End of an Experiment

In its campaign to get the Government out of competition with private business, the Eisenhower Administration last week registered its first sale. The Inland Waterways Corp., which was begun by the Coolidge Administration in 1924, was sold to St. Louis Shipbuilding and Steel Co.'s new subsidiary, Federal Waterways Corp. of Delaware, for about $9,000,000. St. Louis Shipbuilding is owned by Herman T. Pott, 58, who has never before run a river freight system, though he is the largest U.S. builder of towboats and a leading builder of barges. (In the last 10 years he has supplied 20% of I.W.C.'s new vessels.)

Started as an "experiment" to promote inland water transportation, the I.W.C. (better known as Federal Barge Lines)* has been in the red for 17 of its 29 years, last year turned its first profit ($379,385) since 1943. In all, the U.S. has pumped about $27 million into the line, has taken a $13 million operating loss. Three Secretaries of Commerce (Henry Wallace, W. Averell Harriman and Charles Sawyer) who tried to sell the line failed. Secretary of Commerce Sinclair Weeks succeeded by narrowing a field of 208 prospective bidders down to seven and then employing some vigorous salesmanship.

The Government's sale terms were stiff. Though Federal Waterways made no down payment, it must put up an operating capital of $1,000,000, pay off the purchase price within ten years on a graduated schedule of payments at 3 3/4% interest. Until the debt is paid, Federal can declare no dividends, and will have to pay taxes of from $250,000 to $500,000 in each of the next few years. For the next 20 years it will also have to provide about the same number of trips I.W.C. did or be taken into court by the Government.

*One of the largest inland barge systems in the U.S., operating on 3,300 miles of the Mississippi and its tributaries in eleven Midwestern and Southern states. Physical assets: 253 barges, 4 tugs, 20 towboats, 20 new barges and one new towboat to be delivered this year, and a profitable 18-mile railroad.

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