United States Shipbuilding Company
Encyclopedia
The United States Shipbuilding Company was a short-lived trust made up of seven shipbuilding companies, a property owner and steel company. Its stocks and bonds were unattractive to investors, and several of its member shipyards were overvalued, conditions which brought down the company less than a year after it was formed in 1902. The company’s failure enabled Bethlehem Steel
to become Bethlehem Shipbuilding & Steel Company
.
At the turn of the 20th century, John Willard Young
, a son of Mormon pioneer Brigham Young, promoted the idea that many leading American shipbuilding companies should form one gigantic combination. The United States Shipbuilding Company was the manifestation of that idea.
Under that idea, the enterprise's central designing office would apportion the shipbuilding work to the yards best able to take it, to better compete with European shipyards. Although American shipbuilding was not considered a highly profitable venture, the political environment seemed right for improvement. President William McKinley
and his new Vice President, Theodore Roosevelt
, had endorsed federal subsidies for American shipbuilding industries, to compensate for the subsidies provided by European governments, but Congress had not yet approved such a measure. A renowned naval architect and public servant, Lewis Nixon
, was chosen to lead the venture, and helped to attract several major shipyards to participate.
Unfortunately, however, "the one thing [the consolidated firms] lacked, individually and collectively, was a realistic prospect of earning sustained profits." Financially the corporation failed almost immediately. As one scholar would later write of this plan, “the theory was impossible; the condition was untenable; the trust, as it was manufactured, was impracticable; and the United States Shipbuilding Company was insolvent.”
Young first obtained an option to purchase the Newport News Shipbuilding and Drydock Company (of Newport News, Virginia
), then approached Nixon, who was then the lessor of the Crescent Shipyard
in Elizabethport, New Jersey
. Nixon agreed to work with Young in forming the proposed combination, and granted him an option on his own plant. They then obtained options to purchase other shipbuilding companies. Working with a cotton industry bank known as the Trust Company of the Republic, they sought out underwriters, and planned to issue stock and sell bonds, in order to provide the funds to buy the plants and then operate them at a profit.
An initial prospectus
was prepared for issue on May 7, 1901, but the actual issuance was withheld at the last moment because of what became known as the Northern Pacific “short squeeze” of 1901, a panic that occurred on that date. A news dispatch of that date described the proposed combination. It described a combination that would include Union Iron Works
(of San Francisco), Bath Iron Works
of Bath, Maine
, Hyde Windlass Co. (also of Bath), Crescent Shipyard, Samuel J. Moore & Sons Co. of Elizabethport, New Jersey, Canda Manufacturing Co. of Carteret, New Jersey
, and Newport News Shipping and Drydock Co. All but Canda Manufacturing were shipyards, and Canda (which manufactured car wheels) reportedly owned a prime location near Staten Island
for construction of a new shipyard.
Three months later, it was again announced (again prematurely) that the new corporation would be launched in a few days. This time, British arms manufacturer Vickers Sons & Maxim
, which had acquired the William Cramp & Sons shipyard in Philadelphia, and the Bethlehem Ship & Armor Plate works were included on the published list of interests included in the corporation. Ultimately, Vickers stayed out of the venture.
In September 1901, while the USSC was still just a concept, Roosevelt replaced the assassinated President McKinley. Roosevelt had crusaded against trusts, and his elevation created a hostile environment toward formation of combinations like USSC, marked by the Department of Justice’s
suit in February 1902 to prevent the formation of the Northern Securities Company
railroad trust. Meanwhile, federal shipyard subsidy legislation stalled in Congress.
By the time that a prospectus for USSC was formally issued in June 1902, Newport News and Vickers Sons & Maxim were no longer listed as participating interests, but Harlan & Hollingsworth Co. of Wilmington, Delaware
, and Eastern Shipbuilding Company of New London, Connecticut
were now included.
The June 1902 prospectus stated, among other things, that the USSC had been organized under the laws of the State of New Jersey and described as its directors Nixon, Henry T. Scott (president of Union Iron Works), Charles J. Canda (president of Canda Manufacturing Co.), John S. Hyde (president of Hyde Windlass Co.), E. W. Hyde (president of Bath Iron Works), and Irving M. Scott (Vice President and General Manager of Union Iron Works). In fact, incorporation had not yet occurred, and the board had not yet been constituted. Once the company was organized several months later, only four of those mentioned in the prospectus as directors ever served as directors. The prospectus also stated that the plants were earning $2.25 million for a year and had abundant facilities for additional work and increased earnings.
Even with positive representations in the prospectus, however, the public purchased less than $500,000 of the $9 million in bonds offered for sale, and foreign underwriters offered no cash, only promises (that were ultimately never honored). Eager to make the USSC more attractive to investors but facing a huge shortfall in funds, the promoters turned to Charles M. Schwab
, then president of United States Steel, to discuss USSC acquiring Bethlehem Steel Company (which at the time was more sound than the shipyards already in the combination). With little cash to offer for Bethlehem (then held by a J.P. Morgan syndicate), the promoters instead proposed to pay for the acquisition with $7.2 million in cash and $2.5 million in USSC stock issued against the plants themselves. The cash came from Schwab, who furnished it on conditions that were highly favorable to him. By bringing Bethlehem into the combination, however, USSC could send a message to potential investors that Morgan was now behind the overall venture, and claim to be the world’s only company capable of building a battleship complete with armament, armor and all equipment.
In August 1902 USSC purchased the Union, Bath, Hyde Windlass, Crescent, Moore, Eastern, Harlan & Hollingsworth shipyards, the Canda Manufacturing company, and the capital stock of Bethlehem Steel. The par value
of these transactions totaled $69.5 million – yet (with the exception of Bethlehem Steel) the total value of the companies was appraised at less than $12.5 million. It soon became clear that the Bath, Crescent, Moore, Eastern, and Harlan & Hollingsworth shipyards were deeply indebted, and that the new trust lacked the ability to meet charges arising from the bond issuance. The goal of organizing a huge trust had been accomplished, but the result was doomed to fail, because from the start it was "already a water-logged wreck." The promoters were immediately forced to personally borrow $1.5 million from New York banks, to make up for cash that never arrived from foreign subscribers. USSC’s problems brought down the Trust Company of the Republic, which had placed its own future on the line when arranging USSC’s financing, by purchasing the largest share of bonds.
In September 1902, when Young was in France in a futile attempt to convince subscribers to invest, Ann Pulitzer, a former prostitute, was murdered in his New York apartment. His son William Hooper Young, who had been living there, eventually pled guilty to second-degree murder. Prosecutors accepted the plea and dropped first-degree murder charges because of evidence that Hooper Young was mentally ill.
. A federal court appointed former U.S. Senator James Smith Jr. as the receiver. The company emerged from receivership, without Nixon, as Bethelem Shipbuilding and Steel Company
, in 1904.
.
In 1905 John S. Hyde, son of the founder of the Bath Iron Works, purchased the Iron Works and Hyde Windlass Co. from the surviving company, which had bought the companies out of the receivership. It flourished as a supplier of major ships to the U.S. Navy.
Bethlehem Shipbuilding and Steel repurchased and kept for itself the Union Iron Works in San Francisco and the Harlan & Hollingsworth Co. shipyard in Delaware (and began purchasing other shipyards). The name of the Delaware operation changed from Harlan & Hollingsworth to the Harlan Plant of Bethlehem Steel. That shipyard closed in 1926, although it was reopened for a time during the Second World War and part of the shipyard was used by the Dravo Corporation
until 1964.
Litigation arising from USSC’s collapse continued for many years, as various victims sought relief against alleged wrongdoers. Plaintiffs in such suits included former New York Governor Benjamin Barker Odell, Jr., railroad president John Caldwell Calhoun (grandson of the former vice president
of the same name), and John W. Young, originator of the idea. In 1915, Smith (whose own financial enterprises had collapsed) was suing Schwab for fees allegedly owed him from his USSC receivership. In 1918, New York's highest court ordered a retrial of claims by shareholders of the Trust Company of the Republic against railroad president George Gould, a member of its board of directors who failed to attend any of the meetings where key votes were cast. On remand, the court ruled against Gould, and entered a $723,583 judgment against him in September 1919.
Bethlehem Steel
The Bethlehem Steel Corporation , based in Bethlehem, Pennsylvania, was once the second-largest steel producer in the United States, after Pittsburgh, Pennsylvania-based U.S. Steel. After a decline in the U.S...
to become Bethlehem Shipbuilding & Steel Company
Bethlehem Shipbuilding Corporation
Bethlehem Steel Corporation Shipbuilding Division was created in 1905 when Bethlehem Steel Corporation acquired the San Francisco shipyard Union Iron Works in 1905...
.
At the turn of the 20th century, John Willard Young
John Willard Young
John Willard Young was a leader in The Church of Jesus Christ of Latter-day Saints . He is one of the few individuals to have been an apostle of the LDS Church and a member of the First Presidency without ever having been a member of the Quorum of the Twelve Apostles.-Early life and apostolic...
, a son of Mormon pioneer Brigham Young, promoted the idea that many leading American shipbuilding companies should form one gigantic combination. The United States Shipbuilding Company was the manifestation of that idea.
Under that idea, the enterprise's central designing office would apportion the shipbuilding work to the yards best able to take it, to better compete with European shipyards. Although American shipbuilding was not considered a highly profitable venture, the political environment seemed right for improvement. President William McKinley
William McKinley
William McKinley, Jr. was the 25th President of the United States . He is best known for winning fiercely fought elections, while supporting the gold standard and high tariffs; he succeeded in forging a Republican coalition that for the most part dominated national politics until the 1930s...
and his new Vice President, Theodore Roosevelt
Theodore Roosevelt
Theodore "Teddy" Roosevelt was the 26th President of the United States . He is noted for his exuberant personality, range of interests and achievements, and his leadership of the Progressive Movement, as well as his "cowboy" persona and robust masculinity...
, had endorsed federal subsidies for American shipbuilding industries, to compensate for the subsidies provided by European governments, but Congress had not yet approved such a measure. A renowned naval architect and public servant, Lewis Nixon
Lewis Nixon (naval architect)
Lewis Nixon I was a naval architect, shipbuilding executive, public servant, and political activist. He designed the United States' first modern battleships, and supervised the construction of its first modern submarines, all before his 40th birthday. He was briefly the leader of Tammany Hall...
, was chosen to lead the venture, and helped to attract several major shipyards to participate.
Unfortunately, however, "the one thing [the consolidated firms] lacked, individually and collectively, was a realistic prospect of earning sustained profits." Financially the corporation failed almost immediately. As one scholar would later write of this plan, “the theory was impossible; the condition was untenable; the trust, as it was manufactured, was impracticable; and the United States Shipbuilding Company was insolvent.”
Groundwork
Newport News, Virginia
Newport News is an independent city located in the Hampton Roads metropolitan area of Virginia. It is at the southeastern end of the Virginia Peninsula, on the north shore of the James River extending southeast from Skiffe's Creek along many miles of waterfront to the river's mouth at Newport News...
), then approached Nixon, who was then the lessor of the Crescent Shipyard
Crescent Shipyard
Crescent Shipyard, located in Elizabeth, New Jersey, built a number of ships for the United States Navy and allied nations as well during their production run, which lasted about ten years while under the Crescent name and banner. Production of these ships began before the Spanish-American war and...
in Elizabethport, New Jersey
Elizabethport, New Jersey
A neighborhood in the City of Elizabeth, New Jersey. Formerly home of the Singer Manufacturing Company, makers of Singer Sewing Machines....
. Nixon agreed to work with Young in forming the proposed combination, and granted him an option on his own plant. They then obtained options to purchase other shipbuilding companies. Working with a cotton industry bank known as the Trust Company of the Republic, they sought out underwriters, and planned to issue stock and sell bonds, in order to provide the funds to buy the plants and then operate them at a profit.
An initial prospectus
Prospectus
Prospectus may refer to:* Prospectus * Prospectus * Prospectus * Parkland College's newspaper...
was prepared for issue on May 7, 1901, but the actual issuance was withheld at the last moment because of what became known as the Northern Pacific “short squeeze” of 1901, a panic that occurred on that date. A news dispatch of that date described the proposed combination. It described a combination that would include Union Iron Works
Union Iron Works
Union Iron Works, located in San Francisco, California, on the southeast waterfront, was a central business within the large industrial zone of Potrero Point, for four decades at the end of the nineteenth and beginning of the twentieth centuries.-History:...
(of San Francisco), Bath Iron Works
Bath Iron Works
Bath Iron Works is a major American shipyard located on the Kennebec River in Bath, Maine, United States. Since its founding in 1884 , BIW has built private, commercial and military vessels, most of which have been ordered by the United States Navy...
of Bath, Maine
Bath, Maine
Bath is a city in Sagadahoc County, Maine, in the United States. As of the 2000 census, the city population was 9,266. It is the county seat of Sagadahoc County. Located on the Kennebec River, Bath is a port of entry with a good harbor. The city is popular with tourists, many drawn by its...
, Hyde Windlass Co. (also of Bath), Crescent Shipyard, Samuel J. Moore & Sons Co. of Elizabethport, New Jersey, Canda Manufacturing Co. of Carteret, New Jersey
Carteret, New Jersey
Carteret is a borough in Middlesex County, New Jersey, United States. As of the 2010 United States Census, the borough population was 22,844.Carteret was created as the borough of Roosevelt on 11 April 1906, incorporating Woodbridge Township, and was a result of a referendum on 22 May 1906...
, and Newport News Shipping and Drydock Co. All but Canda Manufacturing were shipyards, and Canda (which manufactured car wheels) reportedly owned a prime location near Staten Island
Staten Island
Staten Island is a borough of New York City, New York, United States, located in the southwest part of the city. Staten Island is separated from New Jersey by the Arthur Kill and the Kill Van Kull, and from the rest of New York by New York Bay...
for construction of a new shipyard.
Three months later, it was again announced (again prematurely) that the new corporation would be launched in a few days. This time, British arms manufacturer Vickers Sons & Maxim
Vickers
Vickers was a famous name in British engineering that existed through many companies from 1828 until 1999.-Early history:Vickers was formed in Sheffield as a steel foundry by the miller Edward Vickers and his father-in-law George Naylor in 1828. Naylor was a partner in the foundry Naylor &...
, which had acquired the William Cramp & Sons shipyard in Philadelphia, and the Bethlehem Ship & Armor Plate works were included on the published list of interests included in the corporation. Ultimately, Vickers stayed out of the venture.
In September 1901, while the USSC was still just a concept, Roosevelt replaced the assassinated President McKinley. Roosevelt had crusaded against trusts, and his elevation created a hostile environment toward formation of combinations like USSC, marked by the Department of Justice’s
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
suit in February 1902 to prevent the formation of the Northern Securities Company
Northern Securities Company
The Northern Securities Company was an important United States railroad trust formed in 1902 by E. H. Harriman, James J. Hill, J.P. Morgan, J. D. Rockefeller, and their associates. The company controlled the Northern Pacific Railway, Great Northern Railway, Chicago, Burlington and Quincy Railroad,...
railroad trust. Meanwhile, federal shipyard subsidy legislation stalled in Congress.
The 1902 rollout
Wilmington, Delaware
Wilmington is the largest city in the state of Delaware, United States, and is located at the confluence of the Christina River and Brandywine Creek, near where the Christina flows into the Delaware River. It is the county seat of New Castle County and one of the major cities in the Delaware Valley...
, and Eastern Shipbuilding Company of New London, Connecticut
New London, Connecticut
New London is a seaport city and a port of entry on the northeast coast of the United States.It is located at the mouth of the Thames River in New London County, southeastern Connecticut....
were now included.
The June 1902 prospectus stated, among other things, that the USSC had been organized under the laws of the State of New Jersey and described as its directors Nixon, Henry T. Scott (president of Union Iron Works), Charles J. Canda (president of Canda Manufacturing Co.), John S. Hyde (president of Hyde Windlass Co.), E. W. Hyde (president of Bath Iron Works), and Irving M. Scott (Vice President and General Manager of Union Iron Works). In fact, incorporation had not yet occurred, and the board had not yet been constituted. Once the company was organized several months later, only four of those mentioned in the prospectus as directors ever served as directors. The prospectus also stated that the plants were earning $2.25 million for a year and had abundant facilities for additional work and increased earnings.
Even with positive representations in the prospectus, however, the public purchased less than $500,000 of the $9 million in bonds offered for sale, and foreign underwriters offered no cash, only promises (that were ultimately never honored). Eager to make the USSC more attractive to investors but facing a huge shortfall in funds, the promoters turned to Charles M. Schwab
Charles M. Schwab
Charles Michael Schwab was an American steel magnate. Under his leadership, Bethlehem Steel became the second largest steel maker in the United States, and one of the most important heavy manufacturers in the world....
, then president of United States Steel, to discuss USSC acquiring Bethlehem Steel Company (which at the time was more sound than the shipyards already in the combination). With little cash to offer for Bethlehem (then held by a J.P. Morgan syndicate), the promoters instead proposed to pay for the acquisition with $7.2 million in cash and $2.5 million in USSC stock issued against the plants themselves. The cash came from Schwab, who furnished it on conditions that were highly favorable to him. By bringing Bethlehem into the combination, however, USSC could send a message to potential investors that Morgan was now behind the overall venture, and claim to be the world’s only company capable of building a battleship complete with armament, armor and all equipment.
In August 1902 USSC purchased the Union, Bath, Hyde Windlass, Crescent, Moore, Eastern, Harlan & Hollingsworth shipyards, the Canda Manufacturing company, and the capital stock of Bethlehem Steel. The par value
Par value
Par value, in finance and accounting, means stated value or face value. From this comes the expressions at par , over par and under par ....
of these transactions totaled $69.5 million – yet (with the exception of Bethlehem Steel) the total value of the companies was appraised at less than $12.5 million. It soon became clear that the Bath, Crescent, Moore, Eastern, and Harlan & Hollingsworth shipyards were deeply indebted, and that the new trust lacked the ability to meet charges arising from the bond issuance. The goal of organizing a huge trust had been accomplished, but the result was doomed to fail, because from the start it was "already a water-logged wreck." The promoters were immediately forced to personally borrow $1.5 million from New York banks, to make up for cash that never arrived from foreign subscribers. USSC’s problems brought down the Trust Company of the Republic, which had placed its own future on the line when arranging USSC’s financing, by purchasing the largest share of bonds.
In September 1902, when Young was in France in a futile attempt to convince subscribers to invest, Ann Pulitzer, a former prostitute, was murdered in his New York apartment. His son William Hooper Young, who had been living there, eventually pled guilty to second-degree murder. Prosecutors accepted the plea and dropped first-degree murder charges because of evidence that Hooper Young was mentally ill.
The collapse
Within a year of its incorporation, Schwab took control of USSC, but USSC’s mortgageholders soon forced it into receivershipReceivership
In law, receivership is the situation in which an institution or enterprise is being held by a receiver, a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights." The receivership remedy is an equitable remedy that emerged in...
. A federal court appointed former U.S. Senator James Smith Jr. as the receiver. The company emerged from receivership, without Nixon, as Bethelem Shipbuilding and Steel Company
Bethlehem Shipbuilding Corporation
Bethlehem Steel Corporation Shipbuilding Division was created in 1905 when Bethlehem Steel Corporation acquired the San Francisco shipyard Union Iron Works in 1905...
, in 1904.
Aftermath
One of USSC’s first actions was to close Nixon’s Crescent Shipyard. By then, Nixon had re-entered the shipbuilding business by leasing a yard in Perth Amboy, New JerseyPerth Amboy, New Jersey
Perth Amboy is a city in Middlesex County, New Jersey, United States. The City of Perth Amboy is part of the New York metropolitan area. As of the 2010 United States Census, the city population was 50,814. Perth Amboy is known as the "City by the Bay", referring to Raritan Bay.-Name:The Lenape...
.
In 1905 John S. Hyde, son of the founder of the Bath Iron Works, purchased the Iron Works and Hyde Windlass Co. from the surviving company, which had bought the companies out of the receivership. It flourished as a supplier of major ships to the U.S. Navy.
Bethlehem Shipbuilding and Steel repurchased and kept for itself the Union Iron Works in San Francisco and the Harlan & Hollingsworth Co. shipyard in Delaware (and began purchasing other shipyards). The name of the Delaware operation changed from Harlan & Hollingsworth to the Harlan Plant of Bethlehem Steel. That shipyard closed in 1926, although it was reopened for a time during the Second World War and part of the shipyard was used by the Dravo Corporation
Dravo Corporation
Dravo Corporation was a shipbuilding company with shipyards in Pittsburgh, Pennsylvania and Wilmington, Delaware. It was founded by Frank and Ralph Dravo in Pittsburgh during the 1890s.-Facilities:...
until 1964.
Litigation arising from USSC’s collapse continued for many years, as various victims sought relief against alleged wrongdoers. Plaintiffs in such suits included former New York Governor Benjamin Barker Odell, Jr., railroad president John Caldwell Calhoun (grandson of the former vice president
John C. Calhoun
John Caldwell Calhoun was a leading politician and political theorist from South Carolina during the first half of the 19th century. Calhoun eloquently spoke out on every issue of his day, but often changed positions. Calhoun began his political career as a nationalist, modernizer, and proponent...
of the same name), and John W. Young, originator of the idea. In 1915, Smith (whose own financial enterprises had collapsed) was suing Schwab for fees allegedly owed him from his USSC receivership. In 1918, New York's highest court ordered a retrial of claims by shareholders of the Trust Company of the Republic against railroad president George Gould, a member of its board of directors who failed to attend any of the meetings where key votes were cast. On remand, the court ruled against Gould, and entered a $723,583 judgment against him in September 1919.