United States Steel: A Corporation with a Soul

By Arundel Cotter

"United States Steel: A Corporation with a Soul" by Arundel Cotter. Published by Good Press. Good Press publishes a wide range of titles that encompasses every genre. From well-known classics & literary fiction and non-fiction to forgotten−or yet undiscovered gems−of world literature, we issue the books that need to be read. Each Good Press edition has been meticulously edited and formatted to boost readability for all e-readers and devices. Our goal is to produce eBooks that are user-friendly and accessible to everyone in a high-quality digital format.

• Language: English
• Publisher: Good Press
• Release date: Dec 3, 2019
• ISBN: 4057664575203

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Arundel Cotter

United States Steel: A Corporation with a Soul

Published by Good Press, 2022

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EAN 4057664575203

Table of Contents

FOREWORD

UNITED STATES STEEL

PROLOGUE THE MAN AT THE HELM

CHAPTER I THE WHY AND HOW OF THE BIG COMPANY

CHAPTER II THE BIRTH OF THE BIG COMPANY

CHAPTER III EARLY HISTORY AND GROWTH—1901 TO 1907

CHAPTER IV THE TENNESSEE PURCHASE

CHAPTER V MEN WHO MADE UNITED STATES STEEL

Elbert H. Gary

John Pierpont Morgan

Charles M. Schwab

George W. Perkins

Other Men of the Corporation

CHAPTER VI DEVELOPING WORLD MARKETS

CHAPTER VII THE SPIRIT OF THE CORPORATION

CHAPTER VIII THE CORPORATION’S IMPLEMENTS

CHAPTER IX THE STEEL TOWNS

CHAPTER X HUMANIZING INDUSTRY

CHAPTER XI INVESTIGATIONS AND DISSOLUTION SUIT

CHAPTER XII QUESTIONS OF POLICY

CHAPTER XIII STEEL FROM THE INVESTOR’S VIEWPOINT

CHAPTER XIV THE GREAT STEEL STRIKE

CHAPTER XV HELPING UNCLE SAM WIN THE WAR

CHAPTER XVI THE MIDDLE PERIOD—1907–1914

CHAPTER XVII THE WAR AND AFTER

APPENDIX Comparative Production

FOREWORD

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When, in 1914–1915, I wrote The Authentic History of the United States Steel Corporation, which has been enlarged and brought up to date in the present volume, the Government’s suit for the dissolution of the Corporation had not been decided. In fact, the lower court handed down its decision just about the time the book was going to press.

It was my good fortune to hear the testimony of the most important of the more than 400 witnesses and argument of counsel in the suit and to supplement the information so gained by conversations with steel men, inside and outside the Corporation, with whom my work brings me in constant contact. And all that I learned convinced me more and more that the big company was not illegal, either technically or morally, and that, in fact, its influence on industry was beneficent. It is naturally a matter of personal gratification that the suit has resulted in the complete vindication of the Corporation.

We live in a day of big corporations and the tendency seems to be to concentrate still more capital and manufacturing facilities. It is therefore important that we should know something of their activities, not only economic but social.

I believe that the United States Steel Corporation is one enterprise that endeavors always to live up fully to the responsibilities it must perforce assume to its employees and to the public, as well as to its stockholders. I believe that it has earned the title of A Corporation With A Soul. And, so believing, I have not hesitated to tell the story of United States Steel as I have learned it by years of personal observation and contact.

Arundel Cotter.

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UNITED STATES STEEL

PROLOGUE

THE MAN AT THE HELM

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Every business enterprise, however great, reflects in its dealings with its competitors, customers, employees, and the public generally, the individuality of some one man. Curious as it may seem at first glance, this personal touch, far from being lost, is particularly evident in the greatest of all business enterprises, the United States Steel Corporation.

Many men, including some of the ablest financiers the country has produced, have assisted in a measure in making the Corporation what it is to-day. Morgan, Frick, Perkins, all these and others, have helped with their counsel in bringing the Corporation to the pre-eminent place it holds in the industrial world. But one man has stood out among all these—Elbert H. Gary, its chairman and chief executive officer.

Throughout its ramifications the Steel Corporation is everywhere a reflection of Gary’s spirit. His influence, from the time of its incorporation nearly twenty years ago, has shaped its policies and, almost from the beginning, has dominated its counsels. For what the Corporation is, whether good or bad, Gary must accept full responsibility.

Judge Gary himself would probably object to the use of the word dominated. He would doubtless prefer guided, for his dominance has never been autocratic. But his colleagues, except perhaps in the earlier days, have confidently accepted his opinion on all matters pertaining to the Corporation’s welfare. And the events of the last few years have proven that they were right in so doing.

Not the Corporation alone but the entire steel trade, the most important manufacturing industry in America, has benefited from Gary’s wisdom. As the chief executive officer of the leading interest in the industry his competitors have always looked to him for leadership in periods of stress. And whenever occasion arose, as in the dark days of the panic of 1907, he proved his right to lead.

There have been times when this leadership was in question if not doubt. One such occasion was as recently as 1919 when the great steel strike threatened.

Gary’s attitude toward labor was well known. He believed in leaning over backward in the matter of giving justice to the worker. And when union organizers and radical agitators attempted to force the closed shop on the industry many of his competitors feared that he would yield to the demands of the labor organizers.

But Gary had never flinched from responsibility, however great. Here was a question of principle involved, concerning not the rights of the employer alone but those of the very large number of unorganized workers. Although pressure was brought to bear upon him from high quarters to compromise and avoid a strike, and later to settle it once begun, the head of the Corporation unswervingly stood his ground and led the steel trade to a signal victory. He proved to those who doubted him that, though he might usually adopt the attitude of suaviter in modo he knew how to assume that of fortiter in re when occasion warranted.

On October 24, 1919, the annual meeting of the American Iron and Steel Institute was held in New York City, at the Hotel Commodore. Some sixteen hundred of its members, including the majority of the leading figures in the steel trade, attended. The steel strike had been going on for some weeks and the steel men were gathered to hear what Gary had to say.

The entrance of the Judge into this gathering was the signal for a most remarkable demonstration. For these staid, solid business men, on catching sight of Gary, broke into a spontaneous salvo of cheers which was enthusiastic and prolonged. It was a tribute to his generalship in the struggle then being waged, an unequivocal admission of his right to supreme command. In that storm of cheers were buried all doubts that may ever have been entertained.

It is impossible to write of the Steel Corporation without writing of its head. His influence on it is too direct, too personal, to be ignored. The Corporation, in a sense, is Gary. He has infused it with his spirit, a spirit which, it is to be hoped, will continue always to animate it.

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CHAPTER I

THE WHY AND HOW OF THE BIG COMPANY

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Mere size, to the majority of us, presents a certain fascination. Especially is this the case when it is the result of human endeavor. Hence, were the United States Steel Corporation nothing but the largest business aggregation in the world its immensity alone might justify placing upon record the facts connected with its formation and its subsequent history.

The Corporation’s vast capitalization, a billion and a half of dollars, its yearly turnover exceeding its capital, its payroll of 275,000 workers, or, with their families, enough to populate a large city, its productive capacity of more than 16,000,000 tons of finished steel annually—to say nothing of other products—the volume of freight carried in its fleet of ore boats, several times the tonnage passing through the Suez Canal, its foreign trade of two hundred million dollars—these alone might make the Corporation’s history worth the telling.

But size, properly considered, is of minor importance in itself. Its importance lies in the power it bestows to influence its surroundings. The greatest of all industrial enterprises could not fail to affect industrial history generally. And the management of the Corporation has recognized its responsibility in this regard and has endeavored to use its strength not selfishly but for the good of all concerned. It is not too much to say that the organization of the United States Steel Corporation marked the beginning of a new and a better era in industrial history.

That this assertion may be challenged goes without saying. But the facts will be permitted to speak for themselves.

The United States Steel Corporation was, in a modified sense, an experiment in popular ownership, the ownership of industry by the worker; it substituted for the ownership by a few men of a number of more or less important organizations one gigantic unit owned by a multitude. To-day the Corporation’s stockholders number around 160,000, and this figure includes only holders of record. Perhaps 75,000, possibly more, of its employees either own stock outright or are buying it on the instalment plan. Counting five to the family it is probable that close to 1,000,000 people are financially interested in the success or failure of the Corporation.

At the time of the big company’s birth corporate publicity was practically unknown. Important developments affecting the interests of security holders were announced, if announced at all, at the convenience of the so-called insiders. Curiosity into corporate affairs was discouraged. But the new business giant set the example of publicity by giving out at stated and frequent intervals detailed information regarding profits, business on hand, and other facts of interest to stockholders and the investing public. This example was later followed by other important steel companies and, with the passage of the years, the practice has become fairly general among large corporate enterprises. Thus the organization of the Steel Corporation may be said to mark the beginning of the era of corporate publicity.

But the most marked effect of the Corporation’s organization was probably that respecting competition. In the old days of the steel trade competition had been ruthless. The big steel merger, if the sworn statements of its competitors may be accepted, put an end to this and substituted an era, of competition still, but of competition clean and aboveboard, governed not solely by greed but by the spirit of fair play between manufacturer and manufacturer. It brought the dawn of the epoch of the square deal between industrial competitors.

In order to get a true perspective on the events immediately leading up to the formation of the United States Steel Corporation, it is necessary to review briefly the history of the steel industry in the United States during the latter half of the nineteenth century, and especially during its closing decade.

In a short half century steel making in America had grown from the age of swaddling clothes to full manhood, or rather gianthood. It stood supreme among industries. From being unimportant among the iron and steel producing nations, the United States, in a comparatively few years, had forged its way to the first place. Its steel mills turned out nearly half of the hard metal used by the world. Steel, from being an industry composed of a few scattered mills situated as nearly as possible to ore deposits with little regard to markets, had become one consisting of great corporate entities each made up of many plants, and these had in their service railroads and steamships plying to and from ore fields situated sometimes hundreds of miles from the plants, bringing to the mills such quantities of the raw metal as but a short time before had not been known to exist. It had bent to its use every modern invention, the newest discoveries of science. Fortunes had been spent, won, and lost in building up these great structures. It had at the same time been an industry subject to the most amazing fluctuations, periods of feast being followed closely by periods of famine.

This half century, or the last two decades of it, was, as has been suggested, a period of war to the hilt between manufacturer and manufacturer, war in which no quarter was asked or given. The history of the steel industry in America bristles thick with the names of millionaires who worked their way to fortune from the slag pile. And for every one of these there were many, whose names are forgotten, who sacrificed health, strength, and fortune in the mad fight for the wealth that poured in unstinted stream from the glowing furnaces of molten iron. The law of steel was essentially that of the survival of the fittest.

Perhaps there is no other great industry that has been so subject to fierce and unrestrained competition as steel making once was. To understand why this is so it is necessary to get an idea of the conditions influencing it. The discovery of the Bessemer process—about the middle of the nineteenth century—by which steel could be made cheap enough to permit of its general use found a world more than ready for it, and the demand for the metal grew by leaps and bounds. The Age of Steel did not dawn; like the tropic day, it broke with fierce glare. The sudden demand naturally opened up vistas of previously undreamed-of wealth for those who could supply it, and, in the desire to secure this wealth, production sprang forward so quickly as even to outstrip demand, strong and increasing as it was. Then ensued the inevitable battle for what business there was, a battle that lasted until consumption took another spurt, which, in turn, resulted in quickening output and a resumption of the battle.

At that time the country was just opening up. Railways were stretching their lines into the golden regions of the West; manufacturers of farm implements were calling for steel to be fashioned into tools to reap the rich crops of the wide prairie lands; inventors were each day evolving some new use for the metal. Was it any wonder then that steel became a world necessity and that the blast furnace became a philosopher’s stone that transmuted dull ore into precious gold? More and larger fortunes, it has been truly said, were made out of steel in the second half of last century than ever came out of the mines of the West or the diamond deposits of South Africa. And in the insane struggle for this so-freely-poured-out wealth men lost all sense of proportion.

It is inevitable that there should be a dark side to the picture. The boom times of the steel trade were succeeded with disheartening regularity by periods of dearth. One year steel manufacturers were building themselves palaces and purchasing steam yachts, the next they were mortgaging all they had to pay wages. One year the steel worker was a man favored above all others of his class, the next he was getting his meals on charity from the soup houses. To this day steel veterans speak of the dull times of the trade as soup-house days.

At these times competition, always fierce, became more ruthless than ever. The old adage regarding love and war was stretched to include the steel industry, and everything was considered fair that might help to keep the mills running full. Prices were cut—and wages with them; steel was dumped on foreign markets at less than manufacturing cost, and steel makers resorted to every means that offered to divert orders from competitors to themselves. It was case of dog eat dog, and failures, with their unavoidable accompaniment of unemployed labor, were all too frequent.

These were the days when the steel pools flourished. These pools were simply attempts on the part of the steel makers—who thoroughly realized that the killing competition just described could benefit no one—to protect themselves in times of stress by binding each other not to sell below a certain price or more than a specified tonnage, and by making it of no avail, from a viewpoint of profit, to do so. There were rail pools and wire pools, shafting pools and plate pools, structural pools, horseshoe pools, and in fact a separate and distinct pool for nearly every steel product made. These pools were merely treaties, but treaties in which no participant trusted the other and which consequently were usually broken by each as soon as the opportunity to get ahead of his fellow pool member presented itself—lest the other should get a similar opportunity first and take advantage of it.

It is doubtful if a single pool agreement, and their number was infinite, was ever honestly kept. Old steel makers chuckle to-day as they relate how each representative of a company taking part in a pool sought to gain an advantage over his competitors while the agreement was yet a-borning. Listening to them one begins to wonder if these were indeed men who bore high and honorable reputations in the business world.

According to the statements of men who themselves took part in pools it was no uncommon thing for a manufacturer to station a salesman outside the building where a conference was being held and, as soon as a price settlement was reached, to stroll casually over to a window and by pre-arranged signal indicate to him the level agreed on, whereupon the salesman would proceed to undercut the price which his employer was even then pledging himself to maintain.

Every man’s hand was against his neighbor then; we were all Ishmaelites, every one of us, said John Stevenson, Jr., a veteran who had worked under Carnegie, in his testimony in the Federal suit for the dissolution of the Corporation. Mr. Stevenson then went on to relate the story of a wire pool conference at which a price of $1.50 a keg for nails had been agreed on. After the morning conference he went to the telegraph office to wire his partner and found one of his fellow conferees there. He waited until the other had handed in his message and walked away. While Stevenson was writing his own wire the operator, in mistake, handed him his competitor’s, asking him to decipher a word. And Stevenson discovered that the message was an offer to a large consumer to sell him 10,000 kegs of nails at $1.40! Whereupon he tore up the paper and substituted a bid of his own at the same price and got the order!

Another instance, related by a large consumer, shows how these agreements were evaded. He said that the company from which he purchased his supplies of steel pleaded the force of a pool agreement as an excuse against giving him a discount from the market price. He then suggested that he be appointed agent of the steel company in his town at a commission of a dollar a ton and this solution of the difficulty was agreed to. He was the only consumer of steel in the town and the commission was only a round-about way of giving him the discount asked.

In the fierce and bitter struggle that was the steel trade only the most daring or the most unscrupulous manufacturer could survive, and under the strain for production that it necessitated only the strongest workers could live. No one, unless he has been through a steel plant, can imagine the conditions under which the steel maker works. The visitor, unaccustomed to the heat that is flung from blast furnace or rolling mill as from the gates of hell, must perforce hold his hands before his face at times to mitigate the frying sensation. True, much has been done of recent years to make the lot of the man at the furnace or rolling mill easier, his work less trying on his health. But at the time of which this is written such was not the case. Under the most favorable conditions the steel mill, as a well-known steel maker said once, is far from being a drawing room. Under the conditions that prevailed toward the end of the last century, when men were worked to the breaking point in the mad fight for tonnage, it was no wonder that the majority of steel workers collapsed early under the strain and were thrown on the human scrap pile, their vitality sapped and their youth gone.

The one slogan of the industry then was tonnage. Everything was sacrificed by the manufacturer to this single end. Machinery, comparatively new, was scrapped to make room for more modern equipment. Waste of this kind was not considered. Production was everything, and nothing was spared to obtain increased output. And it must be admitted that to this attitude on the part of producers, as much perhaps as to her immense natural advantages, the United States owed her rapid rise to the front rank of steel nations.

In the middle of the nineteenth century American steel making was in its infancy. In fact, this is also true of the steel industry of the whole world, for it was about this time that William Kelly in America and Henry Bessemer in England discovered what is known as the Bessemer process, which made the metal available for the numberless commercial uses to which it is now put. As late as the early sixties the idea of using steel for railroad rails was scoffed at. In 1867 there were only three Bessemer plants in this country and open-hearth, the steel of to-day, was unknown. Great Britain supplied the world’s steel. But shortly after the third quarter of the century was passed the United States forged to the lead, and has held it ever since. In the year 1900 the steel production of this country was 10,188,329 tons, Germany coming next with 6,645,869 tons, and Britain third with a production of 4,901,060 tons. In 1913 the United States produced 31,300,874 tons of steel, or more than Britain and Germany combined. In 1917 production was 45,060,607 tons, more than two thirds the world output. To-day the rolling mills of the Pittsburgh district alone turn out more than one third of the world’s steel.

The name of Andrew Carnegie is inextricably bound up with the history of steel in the United States—and the world. The Iron Master, the Steel King—by these names he was known, and he earned them. For more than a quarter of a century Carnegie was the most important and spectacular figure in the world of steel and his name will not be forgotten so long as there is a rolling mill in Pittsburgh.

Carnegie’s rise from utter obscurity until he became the dominating figure in the leading manufacturing industry of the world reads like a page of fiction. Only the briefest sketch can be given here. Born in Dumferline, Scotland, in 1835, the future Monarch of Steel came to the United States with his father at the age of thirteen and began at the bottom of the ladder, his first job being that of bobbin boy in a cotton mill, for which he received a weekly wage of $1.20. Two years later he became a telegraph messenger and later an operator for the Pennsylvania Railroad.

The youthful Scot’s ability soon attracted the attention of Col. Thomas A. Scott, head of that great railroad system, and he made Carnegie his private secretary, thus giving him his first foothold on the ladder of fortune.

Industrious and saving Carnegie was soon in the investor class and when an opportunity arose to invest in what, it seemed to him, was an attractive business he was able to seize it, purchasing a one-sixth interest in the Iron City Forge Co. and becoming his own man.

One of his partners in the enterprise was Henry Phipps, the playmate of his boyhood and his friend through good fortune and through bad. In every one of his subsequent ventures Phipps had a share, and an important one, that of raising money to carry out Carnegie’s manufacturing plans. In Pittsburgh they say that Phipps’ horse knew every bank in town so often had his master stopped him before them when seeking loans.

Those were the days of iron. Steel was still being made only by the spoonful. But one day Carnegie saw in action one of the earlier Bessemer converters, the implements that gave birth to the Age of Steel, and this sight, impressive as it is even to the layman as a mere spectacle, converted him from iron to steel. His keen mind saw immediately the immense possibilities of the new process and he went into the manufacture of steel on a large and growing scale.

And his success was phenomenal. Breaking down all obstacles in his path to fortune he fought his way upward ruthlessly and became a terror to competitors.

In 1901 Carnegie sold out the steel business he had created to the organizers of the United States Steel Corporation for $303,450,000 in 5 per cent. bonds and $188,556,160 in preferred and common stocks of the new company, a total price of $492,006,160!

The mark that Carnegie left on the industry will never be wiped out. In his late days he set the pace for all to follow, and it was a fast one. Although pitiless to his competitors he had the gift of drawing to him men of high ability; he was a wonderful judge of men, and to his intimates he was generous and open. A born commander, a Napoleon of industry, he built up an organization that had no equal in its day, one that was at the same time extremely efficient and utterly loyal.

Whether Carnegie made the best use possible of his unquestioned abilities is for posterity to decide. Beyond doubt America’s pre-eminence in steel was due largely to him. But he was also at least partly responsible for the unstable condition that existed in the trade of his day. Production, tonnage, was his fetish, for in this he saw the means of reaching and keeping his supremacy, and to get it he did not spare himself, the men under him or, least of all, his competitors. His one effort was to keep the mills running full, and everything was subordinated to that.

It is not generally recognized that Carnegie was to some extent responsible for the formation of the United States Steel Corporation. The part he played was behind the scenes. He wanted to sell out and retire, to devote the rest of his life to philanthropy, education, and the promotion of world peace. Even for such a master salesman as he the task of finding a customer was gigantic, but he succeeded as he usually did.

The frequent and prolonged periods of depression had forced upon steel makers the conviction that some way of combining to prevent their recurrence was desirable, even necessary, if the United States was to keep and increase its lead in the manufacture of the metal most needed by the age. Between the years 1890 and 1900 industrial combinations were as thick as the leaves in autumn. And steel had not escaped this tendency to amalgamate. The Federal Steel Company, with $100,000,000 issued capital, was the first large steel consolidation. The country’s wire plants had been merged gradually into one company, the American Steel and Wire Company of New Jersey, which controlled all but a small number of mills. A somewhat similar situation existed in regard to tin plate, tubes, and fabricated products. What might be called the steel companies proper were themselves all mergers of small plants, the trade being divided among several large competing units. A merger of these units had been talked of time and again and its accomplishment was considered inevitable, sooner or later, unless Carnegie first succeeded in crushing all competition and establishing a virtual monopoly for himself, as many thought he would. The time was ripe for a big steel combine.

And the time being ripe, the man was provided, the man destined to take Carnegie’s place as the central figure in the steel industry, not only of this country but of the world. He was Elbert H. Gary, then president of the Federal Steel Company, one of the Carnegie company’s largest and most important competitors, whose operations centred in the Chicago district.

Born on a farm near Wheaton, Ill., and educated to the practice of the law, Gary’s work brought him into connection with many large corporations including the Consolidated Steel and Wire Company and the Illinois Steel Company, for which he was general counsel. When the Federal Steel Company was organized in 1898 as a merger of the Illinois and other companies, Gary, then a director of the Illinois company, took the principal part in the organization activities. The executive ability he displayed so impressed his associates and the Morgan interests, who financed the merger, that he was unanimously chosen president of the new company. His selection for this post, coming as a great surprise to himself, first gave him a prominent part on the industrial stage, on which he has been the most striking figure almost ever since.

Gary’s ambition, like Carnegie’s, knew no bounds; but where the little Scotch ironmaster worked to make the steel industry an empire over which he should reign supreme, Gary dreamed of an immense Republic of Steel. Where Carnegie sought to unify the control of the steel