Bethlehem Steel

Bethlehem Steel: Builder and Arsenal of America

Kenneth Warren
Copyright Date: 2008
Published by:
Pages: 35
https://www.jstor.org/stable/j.ctt5vkdr5
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  • Book Info
    Bethlehem Steel
    Book Description:

    In the late 19th century, rails from Bethlehem Steel helped build the United States into the world's foremost economy. During the 1890s, Bethlehem became America's leading supplier of heavy armaments, and by 1914, it had pioneered new methods of structural steel manufacture that transformed urban skylines. Demand for its war materials during World War I provided the finance for Bethlehem to become the world's second-largest steel maker. As late as 1974, the company achieved record earnings of $342 million. But in the 1980s and 1990s, through wildly fluctuating times, losses outweighed gains, and Bethlehem struggled to downsize and reinvest in newer technologies. By 2001, in financial collapse, it reluctantly filed for Chapter 11 bankruptcy protection. Two years later, International Steel Group acquired the company for $1.5 billion.InBethlehem Steel,Kenneth Warren presents an original and compelling history of a leading American company, examining the numerous factors contributing to the growth of this titan and those that eventually felled it-along with many of its competitors in the U.S. steel industry.Warren considers the investment failures, indecision and slowness to abandon or restructure outdated "integrated" plants plaguing what had become an insular, inward-looking management group. Meanwhile competition increased from more economical "mini mills" at home and from new, technologically superior plants overseas, which drove world prices down, causing huge flows of imported steel into the United States.Bethlehem Steelprovides a fascinating case study in the transformation of a major industry from one of American dominance to one where America struggled to survive.

    eISBN: 978-0-8229-7376-8
    Subjects: History, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. List of Figures and Tables
    (pp. vii-x)
  4. PREFACE
    (pp. xi-xiv)
    Kenneth Warren
  5. INTRODUCTION
    (pp. xv-xx)

    A prolific if rather vague early twentieth-century writer began a book with these words: “In the following pages I propose to prove that Business is now being developed into a science.” More than 170 pages later he ended with these: “The industrial and commercial contest of the next twenty years . . . will be incredibly vast and magnificent; and the inevitable law of Nature will still hold good—the fittest will survive.”¹ The difficulty was knowing which really were the fittest. Was it those who had merely survived? In business, as in other departments of life, difficulties evoke various...

  6. Part I. The Bethlehem Iron Company, 1857–1899
    • 1 THE EARLY YEARS AND THE DECLINE OF THE ANTHRACITE IRON INDUSTRY
      (pp. 3-14)

      The context for the emergence and growth of Bethlehem, Pennsylvania, as an iron making center at the time of the Civil War was the development of the anthracite coal industry and the application of anthracite to the smelting of iron. Almost thirty years before, Albert Gallatin, by then an elder statesman, had sent a memorial to the Free Trade Convention in 1831. It considered the conditions that might enable American ironmasters to compete with foreign iron in the Atlantic coastal districts. The first item on his list of desirable improvements was “a happy application of anthracite coal to the manufacture...

    • 2 THE ESTABLISHMENT AND GROWTH OF IRON AND STEEL MAKING IN BETHLEHEM
      (pp. 15-31)

      The town of Bethlehem, Pennsylvania, was founded in 1741 by Count Zinzendorf, the leader of a group of Moravian settlers. By the mid-nineteenth century, the clearing they had made in the forest by the side of the Lehigh River had become a town of some three thousand people and a service and processing center for the surrounding agricultural area, with flour milling, brewing, tanning, saw milling, agricultural implement manufacturing, and so on. As late as spring 1852, C. H. Schwartz, traveling to Bethlehem from Doylestown, twenty miles to the south, was impressed by its unspoiled surroundings. Of the countryside south...

    • 3 FAILURE IN COMMERCIAL STEELS, 1880–1899
      (pp. 32-42)

      Between 1880 and 1899, the national rail network almost doubled, from 92,100 to 163,500 miles. Of this increase, 73 percent occurred in the 1880s. At the beginning of this period, 29 percent of the mileage was laid with rails made from steel; by 1890, the figure was already 80 percent.¹ Supply was now dominated by domestic producers. Rail imports were 259,000 tons in 1880; ten years after that, no rails were brought in, and in 1899, imports were only 2,000 tons. Domestic output at the three dates was 860,000, 1.87 million, and 2.27 million tons. Demand increased, but the struggle...

    • 4 ARMAMENTS AND ORES
      (pp. 43-64)

      By the 1880s, as Andrew Carnegie once proudly explained to Britain’s Prime Minister William Gladstone, the United States had already pulled ahead of the United Kingdom as the world’s leading economy. But although a pacesetter in the arts of peace, it lagged behind even many lesser European powers in its capacity to wage war on either land or sea, a very different situation from that during the Civil War, when it had the dubious distinction of pioneering modern, industrialized warfare. In heavy military hardware, its backwardness applied across the board—in guns, in ability to mount heavy ordnance in warships,...

  7. Part II. From a Struggling Plant to the Second Rank in Steel
    • 5 REORGANIZING AND REDIRECTING BETHLEHEM STEEL
      (pp. 67-83)

      One of the most distinctive features of the Bethlehem Iron Company was the small, close-knit, localized nature of its controlling body. Of its nine-man board (excluding secretary and treasurer) in 1889, at least eight lived either in South Bethlehem or in the near neighborhood.¹ There was a good deal of intermarriage among the families of the principals, resulting in interlocking “dynasties.” The best of those who entered the company employment stayed on, rising through its hierarchy to become members of top management or directors. Only rarely did men leave for key positions elsewhere in the industry. Similarly, few persons of...

    • 6 WAR MATERIEL, SHIPS, AND COMMERCIAL PRODUCTS, 1904–1914
      (pp. 84-101)

      Although Bethlehem Steel controlled a number of shipyards, Charles Schwab was sure from the start that the main asset and focus of attention must be the steel works. On 19 January 1905, a special meeting of the board of directors of the Bethlehem Steel Company was held to consider the offer of the plants of the United States Shipbuilding Company. Invited to comment, Schwab did not completely write off the shipyards but made unmistakably clear where the strength lay:

      Gentlemen, I can speak more specifically of the Bethlehem Steel Company, than I can of the others; and I can only...

    • 7 WARTIME ACTIVITY, EXPANSION, AND MERGERS, 1914–1923
      (pp. 102-115)

      The headway made by the Bethlehem Steel Corporation during the first nine years of its existence was impressive. Schwab had earlier announced that one of his ambitions was to build a company to rival Krupp. He was well on the way to achieving this; in the 1914 edition of the world authority on naval power,Jane’s Fighting Ships,the full-page Bethlehem Steel Corporation advertisement appeared sandwiched between ads for Whitworth and Krupp AG as well as for Cammell Laird and for Vickers. Capacity for steel had been extended more than fourfold, from 210,000 tons to 1.11 million tons; for pig...

    • 8 BETHLEHEM STEEL IN THE 1920S BOOM
      (pp. 116-131)

      In every age, and in any field, it is dangerous to assume that things will continue as they have in the recent past. By the early 1920s, the activities that had provided Bethlehem Steel with large profits over the previous few years were already becoming of minor significance. The company was in the difficult position of being the largest maker of heavy armaments at a time when it seemed that munitions of war would no longer be needed. This was apparently confirmed by the international agreements on limitation of navies that followed the so-called Washington Conference held in fall 1921....

    • 9 RETRENCHMENT, RECONSTRUCTION, AND WAR, 1930–1945
      (pp. 132-149)

      In 1931, explaining to stockholders the controversial bonus system he had introduced more than a quarter century before and had controlled ever since, Bethlehem’s life-long chairman, Charles M. Schwab, made special reference to their president, Eugene Gifford Grace, recipient of by far the largest sums. He stressed that Grace’s “genius, good judgment and untiring energy” had been the principal factor in the company’s success. Over the twenty-three years to 1941, Grace would receive on average $600,000 a year, all but an insignificant part of this sum being his bonus. He lived in what was called at the time a “regal...

    • 10 MATERIAL SUPPLIES, GROWTH, AND COMPETITION IN THE EAST, 1945–1957
      (pp. 150-164)

      In August 1945, as the war in the Pacific came to an end, Eugene Grace entered his seventieth year. A few days before he reached that milestone, he received a letter from Archibald Johnston, who thirty years before had supported his appointment as president of Bethlehem. Johnston had been retired for twenty years, and the shakiness of his handwriting bore witness to his age. His sentiments were warm, and he made clear his conviction that the company’s future depended heavily on the near septuagenarian: “My Dear E.G., It is a pleasure to wish you another happy birthday andmany more...

    • 11 STEEL MAKING IN THE FAR WEST AND MIDWEST
      (pp. 165-178)

      At the end of the 1930s, Bethlehem controlled 46 percent of the steel capacity that it and U.S. Steel owned in the West. During World War II, the Kaiser corporation built the Fontana works. U.S. Steel, having constructed and operated the Geneva works for the government, purchased the plant shortly after the war ended. In spite of considerable extensions, particularly in Seattle, Bethlehem’s share of western capacity fell to 20 percent. After falling for a time, western consumption of steel revived at the end of the war and then grew strongly, yet in the postwar years, Bethlehem’s share in the...

  8. Part III. Triumph, Crisis, and Collapse
    • 12 SHIPBUILDING, STEEL, AND LABOUR IN BETHLEHEM’S PEAK YEARS
      (pp. 181-209)

      Compared with Eugene Grace’s forty-four years’ leadership of Bethlehem Steel, Arthur Homer’s tenure as head of Bethlehem was brief, lasting only seven years from fall 1957. In April 1964, he was succeeded by Edmund Martin, who retired in 1970. In contrast to Grace, who retired at eighty-one years of age, each of his immediate successors retired at sixty-eight. Grace’s last decade in command had been one of spectacular growth and solid financial success; during the leadership of his successors, the operating environment was less favorable. After recovery from the 1954 recession, for the three operating years from 1955 through 1957...

    • 13 RESPONDING TO CRISES IN THE 1980S
      (pp. 210-228)

      The 1980s proved even more traumatic than the 1970s for Bethlehem Steel. In the early part of the decade, the company faced its problems with leadership from a very different background than in prior years. Lewis Foy retired in spring 1980 and was succeeded by Donald Trautlein, who, after a career at Price Waterhouse, had joined Bethlehem as comptroller only three years earlier. It has been suggested that the sixty-five-year-old Foy believed that Trautlein, because of his lack of experience in steel, might find some consultancy role for him. This did not happen, and Foy remained a director for only...

    • 14 PARING AWAY THE UNVIABLE
      (pp. 229-244)

      On one occasion during the 1980s, a senior executive at Bethlehem Steel suggested that the company should close down all its steel operations except for Burns Harbor and Sparrows Point.¹ The idea was greeted as outrageous and unacceptable. In fact, in fifteen years to 1992, Bethlehem closed five of its nine plants with a capacity of well over 8 million tons of raw steel. Still, there often seemed to be an uncertain sense of direction. There is some evidence that the chairman’s work background may have been an important factor when plant closure decisions were being made.

      Bethlehem’s output of...

    • 15 HOPE AND HOPE DASHED: Trade and Rationalization during the 1990s
      (pp. 245-258)

      In 1995, two former heads of Bethlehem Steel, Donald Trautlein and Walter Williams, now sixty-nine and sixty-six, respectively, were asked for recollections of their experiences. Trautlein, under whose leadership some thirty-five thousand jobs had been lost, emphasized the progressive nature of cutbacks: “Every time you made a tough decision, you’d try to think, ‘Well this is it’ but it doesn’t work out that way.”Williams referred to the conflicting thoughts and emotions surrounding the challenges and plant closures of his period of office: “You say, ‘Gosh, darn it, if we can just get everybody working together we can turn this thing...

    • 16 INTO THE ABYSS
      (pp. 259-270)

      In 2000, Duane Dunham, employed by Bethlehem Steel since 1965, president of the Sparrows Point division in the mid-1990s, and then head of commercial and business development, became chairman of the company. At fifty-eight, he was the youngest of the three top executives who might have replaced Barnette. Dunham had become a director only during 1999, when he took over as president and chief operating officer from Roger Penny, who became vice chairman before retiring in January 2000 at sixty-three.

      During 2000, the company commissioned the new $600 million cold sheet mill it had been building at Sparrows Point. This...

  9. EPILOGUE: The Roots of Decline
    (pp. 271-274)

    In spring 2004, the one-hundredth anniversary year of the Bethlehem Steel Corporation that had just been absorbed into the International Steel Group,Fortunemagazine published an article titled “The Sinking of Bethlehem Steel.” It suggested that the process of decline to the company’s extinction had taken up almost half its life, that is, the sources of its ultimate collapse can be traced back at least to the mid-1950s, at which time there was little or no outward indication of decay. In 1955, Bethlehem was eighth in the Fortune 500 list of companies, Eugene Grace was in his last years in...

  10. APPENDIX A: STATISTICAL TABLES
    (pp. 275-285)
  11. APPENDIX B: CHAIRMEN AND PRESIDENTS OF THE BETHLEHEM STEEL CORPORATION, 1904–2003
    (pp. 286-286)
  12. NOTES
    (pp. 287-310)
  13. SELECTED BIBLIOGRAPHY
    (pp. 311-316)
  14. INDEX
    (pp. 317-322)