Shipping: Matson’s Rescue Drill

“Matson Lines” used to mean white cruisers ribboning through Hawaiian islands with luau, leis and instant romance for all aboard. As a business. Matson (1962 revenues: $100 million) is somewhat less glamorous. Labor troubles and stockholder squabbles led it into a storm that climaxed in an operating loss of $2,400,000 in 1961. Then, Matson called in a new skipper, Stanley Powell Jr., 46, rounding out his first year as president, proved last week that he has begun to bring the line back into clearer sailing weather: he reported that Matson earned $2,249,000 in 1962, and had the best showing in six years on its all-important run to Honolulu.

Serving the Owners. The line that was launched in 1882 by far-seeing Captain William Matson grew rich and lazy over the years as it came to dominate traffic between California and Hawaii. Long after Captain Matson’s death in 1917 his successors began to battle. A California-based faction, including the captain’s heirs, wanted to continue Matson’s diversification into such things as hotels and oil and insurance companies to keep the conservative old line growing with the times. But a controlling faction led by three of Hawaii’s “Big Five” companies* prevailed. They sold off Matson’s non-shipping properties, including its famous hotels on the beach at Waikiki, and insisted that Matson stick to Hawaiian shipping, on which much of their fortunes depended. Hawaii buys 65% of all its goods from the mainland.

But concentration on Hawaiian shipping made Matson a helpless victim of six Pacific ocean-going unions. Even though its Hawaii run was not subsidized by the U.S. Government, Matson had to follow suit when subsidized U.S. shipping lines gave in to frequent wage demands to avoid strikes. Result: labor now accounts for half of its operating costs on freighters and even more on passenger liners. High operating costs have also led to freight-rate rises of 48% since 1957, prompting many Hawaiian businessmen to blame Matson for the island’s dizzily high prices and to shop for alternate shipping lines. Containing the Cargo. Powell has modernized the line’s management and stepped up modernization of its fleet. Matson has converted one freighter into a floating garage to haul cars to Hawaii, and two others into bulk sugar carriers that pump their cargoes directly into the California refineries. But most of Matson’s $27 million investment since 1957 has gone toward outfitting its ships with trailerlike aluminum containers that make handling easier. Because of the savings, Matson has cut rates for containerized freight to 20% below its regular freight rates.

Matson still has its troubles. Despite hoopla promotion, its two Honolulu-bound passenger liners lost $2,200,000 last year. Now the Lurline is down with a nervous turbine. Matson would like to retire her, or to shift her or her sister, the Matsonia, away from Hawaii to the subsidized South Seas run. At a price of $1,500,000 in wage increases this year, Matson has bought labor peace at least through mid-1964. President Powell is wary of pushing the unions too hard with automation plans, and he does not believe in bragging too much about the future. Says he: “We’ve had our hands full just getting into the shape where we have any future at all.”

* The three, which together own 72% of Matson stock: Alexander & Baldwin, Castle & Cooke, and C. Brewer & Co.