By Stas Margaronis
Following the end of World War II, the Japanese government sought to re-establish its industrial base through shipbuilding. It recognized that shipbuilding would replace its decimated merchant fleet with brand new vessels and that by developing itself as a low-cost producer would encourage foreign buyers to build in Japan creating orders for ships, steel, pipe and other products that would have a ripple or multiplier effect on the post war economy and hasten industrial modernization.
MITI AND THE JAPANES ECONOMIC MIRACLE
In order to finance the early development of shipbuilding, when Japan was strapped for cash, some very innovative methods were employed to finance shipbuilding. Chalmers Johnson writes in MITI AND THE JAPANESE MIRACLE” that MITI used tariffs to finance ships. The Ministry of International Trade and Industry financed ship ‘exports’ by imposing tariffs on sugar imports to Japanese consumers:
“Between 1953 and 1955 MITI would issue import licenses for sugar to trading companies-which were then selling Cuban sugar in Japan at from two to ten times the import price-only if they had allied themselves with a shipbuilder and could submit an export certificate showing that they had used 5 percent of their profits to subsidize ship exports. For the two years it was in effect, the sugar-link system supplied some Y(Yen) 10 billion to the shipbuilding industry.” (p.232)
A U.S. shipping company, National Bulk Carriers, contracted with the Japanese government to build ships at a former Japanese naval shipyard in 1951, because of shipyard limitations in the United States.
Another reason was the lack of U.S. government interest in maintaining the competitive lead U.S. shipbuilders had developed in the mass-production of Liberty ships to provide war supplies to the military theatres in Europe and Asia. As a result, NBC brought US modular shipbuilding and welding systems for use in building its ships in Japan but was required by the Japanese government agreement to make its technology and expertise available to competing Japanese shipbuilders who used and refined US expertise to modernize Japanese shipyards.
THE JAPANESE SHIPPING AND SHIPBUILDING INDUSTRIES
A history of Japanese shipbuilding “THE JAPANESE SHIPPING AND SHIPBUILDING INDUSTRIES” written by Tomohei Chida and Peter Davies recalls that the technology transfer provision between the Japanese government and NBC contained the “insistence that all types of Japanese shipbuilders and engineers were to have free access to the establishment and were permitted to examine all aspect of its (NBC) building system. As a result of this arrangement NBC constructed 52 ships totaling some 2.36 million d.w.t (dead-weight-tons) …. from 1951 to the closure of the yard in December of 1962.” (p.112)
Of particular interest to the Japanese was the modular system of building ships and the use of welding that Ludwig and Henry Kaiser and others had pioneered during World War II.
During World War II, the Japanese lacked U.S. mass-production methods and so after the Battle of Midway, when the U.S. Navy destroyed the attacking Japanese carrier fleet, the Japanese could not quickly replace the carriers. The loss of the Japanese carriers helped turned the tide against the Imperial Navy in the Pacific.
The NBC deal with Japan helped the Japanese sufficiently so that when the Suez Canal was shut in 1956 by military hostilities, Japanese builders were able to offer and sell large tankers to circumnavigate the coast of Africa and deliver Middle Eastern oil to Europe and the United States. This helped turn Japan into a leading shipbuilding nation.
However, Chida and Davies write that the Japanese acquisition of American technology was key:
“NBC’s Kure shipyard quickly became acknowledged as the leader in the diffusion of the new technology and as the originator of a fresh system for Japanese shipbuilders. The importance of the latter development cannot be overemphasized. It reflects the far-sighted wisdom of the Japanese Government at the time who, by facilitating the agreement, enabled a prototype for all new shipyards to be demonstrated. This action, together with the introduction of large-scale section building, the improvement of welding techniques and the rise in the quality of steel, then prepared the way for future growth and the industry was thus well prepared for the boom which accompanied the closure of the Suez Canal.” (p.112)
DANIEL LUDWIG, U.S. SHIPOWNER AND BUILDER, BRINGS U.S. EXPERTISE TO JAPAN
This version does not give due credit to the American who helped make this happen. THE INVISIBLE BILLIONAIRE, written by Jerry Shields is the biography of American shipowner and billionaire Daniel Ludwig, owner of National Bulk Carriers. Shields describes the important role Ludwig and NBC played in the Japanese shipbuilding modernization.
The biography describes that Ludwig abandons the United States after World War Two era, because of drydock limitations at his Virginia shipyard and the shut off of U.S. government subsidies after the war. Ludwig made money building tankers at his Welding Shipyard in Virginia as well as operating vessels for the US Maritime Commission. Unlike Liberty ship builder Henry Kaiser, Ludwig made money as a builder and an operator.
He decides to invest in Japan to take advantage of low Japanese wages and the presence of the large drydock at Kure, which was used to build the Japanese battleship Yamoto.
From a young age Ludwig understood the importance of political influence in the shipping business, Shields recounts. In the 1920s when Prohibition made the sale of alcohol illegal, Ludwig and his father went in to the alcohol transport business, possibly on behalf of one of the New York mob organizations. Unfortunately, the Ludwig ship was caught smuggling liquor into the United States. Ludwig’s father – possibly with mobster assistance – hired a smart criminal attorney who somehow won the dropping of all criminal charges against the crew and owners and let the ship return to its trade. This extraordinary sequence of events, Shields tells us, was achieved thanks to the intervention of U.S. Secretary of State Hughes, who served under President Coolidge and later became Chief Justice of the United States Supreme Court!
After that scrape with the law, the Ludwigs went legitimate. Daniel hired a Washington lobbyist and began buying surplus vessels from the Shipping Board (later the Maritime Commission and later the Maritime Administration), modernizing the ships to improve capacity and profitability. Using his political influence, he renegotiated the terms of his agreements with the U.S. government to suit his cash flow requirements.
In 1950, Shields writes, the Japanese were at first reluctant to lease the Kure drydock to Ludwig, but eventually agree after Ludwig exerts his influence over U.S. Occupation authorities. The deal is very controversial with the British who unsuccessfully sought to scuttle the NBC deal for fear that it would help Japanese shipbuilders take market share from Britain.
Ludwig rejects the U.S. occupation authority’s requirement that NBC use Japanese steel to build his ships in Japan because “Japanese steel was not well suited to welding. Its sulfur content was too high.” Instead, he opts to import steel from the United States with lower sulfur content. As there is a world-wide shortage of steel for post-war US shipbuilding this provision is controversial with U.S. authorities but Ludwig uses his political influence and gets his way. (pp.165-166)
Shields reports: “he could bring American ship-plate steel of welding quality to Kure for two thirds of what it would cost him to buy the Japanese product.” (p.166). In his agreement with the Japanese government, Ludwig was also allowed to import foreign engines, mechanical equipment and other shipbuilding equipment duty free. (p.164)
By 1952, Ludwig has launched his first tanker the 38,000-ton Petrokure, 10,000 tons greater than any tanker built at the time. The large drydock at Kure gives Ludwig the opportunity to build vastly larger tankers at cheaper labor cost than he could have built in the United States. He has plans for three more similar size tankers before he builds a 44,000-ton tanker scheduled to be completed in 1954.
The steel shortage poses a challenge to Ludwig’s plans until he discovers that U.S. Steel is willing to accept him as a partner in their exploitation of an iron ore field in Venezuela that produces a higher quality of iron ore than is available in the United States. In 1951, Ludwig and US Steel agree that NBC will build 60,000 ore carriers to carry Venezuelan iron ore to Japan at a substantial savings and improvement in quality from the material the available in Japan. (p.171)
By 1954 NBC’s Kure yard employs 2,500 workers and another 1,500 workers as subcontractors and is building a fleet of 60,000-ton ore carriers to increase iron ore imports from Venezuela.
As a result, Ludwig is not only modernizing Japanese shipbuilding, he was also building a new fleet of Japanese built tankers and bulk carriers. At the same time, he is playing a major role in upgrading the Japanese steel industry by importing better quality and lower cost ore from Venezuela. Thanks to Ludwig, Japan is not just outperforming U.S. and European shipbuilders, he is preparing the Japanese to compete with U. S. and other foreign steel makers.
Ludwig also solved a critical shipbuilding problem that had undermined Japanese shipbuilding during World War II: welding. Ludwig had been a major proponent of welding as opposed to riveting since before the World War Two. Then, the failure of rivets had caused damage to one of his vessels, the Phoenix, and so he embraced welding as a superior technology to the extent that his Norfolk, Virginia shipyard was named Welding Shipyard, Inc:
“One technique he did not originate but did pioneer and help make standard in the industry was welding ship seams together rather than riveting them. All- welded ships were being produced in British yards in the mid-1930s, and Ludwig relied on a similar technique in his renovation work. His experience in 1926 on the Phoenix had convinced him of the wisdom of this method. And his naming the shipbuilding operation Welding Shipyard shows that he intended to set himself apart from other American yards, that were still riveting.
Another motivation, in addition to safety, was certainly cost; it was cheaper to weld seams than to rivet them. Other yards eventually learned the lessons Ludwig had, and during the course of World War II nearly all-American shipyards laid off Rosie the Riveter and replaced her with Wanda the Welder.” (p.117)
During World War II, Ludwig built so-called jumbo T-3 tankers of 18,000 tons, 2,000 tons bigger than the T-2 and T-3 tankers being built at most U.S. shipyards. Ludwig emphasized that ‘bigger is better’ and also provides improved economies of scale. On this basis, he went to Japan to build the first generation of so-called supertankers. (p.124)
In Japan, Chida and Davies note poor welding contributed to the loss of two Japanese destroyers in 1935. Japan abandons the technique and reverts back to the riveting process. This is a slow, labor-intensive process that retarded the deployment of mass production and section building. These were methods pioneered by the Americans during World War II. In a real sense, American shipbuilding doomed Japan to defeat on the high seas and welding played a key role.
Ludwig facilitated the adoption of welding in Japan by importing American methods refined at his US shipyard. He also weaned Japanese shipbuilders and steelmakers away from steel with high sulfur content that was “not well suited to welding”, according to Shields. In fact, Japan’s problems with welding are directly attributable to the high sulfur content of its steel that made steel brittle and led to cracks during the welding process and may have contributed to the sinking of the Japanese destroyers in 1935. Ludwig’s introduction of low sulfur iron ore solves the problem for Japanese builders. At first, he replaced the Japanese ore with American ore and then replaced American ore with higher grade Venezuelan iron ore.
Chida and Davies note that Japanese shipbuilders and steel makers were collaborating on improving steel quality and production for use in Japanese shipbuilding and that Japanese designers refined American’s methods in section building. As a result, manhour per gross ton in Japan went from 145 hours in 1949 to 78 hours in 1956. (p.114)
Chida and Davies conclude “it is clear that…. from 1952 to 1956 marked a decisive turning-point in the industry’s history.”
In another history of Japanese shipbuilding the authors note: “Japan’s shipbuilding industry experienced a dramatic surge of growth from the post-1954 “first export-ship boom”, and by 1956 it had surpassed Britain to become the top-ranked shipbuilding country in the world – a position it would retain for the rest of the century.”[1]
Some of that credit belongs to an American shipowner and shipbuilder named Daniel Ludwig.
[1] “The lower labour market and the development of the post-war Japanese shipbuilding industry” by Takeshi Haraguchi and Kazuya Sakurada, https://www.degruyter.com/document/doi/10.1515/9789048530724-023/pdf