On the other hand, the promoters of the new company were able to make a strong plea based on the unsatisfactory conditions of water transportation in previous years. For the first time in fifteen years San Francisco shippers had a remedy in their own hands.
With the successful operation of this company, San Francisco need fear no excessive prohibitory rates from the Transcontinental or similar associations; the relief in transportation will be immediate and ample, which, together with sailing ships via Cape Horn, solves the immediate question of cheap transportation, freedom from excessive freights, and makes our city again the distributing point, instead of an isolated terminus of a long haul by rail.[442]
The Raising of Funds
The original intention was to raise a fund of $100,000, and it appears that the Panama Railroad agreed to enter into a contract with the North American Navigation Company providing that sum were subscribed. When $80,000 had been promised, however, the promoters solicited the aid of the recently formed Traffic Association, and upon its advice increased their capital to the sum of $200,000. As is frequently the case, in such campaigns no subscriptions were binding until the whole amount should have been subscribed. Before this point was reached the promoters nevertheless concluded their contract with the Panama Railroad. Perhaps they were over-optimistic, perhaps they felt that the chance of making such a contract should not be allowed to pass—at any rate they signed the contract and thereby agreed to dispatch steamers from San Francisco on fixed dates to connect with the rail line at the Isthmus. The text of the contract was not divulged, but the public was informed that it was to go into effect March 8, 1893, and that it gave to the North American Navigation Company the exclusive right of through billing between New York and San Francisco by way of the Isthmus of Panama.[443]
When the time came to dispatch the first vessel called for under this contract, the Navigation Company found itself in the uncomfortable position of a concern with important responsibilities and no money with which to meet them. Not a dollar of the capital stock had been paid in, and only $160,000 had been subscribed. Under these circumstances certain of the individuals most interested personally guaranteed the charter hire of the first boat, and the same was done for the second, and for the third, at intervals of twenty days. Before the time arrived for the departure of the fourth vessel, the entire $200,000 asked for had been pledged. By December, 1893, this fund was exhausted, and $100,000 more was raised—not without difficulty, and with some feeling of discouragement on the part of the promoters.[444] The additional subscription made possible the continuance of the service approximately till the 1st of May, 1894, or for a total period of a little over a year. There is some evidence that the managers of the company desired a still further extension, but if an attempt of this sort was made, it met with no success.
During the life of the North American Navigation Company five steamships were chartered: the St. Paul, Mexico, Keweenaw, Progreso, and Saturn. The “St. Paul” and the “Mexico” were small boats, with a net tonnage, respectively, of about 700 and 1,350 tons dead weight. The net tonnage of the “Keweenaw” was reported to be 2,004 tons, that of the “Progreso” and “Saturn” somewhat less.[445] Some passengers were carried by the line, but not many. The Pacific Mail also operated five vessels with capacity carrying from 2,000 to 2,500 tons. These were all small craft as compared with steamers of the present day. The original program, as has been said, called for a twenty-day interval between sailings, and the total estimated time consumed in shipment from San Francisco to New York was put at thirty-two days. It could scarcely have been expected that these ships could accommodate any large portion of the business of the Pacific Coast, nor indeed was there much chance for them to earn any considerable profit on the business which they did carry. The fact that so large a guaranty fund was insisted upon by the Panama Railroad before any exclusive through billing arrangement would be made, is evidence that a deficit was expected. As a matter of fact the total fund of $300,000 was used up before the fifteen months contemplated in the original agreement had entirely expired.
Drop in Railroad Rates
The principal purpose of the North American Navigation Company was, beyond question, to compel a reduction in transcontinental rates by rail and water by demonstrating that the business men of San Francisco could establish an independent connection of their own. This accounts for the enthusiasm with which the project was greeted in the community at large. The Navigation Company was looked upon as a kind of St. George tilting against the dragon of monopoly. The newspapers printed columns of description with pictures of the boats chartered by the new line, the promoters gave out interviews, and crowds gathered at the wharves to see the vessels leave. And it was by pointing to the rate reductions accomplished that the company subsequently justified itself.
Mr. Leeds, manager of the Traffic Association, estimated that the 84,000 tons which he thought the new steamship line would handle, added to what the clipper ships were carrying, would leave about 250,000 tons for the railroads to transport from coast to coast. On this he expected to see a decline in rates of not less than 20 per cent. More exactly, he calculated that the saving to shippers due directly to the operation of the North American Navigation Company would amount to $660,000; that due to clipper ship competition would total $1,110,000; and that secured through a decline in railroad rates would be $1,248,000; or a total of $3,018,000.[446] Captain Merry, president of the Navigation Company, declared when all was over that a saving of $3,500,000 had been made on Pacific Coast products shipped east during the life of the company, in addition to the saving of perhaps $1,500,000 on westbound freight.[447]
Undoubtedly the operations of the Navigation Company intensified the rate war started by the clipper ships, and the reductions in transcontinental charges were considerable. According to Mr. Leeds the cuts on eastbound transcontinental freight, all-rail, on representative articles, by January, 1894, were as follows:[448]