Malcom McLean

For those of a similar name, see Malcolm Maclean (disambiguation).
Malcom Purcell McLean

McLean at railing, Port Newark, 1957
Born Malcolm Purcell McLean
November 14, 1913[1]
Maxton, North Carolina
Died May 25, 2001(2001-05-25) (aged 87)[1]
Known for Pioneer of containerization

Malcom Purcell McLean (born Malcolm Purcell McLean, November 14, 1913 – May 25, 2001) was an American businessman. He was a transport entrepreneur who developed the modern intermodal shipping container, which revolutionized transport and international trade in the second half of the twentieth century. Containerization led to a significant reduction in the cost of freight transportation by eliminating the need for repeated handling of individual pieces of cargo, and also improved reliability, reduced cargo theft, and cut inventory costs by shortening transit time.

Early life

McLean was born in Maxton, North Carolina in 1913.[2]

In 1935, when he finished high school at Winston-Salem, his family didn't have enough money to send him to college. But there was enough for Malcolm to buy a used truck.[3]

In this year McLean, his sister, Clara McLean, and his brother, Jim McLean, founded McLean Trucking Co.[2] Based out of Red Springs, North Carolina, McLean Trucking started out hauling empty tobacco barrels – with Malcom as one of the drivers.[4]

Containerization

The idea of transporting trucks on ships was put into practice before World War II. In 1926 regular connection of the luxury passenger train from London to Paris, Golden Arrow/Fleche d'Or, by Southern Railway and French Northern Railway began. For transport of passengers' baggage four containers were used. These containers were loaded in London or Paris and carried to ports, Dover or Calais, on flat cars in the UK and “CIWL Pullman Golden Arrow Fourgon of CIWL” in France.[5]

In the early 1950s McLean decided to attempt use of the containers 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. The original concept was modified 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 of a newly formed corporation called McLean (occasionally spelled as "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 chassis to allow removable containers.

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) Trailer Vans [6] called later as 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."[7] McLean flew to Houston to be on hand when the ship safely docked.[4]

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 39-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.[8]

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 Newark-Elizabeth Marine Terminal, 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 reductions in labor and dock servicing time, McLean followed Roy Fruehauf's lead and became vigilant about standardization. His efforts to increase efficiency resulted in standardized container designs that were awarded patent protection.[9] McLean made his patents available by issuing a royalty-free lease to the International Organization for Standardization.

By the end of the 1960s, Sea-Land Industries had 27,000 trailer-type containers, manufactured by Fruehauf, 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 United States. In January 1969, Reynolds agreed to buy Sea-Land for $530 million in cash and stock. McLean made $160 million personally,[10] 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 container ships 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. 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.

Subsequent business ventures

In 1968 Mclean financed a real estate project in Waveland, Mississippi, that has become Diamondhead.

In 1978, McLean purchased United States Lines. There, he built a fleet of 4,400-TEU container ships that were the largest afloat at the time. The ships, operating in round-the-world service, were designed in the aftermath of the 1970s oil shortages and were fuel-efficient but slow, and therefore not well-adapted to compete in the subsequent period of cheap oil. USL went bankrupt in 1987. McLean took very personally the criticism directed against him after the collapse of USL and the resulting loss of many jobs associated with and dependent on USL.

In 1982, McLean made the Forbes 400 Richest Americans list with a net worth of $400 million, however, a few years later, having gambled on rising oil prices that failed to materialize, McLean had to file for Chapter 11 bankruptcy owing debt of $1.3 billion.

In 1991, at 78, McLean founded Trailer Bridge, Inc., which operates between the US mainland (Jacksonville, Florida), Puerto Rico and the Dominican Republic.

McLean also developed non-maritime inventions, including a means of lifting a patient from a stretcher onto a hospital bed.

Death

McLean died at his home on the East Side of Manhattan on May 25, 2001, age 87, of heart failure.[2] His death prompted Norman Y. Mineta to make the following statement:[11]

"Malcom revolutionized the maritime industry in the 20th century. His idea for modernizing the loading and unloading of ships, which was previously conducted in much the same way the ancient Phoenicians did 3,000 years ago, has resulted in much safer and less-expensive transport of goods, faster delivery, and better service. We owe so much to a man of vision, 'the father of containerization', Malcom P. McLean."

In an editorial shortly after his death, Baltimore Sun stated that "he ranks next to Robert Fulton as the greatest revolutionary in the history of maritime trade."[12] Forbes Magazine called McLean "one of the few men who changed the world."[12]

On the morning of McLean's funeral, container ships around the world blew their whistles in his honor.[2]

Honors

Fortune inducted McLean into its Business Hall of Fame in 1982. In 1995, American Heritage named him one of the ten outstanding innovators of the past 40 years. In 2000, he was named Man of the Century by the International Maritime Hall of Fame.

McLean was inducted into the Junior Achievement U.S. Business Hall of Fame in 1982.

In 2000, McLean received an honorary degree from the U.S. Merchant Marine Academy.

McLean is the only person to found three companies that were later listed on the New York Stock Exchange (plus two others on the NASDAQ).[13][14]

Trailer Bridge, Inc., which McLean founded in 1992, annually awards the Malcom P. McLean Innovative Spirit Award. The annual McLean Award recognizes an outstanding graduating student at George Mason University, selected by professors.

McLean was inducted into the North Carolina Transportation Hall of Fame in 2006.[15]

Notes and references

Footnotes
  1. 1 2 "Malcom Purcell McLean, Jr". Find a Grave. Retrieved 2015-07-22.
  2. 1 2 3 4 Saxon, Wolfgang (May 29, 2001). "M. P. McLean, 87, Container Shipping Pioneer". The New York Times. Retrieved 2015-07-22.
  3. ↑ "Men, Money and Ideas Are Remaking A Region". LIFE. 10 (1): 84. 1949.
  4. 1 2 Cudahy, Brian J., - "The Containership Revolution: Malcom McLean's 1956 Innovation Goes Global" TR News. - (c/o National Academy of Sciences). - Number 246. - September–October 2006. - (Adobe Acrobat *.PDF document)
  5. ↑ Lewandowski, Krzysztof (2014). "Czechoslovak activity to prepare European norms for containers before the Second World War" (PDF). Acta Logistica. 1 (4): 1–7. ISSN 1339-5629.
  6. ↑ "TANKERS TO CARRY 2-WAY PAY LOADS; Filled Trailer Vans to Form Cargoes for Vessels That Normally Carry Ballast". NEW York Times. April 27, 1956.
  7. ↑ "Who Made America? - Innovators - Malcom McLean". pbs.org. Retrieved 2015-07-22.
  8. ↑ Ebeling, C. E. (Winter 2009), "Evolution of a Box", Invention and Technology, 23 (4): 8–9, ISSN 8756-7296
  9. ↑ U.S. Patent 2,853,968 - (Apparatus for shipping freight)
  10. ↑ Hanseatic Lloyd—News
  11. ↑ "Malcom McLean Made Waves With Shipping Containers". investors.com. June 25, 2014. Retrieved 2015-07-22.
  12. 1 2 "Shipping Pioneer Largely Ignored". - The Baltimore Sun. - June 14, 2001. p.23A.
  13. ↑ http://articles.latimes.com/2001/may/29/local/me-3847
  14. ↑ http://www.joc.com/maritime-news/malcom-p-mclean-1913-2001_20010603.html
  15. ↑ "2006 Induction and Awards Ceremony Photos". North Carolina Transportation Hall of Fame. June 1, 2013. Retrieved 2015-07-22.
References
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