At the end of the 19th Century, the Cunard Company was facing increasing competition from Germany's North German (Norddeutscher) Lloyd and Hamburg America Line.  German ships such as the Kaiser Wilhelm der Grosse, Deutschland, Kronprinz Wilhelm, and Kaiser Wilhelm II were leading the industry in terms of size, speed, and comfort.  At the same time, American financier J. P. Morgan acquired the White Star Line for his own conglomerate, the International Mercantile Marine.  Morgan soon owned, or at least had a controlling interest in, all of the shipping lines on the North Atlantic except for Cunard and the French Line. Morgan offered to purchase Cunard, but Cunard declined.  At the same time, Cunard did not the financial resources to respond to the competition with new ships.  Even though Morgan promised that British-flagged ships would be available for the use of the British Admiralty in times of war, the British themselves were concerned that their ability to dominate the waves was at stake, and that they were either going to be outcompeted by the Germans or bought out by the Americans. In this period of crisis for British shipping, the chairman of Cunard, Lord Inverclyde turned this crisis into an opportunity for Cunard.  He approached the Arthur Balfour government for a loan and a deal.  By an agreement signed in June 1903, the British Government gave Cunard a loan of £2.6 million to finance two ships, repayable over 20 years at an interest rate of 2.75%. The ships would receive an annual operating subsidy of £75,000 each in addition to a mail contract worth £68,000. As a quid-pro-quo, the ships would be built to Admiralty specifications so that they could be used as auxiliary cruisers in times of war. These two ships would be the Lusitania and Mauretania.

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