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is retained because, mechanically, it functioned satisfactorily but the true function of the equipment was over- looked. The operators keep the equipment in use because it works mechanically but they fail to realize that the equipment fails to work economically because another type of equipment could perform the same work at a less cost per ton. Equip- ment is acquired to perform cargo handling economically, and not be- cause it is a fine example of mechani- cal engineering. The manner of financing equip- ment is found frequently to be the controlling factor where the opera- tor knows his present methods and equipment are obsolete. This poiat was covered in a part of the author's paper presented at the 1933 meeting of the Society of Naval Architects and Marine Engineers, and the statement applies just as much to equipment and methods on the terminal as it does to the cargo handling equipment of a ship. Because there are so many operations that are obsolete in one respect or another, the statement in part is quoted below: Knowledge and Profit “A shipping executive may under- stand the principles of profitable ship operation, and possess a vast store of knowledge of methods and equip- ment, yet he may not be able to trans- late this knowledge into profit be- cause of a lack of finances, and the opposition of the higher executive of the company. “The objection is often raised that the purchase of modern equipment cannot be financed. This recalls the statement of Wellington in his book “Economies of Railway Location,” that energetic managements find ways to finance equipment which will re- duce costs. “It is very costly to postpone pos- sible savings. An energetic, well in- formed management is constantly on the alert to find ways and means of financing improvements to cut costs. “An improvement costing $10,000 which will save $10,000 a year, will produce a net saving of $40,000 in five years. If the improvement is de- layed two years by a false point of view, lack of means of financing the improvement, or organization fric- tion, the net saving in five years is reduced to $20,000. “Tt is possible to tabulate wasted opportunities, amounting to millions of dollars, using only cases where improvements for more economical cargo handling were made after de- lays of two to six years. “This is a poor time to finance im- provements by increasing capital ex- penditures by means of loans, or sale of stocks and bonds; it is a very good time to increase capital expenditures by transferring expenditures from operating costs to expenditures for the more economical handling of cargo. When the cost of improve- ment is liquidated, that which was formerly a portion of operating cost may be transferred to profits. “The problem of financing cargo handling equipment then becomes primarily one of transition financing. When the problem is to finance trae- tors and trailers, pallet and fork trucks, etc., it is possible that an en- ergetic management of any except a bankrupt or near bankrupt company may find a way to finance these im- provements which will pay for them- selves within a short time—six months, a year, eighteen months, or even two years, depending upon the state of finances of the company and the savings resulting from the im- provement. Responsibility of Management “The number of terminals with obsolete cargo handling gear in 1928 and 1929 indicates that not lack of finances but lack of a _ progressive point of view and an energetic man- agement is the principal cause of the slow progress in modernization of the cargo handling features of the ships. “One line acquired equipment cost- ing $35,000 without the outlay of a single cent. The equipment manu- facturers placed the equipment on the terminal, taught the organization its most effective use, and accepted as payment the savings which resulted. In another case, a guarantee was made as to results. This guarantee was exceeded. In the first year of operation $70,000 was saved on an investment of $140,000. “A financing plan is now being offered by a cargo handling consult- ant which provides that 20 per cent of the savings accrues to the ship- ping company and the balance is ap- plied against the purchase price of the equipment. “Improvements requiring financing with a shipping company’s own funds may be difficult, because of the rela- tions with the company’s bankers. A line with a floating debt of $50,009 on which it is paying interest at 6 per cent, is spending $3000 yearly, while obsolete hatch covers may cause an excessive cargo handling cost of $6000. Therefore, twice us much would be saved by spending money on new equipment rather than on reducing the floating debt. Wheth- er this can de done depends on whether the bank is more interested in getting the debt reduced than in financing cargo handling equipment. “A broad visioned banking conneé- tion is a necessity to maximum profits, particularly at this time. A dollar invested now in reconditioning or modernizing will be worth more than a dollar five years from now, possibly because of rising prices and surely because savings effected will extend over a longer period. Clear headed bankers know this, and will finance improvements which the facts show will pay for themselves within a reasonable period, possibly up to two MARINE REviEw—April, 1935 years. “It is the function of shipping managements to convince the banker, with facts obtained by observation, analysis, and experiment, that the economies claimed will be realized within the period named.’’ Principles are fundamental to a thorough understanding of freight handling and the greatest economies are obtained by those who apply them intelligently. American Bureau Should Continue Present Functions Active opposition has developed to the possible replacement of the Amer- ican Bureau of Shipping as the au- thority for the approval of plans and specifications for the building and repair of ships. The suggestion has been made that the proposed en- larged technical staff of the bureau of navigation and steamboat inspec- tion, which is one of the provisions of the ship safety program, now be- ing considered by congress, should assume the responsibility of approv- ing such plans and specifications. R. J. Baker, president of the American Steamship Owners’ asso- ciation, offered a substitute for the section of the measure referring to this matter. As amended by Mr. Baker, the section would read: “The American Bureau of Ship- ping shall be authorized in respect of vessels classed or to be classed with the said bureau and in the case of unclassed vessels in accordance with the said approved plans and specifica- tions and rules and regulations and the certificate of said bureau when said plans and _ specifications and rules and regulations have been com- plied with shall be accepted by the director as evidence of such compli- ance, subject to the right of the di- rector to verify the correctness of the findings of the said bureau.’’ H. Gerrish Smith, president, Na- tional Council of American Shipbuild- ers informed the committee that the council had given close attention to this question since it vitally affects the design and building of ships and that therefore the council supported the amendment offered by Mr. Baker. Some shipowners at the hearing suggested that this authority should apply to other recognized classifica- tion societies as well as to the Amer- ican Bureau of Shipping. In addi- tion to supporting the Baker amend- ment, J. Lewis Luckenbach, president of the American Bureau recommend- ed that provision be made under which the bureau of navigation and steamboat inspection could set up a technical staff to review the recom- mendations made by the American Bureau. He pointed out that the American Bureau has nothing to do with insurance but deals with the construction of ships as to their strength characteristics. 49