Barging Ahead

When the U.S. was opening its frontier and beginning to build a national economy, Wells Fargo and Union Pacific earned a place in the country's history and legend. In existence as an independent nation for only 21 years, the Philippine Republic is still pushing back its own frontiers, and it has a carrier that is playing much the same part as the U.S. pioneers. It is Lusteveco (short for Luzon Stevedoring Co.), the biggest and fastest-growing commercial cargo handler in transportation-shy Southeast Asia.

Based in Manila, Lusteveco operates both on land and sea, and its frontier is formidable. Half of the country's 38,000 miles of roadway is ordinarily undrivable. Its waterways, which are more important than the land routes, trace a hazardous course among 7,000 islands ranging from Luzon in the typhoon-tossed north to Mindanao, 1,100 miles to the south where the seas are placid--except for roving Moro pirates.

Postwar Windfall. Braving such obstacles, Lusteveco deploys a fleet of 500 trucks on land, a small coastal navy of 16 tankers, 107 tugs and 448 barges at sea, and a string of modern warehouses at major ports. The company moves 80% of the country's vital interisland traffic: home-grown timber, coconut and sugar on its way to port for overseas markets; steel, machinery and other imports headed from Luzon to other parts of the nation. Lusteveco stevedores shoulder nearly all the Philippines' foreign trade borne by ships, which may be docked by Lusteveco tugs, provisioned at Lusteveco terminals, rescued by Lusteveco salvage teams, repaired at Lusteveco yards.

The company totted up record sales of $26 million last year, which is a long Philippine sea mile from its beginning in 1909, a decade after Commodore Dewey routed the Spanish colonialists in Manila Bay. Founded by a group of U.S. veterans of the Spanish-American War, Lusteveco got its modest start by bunkering coal-hungry U.S.

Navy ships, branched into commercial cargo handling as Philippine exports began to rise. When World War II came, the Navy commandeered all the company's facilities. After the Japanese conquest of the island nation, all seemed lost for Lusteveco--until it received a handsome postwar windfall. In 1945, with the approval of General Douglas MacArthur, the company was given a treasure in surplus LSTs, cranes and trucks to replace its lost equipment.

Lusteveco's U.S. owners, including Edward M. Grimm and Charles ("Chick") Parsons, who was a Navy guerrilla in World War II (and later told about it in Rendezvous by Submarine), promptly set about rebuilding. By 1963, Grimm, Parsons and colleagues were able to sell their 50% interest for $6.6 million to a group of Filipino businessmen and investors headed by Jose B. Fernandez, now 43 and the company's chairman. U.S.-educated (Fordham, Harvard Business School) and a member of a wealthy Manila family, Fernandez tapped as president a young American: Donald I. Marshall, 37, son of one of Lusteveco's prewar managers and a Lusteveco staffer who joined the company afer graduating from Stanford Business School in 1950.

Missionary Zeal. Under Fernandez and Marshall, Lusteveco has barged ahead with a sort of missionary zeal. Sales have almost doubled since 1963, but the company is chary with dividends. It plows nearly all its earnings back into expansion. "Until we are sure we can meet the needs of the country," explains Fernandez, "we will continue to give that first priority and dividends second."

To meet those needs, Lusteveco has been spending some $4,000,000 a year on new equipment, which is a lot by Philippine standards. Its own yards at II-oilo turn out a new tug every six weeks, two new barges a month--most of them prestressed concrete creatures that carry 2,000 tons of cargo, are cheaper and easier to maintain than standard steel barges.

Standard as such hardware and experience may be in other parts of the world, it is in short supply in Southeast Asia, as U.S. military logistics experts have discovered to their chagrin. Lusteveco tugs and barges helped break the Saigon shipping bottleneck, and the company is bidding for similar work at Thailand's choked port of Bangkok. Still, happy as he is to have the U.S. military business (which now accounts for 12% of sales), Fernandez finds that he is hard-pressed to "accommodate that Viet Nam effort," looks for the day when he can "bring back a lot of the equipment and put it to work" at home.

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