Wholly Owned Subsidiary of Neptune Orient Lines
Sales: $3.42 billion (2002)
NAIC: 488320 Marine Cargo Handling; 484110 General Freight Trucking, Local; 483111 Deep Sea Freight Transportation; 483113 Coastal & Great Lakes Freight Transportation; 488390 Other Support Activities-Water Transportation; 488991 Packing & Crating; 488210 Support Activities for Rail Transportation; 551112 Offices of Other Holding Companies; 541613 Marketing Consulting Services
APL Limited, formerly called the American President Companies Ltd., operates container shipping services by container ships on Pacific and Indian Ocean trade lanes, conducts transportation services between major Asian and North American cities and commercial centers, and serves the transportation needs of North America with an intermodal transportation network that includes rail, trucking, and freight brokerage and consolidation services. The company is considered one of the most efficiently operated shipping companies in the world.
Early History of Oldest Continuously Operating U.S. Steamship Company
The Pacific Mail Steamship Company, predecessor of the American President Companies Ltd., was founded in 1848, two years before the transcontinental railroad was completed; its founding at this time provides American President Companies its claim as the oldest continuously operated steamship company-in the United States. The Pacific Mail Steamship Company set out to carry mail from the Isthmus of Panama to the Oregon Territory. In 1867 it began the first regular shipping service between the United States and Asia, carrying passengers, cargo, and mail between the western United States, China, and Japan. The company's wooden ships, weighing 2,500 gross tons, used steam power to drive paddle wheels set amidships; the paddle wheels were augmented by twin square-rigged masts.
In 1921, the Pacific Mail Steamship Company was acquired by Dollar Steamship Lines, a company founded in the early 1900s by lumberman Robert Dollar, who established a fleet of steam schooners to carry his lumber from mills in northern California and Oregon to cities and railheads in southern and central California.
Dollar Steamship Lines established around-the-world shipping services in 1925 and expanded those services up until 1938 when, staggering under the combined effects of the Great Depression and debts incurred through building its fleet, the company was on the brink of bankruptcy. In 1938 the Federal Maritime Commission arranged a subsidy to keep the company solvent; later that year, the Commission released the company from its debt in return for 90 percent of the Dollar Steamship Lines' common stock. The services of the Dollar Steamship Lines were considered vital to the United States in light of the rise of fascism in Europe and the Sino-Japanese war in the Far East.
Wartime Government Contracts and Big Changes Through the 1980s
On November 1, 1938, Dollar Steamship Lines' new board of directors changed its name to American President Lines Ltd.; the name change was due in part to the company's practice of naming its ships after American presidents. American President Lines' fleet saw service activity during World War II, as several ships were sold to the U.S. Navy for troop transports and others operated as "Liberty Ships" to transport materiel for the war effort.
After the war the company was involved in a costly and bitter seven-year court battle that resulted in its acquisition in 1952 by Ralph K. Davies, a former executive of Standard Oil of California, who had begun buying shares in American President Lines in 1944. By 1952, Davies owned 11 percent of the outstanding shares of the company, becoming its largest minority shareholder. On October 29, 1952, a group of investors led by Davies outbid two other investor groups, including one led by R. Stanley, a son of Robert Dollar, and paid $18.3 million for the Federal Maritime Commission's controlling interest in the company. Davies became chairman of American President Lines, a position he held until 1971, and he merged the APL Associates with Natomas Company, a gold-dredging firm that grew to become an oil and gas exploration company and, in 1965, the parent organization of American President Lines.
When Davies took control of the company, APL was a leader in providing cargo and passenger services between the Pacific Northwest of the United States and the Far East and offered around-the-world services for cargo and passengers. The company had recently launched its efforts in intermodal shipping, when it acquired more than 1,000 small shipping containers in 1951. In intermodal shipping, large containers are packed with cargo at its source and moved—by truck, train, or oceangoing vessel—to the cargo's destination without being unpacked. APL purchased its first partially containerized ships in 1961; 12 years later, fully containerized vessels were entering its fleet.
In a retrenchment in the mid-1970s, under the leadership of Chandler Ide—who became head of Natomas Company by succeeding Davies in 1971—APL discontinued its around-theworld freight services and passenger services to concentrate on its Pacific and Indian Ocean lines. But it also began to parlay its capabilities in containerization into a North American intermodal network. In 1979 the company introduced the first container train, with service between the West Coast and New York, under the trade name "LinerTrain."
While building that land-based intermodal network, APL constructed the ship President Lincoln, the first of three C9-class, diesel-powered container ships it would build through the 1980s. The President Lincoln entered APL's fleet in 1982, the same year the company introduced its 45-foot high-cube shipping container to the industry.
APL was spun off from Natomas as an independent, publicly held company on September 1, 1983, in part as a result of a hostile takeover attempt on the company by Diamond Shamrock. The spinning off of the company separated Natomas's real estate and oil and gas ventures, which led the companies in different directions through the 1970s in their own burgeoning growth. The growth of that company and American President Lines made them incompatible for future relations, so the companies went their separate ways. Consequently, APL became an independent company, coming full circle to the type of company it had been in the mid-1950s. Financial specialist W. Bruce Seaton, who was then president of APL, was named chairman and chief executive officer.
In 1984 and 1985 APL introduced innovations such as lightweight rail cars that could accommodate two shipping containers stacked one on top of the other; a "double-stack" system for its LinerTrain; 48-foot-long containers for use in North America; and high-cube, wide-bodied refrigerated containers. Also in that period APL acquired two new J9-class diesel-powered container ships and three freight brokerage firms in the United States that were managed by its new subsidiary, American President Domestic, later called APL Land Transport Services.
The company continued its growth with the launching of a $500 million capital expansion program in 1986 that included the purchases of five new C10-class container ships and new rail equipment, and provided enhancements for its shipping terminals and computer systems. A year later, in 1987, the company moved to double the size of its Oakland, California, port facilities.
In a move that expanded the range of its intermodal service, APL in 1988 launched a door-to-door truck load transportation service for domestic freight in the United States. The "Red Eagle" service was started to compete with over-the-road truckload carriers. These moves through the 1980s were directed by W. Bruce Seaton, who had come to the company through the Natomas organization.
Seaton was highly critical of APL and was considered an outsider in the shipping industry when he was named president of the company in August 1977; however, he was given the Admiral of the Ocean Sea Award by the United Seamen's Service—considered to be one of the industry's most prestigious "insider" awards—in 1989 for having established APL as a leader in the industry. The United Seamen's Service, a benevolent professional association for seafarers, sailors, and dock men, cited Seaton's emphasis on the Pacific and Indian Ocean trade routes, intermodal services, and electronic and information services as areas in which he extended his company's leading position in the industry. Seaton retired as chairman and chief executive officer of the corporation on January 2, 1992.
People are the engine at APL, one of the largest logistics and container transportation companies in the world—a company at the heart of international trade. APL's roots are in one of the most venerable economic activities transcending national and geographic borders: trading with those at a distance via commerce on the sea—literally, "shipping." Indeed, even today, most of world trade travels over the water. While shipping continues to be an important business, it is also now a part of something larger. It is one link in global "supply chains"—the complex movements of and demand for raw materials, parts, sub-assemblies and finished products. And so today, our business is assisting retailers, manufacturers and our other customers to manage their own supply chains in whole or to manage distinct and individual links of those supply chains, such as shipping.
Costly Changes Through the 1990s
APL went through a restructuring in the second and third quarter of 1990 that resulted in the departure of Donald C. Orris, the president of American President Domestic; the move also forced the company both to consolidate and refocus several of its services. Orris was replaced by Timothy J. Rhein, formerly president and chief executive of American President Lines; the unit under Rhein's leadership was renamed APL Land Transport Services Inc. Robert Dahl, then the company's chief financial officer, left his position. The cost of the restructuring caused APL to report a $60 million loss for the year in 1990.
APL launched double-stack intermodal train services between the United States and Mexico in the 1980s to connect the Ford automobile plant in Hermosillo, automotive component manufacturers in Mexico, with Ford's automobile component suppliers in the United States. In 1991, in a move to capitalize on the possible free trade agreement between the United States and Mexico, APL established its double-stack train service from Mexico City to Chicago, Illinois, for general freight and auto supplies headed for Chrysler operations in Mexico. That move was seen as putting APL in the position to take advantage of an expected increase in trade between the United States and Mexico.
Also in 1991 APL spent $78 million to buy back 3.8 million shares of its stock from Itel Corporation, a transportation equipment leasing company based in Chicago that held nearly 21 percent of the company's stock. Itel Corporation was considered by some likely to take over APL from 1988 until that stock sale.
By 1992, APL was operating a fleet of 20 full container ships—each of which, clinging to corporate tradition, was named after an American president—and a network of foreign-flag feeder vessels that changed in number due to requirements in the trade. The company's ships sailed under the U.S. flag. The 20 ships had a nominal international transportation volume of more than 20,000 40-foot equivalent units (FEUs) and ranged in maximum speeds from 21.1 to 24 knots.
APL tracked its fleet of containers, chassis, and trains through its APL Information Services, Ltd. subsidiary, which used a system of mainframe and mini- and microcomputers linked through a telecommunications network with its ships and offices in North America, Asia, and the Middle East. Those computer systems booked cargo and generated bills; tracked and controlled rail cars and containers; pre-planned the loading of containers onto ships; and routed ship, rail, and truck movements, while providing customers the ability to access information on the location and status of their cargo via touch-tone telephones, personal computers, and facsimile machines.
APL's largest customer for its international transportation operations has been the government of the United States, which was responsible for approximately 8 percent of the company's 1991 consolidated revenues of $2.44 billion. The company reported that its 1991 revenues from the U.S. government were increased substantially because of increased shipping for the Persian Gulf War. The company bid competitively on its contracts for the U.S. government.
John M. Lillie succeeded Seaton as chairman and chief executive officer of APL in January 1992. Lillie, a former chief executive of Lucky Stores Inc., was considered even more of an outsider than was Seaton when he took the company's helm. Lillie took control while the company was redirecting its non-stacktrain business and while the economy was in a state of recession. For these reasons, APL's revenues from its North America transportation operations declined in 1992. At the same time, volumes in the company's North American stacktrain operations were down. Still, APL's sales exceeded $2.5 billion in 1992.
In 1993, APL's revenues and volumes from North American stacktrain operations improved. This was due in large part to increased stacktrain services to Mexico and Canada. Meanwhile, APL entered into a 30-year lease with the Port of Los Angeles to form a new terminal facility, at a cost of approximately $70 million.
In 1994, APL formed an agreement with Transportation Maritime Mexicana (TMM), a Mexican transportation company, which allowed each to equally charter vessel space for three years. APL also signed a lease with the Port of Seattle to improve and expand its existing terminal facility. The amended lease included an expansion from 83 acres to 160 acres. Meanwhile, APL's stacktrain volumes improved with the recovering U.S. economy. The company added 1,000 containers to its fleet and increased its Mexican and Canadian shipments, in particular, automotive shipments between the United States and Mexico. At the same time, a collision involving APL's vessel, the President Washington, cost the company $2 million. Another cost came when the company lost its position as primary carrier of U.S. military cargo.
- Pacific Mail Steamship Company is founded; the company is given a ten-year government contract to deliver mail between Panama and Oregon; William Henry Aspinwall is elected president of the company.
- Aspinwall retires as president of the company.
- The company purchases its main rival, the Atlantic Mail Steamship Company.
- The company begins its trans-Pacific passenger service.
- The company begins service to Australia and New Zealand.
- Pacific Mail is restricted from using the Panama Canal; its parent company, the Southern Pacific Railroad, begins selling off Pacific Mail's fleet.
- The company begins its tradition of naming ships after U.S. presidents when it purchases seven president ships from the U.S. government.
- Dollar Steamship Lines acquires the Pacific Mail name.
- The U.S. government assumes control of Dollar Steamship Lines, renaming it American President Lines.
- Ralph K. Davies purchases American President Lines from the U.S. government for $18 million.
- APL makes its final trans-Pacific passenger voyage.
- APL stock goes public.
- The company begins service to Vietnam.
- APL merges with Neptune Orient Lines (NOL), keeping its name; the company enters into the New World Alliance agreement.
- APL is named Best Carrier in Journal of Commerce 's first annual award.
APL entered into a Global Alliance Agreement in 1995 and began service to Europe and Latin America. The company also became the first global carrier to create a web site, offering online shipment transactions. In 1997, one year shy of the company's 150-year-anniversary, APL merged with Neptune Orient Lines (NOL), a shipping company from Singapore. The merger—which cost NOL $825 million, or $33.50 per share—created one of the world's largest global transportation companies. The following year, APL entered the New World Alliance agreement (with Hyundai Merchant Marine and Mitsui O.S.K. Lines), improving the company's coverage of world markets.
Staggering Losses Post-Millennium
APL sales increased to $3.8 billion in 2000. In the same year, APL expanded its container fleet with $100 million worth of new containers; bolstered its Asia-Australia service; and announced a new Mediterranean Atlantic Service. In the next few years, APL would receive a number of awards, including Best Intra-Asia Shipping Line by CargoNews Asia; Best Carrier in the Journal of Commerce ; First Global Carrier Award from Philips Electronics; Sri Lanka's ICS awards (for both the east and westbound trade lanes); Wal-Mart's International Ocean Carrier of the Year; Asia Logistics Awards' top IT innovator; and "Best Transpacific Shipping Line," at the Asian Freight & Supply Chain Awards.
Yet, the company's sales dropped to below $3.6 billion in 2001, while APL's parent company, NOL, reported a $57 million loss for the year. The loss was attributed to sluggish Asia-Europe trade markets and an overall poor economy. Specifically, for APL, trade volumes did not increase during a time when capacity increased more than 9 percent. At the same time, insurance costs, as well as those associated with new security requirements, skyrocketed.
In 2002, NOL suffered a staggering $330 million loss, while APL's sales dropped to $3.4 billion, with a $71 million loss in profits. In response, APL—led by acting CEO Ron Widdows—reduced costs and sped up decision making. For one, the position of COO, which was held by Ed Aldridge, was eliminated.
By 2003, business was improving for APL, which recorded first quarter earnings (before net interest expense and tax) of $87 million. For the same quarter, NOL reported a net profit of $88.7 million. APL expanded its capacity by upsizing vessels and partnership measures with other carriers. The company ended 2003 with a hopeful bilateral maritime agreement between the United States and China. China's market was thought to be one of the world's fastest-growing maritime trade zones.
Alexander & Baldwin; A.P. Møller-Maersk; Bollore; Crowley Maritime; Evergreen Marine; NYK Line.
American President Lines Fact Book, Oakland, Calif.: American President Companies Ltd., 1987.
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"Freight Firm Launches Domestic Land Service," Journal of Commerce and Commercial, February 19, 1988.
Grabowicz, Paul, "American President's Big Oakland Move," Tribune (Oakland, Calif.), July 22, 1987.
Levine, Daniel S., "APC Buys Own Shares from Itel," Tribune (Oakland, Calif.), March 21, 1991.
"Lillie to Succeed Seaton at American President Cos.," San Francisco Business Times, December 14, 1990.
Magnier, Mark, "APC's Inland Unit Realigns Operations," Journal of Commerce and Commercial, June 27, 1990.
——, "Jury Still Out on Impact of Itel-Henley-APC Deal," Journal of Commerce and Commercial, August 1, 1991.
——, "Layoffs Underway As APC Realigns," Journal of Commerce and Commercial, September 18, 1990.
——, "Many on Street See American President As Ripe for Takeover," Journal of Commerce and Commercial, August 1, 1991.
——, "Outsider Makes Mark in Shipping," Journal of Commerce and Commercial, October 18, 1989.
Niven, John, The American President Lines and Its Forebears, 1848–1984: From Paddlewheelers to Containerships, Newark: University of Delaware Press, 1987.
—update: Candice Mancini