HISTORY OF BETHLEHEM STEEL



HISTORY OF BETHLEHEM STEEL

By Bill Barry

Community College of Baltimore County

In 1907, Charles Schwab proclaimed “I’ve thought the whole thing over, and if we are going to go bust, we will go bust big.” Although Schwab—according to this anecdote repeated often by his successor as president of Bethlehem Steel, Eugene Grace—was referring to his commitment to build the I-beam, Schwab prophetically predicted the history of a corporation which grew from a small iron works in the Lehigh Valley of Pennsylvania to become the second-largest steel producer in the world, but indeed went bust big--becoming the largest bankruptcy of modern times on December 31, 2003.

Originally called the Saucona Iron Company, for a nearby creek which was its source of iron ore, the company was founded in 1857 as a blast furnace to produce rails for the Lehigh Valley Railroad. Renamed Bethlehem Iron Company in 1861, it converted to the Bessemer process in 1873, but became a major corporation in 1904, when Schwab bought control of the company and created a holding company which eventually became—after U.S. Steel—the second-largest steel producer in the world.

In 1905, Schwab considered an I-beam developed in 1897 by Henry Grey, as a structural component for new buildings to replace the separate pieces that were riveted together. Despite The Panic of 1907 which made raising capital difficult, Bethlehem Steel built a new mill and created a market for the beam, which became the company’s trademark and which was used for such prestigious projects as Gimbel’s headquarters in New York City and the Empire State Building.

Bethlehem developed into a major armaments supplier as well. After producing armor plate in 1886, the company moved into artillery gun production in 1900 and developed a new type of heated tungsten-chromium steel, developed by Frederick Winslow Taylor, who worked for Bethlehem from 1896-1901. In October, 1914, Schwab met secretly about submarine contracts with British officials including Winston Churchill, to circumvent US neutrality agreements. By the end of World War I, Bethlehem had become a major weapons supplier and Schwab, despite working as a “$1 a year man,” had become enormously wealthy.

Bethlehem Steel’s purchase in 1916 of the Pennsylvania Steel Company not only doubled the company’s capacity but also brought a subsidiary of particular interest to residents of Maryland: the Maryland Steel Company owned a steel mill and shipyard at Sparrows Point, located on a peninsula jutting into Chesapeake Bay, in eastern Baltimore County. By 1957, this mill was the largest in the world, employing 35,000 workers and providing Bethlehem with a monopoly in the eastern United States.

Throughout the next decades, Bethlehem maintained its position as the second largest steel producer, but was mired in Schwab’s vision of heavy capital investment, and higher productivity rather than investments in new technology, following Andrew Carnegie’s admonition of “pioneering don’t pay.” As a result, new products—like aluminum cans—began to erode the company’s power in the late 1950s, although officials, from Schwab to the present day, have loudly blamed the company’s problem only on imported steel.

Bethlehem also participated eagerly in the anti-unionism which pervaded the steel industry. After breaking a steelworkers strikes in 1910, Schwab established a company union, called The Employee Representation Plan, but on September 26, 1941, The Steelworkers Organizing Committee won a National Labor Relations Board election and have represented the workers ever since.

The decline of the steel industry after 1957—for reasons too complicated for this short article—brought the collapse of Bethlehem Steel. Its death rattle was heard in October, 2001, when it filed for bankruptcy, and its death watch began in December, 2002, when it dumped its pension liabilities on to the federal government. Bethlehem Steel formally dissolved, with its 131 million shares reduced to waste paper, on December 31, 2003. The assets were sold in May, 2003, to International Steel Group (ISG) and were resold in late 2004 to Mittal Steel, Inc.

Further Reading

Katie Flanagan. The Rise and Fall of Bethlehem Steel: A Case Study (Loyola College. 2004)

Robert Hessen. Steel Titan: The Life of Charles Schwab (1975)

Mark Reutter. Sparrows Point. Making Steel: The Rise and Ruin of American Industrial Might (2nd. ed 2004)

John Strohmeyer. Crisis in Bethlehem: Big Steel’s Struggle to Survive (1986)

Linda Zeidman. “Sparrows Point, Dundalk, Highlandtown, Old West Baltimore: Home of Gold Dust and the Union Card.” In The Baltimore Book (1991)

Further Web Sites

comprehensive history of the corporation

–a local site describing the workers at Sparrows Point

Further videos

Bethlehem Steel: The People Who Built America (produced by WLVT-TV, Lehigh Valley PBS. 2004)

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