Statement on George W. Goethals

It is with extreme regret hat I learn that General Goethals in his many conferenced with newspaper men in the last week has sought to create the impression that there is a personal controversy between us. Coming from such a source, the press is entirely justified in assuming that such is the fact.

The truth is that there is not and never has been any personal controversy between General Goethals and myself. Ever since his employment by the Shipping Board, our contacts have been pleasant.

There have, however, been certain profound differences of opinion between General Goethals and the Shipping Board, all of them bearing on the paramount question of the rapidity of the construction of ships, the price at which they shall be constaucted, the method of determining prices, and the ownership of the ships on our stocks which have been contracted for by Beitish and other alien contractors.

(1). Wooden ships.
The Shipping Board has never believed in wooden ships as a commercial proposition. From the beginning, it has announced that of the five months lossess from February first to July 1st. These losses exceed in rate by at least 100 per cent. the anticipated reproduction of steel in all the countries of the World for which the most sanguine can hope. If we can obtain wooden ships in any quantity, whether slow or fast in speed, there is an absolute need for them, the slower ships to release the faster ships in the coastwise trade and also to relieve the railway congestion, and those of a higher speed for trans-Atlantic service. The Board's project for building these ships asked for the appointment of General Goethals' as its head and expressed a hope that we might construct three million deadweight tons of such ships in eighteen months. The project was approved by the Council of National Defense after an independent investigation, and then adopted by the President. General Goethals accepted appointment under the Board to carry this forward.

Without any serious investigation, he determined that the project could not be a success, and we have recently learned actually instructed our agents sent out, as we supposed to stimulate the construction of a great fleet, to discourage their building, actually saying to them that he did not "desire to build wooden ships", and this at a time when the rate of losses had reached the proportions we have above described.

The Shipping Board differs with General Goethals as to this method of stimulating the rapid construction of vessels for the emergency.

Subsequently at a public dinner in New York, given by the Steel interests, with all reporters present, General Goethals attacked the wooden shipbuilding project, which had been adopted by the President, and its projectors in language which, to say the least, was very unhappily chosen. Instantly, all of the contractors who had been gathering their energies and forces and materials together for the construction of these ships slackened their efforts and some of them gave up entirely. The Board disagreed with General Goethals' methods of stimulating the production of tonnage also in this regard.General Goethals stated at about this time that we could not build over 150 wooden ships in the eighteen months succeeding. Under constant pressure from the public and from the Board since that time, he has now let contracts which, even under the slowly constructed and elaborate design he has chosen, will give us a million and a half tons of ships in eighteen months, or a million deadweight tons more than he said could be constructed, and we still have offers for 400 more ships, which would give us another million deadweight tons. The elaborate design of hull referred to is reliably estimated to cost much more, to take a third longer time to construct than other designs approved by the American Bureau of Shipping, whose rules the General has made the standard of construction in all his contracts.

(2) The price of steel:
Before the Board embarked on its wooden ship project, it endeavored to get contracts for the construction of steel vessels, but was informed by the yards that the steel could not be obtained. After the wooden ship project was under way the Board quietly declared its intention to commandeer the steel producing plants, and almost immediately the President of the largest Steel Corporation sent word that he desired to see the Chairman of the Shipping Board. We requested General Goethals to take the matter up with the Steel President and the General reported back that the steel producers had agreed to produce a very large amount of steel and had shown him figures which satisfied him that 4 cents per pound, or $95.00 per ton for plates, was a fair price. General Goethals based his estimates to Congress for the appropriation of the $750,000,000 on vessels constructed of steel at $95 per ton. We have since been offered the steel in quantities sufficient to take care of all our needs at $28 per ton less than this price.

The Shipping Board differed with General Goethals as to this price of steel, but in spite of this difference, General Goethals announced at a public meeting at which reporters were present that the contracts for the construction of steel vessels placed the steel at $95 per ton, and several contracts came to us for signature on this basis. After investigation, we declined to sign any more contracts and insisted that they should be written on a base of $56 a ton, with a sliding scale up and down for any variation in the ultimate price. The Shipping Board differed with General Goethals in accepting what he said of Mr. Farrel's justifying figures, and in placing the $95 a ton rate in his contracts.

(3) Commandeering of Steel Plants:
General Goethals was violently opposed to placing in the United States Government the power to commandeer the iron and steel producing plants. He said that his intimacy with the steel men could obtain proper prices. The Shipping Board differed from him in this regard, and the legislation ultimately passed, placing the commandeering power in the President, was along the lines of its final suggestion. The Shipping Board differed with the General as to his power to control the price of steel from the steel producers through personal negotiations.

(4) Fixing of Price of Steel.
General Goethals, without consultation with the Shipping Board, after the disagreement on the $95 tentative rate, referred the question of fixing the price of steel to the Advisory Board of the Council of National Defense. This Board was made up of Judge Gary and Mr. Farrell of the United States Steel Corporation and other steel producers. The Shipping Board differed from General Goethals as to this method of determining the price, and asked that it be placed with the Federal Trade Commission, where it now rests.

(5) Alien Tonnage on our Stocks:
In the period between February 10 and April 1, the British Government, through the Cunard Company, obtained contracts in our steel ship building yards for the construction of a million deadwdight tons of steel ships. This took up practically all our then available space. After various delicate negotiations with the British Government, negotiations conducted by the Chairman of the Shipping Board, the British Government graciously offered to release these contracts to the United States. The Shipping Board felt that with the enormous destructivity of the submarine, these ships should be kept under our own flag for the possible use of carrying our troops and supplies to France.Although fully cognizant of these delicate negotiations, General Goethals, without consultation with the Shipping Board, on Friday last, announced that, after investigation, he was satisfied that these alien contractors would pay the cost of expediting ships now building for them, and take them off our hands. The Shipping Board differs with General Goethals in making such an announcement on such a delicate subject. He has since advised us that he has no information to the effect that the British Government will pay the cost or is desirous of doing so, or of taking the ships off our hands.

(6) Government Ship Building Plants:
On Friday last General Goethals announced that he proposed on Monday, July 16th, to offer contracts for the building of two plants to be owned by the Government for the construction of fabricated steel ships to produce 400 ships within the next twenty-four months, and that "options would be given to contractors to purchase the plants at arbitrated values on the completion of the work."He has since sent us a copy of the contract which he proposed to offer on Monday which provides that the Government shall make this great investment of money largely in pilings driven in the ground and amounting to many millions over twenty of dollars on land which it would not own, but which it would lease from the American International Corporation, a corporation controlled by the Vanderlip Bank group in New York, and closely affiliated with the steel producers. This Corporation was to have the option of buying the Government plant at an appraisal which of course would be seriously affected by the fact that the plant was not erected on Government property. It should be noted that the private corporation had the option to purchase, not that the Government had the option to purchase. The Shipping Board disagrees with General Goethals on this method of building Government plants, and of investing Government money. At no time prior to the announcement of his program on last Friday, did General Goethals advise the Shipping Board that he intended this character of investment that would give this power over a newly created Government plant to private persons.

We believe we have said enough to indicate that the differences between General Goethals and the Shipping Board are not of a personal or private character.----