4. The healthy professional rivalry' of the various yards can be utilized to produce the best results in design, construc tion and administration, without the disastrous and narrow ing devices of destructive competition.
5. The standardization of the numberless details of ship fittings, auxiliaries and appliances, which are now almost as various and incongruous in design as they are in number, and their production in quantity by those best qualified, would produce enormous economies.
6. It will be possible to effect great economies by the sepa ration of warships and merchant construction into difFerent establishments, thus avoiding the difficulties of organization and increased cost of radically different types of construc tion upon ad joining ships.
7. The better organization and management of the indi vidual concerns would be a necessary and direct result of this incorpora.tion.
9. Other advantages derived front combination.— Of course the most important advantage of combin ing business is to eliminate competition. Under a monopolistic regime, prices may be made higher, job bers' profits eliminated and a large number of operat ing economies may be practiced. All the advantages of' large-scale production may be enjoyed, such as purchasing at low prices in large quantities, saving by products, saving in cross freights, saving in selling expenses and in advertising. Moreover, all the plants can select and use the best patents, trade-marks and trade names, and thus get the advantage of the best products of each plant. Finally, a large corpora tion finds it easier to make and to retain sound bank ing connections than a small one.
10. Advantages of the holding company.—The ad vantages above enumerated apply to all forms of in tercorporate relation. We have still to consider the technical advantages of stock-ownership as distin guished from the other legal devices—consolidation, sale of assets and lease of assets. In the first place, the system of a holding company with subsidiaries may be the only method open under the law. It is difficult for corporations of two different states to consolidate. This is especially true if they are engaged in a public service business, and hence we find a great number of holding companies in the public service field, some of which control as many as nineteen or twenty public service properties, located in nearly as many states. Then, too, the laws of some states, i.e., Pennsylvania, prohibit the holding of real estate by foreign corpora tions. In fact, in many ways it is better to retain the separate corporate existence of local plants in order that they may be more easily adjusted to local condi tions.
By forming new companies for fresh ventures the capital invested in successfully established enterprises is not hazarded. The expense of obtaining subsidiar ies is slight, since only a small proportion of fir?. stock is required to maintain control. This stock can be deposited as security for collateral bonds, from the proceeds of which the parent company can reimburse itself for the money spent in acquiring the stock. Moreover, by retaining the identity of the subsidiary companies, instead of consolidating them, a spirit of emulation 'nay be stirred up, and the old managers may retain their nominal titles instead of becoming subordinates in a large consolidation.
Judge Gary praised the organization of the United States Steel Corporation on just this ground. He said: We believe these subsidiary companies having their boards of directors and their officers, consisting of presidents, vice president, etc., have more responsibility and reach a higher success in the management of the properties in their charge than they would if they were simply the managers of these mills as departments. . . . We have now what we call the deadly parallel columns. . . . I mean by that that we have cost sheets, showing the costs of the different products at the different mills of the different companies and when these come up for examination and it is ascertained that the costs at one mill or at one company are larger than they are in some other place, then, of course, we bring these people to gether and ask them to find out why it is, and we endeavor to adopt all the best methods which have been in use at the lower-cost mill in the other mills, to reduce the costs of all.' 11. Financial companies.—While discussing hold ing companies some attention should be paid to those which exist chiefly for the purpose of facilitating the financial operations of other companies, or of other enterprises. The best known of these bolding com panies are the mortgage companies that do business in the large cities, by taking mortgages on real estate, and depositing these with a trustee as security for their own bonds. The bonds are often issued in $100 de nominations, filo sometimes $10 certificates are first issued, to be subsequently exchanged for the $100 bonds. This device is perhaps the most successful yet used to make real estate the basis of liquid securities.