'56 Packard Man

In August of 1958, Matson’s Hawaiian Merchant carried 20 containers from Alameda/Oakland, California to Hawaii, the first containerized cargo run in the Pacific.

In last Sunday’s post about the Lurline and Matson Lines, we briefly mentioned that Matson had championed containerized shipping of cargo on the West coast. Today we will explore the origins of containerized shipping and how the concept revolutionized shipping, transportation and the global economy.

The genius behind the concept was a North Carolina farm boy-turned trucker: Malcolm McLean. Matson ran with the idea on the West Coast, but it was Malcolm McLean who sparked this world-wide transformation of shipping and transportation.

Malcolm McLean

As a youth growing up on a farm in a small town of Maxton, North Carolina, McLean learned early on about the value of hard work and determination: His father was a farmer who also worked as a mail carrier to supplement the family’s income. When young Malcolm graduated from high school in 1931, the country was in the midst of the Depression and further schooling was simply not possible. Pumping gas at a service station near his hometown, McLean saved enough money by 1934 to buy a second-hand truck for $120. This purchase set McLean on his lifelong career in the transportation industry.

McLean’s vision totally transformed the centuries-old shipping industry, an industry that had long decided that it had no incentive to change. Containerization brought the greatest changes to water transportation since steamships replaced sailing vessels. And it came just in time to save the American Merchant Marine from going down with all hands under the burden of rapidly-rising costs and foreign flag competition. By developing the first safe, reliable, and cost effective approach to transporting containerized cargo, McLean made a contribution to maritime trade so phenomenal that he has been compared to the father of the steam engine, Robert Fulton.

After purchasing his truck in 1934, McLean began hauling dirt, produce, and other odds and ends for the farming community in Maxton, where reliable transportation was hardly commonplace. Eventually, he purchased five additional trucks and hired a team of drivers, a move that enabled him to get off the road and look for new customers. For the next two years, his business thrived, but when poor economic conditions (the sharp Roosevelt Recession-in-a-Depression of 1937) forced many of his newly won customers to withdraw their contracts, McLean scaled down his operation and got behind the wheel again.

During this setback in his life, McLean came across the idea that changed his destiny. The year was 1937, and McLean was delivering cotton bales from Fayetteville, North Carolina, to Hoboken, New Jersey. Arriving in Hoboken, McLean was forced to wait hours to unload his truck trailer. He recalled: “I had to wait most of the day to deliver the bales, sitting there in my truck, watching stevedores load other cargo. It struck me that I was looking at a lot of wasted time and money. I watched them take each crate off the truck and slip it into a sling, which would then lift the crate into the hold of the ship.” It would be nineteen years before McLean converted his thought into a business proposition.

For the next decade and a half, McLean concentrated on his trucking business, and by the early 1950s, with 1,776 trucks and thirty-seven transport terminals along the eastern seaboard, he had built his operation into the largest trucking fleet in the South and the fifth-largest in the country. As the trucking business matured, states adopted a new series of weight restrictions and levying fees. Truck-trailers passing through multiple states could be fined for excessively heavy loads. It became a balancing act for truckers to haul as much weight as possible without triggering any fees. McLean knew that there must be a more efficient way to transport cargo, and his thoughts returned to the shipping vessels that ran along the U.S. coastline. He believed “that ships would be a cost effective way around shoreside weight restrictions . . . no tires, no chassis repairs, no drivers, no fuel costs . . . Just the trailer, free of its wheels. Free to be lifted unencumbered. And not just one trailer, or two of them, or five, or a dozen, but hundreds, on one ship.” To some extent, McLean’s vision was not entirely new. As far back as 1929, Seatrain had carried railroad boxcars on its sea vessels to transport goods between New York and Cuba. In addition, it was not uncommon for ships to randomly carry large boxes on board, but no shipping business was dedicated to a systematic process of hauling boxed cargo.

Seeing the feasibility of these types of operations may have inspired McLean to take the concept to a new level. Transporting “containerized cargo” seemed to be a natural, cost-effective extension of his business. McLean initially envisioned his trucking fleet as an integral part of an extended transportation network. Instead of truckers traversing the eastern coastline, a few strategic trucking hubs in the South and North would function as end points, delivering and receiving goods at key port cities. The ship would be responsible for the majority of the travel – leaving the trucks to conduct short, mostly intrastate runs generally immune from levying fees.

With that concept in mind, McLean redesigned truck trailers into two parts –  a truck bed on wheels and an independent box trailer, or container. He had not envisioned a Seatrain type of business, in which railroad boxcars were rolled onto the ship on their own wheels. Instead, McLean saw several stackable trailers in the hull of the ship. The trailers would need to be constructed of heavy steel so that they could withstand rough seas and protect their contents. They would also have to be designed without permanent wheel attachments and would have to fit neatly in stacks. McLean patented a steel-reinforced corner-post structure, which allowed the trailers to be gripped for loading from their wheeled platforms and provided the strength needed for stacking. At the same time, McLean acquired the Pan-Atlantic Steamship Company, which was based in Alabama and had shipping and docking rights in prime Eastern port cities.

Buying Pan-Atlantic for $7 million, McLean noted that the acquisition would “permit us to proceed immediately with plans for construction of trailerships to supplement Pan-Atlantic’s conventional cargo and passenger operations on the Atlantic and Gulf coasts.” He believed that his strong trucking company, combined with newly redesigned cargo ships, would become a formidable force in the transportation industry. Commenting on McLean’s controversial business plan, the Wall Street Journal reported: “One of the nation’s oldest and sickest industries is embarking on a quiet attempt to cure some of its own ills. The patients are the operators of coastwise and intercoastal ships that carry dry cargoes.” The cure, the article noted, was business operators like McLean who were breathing new life into the shipping industry.

Though McLean had resigned from the presidency of McLean Trucking and placed his ownership in trust, seven railroads accused him of violating the Interstate Commerce Act. The accusers attempted to block McLean from “establishing a coastwise sea-trailer transportation service.” A section of the Interstate Commerce Act stated that it “was unlawful for anyone to take control or management in a common interest of two or more carriers without getting ICC’s approval.” Ultimately unable to secure ICC’s endorsement, McLean was forced to choose between his ownership of his well-established trucking fleet or a speculative shipping venture. Though he had no experience in the shipping industry, McLean gave up everything he had worked for to bet on intermodal transportation. He sold his 75 percent interest in McLean Trucking for $6 million in 1955 and became the owner and president of Pan-Atlantic, which he renamed SeaLand Industries.

The maiden voyage for McLean’s converted oil tanker, the Ideal X, carried fifty-eight new containers from Port Newark, New Jersey, to Houston in April 1956. Industry followers, railroad authorities, and government officials watched the voyage closely. When the ship docked in Houston, it unloaded the containers onto trailer beds attached to non-McLean owned trucking fleets and its cargo was inspected. The contents were dry and secure. McLean’s venture had passed its first hurdle, yet it was just one of many obstacles that he encountered. He needed to convince lots of customers to rely less on his former business, trucking. McLean also needed to persuade port authorities to redesign their dockyards to accommodate the lifting and storage of trailers, and he needed to rapidly expand the scope of his operations to ensure a steady and reliable revenue stream. Securing new clients proved the least difficult, since McLean’s SeaLand service could transport goods at a 25 percent discount off the price of conventional travel, and it eliminated several steps in the transport process. In addition, since McLean’s trailers were fully enclosed and secure, they were safe from pilferage and damage, which were considered costs of business in the traditional shipping industry. The safety of McLean’s trailers also enabled customers to negotiate lower insurance rates for their cargo.

McLean’s next challenge was convincing port authorities to redesign their sites to accommodate the new intermodal transport operation. Although he received his first big break with the backing of the New York Port Authority chairman, McLean continued to run into resistance. The tide did not change until the older ports witnessed the financial resurgence of port cities that had adopted containerization. His business got an additional boost when the Port of Oakland, California, invested $600,000 to build a new container-ship facility in the early 1960s, believing that the new facility would “revolutionize trade with Asia.”

The Port of Oakland, working with Matson’s research department, seized upon the containerization idea. Matson’s containerization program for Hawaii was the product of its in-house research department, which was established in 1956 and was the first of its kind in the industry. It was a tremendous program, perhaps one of the most significant ever undertaken by an ocean carrier. Matson established its research department just as McLean shipped his first containerized load from New Jersey to Houston.

The Port of Oakland was visionary in establishing containerized shipping on the West Coast. It was a move that took the Northern California shipping crown from San Francisco. San Francisco as a port has never recovered its former glory. Part of the reason for this was intransigence of the Longshoreman and Stevedore union, the ILWU. The Union rank and file bitterly, even violently, fought containerization. To his credit, the union leader, Australian born Harry Bridges, recognized that containerization was the wave of the future and he fought both the union rank and file and company managements to secure a labor contract that recognized that containerization would all but replace the centuries-old break bulk method of handling cargo.

San Francisco’s finger-like piers are fine for cruise ships, but unworkable for containerized cargo. On the hill (Telegraph Hill) in the center of this image from 1970 is Coit Tower. In the distance is the Golden Gate Bridge.

Labor issues aside, the Port of Oakland’s coup over the Port of San Francisco was successful because of geography. San Francisco’s hilly landscape, heavily developed waterfront, and historic finger piers were not conducive to container port development, which required large expanses of open, flat ground. The Port of Oakland attracted shipping companies by developing container facilities on filled land near the western terminus of the Southern Pacific Railroad. The port’s links to major rail and road networks proved superior to those on the San Francisco side of the Bay.

Two views of the Port of Oakland. Above: seen in 1968, the landfill at the purpose-built container ship dock site has yet to be completed. In the distance is Mount Diablo, the highest point in the Bay Area at some 3,800 feet. Below: a view of the Port of Oakland from 1970 with only one container ship docked. Today, ships wait anchored in San Francisco Bay for their turn at the docks. 

Below: Matson ships and containers at Oakland.

480901_0.tif. MANUKAI 066>>AP4 BSA/Oct 7, 2003/BRUCE ASATO PHOTOStevedores handling the bow lines are dwarfed by the huge M/V Manukai, the newest container vessel in the Matson fleet. BIZ–KELLY STORY

Above: Matson’s latest Lurline is an 826.6 feet long “RoRo” (Roll-on, Roll-off) containership that can also carry 760 cars (thus the “RoRo”).

Matson’s engineers constructed a prototype container ship dock across the estuary from Oakland in Alameda, California. Along with that prototype dock was the first purpose-built container crane. McLean’s trial run container ship, Ideal X, was loaded and unloaded by conventional cranes. Matson was taking the next step. In 1958, Matson loaded a container of Gerber Baby Food and 19 other containers onto Hawaiian Merchant, which departed Alameda on 31 August, the first containerized load across the Pacific to Hawaii.

Above: A container of Gerber Baby Food is loaded onto Matson’s Hawaiian Merchant along with 19 other containers in the first containerized shipment to Hawaii, August, 1958. Below: Hawaiian Merchant sails toward the Golden Gate underway to Hawaii.

The transformation of the Matson fleet from break bulk to container vessels began in earnest in 1960, when the Hawaiian Citizen became the first vessel in the Pacific to be converted to a full containership. It was also the first vessel to incorporate a large-scale reefer container capacity into the company’s regular container service. The Safeway supermarket chain has long relied on Matson’s refrigerated cargo carrying ability to supply its stores in Hawaii.

While other Matson ships were converted to carry containers in the early 1960s, construction of the first containership in the world to be built from the keel up commenced in 1967, from a design developed by Matson’s own naval architects. That vessel, the Hawaiian Enterprise (later renamed Manukai), and her sistership, Hawaiian Progress (renamed Manulani), entered service in 1970 and marked the beginning of a new generation of containerships. The gains in productivity and efficiency were remarkable. In 1950, an average commercial vessel could carry 10,000 tons at a speed of 16 knots. Following the development of containerization, the average commercial vessel carried 40,000 tons at a speed of 23 knots. Ships loaded in the old break bulk cargo style often took as long as a week to unload.

With Matson going all-in for containerization on the West Coast, McLean pressed ahead elsewhere. The work of McLean and Matson toward containerization reflected a shared vision of the future of transportation, though it was not a deliberate, unified effort. It just happened that Matson and McLean were in sync with the development of containerization. With its tourist business to Hawaii and other Pacific ports of call  increasingly threatened by airlines and seeing its future in containerized cargo, Matson sold its hotels in Hawaii in 1959 to Sheraton. By 1970, Matson was completely out of the passenger ship business.

Angrily opposed by dockside unions nationwide, shippers and port authorities joined with McLean and Matson to develop containerization. The labor savings associated with McLean’s intermodal transportation business was a major victory for shippers and port authorities, but it was a huge threat to entrenched dockside unions. The traditional break-bulk process of loading and unloading ships and trucks necessitated huge armies of shore workers. For some ports, the real threat to the industry was not McLean but other modes of transportation that were making ship transport obsolete. By endorsing McLean’s business strategy, port officials believed that they were protecting the future of their business. If that meant fewer workers, so be it. They reasoned that it was better to have fewer workers in a prosperous enterprise than many in a declining one.

To achieve the dramatic reductions in labor and dock servicing time, McLean was vigilant about standardization and Matson engineers worked toward the same goals. McLean’s 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 Industrial Organization for Standardization (ISO). The move toward greater standardization helped broaden the possibilities for intermodal transportation. In less than fifteen years, McLean had built the largest cargo-shipping business in the world. By the end of the 1960s, McLean’s SeaLand Industries had 27,000 trailer-type containers, 36 container ships, and access to over thirty port cities. The Port of Oakland by 1970 had far eclipsed San Francisco as a port and today still ranks as one of the busiest ports in the nation. Matson’s pioneering A-frame gantry crane for loading and unloading containers is still in use.

When McLean set out to gamble on his idea of containerized cargo, he probably did not realize that he was revolutionizing an industry. McLean’s vision gave the shipping industry the jolt that it needed to survive for the next fifty years. By the end of the 20th century, container shipping was transporting approximately 90 percent of the world’s trade cargo. As the West Coast pioneer of containerized shipping, Matson ranks next to McLean for credit for bringing containerization to the world.

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Long gone from the passenger ship business, Matson is still, however, fondly remembered for its white ships calling on Pacific ports, particularly Hawaii: