“It is no secret that Morgan is pursuing his far-reaching plans as the head of a syndicate which comprises a number of the most important and most enterprising business men in the United States, and that the railway interests are particularly well represented in it. Morgan himself, during his stay in London a few months ago, stated to some British shipping men that, according to his estimates, nearly 70 per cent. of the goods which are shipped to Europe from the North Atlantic ports are carried to the latter by the railroads on Through Bills of Lading, and that their further transport is entrusted to foreign shipping companies. He and his friends, Morgan added, did not see any reason why the railroad companies should leave it to foreign-owned companies to carry those American goods across the Atlantic. It would be much more logical to bring about an amalgamation of the American railroad and shipping interests for the purpose of securing the whole profits for American capital.
“This projected combination of the railroad and sea-borne traffic is, as I have pointed out, a great source of danger to the foreign shipping companies, as it will expose them to the possibility of finding their supplies from the United States hinterland cut off. This latter traffic is indispensable to the remunerative working of our North American services, and it is quite likely that Morgan’s statement that they amount to about 70 per cent. of the total sea-borne traffic is essentially correct.”
The negotiations which Ballin carried on in this connexion are described as follows in his notes:—
“When I was in London in July (1901), I had an opportunity of discussing this American business with Mr. Pirrie. Pirrie had already informed me some time ago that he would like to talk to me on this subject, but he had never indicated until then that Morgan had actually instructed him to discuss matters with me. A second meeting took place at which Ismay (the chairman of the White Star Line) was present in addition to Pirrie and myself, and it was agreed that Pirrie should go to New York and find out from Morgan himself what were his plans regarding the White Star Line and the Hamburg-Amerika Linie.
“Shortly after Pirrie’s return from the States I went to London to talk things over with him. He had already sent me a wire to say that he had also asked Mr. Wilding to take part in our meeting; and this circumstance induced me to call on Mr. Wilding when I passed through Southampton en route for London. What he told me filled me with as much concern as surprise. He informed me that the syndicate intended to acquire the White Star Line, but that, owing to my relations with the Kaiser, the acquisition of the Hamburg-Amerika Linie was not contemplated. Morgan, he further told me, was willing to work on the most friendly terms with us, as far as this could be done without endangering the interests of the syndicate; but the fact was that the biggest American railroad companies had already approached the syndicate, and that they had offered terms of co-operation which were practically identical with a combination between themselves and the syndicate.
“In the course of the discussions then proceeding between Pirrie, Wilding, and myself the situation changed to our advantage, and I was successful in seeing my own proposals accepted, the essence of which was that, on the one hand, our independence should be respected, that the nationality of our company should not be interfered with, and that no American members should be added to our Board of Trustees; whilst, on the other hand, a fairly close contact was to be established between the two concerns, and competition between them was to be eliminated.”
The draft agreement, which was discussed at these meetings in London (and which was considerably altered later on), provided that it should run for ten years, and that a mutual interchange of shares between the two concerns should be effected, the amount of shares thus exchanged to represent a value of 20 million marks (equivalent to 25 per cent. of the joint-stock capital of the Hamburg-Amerika Linie). Mutual participation was provided for in case of any future increase in the capital of either company; but the American concern was prohibited from purchasing any additional shares of the Hamburg-Amerika Linie. The voting rights for the Hamburg shares should be assigned to Ballin for life, and those for the American shares to Morgan on the same terms. Instead of actually parting with its shares, the Hamburg company was to have the option of paying their equivalent in steamers. The agreement emphasized that, whilst recognizing the desirability of as far-reaching a financial participation as possible, Ballin did not believe that, with due regard to German public opinion and to the wishes of the Imperial Government, he was justified in recommending an interchange of shares exceeding the amount agreed upon. The American concern was prohibited from calling at any German ports, and the Hamburg company agreed not to run any services to such European ports as were served by the other party. A pool agreement covering the cabin business was entered into; and with respect to the steerage and cargo business it was agreed that the existing understandings should be maintained until they expired, and that afterwards a special understanding should be concluded between both contracting parties.
Immediately after Ballin’s return to Hamburg the Board of Trustees unanimously expressed its agreement in principle with the proposals.
“For my own part,” Ballin says in his notes on these matters, “I declared that I could only regard the practical execution of these proposals as possible if they receive the unequivocal assent of the Kaiser and of the Imperial Chancellor. Next evening I was surprised to receive two telegrams, one from the Lord Chamberlain’s office, and one from the Kaiser, commanding my presence on the following day for dinner at the Hubertusstock hunting lodge of the Kaiser, where I was invited to stay until the afternoon of the second day following. I left for Berlin on the same evening, October 16th (1901); and, together with the Chancellor, I continued my journey the following day to Eberswalde. At that town a special carriage conveyed us to Hubertusstock, where we arrived after a two-hours’ drive, and where I was privileged to spend two unforgettable days in most intimate intercourse with the Kaiser. The Chancellor had previously informed me that the Kaiser did not like the terms of the agreement, because Metternich had told him that the Americans would have the right to acquire 20 million marks’ worth of our shares. During an after-dinner walk with the Kaiser, on which we were accompanied by the Chancellor and the Kaiser’s A.D.C., Captain v. Grumme, I explained the whole proposals in detail. I pointed out to the Kaiser that whereas the British lines engaged in the North Atlantic business were simply absorbed by the trust, the proposed agreement would leave the independence of the German lines intact. This made the Kaiser inquire what was to become of the North German Lloyd, and I had to promise that I would see to it that the Lloyd would not be exposed to any immediate danger arising out of our agreement, and that it would be given an opportunity of becoming a partner to it as well. The Kaiser then wanted to see the actual text of the agreement as drafted in London. When I produced it from my pocket we entered the room adjacent to the entrance of the lodge, which happened to be the small bedroom of Captain v. Grumme; and there a meeting, which lasted several hours, was held, the Kaiser reading out aloud every article of the agreement, and discussing every single item. The Kaiser himself was sitting on Captain v. Grumme’s bed; the Chancellor and myself occupied the only two chairs available in the room, the Captain comfortably seating himself on a table. The outcome of the proceedings was that the Kaiser declared himself completely satisfied with the proposals, only commissioning me, as I have explained, to look after the interests of the North German Lloyd.
“On the afternoon of the following day, after lunch, the Chancellor and I returned to Berlin, this giving me a chance of discussing with the former—as I had previously done with the Kaiser—every question of importance. On October 18th I arrived back in Hamburg.”