The second deal involved Litton Industries.

Litton, founded in the 1930s to make radio tubes, had

been reshaped during the 1950s into a new type of company, a "conglomerate." Among its far-flung
holdings was the Ingalls Shipyard in Pascagoula, Mississippi. Litton, like the other conglomerates of
the day, was bent on fast growth, and it was eager for Ingalls to diversify away from naval contracts
into commercial work. McLean needed ships but had no money; Litton was rolling in money but
desperate to keep its shipyard busy.
Negotiations led to the creation of a company called Litton Leasing. On November 5, 1964, Sea-Land
sold Litton nine containerships for $28 million, using the proceeds to help pay off $35 million in bank
loans. Litton immediately leased the ships back to Sea-Land. Litton took other ships formerly
belonging to the Waterman operation, which McLean was selling off. It widened them, lengthened
them, and installed container cells to meet Sea-Land's specifications. For an annual rent that came to
$14.6 million, the cash-strapped ship line was able to add eighteen containerships to its fleet in just
four years. For good measure, Litton agreed to swap its convertible stock for 800,000 McLean
Industries shares, immediately strengthening Sea-Land's stretched balance sheet by $6.8 million.
Sea-Land's quick moves to acquire a huge new fleet opened the floodgates. During eight short weeks
in the late summer of 1965, no fewer than twenty-six containership ership projects hit the headlines.
Each required $8 to $10 million to convert a ship and another $1-$2 million for chassis and
containers. For an industry notoriously tight with its cash, a total investment of a quarter billion
dollars to enter a trade that might not generate business was almost incomprehensible. Companies that
had watched containerization from a distance for years, curious but noncommittal, now felt that they
had to put up real money or be swept away in the flood. Not all of them were eager. When Sea-Land
threw a party at the Rotterdam Hilton to introduce its service to Dutch shippers at the start of 1966, its
guests booed, and the head of Holland-America Line, itself preparing to carry contain-ers, told a Sea-
Land executive, "You come back with the next ship and take all the containers home."
The established carriers' great fear was that containers would force down freight rates. Four
conferences, one covering traffic each way between North America and northern Europe and the other
two dealing with cargo between North America and the British Isles, set the rates for every
commodity in their trades. They naturally had no provisions for containers.
Joining the conferences was not essential for Sea-Land, although belonging would surely smooth its
way in dealings with European governments and ports. For United States Lines, already a conference
member, conference rules on containers were critical. McLean ordered his representatives to seek
admission to the eastbound and westbound North Atlantic Continental Freight Conferences, and to do
so without causing fights. After Sea-Land proclaimed that it had no desire to start a rate war, the doors
were opened. Sea-Land and United States Lines put forth two proposed rules: moving containers
between piers and warehouses should be cheap, and ocean freight rates should include the use of
steamship lines' containers and chassis, so that shippers would not have to pay extra. Their European
competitors, contemplating container services themselves, accepted both requests. "We didn't ask for
any big concessions," a Sea-Land executive recalled. "We just asked them to accommodate the
container. And, you know, I think that was a big mistake they made, but they did." A European
shipping executive remembered things differently: "They're afraid of Sea-Land," he said, "but they
would rather keep an eye on them from the inside than have them on the outside and wonder what
they're doing." Whatever the case, Sea-Land was able to enter the North Atlantic trade not as an
outcast, but as a member of the club.