threat to end contract

Mill escapes TT Govt, threat to end contract

From a Saipan correspondent

Blasted by the United States Trust Territory Deputy High Commissioner Peter T. Coleman for alleged breaches of its shipping services con tract with the government, Micro nesian Interocean Line Inc, (MILI) almost lost its contract.

The threat came at the end of September when MILI, facing a financial crisis through the long strike by longshoremen on the US west coast, which was costing the company losses of $4,000 a day, was told by Mr. Coleman that the govern ment was taking steps to cancel the contract.

Coupled with MILI’s unhappy situation was the resignation of two members of the board—Mr. Gilbert Hofling, president and general manager, and Mr. Tage Blytmann, vice-president, traffic. Neither man would comment much, although Mr. Hofling did say it was the re sult of “a difference with the board over policy”.

MILI chairman, Mr. George C.

Kiskaddon wrote to the Interior De partment in Washington early in September about MILI troubles. He sought a number of assurances, in cluding normal security protection for civilian goods at ports, amenities for longshoremen, the provision of offices, guards’ quarters, etc.

He also asked the US Government for a loan of $500,000 (or guarantee to private sources). Another request was for the government to buy all MILI port developments at book value and sell to bona fide local enterprise. There were also requests for freight adjustments and compen sation for cargo competitors were allowed to carry to Kwajalein.

The next development was a state ment by Mr. Coleman, alleging that MILI had breached the shipping ser vices contract between it and the TT Government. Because of the alleged breach, the government was taking steps to cancel the contract. He said the government was exercising its claim against a $500,000 performance bond placed with a San Francisco bank by MILI. This was to assure faithful performance of the transport service agreement by MILI.

Mr. Coleman said that if the con tract was cancelled, the TT Govern ment would make every effort to pro tect the interests of the many hun

dreds of Micronesian stockholders and employees of the firm.

This contract, signed on August 1. 1968, is for 10 years and gives MILI exclusive rights to provide shipping services to the TT from the Far East and the US west coast as well as from any other international port.

The government alleged that MILI: • Failed to provide the govern ment with an annual schedule—the basic document of marine service in tentions and capability; • Failed to adhere to a 30-day trans-Pacific schedule, or to an 18day schedule of service to the Wes tern Districts of the TT, according to Mr. Coleman, almost “a wilful disregard of . . , contractual obliga tion”; • Gave notice to Barclays Bank, of San Francisco, that it did not in tend to renew its performance bond, which was in the form of a letter of credit from the bank to the TT government.

It was the last allegation which forced the government’s threat to exercise its claim against the bond.

Failure by MILI to provide an ade quate service bond was looked on by the TT Government as MILI’s most serious breach of contract.

Mr. Coleman in a letter to Mr.

Hofling late in September, said MILI’s “deteriorating financial situa tion” was a matter of grave concern to the government, A consolidated cash forecast indicated a deficit posi tion of about $900,000. After de ducting the possible capital worth of the company, he considered MILI had too big a deficit from which to re cover, unless immediate drastic ac tion was taken.

MILI officials reacted by saying the allegations of Mr. Coleman had not been proved. They considered they were not in breach of contract in anything alleged, except in relation to renewal of the performance bond.

The reprieve came on October 20 when the TT Government and MILI officials announced that they had reached agreement on reorganisation.

This will enable the reorganised ship ping line to continue service to Micro nesia under the general terms of the contract. As a result of the agree ment, the government withdrew notice of intention to cancel the contract, and MILI agreed to take steps to im prove its finances and resolve diffi

culties which led to the government action.

These steps included: Change of control, both operationally and finan cially, to Micronesian stockholders and MILI officials; transfer of stock with shares placed in trust; and re placement of four San Francisco members of the board by four Micro nesians. Under this agreement chair man George Kiskaddon drops out.

The 12-member board is now com posed entirely of Micronesians.

Anewa Bay

Gets Its Pilot

Captain lan de Baird, formerly of the Fiji Marine Department, arrived at Bougainville on October 14 to take up his duties as pilot and harbour master when Anewa Bay becomes a private port administered by the Bougainville Copper Co. Date for the takeover is sometime in November.

At present, pilot work is done by a government pilot from Kieta. An other ex-Fiji Marine Department pilot, Captain Jack Dalby, is port superintendent at Anewa Bay. Cap tain dc Baird was at Singapore before going to Fiji two years ago.

Lorena Had

Teething Troubles

The Norwegian-owned Lorena has made her first cargo voyage from Auckland to Rarotonga, but only atfer teething troubles. She had to leave 35 tons of refrigerated cargo behind because hold temperatures could not be lowered to below freez ing point. This was caused by a mechanical fault, and poor stowage of cargo.

There was also trouble with the NZ Cooks and Stewards’ Union over a requirement by the owners. All ships sailing under the Norwegian flag require all crew to have medical examinations and chest X-rays. The NZ Seamen’s Union agreed to this condition, but the Cooks and Stewards’ Union held off. There was an arrangement to sail the ship with Norwegian cooks and stewards and NZ seamen, pending negotiations be tween the Cook Islands Shipping Co., which chartered the Lorena, and the union.

When the ship was about to leave Auckland for Whangarei to load cement for the Cooks, a representa tive of the Cooks and Stewards Union went on board and said the ship was “black”. The seamen ignored this and took the ship to Whangarei.

At Whangarei, the Cooks and Stewards’ Union mounted a picket line which halted loading for about an hour. When loading was com pleted the Lorena sailed for Raro tonga.