$800 million deal sinks last U.S. global shipper

New owner Maersk to operate Sea-Land's international division

No American jobs lost

July 23, 1999|By Robert Little | Robert Little,SUN STAFF

An $800 million business deal cut the heart out of the American merchant marine yesterday, as a foreign shipping conglomerate carved up the last global ocean carrier based in the United States.

It was a paper transaction only. No American merchant seamen lost their jobs, and no U.S.-flagged ships were handed over to foreign crews.

But the sale of Sea-Land Service Inc.'s international shipping division to the Danish A. P. Moller Group was the latest, and perhaps strongest, blow to a merchant fleet that once circled the globe and dominated international commerce.

All of the great U.S. shipping lines have folded or been sold to foreign corporations. A few U.S. ocean carriers remain -- mostly petroleum companies and small regional lines -- but the worldwide reach of the U.S.-owned commercial shipping fleet is no more.

"It's sad," said Rob Quartel, a federal maritime commissioner under President George Bush. "They're the last big carrier. It seems like the fleet is slowly being destroyed."

The sale means that Maersk Inc., the container shipping division of A. P. Moller, will become the world's largest owner and operator of U.S-flagged merchant ships. Maersk, based in Copenhagen, Denmark, will take over 70 Sea-Land vessels, 19 of them flying the U.S. flag and employing Americans.

Part of Sea-Land will survive the deal. Maersk is purchasing only the international shipping division, which will leave Sea-Land with about 16 U.S.-flagged ships on routes linking the continental United States to Puerto Rico, Alaska, Hawaii and Guam.

But Sea-Land's transformation from an international powerhouse into a small niche carrier continues an industry trend that has seen U.S. shipping companies fall from a position of dominance in global commerce to one of near irrelevance.

Since the years after World War II, when U.S. shipping lines carried most ocean-borne goods worldwide, every global shipping line in the United States has sold out or disappeared.

Foreign labor is cheaper, foreign shipyards charge less to build ships and foreign flags require less stringent standards for safety and repairs. The small U.S. companies that remain trade largely between U.S. ports, routes that must use U.S. ships and labor by law. Rarely can those ships compete with foreign vessels and crews.

United States Lines went bankrupt. American President Lines was acquired by a Singapore transportation conglomerate. Lykes Lines withered and was bought by a Canadian railroad.

Now Maersk will own most of Sea-Land.

"It's the global trend right now. We're disappointed to see it come to an end," said Capt. Tim Brown, president of the International Organization of Masters Mates and Pilots, the union representing most U.S. deck officers in the merchant marine. "Our first concern is maintaining our jobs, though. And right now we're thankful that we're staying aboard the vessels."

At least for now, Maersk officials say, they will continue sailing Sea-Land's U.S.-flagged ships.

Few foreign carriers register their ships in the United States because that would require them to use American labor, which is the most expensive in the world. But Maersk officials said they plan to collect subsidies from the U.S. government of about $2 million a ship -- the same subsidies paid to Sea-Land -- and keep the vessels in the U.S. registry.

Several labor officials said they were sorry to see Sea-Land sold, but most said they were thankful that Maersk was the buyer. The Danish shipping line, the largest in the world, is among the most respected and has a record of investing in the shipping business.

"We welcome Maersk into the U.S. merchant marine," said Robert McFeeters, secretary and treasurer of the Marine Engineers Beneficial Association, the union representing most U.S. shipboard engineers. "International conglomeration is the way the world is going. They have tremendous financial clout and a very widespread professional operation."

The decision to sell Sea-Land was a financial one. The company collected $3.9 billion in revenue last year but posted a $70 million net loss.

Sea-Land has battled the Asian trade drought and low rates that beset every modern ocean carrier, and its parent corporation, CSX Corp. of Richmond, Va., has complained that it is a drag on profits.

CSX split Sea-Land into three pieces this year -- a domestic shipping line, an international shipping line and a marine terminal operator -- a clear sign, analysts said, that a sale was imminent.

Maersk was a likely suitor. Since 1991, Sea-Land and Maersk have used space on each other's ships and shared some operational costs.

The two companies considered Baltimore this year as the site of a jointly operated cargo center but chose to stay in New York Harbor.

Sea-Land was the first ocean carrier to pack cargo in steel containers that fit onto the back of trucks. Using an old T-2 tanker converted in a Baltimore shipyard, it hauled 58 containers from Elizabeth, N.J., to Houston in April 1956. The method is now standard worldwide.

Maersk, with U.S. headquarters in Madison, N.J., sails several U.S.-flagged ships and has received military clearance to haul government cargo.

The sale of Sea-Land requires regulatory approval and is expected to be completed in about four months. The merged U.S. operations would move to Maersk's New Jersey headquarters and operate under the name Maersk-SeaLand.

Maersk and Sea-Land ships stopped calling in Baltimore several years ago, but both operate barge services in the city for container cargo shipped to and from Norfolk, Va. Company officials would not say what the takeover might mean for those operations, but one suggested they would be merged.

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