Twilight of a Tycoon

SOON after eight on most mornings, an elderly man steps out of a Fifth Avenue apartment house and walks with a faltering gait to an office building on Sixth. Few passers-by give him a second glance; in his somber suit, topped by a plastic raincoat on wet days, he seems to be just another Manhattanite going to work. The appearance is misleading. He is Daniel K. Ludwig, the quiet billionaire who has built a shipping, real estate and financial empire that girdles the globe. At 73, Ludwig is worth between $2 billion and $3 billion, which makes him one of the world's half-dozen wealthiest men. Now there are signs that his huge empire may not long survive him in its current form.

Ludwig has no son to whom he can leave control, and no trusted manager who is being groomed as undisputed successor. He has always been reluctant to delegate authority and to build a management team that might challenge his autocratic rule. Because he owns most of his enterprises outright, there are no stockholders to force a change in his ways. He never sees the press, and at National Bulk Carriers, his main operating company in the U.S., executives will cheerfully deny that they know anyone named Ludwig. Says a senior executive who left his employ this year: "Mr. Ludwig organizes his business as a system of separate cells. The members of one cell do not usually know that the others exist, except by rumor. Only Mr. Ludwig knows the full extent of his empire, and how it all fits together."

Even so, the outlines of the empire can be discerned through the camouflage with which Ludwig obscures his activities. The six principal divisions: SHIPPING. Ludwig's 59 oceangoing ships include the six biggest tankers afloat, each more than 326,000 deadweight tons. In all, Ludwig has some 5,000,000 deadweight tons on the high seas--a bigger operation than that of either Aristotle Onassis or Stavros Niarchos. FINANCE. Ludwig owns or controls savings and loan companies that have assets of more than $200 million and deposits of $4 billion. They include Colonial Savings and Loan Association,of San Francisco, with assets of $111.6 million, and Colonial Savings and Loan Association of the South, with assets of $87.3 million.

REAL ESTATE. Through American-Hawaiian Steamship, Ludwig is developing land in several parts of the U.S. The holdings include Westlake Village in Southern California; Ludwig's partner in that $1 billion venture is the Prudential Insurance Co. Ludwig also owns land in the Bahamas and condominium developments in Australia, and has interests in office and apartment buildings in New York.

HOTELS. Ludwig owns or operates such hotels as the Princess in Bermuda, and the International in Freeport on Grand Bahama Island. He is building or planning hotels in San Francisco, Bermuda, West Germany and Mexico. NATURAL RESOURCES. Ludwig owns the world's largest producer of salt by the sun-evaporation method, in Mexico; coal mines in Australia; potash fields in Ethiopia; and iron-ore deposits in both Australia and Canada.

PETROLEUM AND PETROCHEMICALS. As well as owning a refinery in Panama, Ludwig is a partner in development of a refinery and petrochemicals complex in Dade County, Fla.

For a time it seemed that Ludwig did have a business heir: William W. Wagner, vice president of National Bulk Carriers. But Wagner died unexpectedly in March. Said one insider: "Wagner must have had 40 people reporting to him directly. When he went, we were suddenly missing two full levels of management." With unexpected room at the top, there is now competition for power. The leading aspirant is John Notter, 35, president of American-Hawaiian Steamship. Notter, however, is not a shipping man, as Wagner was, but a real estate expert. "What Ludwig needs," says a banker who knows him well, "is another Wagner --a brilliant shipping executive who can see the broad picture, as well as remember the little details. Ludwig got his start in shipping, and everything else has been built on it."

Ships have fascinated Ludwig all his life. The son of a moderately successful real estate operator, he scraped together $25 to buy a sunken, 26-ft. boat lying in the lake off his home town of South Haven, Mich. At the time, he was nine years old. After raising the boat and working all winter on repairs, Ludwig chartered it for more than twice his investment. By the time he was 26, Ludwig had acquired an antique oil tanker, one of the first half-dozen ever built. The tanker business has brought him wealth, but it also nearly killed him. In 1926, he went below decks to rescue two sailors overcome by gasoline fumes. A flash explosion killed the sailors and hurled Ludwig 25 feet through the air, fusing three vertebrae in his back. Even today, after a risky operation, he suffers recurring pains.

Other People's Money. During most of those early years, Ludwig was short of cash; at times, he teetered on the verge of insolvency. But by the mid-19308, he had pioneered a financing technique that is now standard in the shipping business. Before buying or building a ship, Ludwig would arrange for a client to charter it for up to 20 years. He would then borrow the entire cost of the ship, and repay the loan, plus interest, out of the charter fees. The result: a fleet purchased with other people's money.

Over the years, Ludwig has added some profitable frills to the basic technique. His ships are owned by a bewildering tangle of companies incorporated in other countries, particularly Liberia and Panama. The reasons are simple. "Flag-of-convenience" countries like Liberia charge lower registration fees than others, impose few safety regulations and allow industry to hire foreign crews at low wages. In addition, by registering both his ships and the companies that own them in countries that levy no income tax, Ludwig saves millions of dollars each year.

Ludwig's standardization of ship design is legendary among rivals. Wherever the vessels are built, and whatever their size, Ludwig ships have many interchangeable parts. This standardization has two profitable results: construction and maintenance are cheaper and captains and crews can take over any ship without finding it unfamiliar. Ludwig cuts design and construction costs to the bone. Many Ludwig ships have exhaust pipes instead of funnels, which cost more. Few, if any, have air conditioning, and none has the swimming pool for the crew that is common on ships owned by less parsimonious men.

Missing the Boat. Ludwig took big risks in his youth; today he goes for the safe bet. More adventurous owners, including Niarchos and Onassis, keep some ships free so as to benefit from rises in spot charter rates. Ludwig tries to keep all his ships on charter from the moment they sail out of the yard. Thus he has not profited greatly by the recent large jump in spot rates. "He really missed that boat," says one of his shipping managers. "But I don't think he wanted to catch it. The danger of the spot charter business is that you can find yourself with an idle ship and crew, and lose all your profits."

What Ludwig looks for is a steady flow of cash that can be invested in projects that will nourish each other. In Panama, for example, Ludwig tankers take crude to the refinery he owns, and other Ludwig ships help to take the refined products to market. His biggest tankers cannot squeeze through the canal, so Ludwig is building a pipeline across the Isthmus of Panama. He is also developing a $300 million deep-water tanker port. Much steel will be used in these projects; Ludwig bulk carriers ship ore to steel plants.

Cultivating the Great. In his business, Ludwig deals with everyone from heads of government and international bankers to the captains of his own ships. He likes to mix with the great and near great. Richard Nixon, before he became President, was a Ludwig house guest; so was Emperor Haile Selassie of Ethiopia. As befits a man with much to conserve, Ludwig is politically conservative. On the grand piano in his New York penthouse stands a large photograph of him smiling happily at California Governor Ronald Reagan.

But Ludwig has few friends, and is seldom seen in public. He can be a difficult host: once, a friend recalls, he insulted a fading Hollywood star who came to dinner, and showed no remorse when she departed in tears. Ludwig is also a difficult guest. The daughter of a man who worked for him for many years says: "Mr. Ludwig is impatient with small talk. When he comes to supper he will shake hands, smile charmingly, and then go into a corner to talk business. If he admires the view, it is with the eye of a developer."

Ludwig has been married twice. The first marriage broke up quickly, amid much bitterness. His daughter by that marriage admits to "frustrating" relations with her father. Ludwig's second wife, whom he married in 1935, has a son by her first husband. Neither Mrs. Ludwig nor the son plays any part in Ludwig's business. For about 20 years, the Ludwigs lived in a comfortable but unremarkable house in Darien, Conn. Three years ago, they turned over the house to a hospital and made the Manhattan penthouse their main home. Their Darien neighbor for 17 years, Mrs. Edward P. Moore, cannot even describe them. "They hardly ever came out of the house," she remembers. "They just kept to themselves."

Having suffered 40 years of pain in his back, and now reported to be in poor health, Ludwig has become increasingly interested in medicine. Recently, he set up a foundation to channel money into cancer research. Much of his estate will go to the foundation. Characteristically, he has made his arrangements without fanfare, and with attention to legal nuance. In concentrating on detail, however, he seems to have missed one major item: the selection of a successor to steer one of the largest and last personal financial empires.

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