Malcom Mc Lean - Biography

Biography

With only a high school education, McLean pumped gas at a service station near his hometown and saved enough money by 1934 to buy a second-hand truck for $120. He and his sister, Clara McLean, and brother, Jim McLean, founded McLean Trucking Co. Based out of Charlotte, North Carolina, McLean Trucking started out hauling empty tobacco barrels – with Malcom as one of the drivers.

From that beginning, with his single pickup truck, he built it into the second-largest trucking company in the U.S., with 1770 trucks and 32 terminals. On January 6, 1958 (after McLean had sold his interest in the company), McLean Trucking became the first trucking company in the nation to be listed on the New York Stock Exchange. Carrying trucks, or carriages, was not new - it had been done on the Dover-Calais trade.

The idea of transporting trucks on ships was put into practice during World War II, and in the early 1950s McLean decided to attempt it commercially. By 1953, he was developing plans to carry his company's trucks on ships along the U.S. Atlantic coast, from North Carolina to New York. It soon became apparent that "trailerships," as they were called, would be inefficient because of the large waste in potential cargo space on board the vessel, known as broken stowage. McLean modified his original concept into loading just the containers, not the chassis, onto the ships, hence the designation containership or "box" ship. At the time, U.S. regulations would not allow a trucking company to own a ship line. In 1955, McLean sold his trucking company for $25 million and purchased the Pan-Atlantic Steamship Company and the Gulf Florida Terminal Company from Waterman Steamship Corporation, with the idea of using Pan-Atlantic's vessels and operating rights to carry containers. These purchases were made under the name a newly-formed corporation called McClean Industries, Inc of New York. Later the same year McLean Industries acquired the capital stock of Waterman Steamship Corporation.

McLean secured a bank loan for $500 million and in January 1956 bought two World War II T-2 tankers, which he converted to carry containers on and under deck. McLean oversaw the construction of wooden shelter decks, known as Mechano decking. This was a common practice in World War II for the carriage of oversized cargo, such as aircraft. It took several months to refit the ships, construct containers to carry on and below the vessels’ decks and design trailer chassies to allow removable containers.

In some ways, McLean's vision was nothing new. Beginning in 1929, Seatrain Lines had carried railroad boxcars on its sea vessels to transport goods between New York and Cuba. Likewise, the idea of putting truck trailers on railroad flatcars was a method of moving less-than-railroad carload shipments economically. This integrated transport concept held the hope of competing with trucks, which were taking more and more of this business from the railroads. From 1926 to 1947, the Chicago North Shore and Milwaukee Railroad carried motor carrier vehicles and shippers' vehicles loaded on flatcars between Milwaukee and Chicago. In the mid-1930s, the Chicago Great Western Railway and then the New Haven railroad began piggy-back service limited to their own railroad. By 1953, the CB&Q, the C&EI and the SP railroads had joined the innovation. Most cars were surplus flatcars equipped with new decks. By 1955, an additional 25 railroads had begun some form of piggy-back trailer service. What was new about McLean's innovation was the idea of using containers larger than hitherto (which, as before, were never opened in transit between shipper and consignee and were transferable on an intermodal basis, among trucks, ships and railcars).

On April 26, 1956, with 100 invited dignitaries on hand, one of the converted tankers, the SS Ideal-X (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. As the Ideal-X left the Port of Newark, Freddy Fields, a top official of the International Longshoremen's Association, was asked what he thought of the newly-fitted container ship. Fields replied, "I’d like to sink that son of a bitch." McLean flew to Houston to be on hand when the ship safely docked.

In 1956, most cargo was loaded and unloaded by hand by longshoremen. Hand loading a ship cost $5.86 a ton at that time. Using containers, it cost only 16 cents a ton to load a ship, a 36-fold savings. Containerization also greatly reduced the time to load and unload ships. McLean knew "A ship earns money only when she's at sea," and based his business on that efficiency.

In the mid-1950s, mechanization overall was entering the shipping industry as operators tried to increase profit margins. The mechanization they had in mind, however, was larger slingloads, palletization, mechanical conveyor belts and other ways of using more machinery to move break bulk cargoes. McLean's container concept moved the mechanization movement ahead by a quantum leap.

In April 1957, the first container ship, the Gateway City, began regular service between New York, Florida and Texas. During the summer of 1958 McLean Industries, still using the name Pan-Atlantic Steamship Corporation, inaugurated container service between the U.S. and San Juan, Puerto Rico with the vessel Fairland.

The name was officially changed from Pan-Atlantic Steamship Corporation to Sea-Land Service, Inc. in April 1960.

McLean’s operation was profitable by 1961 and he kept adding routes and buying bigger ships.

In August 1963, McLean opened a new 101-acre (0.41 km2) port facility in Port Elizabeth, New Jersey, to handle even more container traffic. The development of the container market was slow until the late 1960s. Many ports did not have the cranes to lift containers on and off ships and change was slow to come to an industry steeped in tradition. Moreover, unions resisted an idea that threatened their very livelihood.

In April 1966 Sea-Land commenced service between New York and Rotterdam, Bremen and Grangemouth (Scotland).

The following year (1967) they were invited by the U.S.Government to start a container service to South Vietnam. The service to Vietnam produced 40% of the company's revenue in 1968/69.

In late 1968 commercial containership service was inaugurated from the Far East to the United States. This service was expanded to Hong Kong and Taiwan in 1969, and to Singapore, Thailand, and the Philippines in 1971.

To achieve dramatic reductions in labor and dock servicing time, McLean was vigilant about standardization. His efforts to increase efficiency resulted in standardized container designs that were awarded patent protection. Believing that standardization was also the path to overall industry growth, McLean chose to make his patents available by issuing a royalty-free lease to the International Organization for Standardization.

The move toward greater standardization helped broaden the possibilities for intermodal transportation. 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 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 ordered five of the largest, fastest containerships in the world - SL-7 class vessels. They had come a long way since the inaugural sailing of the Pan-Atlantic "Ideal-X" in 1956.

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.

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.

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.

Sea-Land’s international services were sold to Maersk in 1999 and the combined company was named Maersk Sealand, which, in 2006, became known simply as Maersk Line.

The former Sea-Land's domestic services now operate as Horizon Lines, which accounts for approximately 36% of the total U.S. marine container shipments between the continental U.S. and the markets of Alaska, Hawaii and Puerto Rico, and to Guam. The company is headquartered in Charlotte, North Carolina.

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