Profits and Loss

In 18 months South Portland (Me.) Shipbuilding Corp. built only eight of the 84 Liberty Ships called for by its contract with the U.S. Maritime Commission. This was the worst record anywhere--but South Portland Ship's profits already were nearly 200% and could run up to 2,000% on the investment. Last week the House Merchant Marine Committee told why.

For three months the committee had investigated the plant, organized by William S. ("Pete") Newell, president of Bath Iron Works and good friend of Maritime Commission head Rear Admiral Emory S. Land. Pete Newell and associates had organized the firm with $250,000 borrowed from Portland banks (the interest to be paid by the Maritime Commission) and up to Oct. 31 had received $450,000 in fees from the Commission.

But, the committee now reported, "the inevitable conclusion is that South Portland Ship is receiving a fee for the trouble of incorporating a company, choosing a name for that company, holding an occasional directors' meeting and delegating the performance of its contract duties."

Just as bluntly the committee listed other faults and put them right up to Jerry Land. Samples: 1) South Portland Ship's contract for yard facilities has no limit on time, almost none on costs; 2) the company lacked skilled managers, promoted green laborers to superintendents in five months; 3) because of sloppy records 75 carloads too much lumber were delivered and had to be paid for by the Maritime Commission; 4) as much as $1,500 a month each was paid for renting cranes, pumps, compressors on a time-used basis but no time record.was kept; 5) a director's friend supplied trucks at $114 a day for work that could have been done with flatcars at 50-c- a day; 6) for a storage area (owned by a subsidiary of the Maine Central R.R., of which Pete Newell is a director) that used to rent for $15,000 or less a year, South Portland Ship is paying $36,000 a year.

Plus Bonus. The investigating Congressmen got even madder about Maritime Commission's financial arrangements. For building a Liberty ship (average cost $1,800,000), the standard contractor's fee, covering undefined "overhead," is $110,000--based on a par building time of 105 days. Days saved can raise the fee to a $140,000 maximum; days over par can dock it to a minimum of $60,000. Every item chargeable to the building of a ship the Maritime Commission pays. Thus Pete Newell and associates stand to make more than $5 million on the 84 ships without putting up a nickel of their own, and despite alleged incompetence, inefficiency and delay.

The Defense. All this, reported the Congressmen, was known to Jerry Land's Maritime Commission, which did no more than plead with South Portland Ship for better performance and belatedly hire a skilled production man to have charge of operations.

To Friend Pete Newell's defense came Admiral Land, hard-working believer in Navy traditions: Pete knows how to construct destroyers; South Portland is not the only example of bad management in the Liberty ship program; there is too great a dearth of first-class shipbuilders to warrant a drastic step.

Dryly the committee pointed out to Land the hard facts of Newell's record, recommended: 1) that South Portland Ship's contracts be canceled; 2) the committee investigate other badly managed shipyards. This week both recommendations seemed well along to fulfillment.

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