“Hogarth said yesterday you were the most knowledgeable person in the world on Great Lakes shipping. I want to know what’s happening to it with this lock blown up.”
“Could you explain what you mean, please?”
“The accident to the lock must be having quite an impact, right? Or can ships still get through?”
“Oh-well, shipping hasn’t come to a complete standstill. They closed the MacArthur and the Davis locks for several days while they cleaned debris out of them and tested them, but they can still use the Sabin Lock-that’s the one in Canadian waters. Of course, the biggest ships are shut off from the upper lakes for a year-or however long it takes them to fix the Poe-the Poe was the only lock that could handle the thousand-footers.”
“And how serious is that? Does it have much of a financial impact?”
He pushed the hair out of his eyes and loosened his tie again. “Most of the shipping is between Duluth and Thunder Bay and ports lower down. Sixty percent of the grain in North America goes out of those two ports on freighters. That’s a hell of a lot of grain, you know, when you think of everything that’s produced in Manitoba as well as the upper Midwest-maybe eighteen billion bushels. Then there’s all that taconite in Duluth.” He pursed his lips in thought. “The Soo locks handle more cargo every year than Panama and Suez combined, and they’re only open for nine months instead of year-round like those two. So there is some financial impact.”
“The cargoes will still come out, but the smaller ships will have an advantage?” I persisted.
He smiled. “Just until they get the Poe Lock back under operation. Actually, there’s been a lot of disarray, both in the grain markets and among the Great Lakes shippers since the lock blew up. They’ll settle down in a few weeks when they realize that most traffic won’t be impaired.”
“Except for the carriers who’ve converted primarily to thousand-foot ships.”
“Yes, but there aren’t too many of those. Of course, grain concerns like Eudora are scrambling to get all their cargoes onto the smaller fleets, even bypassing the 740-foot ships. Grafalk’s is picking up a number of orders. They aren’t jacking up their rates, though, the way some of their less scrupulous brethren are.”
“How profitable is Grafalk’s, in general?”
He looked at me in surprise. “They are the biggest carrier on the lakes.”
I smiled. “I know-I keep being told that. But do they make money? I understand that these smaller ships are unprofitable and they make up his whole fleet.”
Ferrant shrugged. “All we do is insure the hulls. I can’t tell you how much freight they’re carrying. Remember, though, profitability is relative. Grafalk may not make as much as a firm like American Marine, but that doesn’t mean they’re unprofitable.”
Hogarth had come in while we were talking. “Why do you want to know, Miss Warshawski?”
“It’s not just idle curiosity. You know, no one’s come forward claiming responsibility for the bombing-the PLO or the FALN or the Armenians. If it wasn’t a random act of terrorism, there had to be a reason for it. I’m trying to find out if that reason included switching cargo from the big freighters to small vessels like the ones in Grafalk’s fleet.”
Hogarth looked annoyed. “Not Grafalk, I assure you, Miss Warshawski. Niels Grafalk comes from a very old shipping family. He’s devoted to his fleet, to his business-and he’s a gentleman.”
“That’s a fine testimonial,” I said. “It does a lot of credit to your heart. But a fifty-million-dollar ship has been blown up, the North American shipping industry has been thrown into disarray, however temporary, and a lot of business interrupted. I don’t know how the courts interpret such a thing, but someone is gong to have to pay for that business interruption. Grafalk stands to gain a lot by this accident. I want to know what shape his business is in. If it’s doing well, there’s less of a motive.”
Ferrant looked amused. “You certainly look for the less pleasant side of human nature… Jack, you have some idea of the state of the business, don’t you? Just look at your records, see how much cargo coverage he’s got and what his workers compensation insurance is like.”
Hogarth said mulishly that he had a meeting to get to and he thought it was a waste of time.
“Then I’ll do it,” Ferrant said. “You just show me where the files are, Jack, and I’ll have a look-through for Miss Warshawski here… No, really, I think she’s got a good point. We ought to follow up on it.”
Hogarth finally called his secretary on the intercom and asked her to bring him five years of Grafalk Steamship files. “Just don’t ever let the old boy know you did this. He’s very touchy where his family name is concerned.”
Hogarth left for his next meeting and Ferrant made some phone calls while I watched the boats out on Lake Michigan. Monroe Harbor was filling up rapidly with its summer fleet of sailboats. A lot of people were taking advantage of the beautiful weather; the near horizon was filled with white sails.
After some twenty minutes a middle-aged woman in a severely tailored suit came into the office pushing a large wire cart full of files. “These are the Grafalk Steamship files Mr. Hogarth asked for,” she said, leaving the cart in the middle of the room.
Ferrant was enthusiastic. “Now we’ll see what shape the business is in. You can’t tell that just from the hull insurance, which is all I do for Grafalk.”
Five years of Grafalk history was a substantial amount of paper. We had workers’ compensation policies, which went on for about a hundred pages a year, showing classes of employees, states covered, Longshoremen’s Act exclusions, and premium audits. There was a business interruption policy for each year, cargo coverage, which was written on a per-shipment basis, and inland marine, to cover Grafalk’s liability for cargo once it was unloaded from his ships.
Ferrant sorted through the mass with an experienced eye. “You know, the cargo and the compensation are going to tell us the most. We’ll just see the value of the freight he’s carrying and how many people he’s employing to do it. You tot up those workers’ compensation policies-look at the final audited statements and that’ll tell you how many people he’s got sailing for him every year. I’ll go through these cargo policies.”
I sat down at a round wooden table and joined him in stacking the papers covering it down on the floor. “But I thought the whole shipping business was depressed. If he’s not carrying much, how will that tell us anything besides the fact that the industry’s depressed?”
“Good point, good point.” Ferrand placed a stack of workers’ compensation policies in front of me. “We have some industry statistics-the average load carriers are hauling as a percentage of their available tonnage, that sort of thing. We’ll just compare them. I’m afraid it’s a rough approximation. The other thing, though, is that we know about what it costs a day to own one of those old clunkers. Now if it’s not carrying cargo, there’s still overhead-it has to be docked someplace. Unless the ship is in mothballs-which also costs something per diem-you have to have a skeleton crew on board. You need to be able to turn the beast on in a hurry and get to the place where you have a cargo waiting. So we can make a good guess at his costs and then look at these cargoes, here, and see how much he’s earning.”
That seemed like a reasonable approach. I started on my part of the assignment, secretly entertained by Ferrant’s enthusiasm for the project. He didn’t have Hogarth’s personal feeling for the insured.
The first page of the 1977 policy explained that Grafalk Steamship was a closely held corporation, principal address at 132 North La Salle Street in Chicago. The summary of the coverage on the declarations page showed Grafalk with fifteen hundred employees in eight states. These included sailors, secretaries, stevedores, longshoremen, truck drivers, and general office workers. Directors and officers were excluded from coverage. The total premium for 1977 was four million eight hundred thousand dollars. I whistled to myself. A lot of money.