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Discussion Starter #1 (Edited by Moderator)
Contents
  • 1 Pirrie's disastrous over-expansion of Harland & Wolff using RMSP funds
  • 2 The Commission Club
  • 3 Standard Ship Designs
  • 4 Bullard King
  • 5 South American service problems
  • 6 Royal Mail transatlantic service
  • 7 The return to peacetime work at Harland & Wolff
  • 8 Harland & Wolff's labour and political troubles
  • 9 Harland & Wolff expansion on mainland Britain
  • 10 Resumption of Harland & Wolff's financial difficulties
  • 11 The collapse of the post war shipping boom
  • 12 The ownership of Harland & Wolff in 1921
  • 13 German war reparations
  • 14 The Trade Facilities Act and the Northern Ireland Loans Guarantee Act
  • 15 Adda - The First New-Built Diesel Powered Large Passenger Liner
  • 16 Harland & Wolff Contractual Difficulties
  • 17 The Death of Viscount Pirrie
  • 18 Kylsant obliged to take control of Harland & Wolff
  • 19 Bibliography
  • 20 Photographs
Pirrie's disastrous over-expansion of Harland & Wolff using RMSP funds[edit]

When Owen Cosby Philipps was appointed chairman of Royal Mail Steam Packet Co in 1903 it was moribund. By the outbreak of the First World War, he had transformed the company into the flagship of a dynamic leading British shipping group. Most of this expansion was undertaken in collaboration with his friend and close business associate, William James Pirrie of Harland & Wolff (H&W). The story of this breakneck expansion is told in Parts 1 and 2 of this history, culminating in Philipps joining Pirrie to take financial control of H&W in 1918. Part 3 relates the post-war history of their joint endeavour. H&W had such a major impact upon the finances and activities of the Royal Mail group that the shipbuilder's activities dominate Part 3 of this history.

The two friends, who were in control of a massive shipping and shipbuilding enterprise, were well aware of the problems facing them. Sir Owen Philipps was concerned to re-establish the Royal Mail group operations on routes that had been abandoned during the war. In some cases the services had been taken over by American and neutral shipping companies. His companies needed to refit their surviving fleets and most needed to replace tonnage lost during the war. Lord Pirrie knew that despite his massive Clyde-based wartime expansion of H&W, his facilities were incapable of meeting the immediate demand from companies in the Commission Club. Despite the precarious nature of H&W's finances he felt obliged to complete the construction of the big East Yard that had been started in Belfast at the behest of the Government and to further expand his Clydeside facilities.

The Commission Club[edit]

The formation of H&W was assisted by the Liverpool financier Gustav Christian Schwabe and his subsequent involvement in Ismay's White Star Line and other new shipping companies was usually on the basis of work being placed with H&W on cost plus contracts, through secret arrangements known as the "Commission Club".

Pirrie succeeded in bringing other shipping lines to H&W on the same basis. Unfortunately cost-plus contracts do not provide any incentive for the shipyard management to save cost. As a result, by the early years of the 20th Century the H&W Belfast almost invariably lost money on fixed price contracts, obtained in open competition with other yards. Pirrie succeeded in expanding the Club to include RMSP group, the transatlantic IMMC group, P&O, Andrew Weir and Bibby.

It was a feature of the Commission Club that the members should place all their work with H&W. This provision helped Pirrie to disguise how uncompetitive H&W's prices were. It meant however, that Pirrie was obliged to expand the H&W facilities to meet the tonnage requirements of the Club members. This was a major problem for H&W in the immediate post-war scramble for replacement ships.

Standard Ship Designs[edit]

During the First World War the British Government was slow to appreciate that the German U-Boat campaign posed a critical threat to Britain's survival. In the early years of the war most British shipyards were required to concentrate on naval production, despite the mounting merchant ship losses. It was 1917 before the Government decided to construct a large number of standard cargo ships. Work on all existing merchant contracts was suspended and new contracts from private owners prohibited for the duration of hostilities.

In contrast to many UK shipbuilders, Pirrie (who had been appointed Controller General of Merchant Shipbuilding) was an enthusiastic backer of the standard ship programme and H&W quickly established itself as the most prolific producer of these vessels. At the Armistice every berth in the H&W group was occupied by standard ships. Unlike most shipbuilders Pirrie continued the entire programme of ships allocated to H&W, modifying the designs to suit peacetime requirements. Although the concept had been criticised during the war by both shipowners and shipbuilders, it was found that in service the ships proved to be good, serviceable cargo vessels. The construction of standard ships greatly increased shipyard productivity and Pirrie was determined to preserve these gains in the peacetime programme. Pirrie's enthusiasm for standard ships probably influenced Philipps and Lord Inchcape (the chairman of P&O) to take over the 137 standard ships under construction in UK yards in January 1919. Out of that total 36 vessels were building in H&W group shipyards.

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Photo 1: New Texas - Elder Dempster. An N-Type standard ship built by Harland & Wolff, Belfast: 6,568 tons; 11 knots

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Photo 2: Siris - RMSP. A B-Type standard ship built by Caird's, Greenock. 5,242 tons; 10 knots

Bullard King[edit]

In 1850 Samuel Bullard and Daniel King became partners to operate sailing ships. The firm prospered and in 1879 it bought its first steamer, to initiate their Natal Direct Line. Their ships did not call at Cape Town, but made directly from London to Durban, thus providing a faster service. In 1919 the partnership was converted into Bullard, King & Co Ltd and sold to Union-Castle, who continued to operate the Company as an independent entity. A number of inter-company vessel transfers were made, including the Extra Service ships Comrie Castle and Cluny Castle ( Part1 - Photo 27) transferred in 1924.

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Photo 3: Umvoti - Bullard King. Union-Castle extra steamer Comrie Castle transferred in 1924

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Photo 4: Umlazi - Bullard King. Built in Canada in 1918 as War Earl, acquired 1920

South American service problems[edit]

Pre-war, the South American services were a primary focus of the Royal Mail group, but re-establishing these operations after the Armistice presented the group with great difficulties. The opening of the Panama Canal in August 1914 changed the commercial balance of the region at a time when the British and European liner services were disrupted by hostilities and American shipping companies moved in to fill the vacuum and divert trade to the industrial North East of the USA.

Pacific Steam Navigation Co was the group company most effected by these developments. Its service via the Straits of Magellan was now obsolete and its important West Coast local and feeder services were challenged by the ocean liners sailing direct, via Panama. To add to its difficulties first Chile, then Peru passed legislation banning foreign flag vessels from operating between ports within their countries and PSNC abandoned its coastal routes in 1923, selling most of its express steamers to local owners.

PSNC tried to establish new services from the West Coast to New York, but was unable to compete with the Americans. As a consequence a number of PSNC vessels were chartered to other operators or transferred within the group, with RMSP being the main recipient. Royal Mail was also experiencing difficulties and in 1920 it discontinued the passenger service from UK to the West Indies that it had originally opened when the company was first established.

Despite this surplus of South American tonnage RMSP bought the 1903 built Aberdeen Line vessels Miltiades and Marathon in 1920/21, renaming them Orcana and Oruba. These ships had been lengthened in 1912 and a dummy funnel added to each ship. In 1922 they were transferred to PSNC and placed on a Round South America service. The ships proved to be too expensive to operate and the service was abandoned after two voyages. Both ships were laid-up in Liverpool and then Dartmouth and scrapped in1924.
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Photo 5: Oruba - RMSP

Royal Mail transatlantic service[edit]

The South American developments left RMSP with surplus passenger tonnage at a time when there appeared to be an opportunity for the company to establish itself on the North Atlantic. The large German passenger fleet had been handed to the Allies as war reparations, the fleets of the other principal North Atlantic lines had been depleted during the war, shipbuilding costs had greatly increased and there was a considerable passenger demand from families seeking to be reunited in the aftermath of war. In 1920 RMSP announced that it would start a transatlantic service the following year.The ex-PSNC liner Orbita took the first sailing from Hamburg on 30 April 1921, sailing to New York via Southampton and Cherbourg. Unfortunately RMSP could hardly have chosen a worse time to start the service. The United States Immigration Act came into force in June 1921, restricted annual transatlantic immigration to 3% of the US population recorded in the 1910 census, segregated original nationality by nationality. This caused a drastic reduction in the number of westbound, third class passengers.

Nevertheless, RMSP continued the service, with Orduna and Oropesa initially joining the route and many other units from both the RMSP and Lamport & Holt fleets sailing from time to time on the service. The operation was marketed as "The Comfort Route" and the ships soon gained public esteem through the excellent accommodation, good food and service, provided at reasonable fares. The Company's best year was 1923, when 14,795 westbound passengers were carried on 33 voyages. As this represented an average load factor of less than 45% of capacity, the service could not be considered a financial success.

The German fleets made a very rapid recovery, leading RMSP to terminate the majority of its sailings at Southampton in 1925 and discontinue the Hamburg calls entirely in 1926. The RMSP transatlantic service came to an end in 1927 upon the acquisition of White Star.

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Photo 6: Orbita - PSNC. Completed as a troopship in 1915, refurbished and delivered to PSNC by Harland & Wolff, Belfast in 1919 and employed on its Liverpool to Pacific coast of South America before being chartered to RMSP in 1921 for its transatlantic service. Sold to RMSP in 1923. 15,678 grt; 14 kts

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Photo 7:: Oropesa - PSNC. Delivered to PSNC for its Liverpool to Pacific coast of South America service but was then chartered to RMSP for its transatlantic service 1921 - 1923, before resuming sailings on the PSNC South American route

The return to peacetime work at Harland & Wolff[edit]

The refurbishment work needed to enable passenger ships to resume passenger service after their wartime duties provided welcome employment for the H&W outfit trades, while the war standard cargo ships were being completed in the shipyards. One remarkable conversion was Elder Dempster group's Aba. She was a large motor ship that had been ordered by the Imperial Russian Government from Barclay, Curle. When the October Revolution occurred, she was taken over by the British Shipping Controller and on completion in 1918 she was allocated to Glen Line as their Glenapp. In 1920 she was bought by British & African SN (Part of Elder Dempster) and converted into the first ever diesel powered large passenger ship.

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Photo 8: Aba - British & African S N. 7,937 tons; 255 First Class; 140 Second and Third Class Passengers

A number of passenger liners that were under construction during the war were completed as very large cargo ships. The PSNC liner Orca was one example. She returned to H&W in 1921 and was finally completed as a passenger vessel in 1922.

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Photo 9: Orca - PSNC. Upon completion her conversion into a passenger ship in 1922, Orca was placed on the RMSP transatlantic service and was transferred to RMSP ownership in 1923

As the war programme was cleared from the shipyards, work resumed on suspended Commission Club contracts. The Union-Castle mail service liner Arundel Castle was laid down in Belfast as Amroth Castle in 1915, but work had to be suspended because of shortages of materials. She was launched as Arundel Castle in 1919 and completed in 1921. H&W designed her external appearance as a rather bizarre miniature Titanic. Although only 19,000 tons she was supplied with four thin cigarette-like funnels producing a somewhat ungainly looking vessel, in marked contrast to the elegant pre-war Union-Castle designs. The internal layout of her public rooms, dining arrangements and cabins was much more satisfactory however and established the plan for all subsequent Union-Castle liners until the late 1950s. As part of the agreement to allow RMSP to become the major shareholder in H&W, the Company sub-contracted the sister ship, Windsor Castle, to John Brown at Clydebank. Her construction was also delayed by the war and she was only finally delivered in 1922.

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Photo 10: Arundel Castle - Union Castle

Harland & Wolff's labour and political troubles[edit]

The war effort required an end to the continual work demarcation disputes between the various trade unions and the recruitment of labour from outside the trade union membership. H&W management resisted the Ministry's efforts to enforce greater flexibility of employment of the existing workforce and the introduction of non-union workers, preferring to work in harmony with the unions throughout the war.

This harmony was severely strained after the war. Throughout 1918 there had been calls from the entire trade movement for a shorter working week. H&W offered to restore the pre-war 47 hour week, but this was rejected by the unions, who demanded a 44 hour week. The entire H&W workforce went on strike on 25 January 1919. Other Belfast unions joined the demand and the city was soon without trams, electricity, gas and food supplies were threatened. Pirrie was branded as an enemy of the proletariat, but thankfully the strike committee informed Pirrie that they were becoming alarmed at the growing militancy of some of the strikers. He demanded a restoration of public services and repeated the offer of a 47 hour week. Under threat of military intervention the unions conceded and work resumed on 20 February 1919. The demand for a shorter working week involved the men being paid the same weekly wage for fewer hours, thereby increasing the rate per hour. They expected to actually work the same number of hours as previously, but to be paid more hours carrying an overtime premium, to be based on the new enhanced hourly rate. The dispute rumbled on in many industries, including the shipping industry. Pirrie sought to overcome part of the additional cost by authorising the purchase of a large number of labour saving machines for Belfast.

Philipps and Pirrie had both been loyal supporters of the Liberal Party but neither man had anything in common with the growing number of Liberals who supported nationalisation and state intervention in industry. Philipps became the Unionist MP for Chester in 1916 and held the seat until 1922. In 1923 he was elevated to the peerage as Baron Kylsant, of Carmarthen and Amroth. This change of political allegiance created a permanent rift between Philipps and his brother Lord St Davids. Pirrie could not afford a similar disagreement with Philipps.

Although trade union conflict caused considerable problems for H&W, these were far less than the threat presented by the post war political turmoil in Ireland. Pirrie had originally been a supporter of Home Rule for Ireland but in the face of British political blunders; increasing Irish division and violence he also changed his allegiance to the Unionist Party. In 1920 the British Government enacted legislation that partitioned Ireland and in 1921 the Northern Irish Parliament was established, with Pirrie as one of its senators. He was made Viscount Pirrie in the same year, for his wartime work and for his services in helping to establish the Northern Irish Parliament.

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Photo 11: Viscount and Lady Pirrie on their way to the opening of the Northern Ireland Parliament in 1921. He is clearly relishing dressing up in the uniform of an Irish Privy Councillor.

The Southern Irish were deeply divided over acceptance of the Anglo-Irish Treaty with a large faction, including the Irish Republican Army, seeking to establish a parliament in Dublin governing the whole island. The IRA sought to establish arms caches in the Northern Ireland to support an attempted annexation of Ulster. The Belfast Protestant Association in turn sought to expel all Catholic workers from the city's factories. Rioting and disturbances ensued, but thankfully for Belfast civil war broke out between the IRA and the Irish National Army, which caused the IRA to concentrate its forces and arms in the South. Sectarian strife continued in Belfast, but at a lower intensity and over the following year H&W persuaded the trade unions to allow the majority of its Catholic employees to return to work. These massive problems were a major incentive for Pirrie to expand and develop the H&W facilities on the Clyde as an alternative base.

Harland & Wolff expansion on mainland Britain[edit]

At the July 1919 H&W shareholders annual meeting, Pirrie announced that the company had orders for 72 vessels totalling almost 500,000 tons. By the end of the year another 16 orders had been placed, 12 for members of the Royal Mail group and 4 for IMMC. P&O also joined the Commission Club. Pirrie felt that he needed a greater addition to building capacity than H&W would obtain by completing the Belfast East Yard. He authorised a plan to rebuild the Caird & Co's Greenock facility. The work involved filling in the West Harbour and creating six building berths, two of which were over 750 feet long. The workforce was expected to increase from 2,000 to 9,000. Across the Clyde in Dumbarton he instigated a major reconstruction and expansion of the Archibald MacMillan & Son shipyard that was owned by Lamport & Holt, a Royal Mail group member.

While this work was being implemented, Pirrie sought to meet his obligations to the Commission Club members by reserving four berths in John Brown's yard at Clydebank for five years for the Royal Mail group. He also reserved a berth at the Dumbarton yard of William Denny & Brothers to build P&O ships.Pirrie was determined that many of the H&W built ships would be diesel powered by machinery built in the Finnieston works. At the time this H&W facility was managed Frederick Rebbeck, who would become chairman of H&W in 1930. Pirrie ordered Rebbeck to enlarge Finnieston to enable 36 engines to be constructed annually to power 18 ships. This high output volume required a continuous supply of big, high quality steel castings. To provide these components Pirrie and Rebbeck built the UK's largest foundry in Helen Street, Govan. The rationalisation of engine building at Finnieston enabled H&W to sell Caird's engine works at Greenock to their neighbours, Scotts' Shipbuilding & Engineering Co.

In 1914, Pirrie had joined forces with Andrew Weir (the founder of Bank Line), the Earl Grey and Thomas Royden of Cunard, to acquire an option on the controlling interest in the Union Oil Company of California. The four men formed the British Union Oil Company, with the idea of floating the company on the London Stock Exchange, to raise the funds needed to purchase the Californian company's shares. Unfortunately the outbreak of war forced the promoters to abandon their plan, resulting in them incurring substantial personal losses. In 1919 the four men resurrected the idea of establishing an oil company. Pirrie entered into an agreement with the Irish-American oil tycoon, E L Doheny, who had massive interests in the Mexican oil fields through the Mexican Petroleum Company. The four partners successfully launched the British Mexican Oil Company after reaching an agreement with Doheny whereby he undertook to supply all of the oil that they required for 25 years at a fixed price. Under these arrangements, Andrew Weir - now Baron Inverforth - took responsibility for the British company's management and it was agreed that all tankers and barges would be ordered from H&W on a commission basis.

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Photo 12: Andrew Weir - Lord Inverforth

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Photo 13: Inverurie - British Mexican Petroleum Co. The ship is an N-Type cargo ship completed as a tanker with cylindrical tanks in the holds. 6,907 tons; 1922

The colossal volume of business on H&W's books re-awakened Pirrie's concern to guarantee the supply of material and components to the shipyards and he resumed discussions with John Craig, the managing director of the west-of-Scotland steelmakers, David Colville & Sons. In May 1919 it was agreed that H&W would acquire a minority interest in Colville's in exchange for 300,000 H&W £1 preference shares. This transaction was a prelude to the joint cash and shares purchase of Colville's by H&W and the Royal Mail group in March 1920 for £5,250,000. The new acquisition could produce over 800,000 tons of steel, 80,000 tons of iron and 9,000,000 tons of coal per year. John Craig was retained as the managing director of Colville's and he was also appointed to the H&W board.

When the new Belfast east yard launched its first ship in November 1919 Pirrie became anxious about the ability of the Finnieston Engine Works to produce sufficient diesel engines. He finally accepted Rebbeck's view that the works' realistic output was 24 engines per year and not Pirrie's target of 36 engines. To overcome the anticipated shortfall, H&W bought the Scotstoun factory of the Coventry Ordnance Works in early 1920. This well equipped factory was built in 1910 to manufacture gun mountings for the Fairfield and Clydebank shipyards. Following a series of mergers the factory was now owned by the newly formed English Electric Company and was largely surplus to their requirements. Pirrie acquired it for £475,000 and agreed to continue to meet any future Clyde shipyard requirements for naval gun mountings. Very little expenditure would be needed to convert the facility to diesel engine production.

Pirrie also expanded the H&W mainland shiprepair facilities in Liverpool and Southampton and during 1920 began negotiations to establish a presence in London. Lord Devonport, the chairman of the Port of London Authority and a friend of Pirrie's, offered to place all of its repair work with H&W on a commission basis if the Company opened a works in London. Pirrie bought an option on a site at Tilbury, but no further progress was made at this time, because he at last accepted that H&W's expansion was constrained by a of lack of finance.

Resumption of Harland & Wolff's financial difficulties[edit]

The H&W accounts were designed to conceal more than reveal the finances of the Company, nevertheless they do show that in 1918 it had overdrafts totalling £885,000 and owed a further £962,000 for loans received. During the period 1919 to 1921 H&W invested about £6,100,000 in new facilities and equipment and spent a further £4,800,000 on outside investments (mainly Colville's) resulting in total cash expenditure of £10,900,000.

In the same period the cash earned by the business was only about £1,900,000, leaving Pirrie with the problem of raising £9,000,000. Some £5,700,000 was obtained by selling additional ordinary and (non-voting) preference shares - mainly to the Royal mail group. An additional £3,000,000 loans were raised and bank overdrafts increased by £600,000.

Furthermore H&W again needed to finance work in progress as a result of its shipbuilding contracts being for civilian clients, rather than the Government. These were largely financed by a resumption of the use of discounted bills of exchange. (See Part 1) The Company's contingent liability under this heading climbed from nil in 1918 to an astonishing £9,175,000 in 1921. Once again the Company's finances were seriously overstretched.

The collapse of the post war shipping boom[edit]

In June 1920, H&W completed the conversion of Olympic from its wartime troopship role, back to its transatlantic splendour. To Pirrie's great disappointment, at the ceremonial dinner to mark the occasion, the president of IMMC announced that the deteriorating world trading conditions dictated that White Star could not proceed with the planned construction of a liner to replace her sister Britannic, which had been lost during the war.

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Photo 14: Olympic in Thompson Dry Dock, Belfast - Oceanic Steam Navigation Co

At the H&W annual shareholders meeting the following month Pirrie announced that all of the Company's shipyards were fully occupied and that it had 90 vessels on order. He did not mention that there were no inquiries for further contracts. The post war shipping boom had come to a sudden end. Freight rates and the price of second-hand tonnage collapsed so dramatically that the H&W Commission Club arrangements were unable to provide their normal insulation from such problems. In the next few months H&W clients delayed the commencement of work on 10 liners and 2 were cancelled outright. Pirrie was forced to move from breakneck expansion to retrenchment. He ordered closure of building berths in Belfast, Govan and Greenock. Overtime was cut, war bonuses withdrawn, wages cut, staff and workforce laid off.

The ownership of Harland & Wolff in 1921[edit]

In 1921 H&W had in issue 3,000 ordinary shares of £1,000 each. The shareholders were: -

British & African S N Co175
African SS Co175
Imperial Direct Line88
Elder Line 88
Elder Dempster & Co350
Union-Castle375
Royal Mail S P Co525
TOTAL ROYAL MAIL GROUP1,77659.2%
Viscount Pirrie50716.9%
John Brown & Co56018.7%
23 Other shareholders1575.2%
TOTAL SHARES 3,000

The lack of a Royal Mail group parent company and Philipps' system of spreading share ownership amongst his companies would create major difficulties in disentangling his empire in the future.

German war reparations[edit]

One of the major factors that created the post-war slump was the Allies insistence that the Central Powers pay war reparations. The immediate availability of ex-German tonnage had an obvious impact upon the requirement for new-built vessels. By far the most important of the appreciable number of German ships that the British Government received were the two HAPAG transatlantic giants, Bismarck and Imperator. Cunard and White Star made a joint purchase to avoid a bidding war, but with each line taking full control of their respective ship. White Star acquired the incomplete Bismarck and placed a contract with H&W for her completion as Majestic. They also entrusted H&W with the work needed to convert NDL's Columbus into Homeric and Berlin into Arabic. RMSP obtained NDL's Munchen and H&W converted her into Ohio.

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Photo 15: Majestic - Oceanic S N Co. At 56,551 GRT Majestic was by far the largest ship to be operated by White Star Line. During one 1923 voyage to New York she carried 2,625 passengers, the company's highest ever peacetime passenger loading

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Photo 16: Homeric - Oceanic S N Co. Although this ship was designed as an intermediate steamer, she was employed on the White Star mail service. As a result she was painfully slow and White Star were constantly planning her replacement, but were never able to raise the necessary finance

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Photo 17: Arabic - Oceanic S N Co

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Photo 18: Ohio - RMSP after she was transferred to Oceanic S N Co and renamed Albertic

The Trade Facilities Act and the Northern Ireland Loans Guarantee Act[edit]

The British economy fell progressively further into recession during the second half of 1921, prompting Lloyd George to act in October of that year by introducing a package of measures, the most important of which was the Trade Facilities Act (TFA). This was a guarantee facility that offered a total of £25 million Government backing for bank loans provided to finance capital expenditure in the British engineering and shipbuilding industries during 1922/23. Although the Act did not cover Ulster, a separate Northern Ireland Loans Guarantee Act was passed in 1922.

Pirrie immediately applied for £1,000,000 assistance for the proposed H&W London repair establishment and £293,345 for capital work for the Clyde facilities. These guarantees were approved, as the first to be sanctioned under the scheme, but they provided little practical help to the shipyards. Holland America, RMSP and PSNC ordered the suspension of all work on their ships under construction. Pirrie placed the Belfast South Yard on a care and maintenance basis and threatened to close the MacMillan and Inglis yards. These were reprieved by owners agreeing to proceed with the construction of three small ships, including Ayrshire Coast for the Royal Mail owned Coast Lines group.

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Photo 19: Ayrshire Coast - Coast Lines built by A&J Inglis

The lack of work for the yards created a major financial problem for H&W. The "Plus" element of Pirrie's cost plus contract funded general overheads, with the balance representing profit. As output fell, the balance disappeared. As a consequence by the end of the 1921/22 financial year H&W was in serious trouble. It is probable that the true result for the year was little better than break even, but by deferring depreciation charges and other costs, Pirrie declared a profit of £341,000. It is likely that dividends and interest payments on loans were funded by increasing overdrafts to over £2,000,000. Despite the reduced activity in the yards, the discounted bills total had climbed to a staggering £12,300,000, but once again Pirrie succeeded in bluffing his bankers and the bill discounting houses.

The H&W order drought continued for eighteen months until the end of 1922, when the Company surprisingly received an order from Japan for a diesel engined cargo ship. Nippon Yusen Kaisha wanted to test this new form of propulsion and simultaneously placed a second order with Lithgow's for a Sulzer diesel powered sister. The Japanese order was rapidly followed by orders from P&O for three cargo ships, Elder Dempster for six barges and Andrew Weir for three cargo ships. The difficulty for H&W was that all of these orders were placed on a fixed price basis. For decades, H&W had only built on a cost-plus basis and the Company had no estimating system and the yard managements no cost control experience.

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Photo 20: Asuka Maru - Nippon Yusen Kaisha built by D&W Henderson

The greatest help for the entire group came in November 1922 when the Conservative Party regained power in Westminster. The outgoing Liberal Government had refused to advance TFA guarantees for investment in ships. The Conservatives realised that ship orders were essential to enable the shipping and shipbuilding industries to survive. The Royal Mail group immediately began negotiations to obtain TFA loans to complete seven of the suspended contracts with H&W. At the same time Andrew Weir arranged a TFA loan to finance a contract for a further 12 motor ships of the same class as those already under construction at H&W. Helped by the elevation of Philipps to the Peerage as Baron Kylsant, these major orders were all confirmed during 1923.

The TFA support helped to ensure that the 1922/23 financial results were no worse than the previous year, although Pirrie still needed to resort to dubious accounting methods to achieve this result. The David Colville steelworks was suffering from a considerable reduction in demand and its finances were as bad as H&W. There were insufficient ship orders to utilise the berths that Pirrie had reserved in other yards and John Brown was in a very precarious situation. Nevertheless, Pirrie made no provision against the considerable fall in real value below the book value of H&W's investment in these companies. Pirrie had massively over-invested at the top of the boom and was doing everything he could to hide the effect of the formidable problems caused by the subsequent slump.

Adda - The First New-Built Diesel Powered Large Passenger Liner[edit]

A major milestone achieved in 1923 was the delivery by Caird's Greenock yard of the Elder Dempster liner Adda. Although she had the appearance of a traditional steamship, she was in fact the first newly built diesel powered large passenger liner. The first large diesel passenger liner was Elder Dempster's Aba, but she was a conversion from a cargo ship. The arrival of Adda was generally regarded as a vindication of Pirrie's belief in diesel propulsion for passenger as well as cargo ships.

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Photo 21: Adda - 7,816 GRT; twin screw, two 6 cylinder B&W diesel engines, 4,600 bhp = 14 knots; 225 First, 74 Second and 32 Third Class Passengers; 140 Crew.

Harland & Wolff Contractual Difficulties[edit]

Almost all of H&W's shipbuilding contracts had been obtained on a cost-plus basis for almost 30 years. The senior production management had no experience of any other form of working. Pirrie's secretive nature added to the Company's problems. Only Pirrie was aware of the precise contract conditions, and only he knew the financial outcome of each contract. As it was the oldest H&W centre it was not surprising therefore, that Belfast's production costs were becoming prohibitively high. In the face of the dramatic decline in orders, Pirrie considered closing Belfast, but concluded that such a move would be politically unacceptable.

Towards the end of 1923 the long existence of the Commission Club created two major contractual problems as a result of the H&W management's detachment from all consideration of cost. An IMMC liner had been completed during the war as the very large cargo ship Belgic. It was eventually returned to Belfast for conversion into Belgenland for the Red Star brand. On completion of the work the owners protested at the total cost, because H&W had not provided any cost estimates, nor had they obtained the owners prior approval before starting on a considerable amount of work that was additional to the original specification. This dispute was eventually settled at an agreed reduction in H&W's price.

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Photo 22: Belgenland - Red Star Line

The second problem arose on the massive Andrew Weir contract and had even more serious financial consequences for H&W. Pirrie did not make it clear to the Govan management that this was a fixed-price contract. The owner's representative asked for a considerable number of extras to the specification. As they assumed they were working on a cost-plus contract, the H&W management agreed to the extras without asking for a price change.

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Photo 23: Inverbank - Andrew Weir

In both cases Pirrie castigated the H&W management and forced some resignations. These H&W financial difficulties really arose because of Pirrie's failure to build an effective management team and the corrosive effect on the viability of the business of a long period of cost-plus contracts.

The Death of Viscount Pirrie[edit]

After the flurry of contracts outlined above, the drought of orders resumed. The economy of the Belfast yards depended upon building a succession of large liners, but TFA loans had become the only feasible source of finance for these ships. These loans needed to pass through a lengthy bureaucratic governmental process. Pirrie had hoped that some of these would be cleared before he and Lady Pirrie left for a visit to South America in March 1924. It was not to be, and Pirrie hesitated before leaving, nevertheless he eventually departed after inspecting the new H&W London facilities.

Both Lord and Lady Pirrie had been unwell, but the voyage had such beneficial effect on their health that they extended their tour from Buenos Aires, around Cape Horn to Valparaiso and Antofagasta. While the ship was in this port, Pirrie caught a chill which developed into pneumonia. By the time the ship arrived at Panama, Pirrie was convalescing and he insisted upon being brought up on deck to view the canal. The result was fatal and he died on 7 June 1924, at the age of 78.

Kylsant obliged to take control of Harland & Wolff[edit]

The effects of the death of Pirrie upon H&W were extremely serious. He had made no practical preparations for his succession. His ambition and dictatorial methods had blinded him to the need to create an effective management team. He had promoted weak and ineffectual yes-men to senior positions, who were completely unaware of the Company's serious financial position. Control of the largest shipbuilding concern in the world fell by default to the Company's majority shareholder, Lord Kylsant, who had no shipbuilding knowledge whatsoever. The problems that this created, both for H&W and Kylsant's Royal Mail group are related in Part 4 of this history.

Bibliography[edit]

A complete Bibliography for all Parts of this Article is given at the end of Part 7

Photographs[edit]

Many of the photographs used to illustrate this article are from the very large collection contained in the Allen Collection hosted by Benjidog at: -
http://www.benjidog.co.uk/allen
Most of the remaining photographs are from the Ships Nostalgia Galleries, which are available for use in the Directory. Special thanks are extended to Marconi Sahib for his SN postings from the Dickinson collection and Linerrich for providing photographs from his private collection. Both SN Members kindly provided photographs specifically to support this article.The individual photographs used in Part 3 have been provided as follows: -

  1. Benjidog - Allen Collection
  2. Benjidog - Allen Collection
  3. Linerrich
  4. Ships Nostalgia - Stuart Smith
  5. Benjidog - Allen Collection
  6. Benjidog - Allen Collection
  7. Benjidog - Allen Collection
  8. Benjidog - Allen Collection
  9. Ships Nostalgia - Linerrich
  10. Ships Nostalgia - Dick Sloan
  11. Harland & Wolff
  12. Wikipedia
  13. Benjidog - Allen Collection
  14. Ships Nostalgia - Tmac1720
  15. Benjidog - Allen Collection
  16. Ships nostalgia - Marconi Sahib
  17. Benjidog - Allen Collection
  18. Ships Nostalgia - Linerrich
  19. Benjidog - Allen Collection
  20. Harland & Wolff
  21. Benjidog - Allen Collection
  22. Ships Nostalgia - Stein
  23. Ships Nostalgia - Marconi Sahib

Article written and compiled by Fred Henderson

Royal Mail Steam Packet Company Kylsant Empire
Intro Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7
 
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