The End of the White Star Line
The Titanic disaster isn't
what ended the White Star Line, but it pretty much put an end to White Star Line
Chairman, J. Bruce Ismay. Ismay was highly ridiculed by both the press and the
public for surviving the disaster. The press felt Ismay, being president of the
White Star Line, should have gone down with the ship as Captain Smith did. One
newspaper, Randolph Hearst's New York Journal, even dubbed him "J. (Brute) Ismay." Several 1912 newspapers suggested
(as some recent motion pictures have) that Ismay overrode Captain Smith's orders enroute, and ordered full speed, knowing there was ice in the area in an attempt
to beat the Olympic's Atlantic crossing record. Two female passengers
claimed to have overheard Ismay pressuring the captain to go faster while
sitting in the first class reception room. These women were both sitting at the
same table with 3 other women. The other three stated they never heard Ismay
suggesting that to the captain. Therefore, there is no hard evidence
however to support that theory. Both the U.S. and the British Inquiries
following the disaster concluded that Ismay's remaining behind when spaces were
open at the particular lifeboat he was helping load, (collapsible "C") would have just added
another death to the list. He was exonerated by both investigations.
Ismay had decided prior to the disaster to retire his position as president of IMM. After the Titanic disaster, he asked the IMM board of directors to allow him to retain his position as chairman of the White Star Line. Most likely thinking this was bad for business with all of the ridicule and rumors flying around about Ismay, his request was denied in June of 1913. This decision most likely contributed to the future downhill spiral of IMM.
When the IMM formed, it became apparent that Morgan had bitten off more than he could chew. His plan was to end a fierce pre-existing rate war among the shipping lines by buying all of them and placing them under a single trust with fixed pricing and factoring in a comfortable profit margin for himself and his share holders. IMM got off to a rocky start and was almost heading for failure when Morgan repeatedly asked Bruce Ismay to assume the position's of IMM President and Managing Director of White Star. Most of Ismay's decision to accept the position came strictly from allegiance to his father and the company his father had "Risen from the ashes." In just four short years from assuming the presidency, IMM was showing a respectable profit gain under Bruce Ismay's leadership.
After the Titanic disaster and Ismay's forced retirement, the White Star Line did continue on to become one of the top freight and passengers lines in the world. Despite surviving the loss of several of its ships either due to war or disaster, even with IMM's rocky financial status throughout the years, White Star was still one of the favorites for the passenger trade. World War I hurt White Star as it did other shipping lines. Very little income could be generated during the war years with most of White Star's ships either tied up in military service or getting picked off by German u-boats and mine fields. There was an immense shortage of firemen and coal stokers during the war. (as well as a shortage of coal itself) Most had been recruited into military service.
Other incidents that drove down White Star's ability to survive were a rash of collisions and groundings and the inevitable fact that WSL's ships were becoming old. The company struggled to keep up maintenance on the obsolete vessels (20 years plus for most) but it was a loosing battle. The converted oil-fired Olympic was barely passing it's annual sea worthiness inspections by the mid 1920's.She underwent a series of "patch work" to get her past inspections and eventually had a complete refit. In 1927, the White Star Line was returned to British interests, and normal operations were intended to begin.
Most historians agree that the most prosperous years for the White Star Line were between the 1880's and the early 1920's. Threatening the industry of commercial passenger traffic by sea was the development of air transportation. In 1927, Charles Lindbergh proved to the world that crossing the Atlantic by air was the future. By the late '20's, zeppelins were making commercial transatlantic crossings weekly. Transatlantic airmail delivery began around the same time and by the early 1930's commercial passenger airlines were developing quickly.
The future air travel threat along with a severe reduction in annual American immigration numbers (due to new restriction laws) spelled out doom for many commercial passenger steamship companies. By 1925, the International Mercantile Marine Company (IMM) announced that it was looking at disposing of it's non-American holdings including the White Star Line. Since the forced retirement of IMM President and WSL Chairman Bruce Ismay in 1913, and IMM's takeover of White Star, the company never saw the profitable "glory days" that owner JP Morgan had envisioned; the days that the White Star Line had once enjoyed under the Ismay family control. One White Star Line Historian has even suggested that if the Oceanic Steam Navigation Company had been able to fight off the IMM takeover, which was obviously impossible with William Pirrie and Harland and Wolff backing up JP Morgan, that the White Star Line could still be in existence today.
Harland and Wolff shipbuilders were only looking at the dollar signs. (or pound signs) They knew that if Morgan's International Mercantile Marine acquired White Star and the other subsidiary shipping lines, that they would have exclusive contracts for the already established "cost-plus" deal for building hundreds of new ships; which is exactly what happened.
The Man that Sank the White Star Line
Lord Kylsant (Owen Phillips) Chairman, White Star Line
The news of IMM wanting to sell it's foreign holdings, particularly the White Star Line, peaked the interest of many British investors. A lot of people wanted to see what were originally British steamship companies come back into British ownership. One such interested investor was Harland and Wolff's William Pirrie and his new protégé Sir Owen Phillips (soon to become Lord Kylsant) Negotiations for the sale were interrupted when American President Woodrow Wilson intervened and the matter was dropped for the time being.
40 year old 6' 7" Owen Crosby Phillips was rapidly becoming Europe's largest shipping tycoon holding the director's position of the Royal Mail Steam Packet Company and interests in over 40 other companies that included port development, shipbuilding and oil companies. Shortly after William Pirrie died, Kylsant quickly took control of Harland and Wolff and named himself chairman. In 1926, Phillips' conglomeration of interests and holdings, known as the Royal Mail Group, once again entered negotiations for the control of the Oceanic Steam Navigation Company. (White Star Line) A few months later it was announced that Phillips, as chairman of the Royal Mail Steam Packet Company, (RMSP) had purchased the White Star Line for £7 million. (In today's conversion of the British pound to American dollar equates to a little less than $14 million.)
In the early part of 1927, one of (now titled) Lord Kylsant's first official acts as owner of the newly named White Star Line Limited was to end the "cost-plus" ship building agreement that White Star had maintained since the early Ismay days with Harland and Wolff. He wanted all ships built under a fixed price. Interestingly, this act would ultimately threaten Harland and Wolff's profit margin and affect the quality of the ships it would produce.
There was only one problem, Lord Kylsant didn't exactly have the money to pay for the purchase of the White Star Line. It appears that he possessed the skill of floating money among his various holdings; an act that would eventually come back to bite him. Dubbed "Lord of the Seven Seas" by the media, Kylsant arranged for his salary to be based on a percentage of the gross, not the profit as Ismay had done.
He began funneling what little profits White Star was making and moving the money into other purchases. Shortly after acquiring the White Star Line he purchased the Shaw Savill Line. Again, moving finances from location to another. "Robbing Peter to pay Paul" would be a fitting term to describe Kylsant's business practices at this time.
In early 1928, the Royal Mail Steam Packet Company had fallen behind in its payments to the treasury, in fact it owed substantial amounts of money. Kylsant had already ordered the building of the new 60,000 ton Oceanic III from Harland and Wolff at a cost of £3.5 million. The keel had been laid, but the ship would never be built. Even with RMSP so deep in debt, Kylsant still continued to make purchases. In August of 1928, he acquired the Australian Government owned Australian Commonwealth Line and it's entire fleet. (The loan for this purchase would never be paid off) Kylsant now controlled over one sixth of the British Merchant fleet, some 2 million 600 thousand tons of shipping.
In 1929, the first payments for the purchase of the White Star Line came due and Kylsant requested an extension on the loan. RMSP's common stock had already dropped abruptly from 76 shillings to 44, and even Kylsant's brother, Viscount St. Davids, publicly accused him of financial mismanagement.
Eye brows raised out of concern as to exactly where Royal Mail Steam Packet Co. stood financially. Due to the confusing intertwining of interests and holdings involved in the Royal Mail Group, the treasury advisory committee ordered an internal audit and investigation. In 1930, the White Star Line showed a operating loss for the first time in its history. In 1931, the government finally stepped in and conducted its own investigation into the financial status of the Royal Mail Steam Packet Company.
The investigation turned up some problems with the financial prospectus reports published by the Royal Mail Group for 1926, 1927, and 1928. As a result, the "Lord of the Seven Seas" and two other Royal Mail Group executives were arrested and charged with filing false information in the corporate financial reports to the stockholders and the government.
After a nine-day trial, Kylsant was acquitted on the charges of "false accounting practices" for 1926 and 1927 but was convicted for the charge of "deliberate and falsified financial reporting with intent to deceive" for the 1928 prospectus. Kylsant was sentenced to 12 months imprisonment. His title of Lord was removed by the crown as well as his knighthoods and lieutenancies and he returned to just plain Owen Phillips. He appealed the sentence but the appeal was denied. The Royal Mail Steam Packet Company found itself in serious trouble. Creditors had forced the company into asset liquidation and the once powerful Royal Mail Group was slowly being dismantled.
The government stepped in and helped establish a new company Royal Mail Group Limited in order to offer some protection to the company and save jobs. However, many of the individual steam ship lines including White Star were pretty much left to fend for themselves.
After serving 10 months in prison, Phillips disappeared from the public eye and retied to his home in Wales. He died in 1937 at the age of 74.
The Cunard White Star Line
Cunard, White Star Line's long time competitor had also found itself in serious financial jeopardy. Only two years away from the worst stock market crash in U.S. history, Europe had already fallen victim to a depression and Cunard had stopped all plans and construction on their new "super liners."
A call of desperation was made by White Star Manager, Colonel Frank Bustard, to long time retired J. Bruce Ismay for help. Ismay, now in his 70's, surprisingly agreed to help pull White Star out of trouble but it was too late. A new board of directors had been appointed and it had become obvious that the only answer to survival was for both shipping line's to accept the British government's proposal they had made earlier.
In 1934, the government offered to advance the two companies £9,500,000 if they would merge into a single organization. Cunard had already begun construction on the Queen Mary but had run out of funds and the building was delayed for 2-years. Future plans had been drawn as well for the Queen Elizabeth. White Star Line had to stop construction on it's new Oceanic III, which would have become the largest ship in the world. Both organizations knew that the merger was the only answer. The deal was eventually accepted with Cunard holding 62% of the shares. The White Star Line as a stand-alone shipping name was now gone.
Cunard was in a hurry to erase all remnants of White Star and began to phase out holdings and vessels alike. Double house flags were flown on the new Cunard-White Star ships until 1947, at which time Cunard bought the remaining shares held by White Star and liquidated most of it's ships and holdings. By 1950, just about all traces of the famed White Star Line ceased to exist.
Cunard went on to produce its magnificent Queens, such as the Queen Mary (currently a permanently docked hotel and shopping center owned and operated by the city of Long Beach, Ca.) and the regal Queen Elizabeth. The Queen Elizabeth II (QEII) was recently refitted and still continues transatlantic crossings today. Cunard's Sea Goddess II demonstrates the latest ultra-modern technology in ship navigation. Completing her sea trials, in Sept.2003, the Queen Mary II held the title of being the largest cruise ship in the world. Her length is comparable to a Nimitz class aircraft carrier.
After more than a century of business, Cunard experienced a buyout in May of 1998, when Carnival Corporation & PLC purchased the company. Carnival now owns Princess Cruises, Holland America Line, Windstar Cruises, Seabourn Cruise Line, Costa Cruises, Cunard Line, P&O Cruises, Ocean Village, Swan Hellenic, AIDA, A'ROSA, and P&O Cruises Australia, making them the largest shipping line in the world.
On January 1, 2005 the business, assets and liabilities of Cunard Line Ltd were transferred to Carnival plc, ending the Cunard name as a business entity - the name still appears on the side of Queen Mary 2 and sails under the Cunard brand, but it is controlled by Princess Cruises in California.
Time Magazine Dec. 23, 1929
History of the White Star Line: Robin Gardner, Ian Allen Publishing, 2001
Titanic: End of A Dream: Wyn Craig Wade, Rawson-Wade Publishers NY, NY, 1979
New York Times January 8, 1930
Chicago Tribune January 14, 1930
The Royal Mail Story: The Kylsant Years www.users.on.net/~snicol/story/index3.html
Cunard History www.cunard.com
The Great Liners: Time-Life Books, Time-Life Publishing, 1969
Carnival Corporation & PLC
Royal Caribbean International
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