1. Was the investment in building and owning ships a common investment by insurance companies in the late 1950s? I don't know of any other great lakes boats so owned, but am wondering if this sort of investment/long term charter was done with ocean-going ships.
Insurance companies have invested in major capital projects for well over two centuries. Especially after World War II corporate "leasing" of airplanes, railway cars and locomotives, trucks, and all manner of capital equipment provided insurance companies with relatively safe, long range returns. Like large banks, insurance companies have immense revenue streams that allow them to invest massive capital in such investments, retaining ownership and depreciation, while the lessee "rented" the depreciation of the investment. Long-term bare boat charters, like what NMIC negotiated with Oglebay Norton, freed Northwestern from actually operating the vessel and attendant responsibilities, much like BMW or GM do when those firms lease automobiles. However the insurance giants' immense capital reserves allow them to not rely on outside financing. I am sure NMIC and ON hammered out a contract that would allow appropriate charter (lease) payments to NMIC with a buy-out at the end of the charter for ON, or MNIC able to sell the vessel to the highest bidder at that point. And the schedule of payments probably included mechanisms to adjust for inflation during the life of the charter. Northwestern Mutual also owned Wilson's J. H. Hillman, Jr., Joseph W. Wood and J. Burton Ayers. When Great Lakes Steamship Company was dissolved in 1957, NMIC purchased those vessels. Columbia acquired the Hillman on a bareboat charter in 1960. Wilson bought the other two in 1966, and Oglebay Norton assumed ownership of the Hillman in 1973. The Fitzgerald was the first Great Lakes vessel financed by an insurance company although Northwestern had explored the possibility as early as 1948 to provide such financing.
2. How much did Oglebay Norton pay the Northwestern Mutual Life Insurance Company per year under the charter agreement?
I have no idea. I'm sure the contract was privileged information. Someone may know.
3. Was the charter agreement with Olgebay Norton in place before the FItzgerald was ordered, or did Northwestern Mutual begin design or construction while still seeking someone to charter the boat?
NMIC would not invest one red cent in a vessel unless the lessee had an iron-clad float contract in hand.
4. Who was responsible for the cost of routine maintenence/shipyard work- Oglebay Norton or Northwestern Mutual? (I'm assuming Oglebay Norton would have been responsible for the cost of any damages for non-routine wear and tear - like collisions etc.)
In a bare boat charter, the operator generally has full fiscal responsibility for every aspect of the vessel's operation.
5. How was this agreement profitable for Northwestern Mutual? I don't know what the cost to build the Fitzgerald was, but it seems hard to believe Northwestern Mutual would have made a profit in any time frame acceptable to shareholders. Was there some tax advantage with depreciation over a 25 year lease that would have made this agreement profitable? (I'm assuming the Fitzgerald was more than simply a vanity project for the company president.)
I think its cost was a bit shy of $8 million. When its keel was laid, NMIC had assets of $3.8 billion. NMIC had no expenses incurred after its building and was receiving the charter fee (which may have been somehow tied to its gross or net earnings as a carrier) as well as tax write-offs. NMIC also received, tragically, the vessel's insurance settlement. Oglebay Norton received a state-of-the-art vessel at a fraction of what it would have cost it to finance and build itself. Edmund Fitzgerald was far too shrewd and capable a CEO to indulge in "vanity projects" (although that stance has certainly changed among certain contemporary "titans of industry"). He resisted the vessel being named in his honor until almost the last moment.
Fitzgerald ownership questions
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Guest
Re: Fitzgerald ownership questions
Northwestern Mutual Life Insurance owned a couple of other vessels at the time the Edmund Fitzgerald was built. One was the Richard C. Marshall, the others were Thomas Wilson and J. Burton Ayers.
Oglebay Norton payed $570,000 per annum. The bareboat charter was for 25 years, but Oglebay Norton could extend the charter for an additional 15 years, while paying $241,000 per annum.
Northwestern Mutual ordered the Fitzgerald in February 1957.
The Fitzgerald cost $8 million to build. If you take the 25 year charter and multiply it by $570,000 per annum we arrive at $14,250,000. Which means a profit of $6,250,000 - of course before taxes and other costs. No idea if there was an escalator clause for inflation in the charter.
Information on the charter can be found here, starting at page 91 of the pdf document: https://lib.bgsu.edu/finding_aids/files ... f97879.pdf
Oglebay Norton payed $570,000 per annum. The bareboat charter was for 25 years, but Oglebay Norton could extend the charter for an additional 15 years, while paying $241,000 per annum.
Northwestern Mutual ordered the Fitzgerald in February 1957.
The Fitzgerald cost $8 million to build. If you take the 25 year charter and multiply it by $570,000 per annum we arrive at $14,250,000. Which means a profit of $6,250,000 - of course before taxes and other costs. No idea if there was an escalator clause for inflation in the charter.
Information on the charter can be found here, starting at page 91 of the pdf document: https://lib.bgsu.edu/finding_aids/files ... f97879.pdf
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Guest
Fitzgerald ownership questions
I have several questions about the ownership and leasing of the Edmund Fitzgerald for which I've never been able to find reliable answers and am wondering if someone here may know.
1. Was the investment in building and owning ships a common investment by insurance companies in the late 1950s? I don't know of any other great lakes boats so owned, but am wondering if this sort of investment/long term charter was done with ocean-going ships.
2. How much did Oglebay Norton pay the Northwestern Mutual Life Insurance Company per year under the charter agreement?
3. Was the charter agreement with Olgebay Norton in place before the FItzgerald was ordered, or did Northwestern Mutual begin design or construction while still seeking someone to charter the boat?
4. Who was responsible for the cost of routine maintenence/shipyard work- Oglebay Norton or Northwestern Mutual? (I'm assuming Oglebay Norton would have been responsible for the cost of any damages for non-routine wear and tear - like collisions etc.)
5. How was this agreement profitable for Northwestern Mutual? I don't know what the cost to build the Fitzgerald was, but it seems hard to believe Northwestern Mutual would have made a profit in any time frame acceptable to shareholders. Was there some tax advantage with depreciation over a 25 year lease that would have made this agreement profitable? (I'm assuming the Fitzgerald was more than simply a vanity project for the company president.)
THanks!
1. Was the investment in building and owning ships a common investment by insurance companies in the late 1950s? I don't know of any other great lakes boats so owned, but am wondering if this sort of investment/long term charter was done with ocean-going ships.
2. How much did Oglebay Norton pay the Northwestern Mutual Life Insurance Company per year under the charter agreement?
3. Was the charter agreement with Olgebay Norton in place before the FItzgerald was ordered, or did Northwestern Mutual begin design or construction while still seeking someone to charter the boat?
4. Who was responsible for the cost of routine maintenence/shipyard work- Oglebay Norton or Northwestern Mutual? (I'm assuming Oglebay Norton would have been responsible for the cost of any damages for non-routine wear and tear - like collisions etc.)
5. How was this agreement profitable for Northwestern Mutual? I don't know what the cost to build the Fitzgerald was, but it seems hard to believe Northwestern Mutual would have made a profit in any time frame acceptable to shareholders. Was there some tax advantage with depreciation over a 25 year lease that would have made this agreement profitable? (I'm assuming the Fitzgerald was more than simply a vanity project for the company president.)
THanks!