series of sugar contracts extending until mid-1916.
6 These original steamers also carried two large trysails, a fore staysail and jib, and a main staysail, which were constantly used in the early days. But even here Burnham was an innovator, being the first steamship man to set a ship's masts upright. Raking masts had been the rule in sailing ships, but on a steamship the main function of the mast was to serve as a support for cargo booms, and a raking mast was apt to cause trouble by throwing the lead of the forward booms badly out of line.
7 The Naval Liquid Fuel Board, U.S. Navy, published a report on 1 Aug. 1904, analyzing the voyage of the Nebraskan from San Diego to New York.
8 Many American-Hawaiian ships were still in operation 30 or 40 years after construction. It should be remembered that, prior to 1909, there were no Federal taxes on corporate income, and a company was entirely free to work out its own depreciation policy.
9 As already noted, American-Hawaiian became a substantial stockholder in the Texas Company.
10 Most of the credit for economical operation goes to Burnham, but in 1906 Victor Thun was appointed to the newly created post of auditor, and thereafter Thun established an excellent system of internal controls.
11 The par value of these shares was of course $100. Since American-Hawaiian shares had never been sold publicly, they had no established market value. In 1905 the company paid a $6.00 dividend, but its earnings were considerably more than that amount and its growth potential was very promising.
12 Since 1904 had been a good year for American-Hawaiian, with earnings of nearly $5.00 per deadweight ton, this clause proved quite advantageous. In every year that the contract was in force except 1912, American-Hawaiian earnings per deadweight ton were below the critical figure; in 1910 the amount paid to it by the railway was as high as $360,000.
13 In January, 1911, Matson offered to buy out American-Hawaiian for $10,000,000. Although the book value of the company was only about $7,500,-000, the directors turned down the offer.
14 This repeal seems to have reflected two types of pressure. It was requested by President Wilson, who was seeking British support for his policy in regard to Mexico and was therefore sensitive to the British protests against the discrimination contained in the Canal Tolls Act of 1912. The transcontinental railroads, fearing a loss of business to the shipping firms, insisted that inter-coastal shipping should pay tolls at the Canal.
The Canal tolls, since they are based on the size of the ship rather than on the amount of cargo carried, have been especially detrimental to shipping in depression periods. In 1932, for instance, Canal tolls constituted 13 per cent of the cost of intercoastal voyages by American-Hawaiian ships.
15 Of the record-breaking crop of 1915, for example, 285,000 tons — almost the same amount as in 1910—were carried to the East Coast, while 250,000 tons—nearly 100,000 more than in 1910—were refined in California.
16 On the difficulties of the intercoastal trade after 1918, see Hutchins, John G. B., “The American Shipping Industry since 1914,” Business History Review, XXVIII (1954), pp. 105–27.CrossRefGoogle Scholar