The most striking observation derived from the above data is on the manner in which by one means or another, these operators managed to increase freight revenues somewhat more than the increase in cargo expense during the five-year period 1949-1953. The increases and decreases in dollars over the period were: This does not mean that the profit position of the five operators was improved to the extent of anything like $9,066,000, if at all. Operating expenses other than cargo costs also increased during this period, and to maintain the same profit position, it would be necessary to increase revenues to cover not only increased cargo costs, but also the aggregate increases in other expense items such as wages, fuel, subsistence, repairs, and insurance. Comparisons or measurements of actual profits are of questionable value for present purposes because of the variations in methods of operation previously discussed. Net profits are affected by such factors as interest and dividend income, interest expense, and in some cases, by non-shipping operations. Gross profits from shipping operations are affected by such variable items as terminal and cargo handling operations for other account, inactive vessel expense, and amortization and depreciation. However, the apparent fact that there was no general improvement in the profit position of these five operators between 1949 and 1953, traceable to an improved freight revenue/vessel operating expense ratio, is at least strongly indicated by the following summary of their gross profit and loss from shipping operations for those years. Gross Profit (or Loss) from Shipping Operations Five Selected Intercoastal Carriers of Break-Bulk Dry Cargo From the available records it can be shown that the increase in freight revenues for these five intercoastal operators was due to increases in revenues per ton of pay-load freight rather than to increases in tons carried. There is no means of determining the extent to which increased revenue per ton was due to increased freight rates on specific commodities or to changes in cargo consist from low-rate to high-rate cargo. The combined totals of tons carried, and the freight revenue and cargo expense per In the above tabulation it will be noted that between 1949 and 1950 there was a rather sharp drop in cargo tons accompanied by sharp increases in both freight revenue and cargo expense per ton. Thereafter, all three factors show comparatively moderate increases. On examining the individual operating statements, we find that in 1949 two of the five operators carried relatively large tomages of cargo at abnormally low rates as compared to the next four years. It would appear that measuring the increases (and in the case of cargo tons, decreases) from 1949 as a base year gives a somewhat distorted picture of the actual trends during this period. If 1950 is used as the base, by 1953 cargo tonnage had increased by 182,000 tons, freight revenue per ton $4.07, and cargo expense per ton $3.55. It has been stated previously that all measurements in this. field of multiple variations are no more than broad indicators. Care must be taken to avoid unwarranted interpretation of the data presented. The fact that a limited group of operators in the intercoastal trade has managed to meet advancing expenses with increased freight revenues in recent years does not mean that this can go on indefinitely. The trend lines, in other words, cannot be projected into the future, and uncertainty of the future is unquestionably a major factor in any consideration of replacing the present fleet with ships of essentially similar types. The figures show, or confirm, a few simple facts: Labor costs, particularly cargo handling costs, take a large part of the freight-revenue dollar. Their importance diminishes substantially in certain types of operations. While all the determining factors cannot be identified, it is clear that cargo consist has a substantial influence, and that the lowest costs are found in operations using so-called radical ships and methods that eliminate large part of the costs of conventional cargo handling. Without conclusive proof, the figures suggest that in the recent past, the break-bulk dry-cargo business has been neither disastrously unprofitable nor satisfactorily profitable. Cargo tonnage has held up pretty well, and by increasing freight revenues per ton, the operators have managed to contime operations in the face of substantial increases in expense, III. SOLUTION OF THE PROBLEM A. Technological Improvement and Private Enterprise. To understand where the basic solution to the break-bulk dry cargo carrier problem lies, it is necessary to note, first, the wide difference between the cargo handling costs of conventional hatch-loading package freight operations, and the comparable costs of handling cargo by mechanized means (dry and liquid bulk), or by greatly increasing the size of the cargo unit (Seatrain and packaged lumber operations). We have seen that the costs of break-bulk dry cargo handling constitute by far the largest item of operating costs, amounting in some cases to as much as 50% or more of total freight revenues. By contrast, the cargo handling costs of packaged lumber operations are only about 7%, and of the Seatrain operation only 2.7% of the freight revenue dollar. This clearly indicates an area in which truly substantial benefits may be attained, assuming that by one means or another the technological principles of low-cost cargo handling can be applied to the handling of package freight. Second, it is significant that certain basic principles of lowcost cargo handling have been well understood for a number of years. It is self-evident that rapid loading and unloading, with a minimum of direct manual labor costs, is a fundamental principle of economical cargo handling. Rapid loading and unloading can be accomplished in a number of ways and in varying degrees. Palletizing or packaging of cargo is an improvement over the multiple-handling processes involved in broken cargo handling. The operating economies increase as the size of the sling load in a hatch-loading operation increases. When the sling load or package unit is increased to the size of a freight car or truck trailer, maximum economy is attained from the size-of-package factor. Finally, it is more rapid and therefore more economical to move a large package on its own wheels laterally between ship and shore than to lift or lower the package through a "hole in the roof". This, in brief, is the theory on which the present wide interest in the development of roll-on, roll-off ships is based. No figures based on actual experience are available on the costs of operating roll-on, roll-off ships. However, in connection with one of the projects for the construction and operation of roll-on, roll-off highway trailer ships, 1/ cargo expense was estimated at 2.22 percent of freight revenue. In the same statement a figure of 2.57 percent was given for seatrain cargo expense. This closely approximates the 2.7 percent figure previously reported for the 1953 Seatrain operation. 1/Statement of David G. McDonald, General Counsel and Director, McLoan Trucking Company, Washington, D. C., October 7, 1954. It is significant also to note that the loading and unloading time for this roll-on, roll-off operation was estimated as 4 hours at each terminal as compared to approximately 8 hours for the Seatrain operation. The reduction of in-port time, together with other factors such as manning scales of which the details are unknown, produces an additional reduction in the cost ratios of vessel expense and other voyage expense in the roll-on, roll-off operation. It is not intended here to suggest that the roll-on, roll-off · method is the only one by which economies may be effected in the transportation of break-bulk dry cargo. There may well be segments of the domestic trades in which roll-on, roll-off operations may not be feasible. There is evidence that new applications of the vehicle lift-on, lift-off principles similar to the Seatrain operation are planned. Further, there is no question that substantial economies can be effected even in conventional hatch-loading operations through well planned cargohandling methods including palletizing, packaging, and efficient shoreside cargo-handling methods and equipment. It seems clear, however, that of all presently known methods of handling break-bulk dry cargo, the roll-on, roll-off principle appears to offer the greatest potential operating economies. The present costs of building new roll-on, roll-off ships range from around 8 to 11.5 million dollars per ship. In addition, a considerable investment must be made in specially constructed terminal facilities and equipment. Substantial progress in what appears to be at least potentially a revolutionary change in shipping methods can be accomplished only through the initiative, constructive imagination and courage of private investors and operators. Happily, the opportunity and the villingness to take advantage of the opportunity are evident in the present situation. 1. The Terminal Problem. It should be emphasized that adequate terminal facilities, organized and operated for maximum efficiency, are of substantial importance in obtaining maximum savings in operating costs, whether the ships are special purpose roll-on, roll-off vessels or the conventional type of hatch loaders. Many of the terminals now used by domestic water carriers, however adequate they may have been when pick-up and delivery were performed exclusively by rail cars and local drays, cannot handle the large over-the-road trucks and trailers in their present numbers without costly delays in all phases of the operation. Many of these terminals were constructed, also, to serve the smaller prewar coastwise ships, and cannot handle without congestion the cargoes of some of the larger vessels 20 in use. In some of the older terminals the roof column spacing is so elose, pier aprons so narrow and deck surfaces so rough as to limit the se of mechanical handling equipment, The high cost of replacement or modernization of terminal facilities constitutes a serious deterrent to their improvement. The use of certificates of accelerated depreciation my provide a partial answer. 78456 0-56-pt. 1- 8 Where traffic warrants the capital outlay, reconstruction or new construction can provide partial answers. Operators of several newly constructed terminals, using conventional methods and handling conventional ships, have reported large increases in efficiency in comparison with results achieved with older facilities. The emphasis, in both reconstruction and new construction, is on ample facilities for handling trucks, larger sheds designed to permit full utilization of the time and labor-saving potential of mechanical equipment, and rail trackage not only in or behind the shed but also at shipside. Relevant to the problem generally, it should be noted that most operators of special marine terminals consider the transit shed alone to be unprofitable; the supporting warehouses and other storage surfaces providing the profit margin for the terminal as a whole. B. Progress Toward Solution. 1. Existing Applications of Roll-On, Roll-Off and Lift-On, Lift-Off Principles. At the present time there are a number of shipping operations in the United States based on roll-on, roll-off or lift-on, lift-off principles. For the most part these operations are engaged in carrying freight cars or other types of vehicles relatively short distances on inland or protected coastal waterways such as the Great Lakes, Puget Sound, and the Hudson River. There is one off-shore service, the Suwanee Train Ferry Lines, which operates two converted LSD's between Fort Lauderdale, Florida to Havana, Cuba. The capacity of these ships is 23 freight cars on each of 3 decks. The only operations of this type engaged in the deep-water coastwise trade are those conducted by Seatrain Lines, Inc., and MoLean Industries, Inc. The Seatrain operation applies the lift-on, lift-off principle in carrying freight cars between rail system terminals on the Atlantic and Gulf Coasts. Seatrain ships accommodate 100 freight cars which are loaded and unloaded by means of fixed shore cranes. The loading and unloading is usually accomplished in somewhat less than 8 hours at each end of the run, MoLean Industries, Inc., has recently initiated the operation of two combination tanker-container ships. The basic ship is a T2 tanker, upon which has been superimposed a cargo deck elevated somewhat above the normal tanker deck, in order to protect cargo containers or vehicles loaded on the cargo deck from water damage in heavy seas. All cargo is lifted on and off by cranes. The novel feature of this operation is that a dual purpose ship is provided, whose pay load may thereby be increased on the normally unprofitable return leg of the Houston to New York tanker run. 2. New Projects. A substantial number of new and apparently firm projects for the construction of roll-on, roll-off ships for use in the coastwise, intercoastal and noncontiguous trades testifies to the |