UNITED STATES STEEL
A Corporation With a Soul

PUBLISHER’S NOTE

This book is planned as an open and aboveboard presentation of the development of a great business. The story of the steel industry is the story of the United States Steel Corporation; one cannot be told without the other. It is hoped that this frank presentation of facts about our greatest corporation gathered from the records of the company will be of interest to the general reader.

Elbert H. Gary

“The story of United States Steel is the tale of how Gary made his dream come true”

UNITED STATES
STEEL
A CORPORATION WITH A SOUL

BY
ARUNDEL COTTER

GARDEN CITY, N. Y., AND TORONTO
DOUBLEDAY, PAGE & COMPANY
1921

FOREWORD

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.

		PAGE
Prologue. The Man at the Helm		[3]
CHAPTER
I.	The Why and How of the Big Company	[6]
II.	The Birth of the Big Company	[22]
III.	Early History and Growth, 1901 to 1907	[42]
IV.	The Tennessee Purchase	[70]
V.	Men Who Made United States Steel	[87]
VI.	Developing World Markets	[111]
VII.	The Spirit of the Corporation	[132]
VIII.	The Corporation’s Implements	[142]
IX.	The Steel Towns	[160]
X.	Humanizing Industry	[174]
XI.	Investigations and Dissolution Suit	[197]
XII.	Questions of Policy	[217]
XIII.	Steel from the Investor’s Viewpoint	[235]
XIV.	The Great Steel Strike	[246]
XV.	Helping Uncle Sam Win the War	[269]
XVI.	The Middle Period, 1907 to 1914	[283]
XVII.	The War and After	[295]
Appendix		[308]

LIST OF ILLUSTRATIONS

Elbert H. Gary	[Frontispiece]
“The story of United States Steel is the tale of how Gary made his dreams come true.”
	FACING PAGE
Andrew Carnegie	[40]
J. Pierpont Morgan	[41]
Down in a Coal Mine	[56]
Open Pit Mining—Canisteo Mine	[57]
Mine Stables	[72]
Modern Coal Mining by Machinery	[73]
Bee-hive Coke Ovens	[88]
Mouth of Coal Mine—Coke Ovens in Background	[89]
James A. Farrell	[120]
Transporting 222 Tons of Bridge Material in China	[121]
“Drawing” Bee-hive Coke Ovens	[136]
Two Views of Modern By-Product Oven	[137]
The Original Jones Mixer	[152]
A Bessemer Blow	[153]
Interior of Gary School	[168]
Ore Cars at Proctor Yards	[184]
General View of Duluth Ore Docks	[185]
Ore Boat and Train	[200]
Ore Boats at Duluth Docks	[201]
A Trainload of Ingots in Molds	[216]
Ingot on Way to Rolling Mill	[217]
Rails on Cooling Bed	[232]
Pouring Ingots	[233]
Part of the Duquesne Works—Detail of Unloading Ore—a Hulett Machine	[248]
Making Wire Rods—Old Method	[249]
Coils of Red Hot Wire	[264]
Annealing Wire	[265]
Drawing Fine Wire	[280]
Making Wire Fencing	[281]
Making a Steel Tube	[296]
Steel Transportation by Man Power in China	[297]

UNITED STATES STEEL
A Corporation With a Soul

UNITED STATES STEEL

PROLOGUE
THE MAN AT THE HELM

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.

CHAPTER I
THE WHY AND HOW OF THE BIG COMPANY

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 trade and bring it into his own hands, Gary sought to make the industry one owned by the people, and particularly by the workers. Where Carnegie stopped at the ocean and gave his attention to world business only at times when overproduction at home compelled him to seek foreign markets temporarily, Gary sought to establish a world-wide and permanent market for the product of the blast furnaces and rolling mills of the United States.

And the history of the United States Steel Corporation is the story of how Gary made his dream come true.

But the Federal Steel Company, its president soon found, was not an instrument big enough or suitable for the carrying out of his plans. In the first place, its plants were located at too great a distance from the Atlantic seaboard to render an invasion of foreign markets feasible. Freight rates to the ocean were prohibitive. And another hindrance was encountered in the severe ups and downs to which the steel trade in this country was subject. He saw that, if his dreams were ever to be made realities, the Federal Steel Company must be enlarged and expanded, must provide itself with plants able to export steel in competition with Great Britain and Germany, the countries which ruled the international markets, and must so strongly entrench itself that it would not be too greatly affected by periods of stress.

One man there was who could provide the wherewithal for the expansion which the head of the Federal Steel Company considered necessary. This was the late J. Pierpont Morgan. To Morgan, then, Gary took his plans, but the banker was not enthusiastic. Perhaps he saw that many steel concerns were not making money and feared to put so large an amount of capital as was required into the venture; perhaps other motives governed him; but, whatever his reasons, the great financier hesitated, would not permit himself to be convinced. Again and again Gary tried to persuade Morgan, but in vain, and at length Gary, satisfied that he must seek other means to his end, turned his attention toward raising the necessary capital elsewhere. He had already prevailed upon his fellow directors of the Federal Steel Company to pledge subscriptions to a large sum for the purchase or erection of new plants when circumstances played into his hands. Morgan decided to give his backing to the formation of a giant steel merger on the lines Gary had proposed.

The story of how Morgan was won over is an interesting one. It has already been suggested that Carnegie was anxious to sell out, and Carnegie usually got what he wanted. After many attempts to conclude a satisfactory deal with different syndicates Carnegie, like Gary, arrived at the conclusion that Morgan, and Morgan alone, was able to finance the purchase of his properties. Therefore, he decided Morgan must be induced to buy.

At first Carnegie tried ordinary tactics. He had mutual acquaintances suggest to the banker the advisability of a deal by which the Carnegie company would be absorbed. Time and again this suggestion was made, and on each occasion Morgan listened then sent for Gary. The latter, seeing that this would be an excellent means of accomplishing what he desired for the Federal company, as by absorbing the Carnegie company it would not only secure a steel-making and steel-selling organization without equal at the time but would also add to itself plants which could and would give battle for world trade to Britain and Germany, did all he could to induce the financier to accept the suggestions for the purchase of these properties. But each time Morgan hesitated.

Then Carnegie resorted to coercion. Morgan was heavily interested in the National Tube Company which was itself an amalgamation of a number of smaller tube companies. Carnegie made no tubes. His entrance into the business of manufacturing tubular products would undoubtedly have brought the National Tube Company face to face with more serious competition than it had ever encountered. And Carnegie threatened to build a tube mill. This action had two purposes. It was apparently intended to force Morgan to consider the purchase of the Carnegie properties, and it was also a retaliatory measure against the decision of the National Tube management to erect steel mills which would render the company independent of the Carnegie Steel Company for its supplies of raw material and would incidentally deprive Carnegie of a large customer. Carnegie announced his plans for the proposed tube mill publicly and bought a site for it at Conneaut, Ohio. But although Morgan knew that the steel maker was able and ready to carry out his project he gave no sign of having changed his mind.

Carnegie’s next step was more important and serious. He threatened to build a railroad paralleling the Pennsylvania Railroad from Pittsburgh to the coast, a project which, if carried through, would without question have materially damaged the earning power of the great railroad system and would have been a heavier blow to the Morgan interests than the erection of a tube mill. But again Morgan paid no attention. It is extremely doubtful if Carnegie, powerful as he was, could have seriously intended to attempt such an undertaking, and therein may have lain the reason for the banker’s seeming indifference. On the other hand, those who knew Carnegie declared that he would have found means to build the suggested road, even as he had in the past done other things deemed to have been impossible.

That Carnegie had no desire to enter into a pitched battle with the powerful Morgan interests seems to be fairly well established by his next act. Coercion having failed, he again resorted to peaceful tactics and fired what, possibly, was his last shot. And here it might be interjected that, while the event that directly led up to the formation of the Steel Corporation has been narrated scores, probably hundreds of times, the part that Carnegie played therein has usually been overlooked.

Among the Carnegie partners was a young man, Charles M. Schwab, president of the Carnegie Steel Company. Schwab not only represented the top notch of efficiency as a steel maker, a salesman, and an executive, but he had a veritable tongue of gold. To listen to him was to be converted to his views; he could talk the legs off the proverbial brass pot. And Carnegie saw that if the man lived who could convince Morgan to finance a purchase of the Carnegie Steel Company that man was “Charlie” Schwab. Carnegie therefore decided to bring together the financier and the president of the Carnegie Steel Company and to let loose on Morgan the flood of Schwab’s eloquence.

On the night of December 12, 1900, Edward Simmons and Charles Stuart Smith, both close friends of Carnegie, gave a dinner to which Morgan was invited. And to Schwab was assigned the duty of making the speech of the evening. Ostensibly the dinner was merely a social affair with no ulterior motive, but in the light of subsequent events it may be considered certain that it was arranged at the suggestion of Carnegie, and that its purpose was the sale of his properties to Morgan.

Everything went off as planned. Schwab chose for his subject the steel company of the future. He played upon this theme as upon a harp to an attentive audience, not the least attentive of whom was the banker, and, while he never referred directly to the Carnegie company, he made it very clear that the concern which he described in glowing terms would of necessity own and control the Carnegie plants.

Schwab foretold a future of wonderful brilliance for the steel industry. He drew a word picture of a company big enough to insure the greatest economies in the securing and distribution of its raw material, but highly specialized by departments, each and every plant confining its attention to one particular product so as to secure the highest degree of efficiency. He described such an organization as able to dominate the markets of the world and to set a pace that neither England nor Germany could follow. The ideal structure he painted was such an one as was well worthy the attention of the greatest of bankers, an industrial enterprise for which even the great Morgan might well be proud to stand sponsor.

And the youthful Carnegie president swept the financier off his feet and along with him in the flood of his oratory. The United States Steel Corporation was not actually incorporated for some months, as an undertaking so immense naturally took a great deal of time to put through, but it was by that speech that the idea of a vast steel merger, sown in Morgan’s mind by Gary, was quickened into life. In that half hour the United States Steel Corporation, to all intents and purposes, became an actual fact.

CHAPTER II
THE BIRTH OF THE BIG COMPANY

A billion dollars!

During the past seven years the world has grown accustomed to big figures. The enormous expenditures caused by the war and the growth of the national debts of most countries, attributable to the same cause, have made the mention of a sum expressed in ten or more figures rather commonplace. But back in 1901 a billion dollars was an almost unthinkable sum and it was hardly any wonder that the financial world gasped when the plans for the new corporation, with an authorized capitalization of $1,100,000,000 in stock and $304,000,000 in bonds, were announced.

Wall Street had long been accustomed to treat millions with the dollar sign before them as mere trifles and even tens of millions were more or less commonplace. Hundreds of millions commanded respect. But a billion, a thousand million—that seemed merely a row of figures, something that could hardly be computed.

And, indeed, the mind cannot readily comprehend what a billion means. Some concrete comparison is needed to give a faint idea of the immensity of the capital of the “Steel Trust.” A king’s ransom? It would have ransomed a hundred kings! The fabled wealth of Ormus and of Ind, of Croesus, of Montezuma, all these fade into insignificance when compared with this gigantic aggregate of money.

If the authorized capital of the United States Steel Corporation could be turned into solid gold it would weigh 2,330 tons, or more than 5,200,000 pounds!

This gold would have a cubic content of 3,880 feet!

With it you could build a pillar six feet square and towering 108 feet in the air; or a Cleopatra’s needle of virgin gold six feet square at its base and tapering to a point at a height of more than 430 feet.

A train of fifty-eight railroad cars would be required for transporting the precious metal, with two big engines, one at either end, to move the train!

For storage room the gold would require a vault 8 feet high, 20 feet wide, and 24½ feet long, and there wouldn’t be an inch of spare room!

Placed at one end of a scale the gold would need 34,666 men of average weight to balance it!

If the Corporation’s capital were coined into five-dollar gold pieces they would pave a road twenty-five feet wide for more than ten miles!

Stacked one on the other these coins would reach a height of more than twenty miles!

If this huge sum were converted into pure silver it would weigh 87,500 tons, with a cubic content of 268,000 feet!

This silver would form a needle six feet square at the base and piercing the skies to a height of 29,776 feet, or above the highest crest of the Himalayas!

It would take 2,200 freight cars to load it, and about fifty-five powerful locomotives to pull these cars!

This $1,404,000,000, changed into dollar bills, would measure 166,200 miles, forming a ribbon that would girdle the earth six times and leave two streamers each 8,000 miles long floating behind! A ribbon that would reach more than two thirds the distance to the moon!

These bills would cover an area of 228,317,433 square feet!

An expert bank teller working eight hours a day, Sundays and holidays included, and counting one bill a second without rest, would take more than 133 years to count them all. If he started to count on January 1, 1921, one of his descendants might count the last bill in the pile about the end of June, 2054!

If the Corporation’s capital were divided evenly it would give every man, woman, and child in the United States about $14!

The interest on this sum at 6 per cent. would keep some 35,000 American families in comparative comfort without touching the capital!

From the date of the Simmons dinner to that on which the plans for the new corporation were announced was a very short period. The birth of the Corporation did not take long. Once convinced that a merger of a number of large companies making various steel products was practicable and desirable for the good of the industry and of the country—as well as for the pockets of the consolidators—Morgan and his associates lost no time in bringing it about. The dinner took place on December 12, 1900; United States Steel was formally chartered on February 25th of the year following and began business as a corporate entity on April 1, 1901.

It is likely that Schwab himself did not foresee how far reaching would be the effects of his speech. Morgan did not do things by halves. When the young steel maker caught his attention and drew a picture of a company big enough to manufacture all lines of steel and to specialize on each one, powerful enough to enter and occupy foreign markets and rich enough to expand to meet the growing demand for the metal without danger of over-stretching its resources, he painted with his words something which the banker thought it would be a proud thing to father. Morgan saw before him unlimited possibilities, not of money making alone—for this was by no means the ruling passion of his being—but of creating an organization that should leave an indelible impress for good on industrial history, a business so great that its actions could not fail to force themselves upon the attention of the world and to command imitation on the part of other industries. A business, moreover, so powerful that it would not need to resort to the dubious practices of the old days to succeed.

The great steel concern that Schwab discussed corresponded very closely to the company that Gary had long been urging Morgan to assist in creating by the expansion of the Federal Steel Co. Immediately after the dinner Morgan drew Schwab aside and the latter then went more fully into the subject of a vast steel merger than he had been able to in the confines of an after-dinner oration. Finally the financier asked Schwab if he thought Carnegie would sell, and upon receiving an affirmative reply Morgan requested the terms. A few days later Schwab reported that Carnegie’s price was $303,450,000 in bonds and $188,556,160 in stock of the suggested new company. After a prolonged consultation with Gary, Robert Bacon (one of his partners), and others, Morgan accepted these terms.

As a nucleus of the proposed steel corporation, then, we have the Carnegie and the Federal companies. But Gary’s plans had provided for the manufacture of a number of products made by neither of these two concerns, and Schwab, in his talk, had pictured an industrial organization that would turn out from its mills every kind of steel product, that would be able to supply its customers with everything made of the metal from a nail to a railroad car. Morgan was not a man of half measures. There was no need to make two bites of a cherry, even though it was a mighty big cherry. Having once decided to finance the formation of the new company he thought it might as well be comprehensive in its products, and so negotiations were immediately set on foot with the controlling interests in the leading concerns making wire, tubes, tin plate, etc., with a view to bringing them all into the consolidation.

The Morgan interests had financed the organization of the National Tube Co., the principal figure in which was Edmund C. Converse, so the tube company naturally was taken in. The other concerns and interests which it was proposed to unify into the new corporation were the American Steel & Wire Co., the chief figures in which were the late John Warne Gates, Alfred Clifford, William Edenborn, and others; the four companies forming the so-called Reid-Moore group, controlled by Daniel G. Reid and William H. Moore—namely the National Steel Co., American Tin Plate Co., American Sheet Steel Co., and American Steel Hoop Co.

By the early part of February, 1901, the negotiations were concluded and the plans for the organization of the United States Steel Corporation were announced. They provided for the amalgamation of these eight companies, the smallest of which had a capitalization of $33,000,000 and the largest of more than $300,000,000. Before the plans were finally put through, however, two more units were added to the list, the Lake Superior Consolidated Iron Mines, dominated by the Rockefeller interests, and the American Bridge Co., at the head of which was Percival Roberts, Jr. The absorption of the Lake Superior Consolidated Co., with its vast ore holdings and steamship fleet, was deemed necessary to ensure the Steel Corporation an adequate ore reserve. The American Bridge Co., which secured most of its supplies of steel from the Carnegie company, seemed to fit naturally into the plans for the consolidation.

Thus there were ten large companies taken in, merged to form the United States Steel Corporation. They had an aggregate capital of $867,550,394, as follows:

COMPANY	COMMON STOCK	PREFERRED STOCK
American Bridge Co.	$30,527,800	$30,527,800
American Sheet Steel Co.	24,500,000	24,500,000
American Steel Hoop Co.	19,000,000	14,000,000
American Steel & Wire Co.	50,000,000	40,000,000
American Tin Plate Co.	28,000,000	18,325,000
Carnegie Steel Co.	160,000,000	[A]160,000,000
Federal Steel Co.	46,484,300	53,260,900
Lake Superior Consolidated Iron Mines	29,424,594	. . . . . .
National Steel Co.	32,000,000	27,000,000
National Tube Co.	40,000,000	40,000,000
Total.	$459,936,694	$407,613,700

[A] Bonds. All other figures in this column represent preferred stock.

The American Bridge Co., as its name implies, was a fabricator of bridge material and structural steel generally. It was not a steel company in the strict sense. It obtained a large proportion of its supplies of steel from the Carnegie company and fabricated this material. It had a capacity of approximately 600,000 tons yearly. The company was incorporated in May, 1900, as a consolidation of a number of smaller concerns and had a surplus of $4,030,331. Holders of its preferred stock received $110 in preferred stock of the new corporation for each $100 of their holdings, while the common stockholders received $105 in U. S. Steel common for each $100 of their holdings.

Four companies, as has been stated, formed the “Reid-Moore” group. The American Tin Plate Co. was chartered in December, 1898. Like all the concerns forming this group it was considerably over-capitalized. Nevertheless, its earnings in the first year of its existence were approximately $3,600,000 or 20 per cent. on its preferred capital, and in 1900 they exceeded $5,750,000, or about 32 per cent. on the preferred capital. At its formation it acquired thirty-nine different plants, embracing 279 mills, manufacturing tin and terne plates. Its preferred stockholders received $125 in U. S. Steel preferred stock for each $100 of their holdings and its common stockholders $120 in preferred and $125 in common stock of the new corporation for each $100 of their holdings.

The National Steel Co., another of the Reid-Moore concerns, was the maker of raw material for the other three members of the group. Its production was largely confined to semi-finished products and it had a capacity of about 1,700,000 tons of steel a year. It had some ore holdings in the Mesaba Range as well as a twenty-year contract for a one-sixth interest in the ore production of the Oliver Iron Mining Co. The company was chartered early in 1899 and in the first year of its existence earned approximately $8,750,000, or more than 32 per cent. on its preferred stock. Of this amount, however, $3,617,000 was written off for depreciation. At the time it was merged into the Steel Corporation it had surplus and undivided profits of $6,910,995. Holders of both its common and preferred stock for each $100 of their holdings got $125 in the corresponding stock of the new corporation.

The American Steel Hoop Co., third of the group, was formed a month or two later than the National Steel Co. It was a consolidation of nine concerns manufacturing chiefly bars, hoops, bands, cotton ties, and skelp, and had an annual capacity of about 700,000 tons. Its earnings were not as large as those of the others of the group, its first nine months’ operations yielding a return at the annual rate of slightly under 7 per cent. on the preferred capitalization. Its accumulated surplus on April 1, 1901, was $1,660,311. The two classes of its stock were exchanged at par for the same classes of U. S. Steel stock.

Last of the Reid-Moore companies to be organized was the American Sheet Steel Co., chartered in February, 1900. This company acquired 164 sheet mills, nineteen puddling furnaces, and a number of open-hearth furnaces and bar mills. It had a capacity of about half a million tons. Its earnings, from the time it began business to April 1, 1901, amounted to $1,676,480 and its surplus on the latter date was $705,757. Its stock was exchanged for Steel Corporation securities on the same basis as those of the Steel Hoop Company.

The National Tube Co., organized in June, 1899, was a merger of thirteen smaller concerns having an aggregate capacity of about 850,000 tons of steel-wrought tubing. Its principal plants were located in the Pittsburgh district. In the year 1900 the company reported net profits after depreciation of more than $14,600,000, or about 35 per cent. on its preferred capital stock. National Tube preferred stockholders exchanged their holdings at the rate of $100 for $125 of U. S. Steel preferred, while the junior stockholders received $8.80 in preferred and $125 in common stock of the corporation for each $100 they held.

The Federal Steel Co., second only in size and importance to the Carnegie Steel Co., was chartered late in 1898, as a merger of the Illinois Steel Co., Minnesota Iron Co., Minnesota Steamship Company, Mount Pleasant Coke Company, Lorain Steel Co., Elgin, Joliet & Eastern Railway Co., and the Johnson Co. of Pennsylvania. The steel companies it controlled brought to it some of the best-equipped steel mills, manufacturing various products, in the country, as well as a number of ore vessels and the principal ownership of the Duluth & Iron Range R. R. Its earnings in 1899 were approximately $9,100,000, or about 17 per cent. of its preferred stock, and in 1900, $11,722,000, or about 22 per cent. Federal Steel preferred stockholders received new preferred stock at the rate of $110 for each $100, and the common stock was exchanged at the rate of $100 of Federal common for $4.00 of preferred and $107.50 of the common stock of the U. S. Steel Corporation.

The Lake Superior Iron Mines, dominated by the Standard Oil interests, was formed in 1893. It was merely an ore company and had ore reserves, owned or leased, estimated at nearly 400,000,000 tons. The company also owned the Duluth, Missabe & Northern Railroad, and it was affiliated with the Bessemer Steamship Co., afterward purchased by the Steel Corporation. The earnings of the Lake Superior company were enormous, having been nearly 58 per cent. on its capital in 1900. For each $100 of its stock—there was only one class—$135 each of preferred and common stock of the U. S. Steel Corporation were exchanged.

The American Steel & Wire Co., of New Jersey, was a consolidation effected in January, 1899, of the majority of the country’s wire mills. It had a rod mill capacity of more than 1,100,000 tons and a wire nail capacity of more than 10,000,000 kegs, or more than 500,000 tons. It also owned extensive ore and coking coal properties. In the first year of its operation the wire company earned nearly $19.00 a share on its common stock after an allowance of $1,200,000 for depreciation, and in 1900 its earnings applicable to the common stock were $4,202,129, or nearly 8½ per cent. on the issue. Its preferred stock was exchanged on a basis of $117.50 U. S. Steel preferred for each $100, and its common stock on the basis of $102.50 of Steel common for each $100 of Steel & Wire.

We come now to the largest and most important of the ten companies originally merged into the monster Steel Corporation—the Carnegie Steel Co., the great organization ruled by the Monarch of Steel and turning out from its furnaces and mills practically one fifth of all the steel made in the United States; and, incidentally, pouring undreamed-of wealth into the pockets of Carnegie and his associates. A company that realized profits in 1899 of nearly $24,000,000 and in 1900 of approximately $40,000,000!

The Carnegie Steel Co. was a merger of the Carnegie and Frick interests. By its absorption the new corporation secured possession of the greatest steel organization of its time, as well as of the important coke holdings of the H. C. Frick Coke Co.—owning about 40,000 acres of coking coal lands, 11,000 coke ovens, and other property—a controlling interest in the Oliver Mining Co. with its large ore possessions, and the controlling interest in the Pittsburgh, Bessemer & Lake Erie Railroad, not to mention a number of other concerns and interests of less importance.

Unlike most of the other merged companies, the Carnegie Steel Co. had all its steel-making plants concentrated in the Pittsburgh district. It was in this locality that Carnegie had built up his great business machine and his fortune. He had never attempted to build elsewhere, with the exception of his threat to erect a tube plant at Conneaut. Carnegie believed in the future of Pittsburgh. And he himself did more than any one else to assure that future. Carnegie it was who had made Pittsburgh the steel centre of the universe. And his plants there, at the time they were taken over by the Corporation, had an annual capacity of some 3,500,000 tons of steel ingots and more than 3,000,000 tons of finished products.

When the Carnegie company was reorganized in March, 1900—at which time the merger with the Frick company took place—its capital was placed at $160,000,000 in stock and a like amount in bonds. All the stock and all but $50,000 of the bonds were taken over by the organizers of the Steel Corporation and for these, as has been seen, a total of $492,006,160 was paid, as follows: for $159,450,000 Carnegie bonds an equal amount of bonds of the new company was exchanged; another $144,000,000 in new bonds was employed to take up $96,000,000 of the Carnegie stock while $98,277,120 Steel preferred and $90,279,040 Steel common paid for the remaining $64,000,000 Carnegie Steel stock.

In order to provide for the exchange of new stocks and bonds for the securities of the constituent companies the new organization, which it had been finally decided to name the United States Steel Corporation, was given an authorized capitalization of $550,000,000 each in common and preferred stocks and $304,000,000 in bonds, a total of $1,404,000,000. To ensure sufficient working capital at the start a sum of $25,000,000 was put up in cash by the syndicate, headed by the Morgan interests, which had financed the transaction. This syndicate also turned over to the corporation $174,000 in securities of the merged companies which had been acquired by means other than exchange, and expended some $3,000,000 as syndicate expenses. For the cash, stock, and its services the syndicate received 648,987 shares of preferred stock and 648,988 shares of common stock.

Practically all the stockholders of the old companies, satisfied that with the Morgan backing the new company its success was fairly well assured, took advantage of the exchange offer, with the result that at the end of the first nine months of its existence less than 1 per cent. of the old securities were still held in the hands of the public and of the Corporation’s capital as authorized $1,319,229,000 had been issued. To-day only about three hundredths of one per cent. of the stock of the ten companies is still held outside the Steel Corporation.

The steel-producing equipment controlled by this vast aggregation of capital comprised 149 steel works of various kinds, having an annual capacity of 9,400,000 tons of crude and about 7,700,000 tons of finished steel; 78 blast furnaces with a pig iron capacity of 7,400,000 tons; more than 500,000 acres of coking coal lands; more than 1,000 miles of railroad and a fleet of 112 vessels engaged in traffic on the Great Lakes, not to mention large areas of ore-bearing property with uncounted millions of tons of developed and undeveloped ore, as well as docks, natural gas, and limestone properties, etc.

Just as the Corporation’s capital, wealth, and resources had never before been approached by any industrial organization so its board of directors surpassed in aggregate wealth that of any other company. The list of the men who guided the Corporation’s destinies included J. P. Morgan, John D. Rockefeller, and a host of others whose gigantic fortunes were exceeded only by those of the two kings of finance named. The others were: Elbert H. Gary, H. H. Rogers, Charles M. Schwab, Robert Bacon, Edmund C. Converse, Francis H. Peabody, Percival Roberts, Jr., Charles Steele, William H. Moore, Norman B. Ream, Peter A. B. Widener, James H. Reed, Henry Clay Frick, William Edenborn, Marshall Field, Daniel G. Reid, John D. Rockefeller, Jr., Alfred Clifford, Clement A. Griscom, William E. Dodge, Nathaniel Thayer, and Abram S. Hewitt.

Their fortunes, if it were possible to add them together, would amount to a sum greater even than the huge capital of the “Steel Trust.”

Of the original directorate of the Corporation only seven still survive and only two are still directors. These are Gary and Roberts.

Charles M. Schwab was chosen president of the Corporation, Arthur F. Luke treasurer, and Richard Trimble secretary. Elbert H. Gary became chairman of the Executive Committee, and with him were Charles Steele, Percival Roberts, and Edmund C. Converse. A Finance Committee was also appointed with Robert Bacon at its head, and H. H. Rogers, Norman B. Ream, Elbert H. Gary, and P. A. B. Widener as the other members. The salaries of the president and of the chairman of the Executive Committee were placed at $100,000 each.

It is hardly to be wondered at that many prophets declared the new company was foredoomed to failure. Its very size, they claimed, would render it unwieldy, and it would collapse of its own weight. And there was a matter of something like half a billion dollars of common stock represented by no tangible assets, pure water it was claimed. It was questioned if dividends could ever be paid on this.

How could Morgan ever have been induced to back so great and so impracticable an enterprise? Many asked this question, and found no satisfactory reply. Some thought the banker had over-reached himself at last, but the majority were convinced that the organization of the Steel Corporation was merely a prodigious stock-jobbing scheme to put money into the pockets of Morgan and his associates—and that, as such, it would prove eminently successful. Few there were who had faith in the “Steel Trust” as a practical business proposition.

But incredible as it may have seemed to those accustomed to the vagaries of high finance as it was often practised in 1901, the promoters of the United States Steel Corporation did not regard it as a mere venture in financial legerdemain. They had the greatest faith in it as a straightforward business enterprise. They believed in its future. Judge Gary, who took an active part in the organization, has always insisted that it would be successful and the enterprise justified. And the reader of the history of the big company must judge for himself whether it has justified its organization, not only from an economic, but more particularly from a sociological standpoint.

Morgan, it has been said, considered the financing of the Steel Corporation the crowning achievement of his career. Was he mistaken? Or did he, in making possible this giant Corporation, erect himself a monument more lasting than brass?

It has been admitted that a large part of the Steel Corporation’s original capital was water. Just how much will never be decided. Herbert Knox Smith, Commissioner of Corporations under President Roosevelt, estimated that substantially half of the Corporation’s total issue of securities was not based on any tangible property assets. Other critics have gone further, while some have placed the amount of over-capitalization at a lower figure. Mr. Smith’s figures, so far as they go, are probably approximately correct, except that they made little or no allowance for the enormous value of the Corporation’s ore holdings.

But does the cost of tangible assets indicate actual value? Does the cost of erecting a factory or a business indicate the value of that business? Manhattan Island was originally purchased for twenty-four dollars. A business that is losing money is seldom worth the investment put into it, and conversely a money-making concern must be valued on its earning power. Many of the companies merged into the United States Steel Corporation were immensely profitable, and even though they themselves may have been over-capitalized, their value to the new corporation and to their stockholders was greater than their capitalization.

The actual plant cost of the Carnegie Steel Co., to take one instance, had been placed at about $75,000,000. That is, these plants in 1901 could have been duplicated for that sum. But the organizers of the Steel Corporation bought not only the Carnegie plants; they purchased an organization that was at the same time the most efficient steel-making and steel-selling machine in the world, an organization that the best-qualified witnesses have declared was worth anything from $250,000,000 up. An organization, moreover, that had earned $40,000,000 in a single year. And what was true in the case of the Carnegie company was, in part at least, applicable to most of the other concerns which went to make the United States Steel Corporation.

Further, in organizing the big company, there were many conflicting interests to be brought into harmony. It was necessary to secure control of various enterprises in order to obtain the rounded-out organization aimed at by Gary, Schwab, and the others. And each seller, naturally, was holding out for all he thought it possible to get. It was, therefore, a matter of bargaining and without doubt the result was that in more than one case the final price was above the value of the thing purchased.

In this connection it is related that shortly after the corporation had been formed the old Iron Master and Morgan met on a steamship on their way to Europe, and Carnegie in the course of conversation intimated that he considered he had driven a shrewd bargain with the corporation interests. To which the banker is said to have replied: “I would have paid another hundred million if you had asked it.” The story, the accuracy of which cannot be vouched for, concludes that Carnegie never forgave himself for his too-modest demands.

The general consensus of opinion is that the Corporation’s bonds and preferred stock were both amply protected by assets at the time of its organization but that the junior stock had nothing behind it but “blue sky.” Admitting the justice of this claim, which has never been denied and probably cannot be, this state of things no longer exists. Whatever water once permeated the capital of the Steel Corporation has been squeezed out. Year by year the directors have voted large sums out of earnings for the erection of new plants, the extension of old ones, until approximately $900,000,000 has been expended in this manner, this providing adequate—more than adequate—protection for the common stock and putting the Corporation beyond reach of criticism to-day on the charge of over-capitalization.

Not long ago Judge Gary, testifying at Washington before a Senate committee, asserted that the Corporation’s properties then—October, 1919—were actually worth $2,200,000,000 in round figures, or well over $700,000,000 more than its entire funded and stock capital. He asserted they could not be replaced for that sum. And other steel men declare his statement is justified.

When the Corporation began its existence the plants of its subsidiary companies, as we have seen, had a capacity of more than 9,000,000 tons of steel ingots, while its furnace capacity was only 7,740,000 tons. It was compelled to purchase a large proportion of its pig iron requirements in the open market. To-day its plants are capable, if worked at full, of producing 22,350,000 tons of steel ingots and its pig iron capacity is 18,400,000 tons. Practically all this gain in production has been attained by “plowing” profits back into additions and improvements with the object of putting actual plant value behind every dollar of stock issued.

This consummation was arrived at about seven years ago and it was then made known that the policy of using profits for building new mills and furnaces or acquiring additional property had been abandoned and that future expansion would be financed by the issuance of bonds, which would permit stockholders to share more liberally in profits than they had in previous years.

But although the Corporation, since the new policy was announced, has put more than $400,000,000 into new plant, practically all expenditures for extensions have been from earnings. The war, bringing about a boom in steel, brought to the Corporation such large profits that it was possible to use surplus earnings for extensions and yet pay big dividends to stockholders, making new financing both unnecessary and unwise. At present the Corporation is so strongly entrenched financially that the possibility of borrowing for plant additions becoming necessary has been put into the distant future, possibly eliminated forever.

We have seen how the Corporation was formed as a consolidation of ten of the most important steel-producing concerns in the United States, with a combined capacity of nearly two thirds the country’s possible output. So great an operation cannot be considered merely as a matter of finance. The biggest of trusts must of necessity contain enormous potentialities affecting the general welfare of industry and of the State. Its organizers and managers, in consequence, cannot resent fair-minded investigation into the use it makes of its powers. Has the Steel Corporation’s existence been prejudicial to the interests of its competitors, its customers, its employees, or the general public? These questions will be treated in more or less detail in the course of this history, but it might not be out of place to point out a few salient facts on this subject at this point.

Since the Corporation began its existence a number of new steel companies have sprung into being, grown and expanded, while the older so-called independents have greatly increased their output. Although the Corporation has added about 13,000,000 tons to its steel-making capacity its competitors have added a still larger amount with the result that the big company now controls less than half the steel production of the United States.[B]

[B] See Appendix, page [308].

Enjoying the confidence of a number of steel manufacturers competing with the Steel Corporation the writer has been unable after patient investigation to find any evidence of its having at any time used its immense wealth to undersell a competitor, large or small, with the purpose of driving it out of business, while he has discovered more than one instance where it has actually assisted competitors. A company, especially one whose very size exposes it to envy and attack, could not fail to earn the enmity of its competitors if its methods were not at all times fair and above suspicion. The “Steel Trust’s” competitors have time and again, privately and publicly and under oath, declared that they have no cause of complaint against it.

That this attitude on the part of the independent steel men was inspired solely by the fear that criticism levelled against the big corporation would involve a trade war directed against the critic and his consequent ruin has been suggested in irresponsible quarters. This is a poor compliment to the heads of some of the country’s leading industrial organizations. No one who knows Charles M. Schwab, John A. Topping, James A. Campbell, Willis King, E. A. S. Clarke, and other big steel “independents” would regard the charge as worthy of consideration.

How has the customer, the steel consumer, fared? The Corporation has always been slow to advance prices and equally slow to lower them. It has usually endeavored to prevent prices from reaching an abnormally high level in “boom” times, when overwhelming demand had placed the steel seller in control of the market, by setting a maximum quotation at a fair level permitting any manufacturer a fair profit, and has thus protected the consumer whose urgent need of the metal at a particular time made him a prey to profiteering. Such a course was followed in 1914 and in 1917, both periods of ascending prices. And it is being pursued again at the time this is written. To-day the steel maker who has material for immediate or early delivery can get enormous premiums, abnormally high prices, for his output. But the Corporation is selling at the levels agreed on in 1919 with the Industrial Board appointed at that time by the President and refuses to advance its price although the Government itself abrogated the arrangement. And whether for quick or deferred delivery it charges one price. It refuses to give delivery preferment for any consideration, saying in effect “first come, first served.”

And by endeavoring to prevent wild price reductions in periods of depression it has afforded protection to consumers who made their purchases at the top of the market, or near it, and who would have suffered heavy losses from a break in the steel market not only from the reduction in the value of their inventories but because their competitors might be able to buy steel at much lower prices and undersell them.

Has the public, which always pays the bill in the long run and whose interest is paramount, been injured? In the thirteen years from the Corporation’s organization to the beginning of the European war the tendency of steel prices has been downward, not only as compared with those of other commodities, which ascended, but on a dollar-and-cents basis. This tendency of prices will be discussed more fully in a later chapter. The war, it is true, brought about a decided advance in steel prices, but in comparison with other commodities they still show favorably. And there is no question that quality has improved.

No better illustration of the Corporation’s price policy can be found than that afforded by a comparison of the weighted average of actual prices received by it for the past eighteen years on ten principal products with Dun’s index number of all commodity prices indicating the fluctuations in living cost for the same period. In this comparison 1903 is taken as the base because, in that year, Dun’s index number was 99.456, or as nearly as possible 100.

YEAR	DUN’S INDEX NUMBER		CORPORATION’S PRICE RECEIVED		INDEX NO. BASED ON CORP. PRICE
1903	99.46			$37.56	100.00
1904	97.19			33.15	88.3
1905	98.31			32.89	87.6
1906	105.22			34.54	91.8
1907	113.66			36.59	97.3
1908	108.17			36.19	96.3
1909	119.02			32.52	86.5
1910	119.17			34.10	90.7
1911	118.13			31.88	84.8
1912	122.28			30.03	80.0
1913	116.32			33.25	88.5
1914	119.71			30.60	81.4
1915	124.96			30.67	81.6
1916	145.14			41.31	109.9
1917	211.95			60.08	60.0
1918	232.57			68.86	83.5
1919	233.71			62.66	167.0
1920	260.41	(nine	mos.)	62.67	167.0

The ten classes of products used in arriving at the weighted average are: Heavy rails; blooms, billets, slabs and sheet and tin bars; plates; heavy structural shapes; merchant bars; bright coarse wire; wire nails; black sheets; merchant pipe and oil country goods; black plate.

Andrew Carnegie

Nor has the steel worker been lost sight of. It is admitted by all familiar with the subject that the Steel Corporation has been responsible for the steady and decided advance in wages in the industry that has been witnessed in the past nineteen years. Wages have been increased voluntarily and without demand from the men whenever trade conditions made increases possible. At the same time the Corporation has steadily set its face against reducing wages in times of stress. And what is more important it has spent immense sums of money in sanitation, education, and other ways of bettering the wage earner’s lot, has helped him to save and invest his money by offering special inducements for so doing, and has set an example in industry generally that has done more for the cause of common labor than has been accomplished by the labor unions themselves.

J. Pierpont Morgan

It may seem absurd to accuse the management of the Steel Corporation of socialistic leanings. But among the 160,000 stockholders of the big enterprise more than one third are men who work in its furnaces, mines, mills, and offices, and these have become stockholders under the plan that permits employees to acquire stock on the instalment plan and offers a premium as an inducement to hold it. Does the history of the industrial world contain another so striking instance of a step toward ownership of the product of labor by labor itself, toward the highest and best socialism?

CHAPTER III
EARLY HISTORY AND GROWTH—1901 TO 1907

It was perhaps natural that the early years of the big new corporation were not entirely without their troubles. The work of bringing together and making into one harmonious whole a number of different companies, with the smoothing out of mutual jealousies and dispelling of distrust, was a far greater task than the actual financial organization. And it was only with the passage of years that this was successfully accomplished.

It will be remembered that Schwab, in his speech at the Simmons dinner, had pointed to the advantages of integration which would be possible in a big steel merger, and the fact that a concern like the Steel Corporation, and such a concern alone, could successfully invade foreign markets and develop, in competition with European manufacturers, a permanent outlet for American steel. This was the same thought held by Gary when he had previously urged Morgan to finance a big steel combine. Briefly, these were the principal reasons for the Corporation’s existence; and these were the objects which its founders immediately set themselves to attain.

The early history of the Steel Corporation, therefore, will naturally be found to have concerned itself largely with achieving these ends. It is to a great extent the narrative of the various steps taken to coördinate the more or less divergent units brought together in the new Colossus of Steel, of the work that had to be accomplished, the difficulties that had to be overcome, before it could fulfil its raison d’être and win the place it now occupies as the most important business enterprise in the world.

Many dangers faced the new-born Corporation. Not the least of these, although it was not realized at the time, was that, glorying in its giant’s strength, it might use that strength mercilessly, like a giant. Had it chosen so to do there is little doubt that it would have reaped some immediate financial benefits, but events of later years proved conclusively that it would have but laid the seeds for its own eventual destruction. That the Corporation chose a different policy, and up to that time one almost unknown in business, was due to the insistence of Judge Gary.

And here it might be said that he did not have by any means an easy time in convincing all of his co-directors that the policies he advised should be adopted. For years he had a constant struggle, but gradually he won over all of his opponents to this point of view.

Another of the dangers that beset the path of the new Corporation lay in the fact that it was not an operating company with a number of plants controlled by one central management, but a holding company controlling by stock ownership a number of industrial units which had previously been owned by utterly conflicting interests and each of which continued necessarily to operate under a separate management.

The natural corollary of this state of affairs was that the management of each constituent, or subsidiary company, troubled itself solely about the success of its own particular unit and took little interest, if any, in the affairs of the other subsidiaries or the success of the Corporation as a whole. And had this condition continued the attainment of the ends for which the Corporation was organized would have been rendered impossible, its very existence made vain.

To illustrate: the Carnegie Steel Co. and the Illinois Steel Co., a subsidiary of the Federal Steel Co., had widely separated plants, and, because of the important item of freight rates, sold for the most part in different territories. But the two companies competed in a middle ground and each had succeeded in encroaching on the other’s natural territory, in some instances had attached to itself certain customers therein. To retain these customers each company was compelled to sell in a locality adjacent to the other’s mill at the same price as its competitor was willing to offer. The Carnegie company, for instance, might have achieved the custom of a railroad whose Eastern terminus was Chicago. To supply the orders of this road it would have to pay freight tariffs from its mills near Pittsburgh and deliver the goods to the road at Chicago at the same quotation the Illinois company was naming for deliveries from its mills in the very suburbs of Chicago. It is extremely doubtful if such a situation was really advantageous to either company in the long run. It is certain that its continuance would have been distinctly disadvantageous to the Corporation that owned the stock of both concerns; it simply meant that the Corporation would have to pay freight for carrying steel hundreds of miles when it was able to deliver it from a mill practically at the customer’s door.

The officers of each company were naturally unwilling to hand over custom they had built up by years of effort to a concern long regarded as a competitor. Even from the standpoint of the then-existing conditions each must have felt that it was his job to make a good showing for the company he managed; he had no concern elsewhere. But, for the good of the whole organization, it was absolutely necessary that these officers should be brought to realize that they were working first of all for the United States Steel Corporation, that inter-company jealousies must be buried for the common good and the interests of the party made subservient to the welfare of the state. And the way to do this was to make the interests of the Corporation, the controlled company, and the individual worker identical.

Andrew Carnegie had built up the greatest steel company of its time by appealing to the loyalty of his men through self-interest. Like Napoleon’s soldiers, each man under him carried a potential marshal’s baton in his knapsack. The Napoleon of Steel held dangling before the eyes of his subordinates the hope of a partnership in the great Carnegie company as a reward for meritorious service, and most of his later partners won their way upward from the ranks. And the scheme worked out by the Corporation’s management to bring about the desired harmony, to assure loyalty to the United States Steel Corporation first and last, was modelled to some extent on Carnegie’s method. It became known as the Stock Subscription and Profit-Sharing Plan.

Before going into the details of the plan an example of its effects may be illuminating. Journeying over the Corporation’s plants and mines the author was impressed by this very spirit of loyalty and coöperation on the part of officers and workers alike, and commented on it to William A. McGonagle, president of the Duluth, Missabe & Northern Railroad. And Mr. McGonagle related the following instance of this spirit of coöperation:

When we were planning the big ore concentrator at Coleraine the engineers and other officers of the various companies concerned were called together in consultation and certain differences of opinion arose regarding the plans, each of the men present urging changes which he thought would be of benefit to the company he represented. While the discussion was at its height somebody rose and said, “Gentlemen, it is not a question of what is best for the Duluth, Missabe & Northern, the Oliver Iron Mining Co., or any other company; the whole question is, what is best for the interests of the United States Steel Corporation!” That settled it. All differences were smoothed out and a harmonious plan quickly agreed on.

This result was due to the plan referred to which was devised to give each employee the stimulus of personal ownership, an incentive not confined, as it had been formerly, to a few individuals, but distributed throughout the organization.

The plan, as finally worked out and put into operation, was designed to accomplish three main objects: first, to interest employees in the Steel Corporation as a whole and not merely in the operations of the subsidiary for which they worked; second, to give them an incentive to do everything possible to reduce expenses and correspondingly increase profits; third, to offer them an inducement to stay with the Corporation and identify themselves with it.

It is with the first, or stock subscription part of the plan, that the public is most familiar. The benefits of this are extended to all employees of the Corporation who desire to take advantage of it. It is simply an effort to increase their interest in the Corporation and at the same time encourage thrift by enabling them to purchase stock at an attractive price and to pay for it in small instalments, with the additional incentive of a bonus for holding for a certain time the stock purchased. Usually the offering price has been a point or two below the market, but in 1920, for the first time, the subscription price was set slightly above it.

In effect the stock subscription plan makes for a capital-labor partnership. It benefits both the worker and the employing company. It, in a small way, makes the worker a capitalist himself and enables him to see something of both sides of the case in capital and labor disputes. This plan, and others more or less similar adopted by other companies, have done more to bring into accord the relations between capital and labor than thousands of sermons and theses by theoretical reformers. It is a hard-headed, practical solution of the great problem.

The late George W. Perkins has generally been credited with the conception and perfection of this plan. And unquestionably he had much to do with it, and took a leading part in its consummation. He always took a keen interest in anything that tended to better the conditions surrounding the worker or to reduce the friction that, unfortunately, exists between capital and labor. But, as a matter of fact, the plan was largely Judge Gary’s, as was brought out in the testimony in the Steel dissolution suit, and—to quote Perkins himself:

“Two men have been my especial inspiration—one of them Judge Gary, the actual operating developer of corporation progressiveness as we have it at its best; but he has a positive passion for doing good things and big things behind the screen of somebody else’s personality; and credit that belongs to him—tremendous credit—lands elsewhere. Over and over he has made me protest against his insistence that I or another should accept applause for accomplishment directly belonging to himself; for instance, in employees pensions and profit sharing.”

In its application the stock subscription plan has been an unqualified success. Particularly in recent years employees of all classes from common labor to executives have shown eagerness to avail themselves of its terms to acquire a personal financial interest in the big Corporation. Subscriptions for years have far exceeded the amounts of stock offered and all over-subscriptions have been honored. The figures of the annual subscriptions to stock under the plan speak for themselves:

YEAR	PREFERRED SHARES TAKEN	PRICE	COMMON SHARES TAKEN	PRICE	NO. OF EMPLOYEES SUBSCRIBING
1921	——	——	255,308	$81.00	81,710
1920	——	——	161,298	106.00	63,324
1919	——	——	155,098	92.00	59,792
1918	——	——	93,488	92.00	41,991
1917	——	——	66,519	107.00	38,326
1916	——	——	49,538	85.00	24,631
1915		No offering
1914	42,687	105.00	47,346	57.00	45,928
1913	34,418	109.00	25,583	66.00	35,687
1912	30,613	110.00	30,528	65.00	36,575
1911	19,324	114.00	29,072	70.00	26,305
1910	24,679	124.00	——	——	17,381
1909	17,953	110.00	15,380	50.00	19,116
1908	30,398	87.50	——	——	24,527
1907	27,150	102.00	——	——	14,163
1906	24,001	100.00	——	——	12,192
1905	18,180	87.50	——	——	8,494
1904	31,644	55.00	——	——	9,912
1903	47,551	82.50	——	——	26,399

Note: Above figures differ slightly from those given in annual reports, a few employees having failed each year to go through with their subscriptions.

Besides being given as much as three years to pay for stock purchased employees who hold their stock receive an annual bonus for five years. At first, when only preferred stock was issued, the bonus was $5.00 a year. Later, when the common stock began to have a real investment value, this, too, was offered with an annual bonus of $3.50. But in recent years the investment value of the common stock still further increasing, and it having become impossible to purchase any considerable amount of preferred stock at a reasonable price, only the junior security has been offered employees and the bonus on the common has been raised to $5.00 a year.

Latest figures show that there are now more than 66,000 employees and their families interested in the plan, that is, that number are either paying for stock or, having paid, are drawing their annual bonuses. As it is likely that there are still more employees not now on these lists but owning stock bought more than five years ago it seems fairly safe to assume that the number of employees who, as stockholders, have an interest as part owners in the great organization that they work for is not less than 70,000.

And in this number are included employees from all ranks, including workmen, so-called office boys, elevator operators, and executives. The plan was designed to be, and is, catholic in its scope.

Naturally, the stock subscription plan has not been regarded with favor by those whose interests lie in fomenting dissent between capital and labor and the plan has been attacked in many ways. One of these is the charge that it is a money-making scheme under which the Corporation purchases its own stock cheap and sells to the workers at a profit. As a matter of fact, the operation of the plan is a continual source of expense to the Corporation which has so far spent on it an aggregate of $9,160,000. It has, however, profited from the plan in one way—increased loyalty, efficiency, and coöperation.

Only “the men who occupy official or semi-official positions and who are engaged in directing and managing the affairs of the Corporation and of its several subsidiary companies” were concerned in the profit-sharing portion of the plan, generally designated as special compensation. This was more or less an adaptation of Carnegie’s method of rewarding his assistants for good service, with the difference that it held out no allure of return for effort selfishly directed, but only that done for the good of the entire organization. It was a yearly distribution to the men above described of a small percentage of the profits above $80,000,000, part of the bonus being paid in cash and part in stock of the Corporation. At the time of the promulgation of the plan it was made plain that there would be no increases in salaries of officials. All additions to salary would come through these bonuses, and in basing them on the profits of the Corporation and not of the separate subsidiary companies a powerful motive for loyal and harmonious effort for the good of the Corporation was created.

Why did not the workmen generally share in this bonus distribution? It would have been impossible to make anything like an equitable distribution among the employees of every class, especially in view of the fluctuating character of a large mass of the labor employed in the industry. But the worker with his hands did share in profits in a more definite way. His wage was increased time and again and he received the benefits of these increases whether profits were large or small. This was more satisfactory to him. And in the stock subscription part of the plan, with its attached automatic bonus, he had an equal opportunity with the men above him in authority.

But long before the Stock Subscription-Profit-Sharing Plan was perfected steps had been taken to coördinate the work of the Corporation and to bring about economies. First of these was the institution of a system of comparative cost sheets immediately after the Corporation began its existence.

The earning of profits for stockholders was the first object of the big company, as it is in every business, and its formation had been undertaken largely with the idea that the magnitude of its operations would make greater economies possible, with a gain rather than a sacrifice of efficiency and quality.

In the old steel days the calculation of costs had been more or less haphazard, at least in most instances. Too often the entire operating expense of steel making, from mining to the turning out of the finished product, had been “lumped” at the end of the year, and there was no means of arriving at the knowledge of just where profits, if there were any, were made, while if they were non-existent or unsatisfactory it was equally out of the question to fix the blame on any one department. Moreover, such secrets of economy as were discovered by those in charge of a furnace or mill were rigidly guarded as giving an advantage over competitors; all of which did not contribute to a general high average of efficiency and economy.

The Corporation’s management first set to work to ascertain the exact cost of running each and every mine, furnace, or other department, the costs being tabulated for the information of the whole organization. The cost tables were made up in the most minute detail, the blast furnace cost sheets alone containing more than 8,000 different items, and by their aid the several departmental superintendents could see at a glance what item in their operations was below the average, was too costly, and could take the necessary steps to remedy matters. These tables also created a spirit of emulation, of friendly rivalry, between the various departmental units, which alone was a potent incentive toward economy.

So immediate and so marked was the result of this system of cost checking that, according to Charles M. Schwab, a saving of $4,000,000 was effected in the blast furnace department alone in the first year of the Corporation’s existence!

As this history does not pretend to be a technical treatise on the manufacture of steel detailed discussion of the many ways and means adopted by the Corporation to achieve economies would be out of place. But some of them are particularly worthy of mention.

One example of economical methods, interesting because of the fact that is was possible only to a company engaged in operations on a tremendous scale, is concerned with distribution of iron ore to its furnaces.

Steel, although much alike to the uninitiated, differs greatly in quality and suitability for different uses. The difference lies not alone in treatment during manufacture but in the kind and character of ore used. And a plant that has large orders for a particular kind, or analysis, of the metal, would find itself handicapped greatly if its receipts of ore included a mixture of the many grades often found deposited in the earth in close juxtaposition. The right ore for the right use at the right time means better and cheaper steel.

Hence the Corporation maintains in the regions from which it receives its ores well-equipped chemical laboratories for testing and sorting the several varieties of ore. Probably the most important of these is at Hibbing, Minnesota, on the line of the Duluth, Missabe & Northern.

As the long ore trains run through Hibbing small samples of the ore are taken out of the cars and subjected to careful analysis. The trains go on their way to Proctor where the extensive yards of the railroad are located, but before they reach that centre the chemical analysis of the ore in different cars has been ascertained and wired ahead, so that the cars composing the train can be sorted and distributed in sidings in accordance with the classification of the ores they contain. At Proctor new trains are then made up and proceed to the ore docks at Duluth where vessels are waiting to convey the ore to Gary, Chicago, or, by further trans-shipment, by rail to Pittsburgh. And each ship gets the kind of ore needed at the furnace to which it is destined.

This means not only better and more uniform quality in the finished product; it means a saving of several hundreds of thousands of dollars annually to the Corporation.

The Proctor yards themselves are interesting. Stretching two miles with seventy-five miles of track and capable of accommodating 5,400 cars at one time, as many as 469,555 fifty-ton cars of ore have passed through them in one season destined for the Corporation’s hungry furnaces all over the country.

Not least among the economies following in the wake of the Corporation’s organization were the conservation effected and additional profits earned by manufacturing into merchantable products what had formerly been waste. The manufacture of the so-called by-products of the steel industry had been practised in Germany for many years, and to a limited extent in this country as well. But to get the best results not only was a considerable outlay for new plant equipment required, but the services of a corps of trained and experienced chemists had to be engaged. And this meant such an expense that, especially as the whole by-product idea was in a somewhat experimental stage, companies even of a moderate size as steel companies go hesitated to undertake it. With the Corporation’s vast resources, many subsidiaries, and large output the expense of experimenting and investigating was spread out so as to be hardly felt, a careful study of the subject was made, and necessary plants were erected. This has borne fruit not alone in increasing profits for the Corporation and its stockholders but in blazing a path for the steel trade of the United States as a whole (all the larger steel companies have by-product plants to-day), and finally in effecting an important conservation of the natural resources of the country.

Nor, as events of the last few years have shown, have the benefits of the developments of by-product manufacture been confined to the Corporation, the steel trade, or even the United States. Chemicals derived from coke by-products are necessary in modern warfare. They form the basis of high explosives, gases, etc., and when the European war broke out the world at large realized that Germany, in protecting and fostering her by-product industry, had really been preparing for war. The benzol, toluol, and other chemicals manufactured at the coke by-product plants of the Steel Corporation and other companies in this country played an important part in stopping the German hordes and in saving civilization.

Coke, the fuel used to make steel, is obtained, as is probably universally known, from coal. In the old days of the trade, and to a great extent still, the coal was burned in brick ovens with open tops, known as bee-hive ovens, which produced about sixty tons of coke from each 100 tons of coal and blew out in smoke into the air the oils and gas contained in the coal. Even to-day, in the great coal fields that lie near Pittsburgh, may still be seen the dense smudge that arises in the air from thousands of these ovens. But their day is surely, if slowly, passing. In the modern by-product coke ovens sixty-five to eighty tons of coke are obtained from 100 tons of coal, a gain of nearly 25 per cent. in the case of low volatile and about 8 per cent. with high volatile coals. Nor is this saving all. The gases with their oil content instead of being blown out into the air and burned are conducted through pipes to an intricate apparatus where coal tar, ammonium sulphate, a valuable fertilizing agent, ammonia, and benzol, an important base for high explosives and dyes and also usable as fuel for motor cars, as well as other products are extracted, and the gas itself is made available for use in motor engines or in illuminating. More than one city to-day lights its street with the gas from by-product coke plants.

As it requires more than one ton of coke to make a ton of steel it is plain that the 25 per cent. saving in the amount of coke obtained from coal by use of the modern by-product ovens means an enormous economy to the Corporation which produces from seventeen to twenty millions of tons of steel a year, and the saving of four to five millions of tons of coal to the country. Nor are the profits derived from the sale of the by-products themselves immaterial.

How profitable is the manufacture of coke by-products is indicated by the fact that for years before the World War, and possibly even to-day, the patentees of one by-product process were usually willing to erect a plant in connection with a steel plant, at a cost of several millions, and to take their pay for it from the profits of the by-products alone, handing the plant over to the steel company at the end of a stated period. They said in effect: “You give us the coal and we will hand you over the coke produced from it; and in twenty years we will give you the plant.” The Corporation, however, has always erected its by-product coke plants at its own expense.

Another important economy in its saving of both labor and material is found in the generation, from what were formerly the waste gases of blast furnace operations, of electric power for running the entire steel mill.

Still another by-product of the steel industry, and one that means material profits from waste, is Portland cement. In this is utilized blast furnace slag, formerly not merely a waste but a source of expense as it had to be freighted away from the mills and “dumped.” The manufacture of cement from slag had been carried on before the Steel Corporation was formed by the Illinois Steel Co. but only in a small way. The big company extended the cement industry as a side line to steel and erected several new plants, the largest being at Buffington, Indiana. It now has a capacity of about 45,000 barrels a day.

Greater earnings for the Corporation, larger profits for its stockholders, are represented by the extension of the manufacture of these by-products. But, beyond this, the cultivation of this part of the industry means an appreciable reduction in the cost of manufacturing steel, and consequently lower prices to the consumer and the possibility of higher wages to the worker, as well as the elimination of waste and the conservation of the natural resources of a continent.

Besides integration and the achievement of economies the early history of the United States Steel Corporation is largely a narrative of expansion, the building of new plants, and the acquisition of other companies. First of these acquisitions was the purchase, consummated about a month after the Corporation was organized, of the Bessemer Steamship Co., a Rockefeller concern engaged in traffic on the Great Lakes and which had been closely affiliated with the Lake Superior Iron Mines. This company had a fleet of 56 vessels (included in the number of vessels given as taken over by the Corporation in a previous chapter). The new organization paid $8,500,000 for the stock of the company, or about $150,000 for each vessel of the fleet.

In the same year control of the Shelby Steel Tube Co., a New Jersey company owning the principal basic patents for the manufacture of seamless tubes, and having an outstanding capital of $5,000,000 of preferred and $8,150,000 of common stock, was secured, the exchange of securities being made on the basis of one share of U. S. Steel preferred for 2⅔ shares of Shelby preferred, and one share of Steel common for four shares of Shelby common stock. Practically all the stock of the Shelby company—$4,776,100 preferred and $8,018,000 common—was acquired, giving the Corporation a substantial controlling interest.

In 1901 also the Corporation purchased by exchange of stock one-sixth interest in the Oliver Iron Mining Co. and the Pittsburgh Steamship Co. The Carnegie Steel Co. already owned the other five sixths of the securities of both these concerns and this gave the Corporation complete ownership.

In December, 1902, an important deal for the absorption of the Union Steel Co. was consummated. This company was a merger, effected only a month or so previous to its absorption by the Steel Corporation, of the Union Steel Co., a $1,000,000 concern owning a large plant for the manufacture of wire rods, wire, and nails at Donora, Pa., and the Sharon Steel Co., a $6,000,000 company making a similar line of products and located at Sharon, Pa. The merged company had an authorized capitalization of $50,000,000 and a capacity of 750,000 tons of pig iron and 850,000 tons of ingots yearly. The purchase was carried out on the following basis: The Steel Corporation guaranteed an issue of bonds on the Union-Sharon properties amounting to $45,000,000, of which $29,113,500 were issued to pay for the properties, $8,512,500 were purchased by the interests controlling the properties, $3,500,000 were reserved to retire bonds outstanding on the property of the Sharon company, and the balance was reserved to provide for future construction and improvements. The actual cost to the Corporation was fixed at $30,860,501, as follows: bonds guaranteed and issued, $29,113,500; underlying bonds assumed, $3,591,000; cash $497,990; total $33,202,490; less liquid assets taken over with the properties, $2,341,989; net cost, $30,860,501.

Down in a Coal Mine

By this transaction the Corporation acquired five blast and twenty-four open-hearth furnaces, two blooming and slabbing mills, four rod mills, two wire and nail mills, one skelp works, one tube works, one plate mill, one tin plate plant, one sheet plant, a by-product coke plant of 212 ovens, two modern ore steamers, 4,750 acres of coking coal, 1,524 acres of steam coal, and the ownership of two mines and leases on another two in the Mesaba Range with an estimated ore deposit of 40,000,000 tons.

Open Pit Mining—Canisteo Mine

The absorption of this entirely solvent and “going” competitor has been criticized on the allegation that its only purpose could have been to strengthen the larger company’s supposed control of the industry, and to eliminate competition. The reasons for the purchase, testified to by Judge Gary, in the Government suit were twofold. The Union Steel Co., he said, owned blast and open-hearth furnaces the securing of which obviated the necessity of the Corporation building others in the same territory, which it needed, and its wire mill was particularly well located for export business, a prime consideration with the Steel Corporation; and perhaps a more cogent reason was to be found in the desire of the Corporation’s management to centre the interests of H. C. Frick in the Corporation. Mr. Frick was heavily interested in the Union-Sharon concern and on this account, although a director of the Corporation, he did not take a prominent part in the big company’s affairs. His experience and ability made his full coöperation in the directorship desirable and this had a great deal to do with the purchase.

Seventeen months later, in May, 1904, the Clairton Steel Co., which operated three blast and fifty open-hearth furnaces, a rolling mill, billet mill, and blooming mill at Clairton, Pa., was absorbed. The company, controlled by the Crucible Steel Co., was then in the hands of a receiver and its stock was acquired by the payment to the owners of $1,000,000 in U. S. Steel bonds (bought in the open market and costing the Corporation $813,850), and the guaranteeing of bonds to the amount of $10,230,000 outstanding against the Clairton company and its subsidiaries. The purchase also brought to the Corporation a half interest in one ore mine and a lease of another in the Mesaba Range, about 20,000 acres of mineral lands in the Marquette Range, 2,644 acres of coking coal lands, and working assets of nearly $3,000,000.

Smaller acquisitions by the Corporation in the early years of its existence included the Troy Steel Products Co., which owned works at Troy, N. Y., with a capacity of about 200,000 tons of slabs and skelp a year, and the Trenton Iron Co., operating a rod mill with a capacity of some 18,000 tons. The Troy company was bought in 1902 and operated a very short time, it having proved unprofitable.

Hardly had the United States Steel Corporation commenced operations than the directors found themselves faced with the necessity of raising additional working capital. The $25,000,000 cash provided by the under-writing syndicate proved insufficient for the needs of the giant industry. Obligations entered into by the constituent companies before the merger, it was discovered, called for the expenditure of approximately $15,000,000, and fully $10,000,000 was needed to refund what were classified as “purchase money obligations.” It was also thought desirable that expenditures should be made for improvements and additions which, it was estimated, would increase the big company’s earning power at least $10,000,000 a year. Furthermore, it was deemed advisable to add from $10,000,000 to $15,000,000 to the Corporation’s fluid assets to provide for further expansion and to strengthen reserves, as it was obvious that if the Corporation were to need ready cash in a time of stress the amount wanted would not be a matter of a million or so but of many millions and it would be impossible to obtain a very large sum at such a time except at a great loss. By increasing fluid assets the probability of the need for borrowing would be minimized.

The issuance of $15,000,000 new preferred stock or second mortgage bonds was discussed at length, but these courses were not favored as either, aside from initial expense in commissions to underwriters, would have increased fixed charges against earnings—a stock issue permanently and a bond issue for the term of its life—while an increase in capital in either of these two ways so shortly after the formation of the Corporation would almost certainly have attracted unfavorable comment and might have severely affected the value of their holdings to owners of its stock.

Eventually what was known as the Bond Conversion Plan was adopted and promulgated. It provided for the issuance of $250,000,000 new second mortgage bonds and the redemption of $200,000,000 of the outstanding preferred stock, holders of the stock being given the opportunity to subscribe for the bonds to the extent of 50 per cent. of their holdings, 40 per cent. through deposits of stock and 10 per cent. in cash. A syndicate, headed by the Morgan firm, was formed and guaranteed to turn in not less than $80,000,000 in stock and $20,000,000 in cash in exchange for $100,000,000 of the bonds to be issued. For its work the syndicate was to receive 4 per cent. on the total value of the bonds actually issued under the plan, the house of Morgan receiving one fifth of the commission, or four fifths of one per cent.

An actual, though not immediate, money saving, it was pointed out, would be effected under the plan. Although the commissions to be paid the syndicate, $10,000,000, would be larger than in the case of either of the two other ways suggested for raising the new capital required, the net saving in annual interest charges would be $1,500,000, which would not only refund the commission in a comparatively short time but would be more than sufficient to meet sinking-fund requirements for paying off the entire second mortgage issue when it became due, or in sixty years. The actual gain in working capital, should the plan prove a success, would be $40,000,000.

(Redeeming $200,000,000 of 7 per cent. preferred stock would save dividend charges of $14,000,000 yearly, for which would be substituted a charge of 5 per cent. on $250,000,000 bonds, or $12,500,000. The amount required for the sinking fund would be slightly more than $1,000,000 or less than the net annual saving. And a permanent capital reduction would be effected at the end of sixty years.)

No other action of the Corporation’s management, it would be safe to say, has met with such widespread disapproval as did the bond conversion plan, much of the criticism coming from financial experts who questioned the propriety of increasing the bonded debt of the company to so great an extent with so small an actual gain in working capital or resources. It was characterized as dangerous financing and it is known that not all the Corporation’s directors were themselves in full accord with the operation. At a meeting held on May 19, 1902, the plan was submitted to a vote of the stockholders and here considerable opposition developed which led later to the bringing of four suits to prevent its consummation. One of these suits which attracted a good deal of attention was brought by J. Aspinwall Hodge, a New York lawyer. But the Court of Errors and Appeals of New Jersey eventually dismissed these suits and the offer to exchange stock for the bonds—delayed by the suits—was finally made to stockholders in the spring of 1903.

In view of the fact that its avowed object was the raising of $40,000,000 new cash capital, said to be necessary, the plan can hardly be said to have been an eminent success. Exclusive of the syndicate operations only $45,200,000 of preferred stock was exchanged by stockholders for the bonds and the cash subscriptions for the issue from the same source amounted to the insignificant sum of $12,200. The syndicate, at its dissolution, turned in a total of $150,000,000 in preferred stock and $20,000,000 in cash (this, of course, included the $45,200,000 stock and $12,200 cash of the outside stockholders), a total of $170,000,000, and instead of the desired $40,000,000, the actual cash gain to the Corporation from the transaction was $20,000,000 less a syndicate commission of $6,800,000, or $13,200,000 net.

As the Corporation has been able to meet its full preferred dividend requirements since its formation, however, it is obvious that as matters turned out it has saved $2,000,000 a year in interest charges or in eighteen years since elapsed $36,000,000, more than five times the commission paid the syndicate. The yearly saving is also approximately double the $1,010,000 which the sinking fund calls for, so that the net gain to stockholders from the reduction of the preferred capital is $990,000 a year. Looking into the distant future the saving after the bonds are paid off in forty-two years will be $10,500,000 annually.

One of the criticisms hurled at the plan was that its real object was to enable the syndicate, and especially the banking house of J. P. Morgan & Co., to make a profit at the expense of the stockholders. The facts were that the syndicate took a big risk of the bonds selling at less than par after issuance, which they did, and while it is impossible to ascertain the exact gains or losses incurred, the understanding is that Mr. Morgan and his associates in the syndicate actually suffered a loss of something like $8,000,000 from the deal.

It was perhaps natural that the management of the Steel Corporation, in its early existence, should have been more or less divided against itself. This danger was one of the factors urged by its critics against the possibility of its success. Among its directors were Phipps, Frick, and Schwab, old Carnegie partners, and firm believers in the Iron Master’s policy of getting your competitor before he got you. Gary was the prominent figure in another faction that had the foresight to perceive that a new day was dawning in industry, an era of coöperation between manufacturer and manufacturer, to realize that the very size of the Corporation rendered it subject to the enmity of smaller concerns and to legal attack and public disapproval, and that the only way of overcoming this danger was to gain the good will of all by an open and straightforward policy. As the years passed these differences were gradually smoothed out. The directors, as a whole, came to see that Gary’s policy was right, in fact the only one to pursue, and harmony was gradually brought out of the conflicting elements and opinions.

With the passing of the years Gary gained the ascendency in determining the courses of action of the Corporation. Always its chief executive officer he eventually became potential. And it is a high tribute to his judgment and foresight that all of those who disagreed with him at first have later admitted, as did Schwab, in a published speech, “He was right and I was wrong.”

Charles M. Schwab did not long remain as president of the Corporation. His health broke down shortly after its formation and, in 1903, he resigned his position and sailed for a long rest abroad, later coming back to America to purchase control of a small independent concern and to build up an organization of his own that to-day ranks next to United States Steel among the steel-making companies of the United States.

At the time of Schwab’s resignation the Executive Committee was abolished, the position of chairman of the Board created, and Gary was elected to that office. William Ellis Corey, President of the Carnegie Steel Co., was chosen President of the Corporation to succeed Schwab, on the latter’s recommendation, and continued in this capacity until the end of 1910, when he resigned to be succeeded by James A. Farrell, the man who had built up the Corporation’s export trade and who was then president of the United States Steel Products Co.

Before the new-born Corporation had passed the first anniversary of its birth Robert Bacon resigned as chairman of the Finance Committee and was succeeded by George Walbridge Perkins, another Morgan partner. Mr. Perkins continued in this office for several years, but later retired, and since then Judge Gary has filled the offices of chairman of the Finance Committee and chairman of the Board. He is by the Corporation’s by-laws named “chief executive officer in general charge of the affairs of the Corporation.”

In the first nine months of its operations the United States Steel Corporation reported net profits of $84,779,298. After the payment of sinking fund and interest charges on the bonded debt $61,420,304 was left for distribution to stockholders. Dividends of 5¼ per cent. (at the annual rate of 7 per cent.) on the preferred stock, and 3 per cent. (at the annual rate of 4 per cent.) on the junior issue, were paid, the balance after these disbursements, $19,414,497, being carried to surplus account.

In 1902 a gross business of $560,510,479 was done and the net profits therefrom were $133,308,764. The year was a fairly profitable one and although a special appropriation of $10,000,000 for new construction was made and more than $14,000,000 was put aside for depreciation and extraordinary replacement, the big company was able to show the full dividends earned on its stock of both classes and a surplus balance of $34,253,657.

The following year was one of general business depression and the steel industry, the barometer of trade, was seriously affected. The result to the Corporation is shown best by the simple fact that on December 30, 1903, unfilled orders on the books of the subsidiary companies aggregated 3,215,123 tons, against 5,347,253 tons a year previous. This falling off in orders was accompanied by declining prices, and the directors of the Corporation were impelled to reduce the quarterly dividend on the common stock for the third quarter from 1 per cent. to one half of 1 per cent. and to eliminate the junior dividend altogether in the final quarter. Gross sales for the year were $536,572,871 and net profits $109,171,152, the surplus for the period being $12,403,917.

Several changes in the make-up of the subsidiary companies occurred in this year. The most important was the incorporation of the United States Steel Products Export Co. (the “Export” was later dropped from the title), headed by Farrell, to conduct the Corporation’s foreign business. The Carnegie and National Steel companies and the American Steel Hoop Co. were merged into one concern, known first as the National Steel Co., the name being later changed back to the Carnegie Steel Co. Lastly, the American Tin Plate Co. and the American Sheet Steel Co. were consolidated as the American Sheet & Tin Plate Co.

The depression that began in 1903 lasted well into the year following and affected earnings of the Corporation to such an extent that, for the first and only time in its history, the wages of the men employed in the plants were reduced. (Incidentally wages were quickly restored.) Gross sales for the year were only $444,405,431, and net profits, $73,176,522. No special appropriation for new construction was made and, despite the small profits, the Corporation managed to show a surplus after the payment of the full preferred dividend of $5,047,852.

But the wave of prosperity was returning. The first signs made themselves felt in the late months of 1904 and the Corporation’s earnings showed marked improvement in 1905. Gross sales amounted in value to $585,331,736 and net profits of $119,787,658.

A surplus of $43,365,815 was reported after the preferred dividend payment, but $26,300,000 was deducted for new construction in contemplation so that the net amount added to surplus was $17,165,815. In this year production reached the highest mark so far recorded by the big company, the output of pig iron being 10,172,148 tons, of ingot steel nearly 12,000,000 tons, and of rolled products 9,226,386 tons.

In the annual report for 1905 is found the following statement by Judge Gary: “It has been decided to construct and put into operation a new plant to be located on the south shore of Lake Michigan, in Calumet Township, Lake County, Indiana, and a large acreage of land has been purchased for that purpose. It is proposed to construct a plant of the most modern standard....”

About the time those words were being written work on the new plant was being started and the foundations of a new city, now having a population of 56,000, were being laid. It is appropriate that the name chosen for this town should have been Gary, although Judge Gary had nothing to do with the selection of the name.

All previous records for production and profits were shattered in 1906. The betterment in steel conditions that started in 1905 continued throughout the ensuing year, and, indeed, until the latter part of 1907, when the disastrous panic occurred. The Corporation’s report for 1906 showed that it had increased its capacity for pig iron production more than 63 per cent. and its steel capacity nearly 57 per cent. between the date of its organization and January 1, 1907, and this increase enabled it to take advantage of the business betterment and to profit thereby. In 1906 the Corporation’s blast furnaces poured out 11,267,377 tons of pig iron, while its steel plants produced more than 13,500,000 tons of ingots and 10,578,000 tons of finished material. The gross sales of the year amounted to $696,756,926, and the net profits to $156,624,273.

These large earnings justified the resumption of dividends on the junior stock and 2 per cent. on the issue was paid. The balance after dividends was $62,742,860, but special appropriations for proposed expenditures on the Gary plant and for other purposes were made, calling for $50,000,000, this making the net carried to surplus account only $12,742,860.

Another important event of the year in the Corporation’s history was the incorporation of the Universal Portland Cement Co., which was formed to take over the cement plants operated by the Illinois Steel Co., and to erect new plants for the manufacture of this profitable by-product. The production of cement had grown from 486,357 barrels in 1902 to 2,076,000 barrels in 1906. The Universal Company immediately started work on the erection of two new plants, one at Buffington, Indiana, within a few miles of the Gary plant, and the other at Universal, Pa., near Pittsburgh. The results of this enterprise have entirely justified the expectations of the Corporation’s management, and the manufacture of the by-product has increased until an output of 11,197,000 barrels was reached in 1913.

But the most notable event of 1906 was the negotiation of a lease by the Corporation on the ore properties owned by the Great Northern and Northern Pacific Railway companies. This was commonly known as the Hill Lease.

That the Corporation would eventually make some arrangement to secure control of the mining rights on the Hill ore properties had long been believed in the steel trade. It was pointed out by trade authorities that the big company did not have ore reserves commensurate with its immense output, and the obvious conclusion was that it would not fail to secure such reserves sooner or later. The vast properties in the Mesaba Range owned by the railroad dominated by James J. Hill constituted, it was claimed, the only commercially valuable supply of importance which had not yet been appropriated by one steel company or another, so the natural conclusion was that the Corporation must eventually attach to itself these supplies of ore.

Negotiations leading up to the lease went on for several years before the matter was finally brought to a head in December, 1906. The lease, which was probably the most voluminous document of its kind ever written, gave the Corporation the right to mine the Hill ores until exhaustion, or, at the Corporation’s option, until January 1, 1915, the exercise of this option being contingent upon a two-year notice to be given before that date. The Corporation positively declined to enter into the lease unless it contained provision for cancellation, and it later exercised this right, the directors at the close of 1912 serving notice of their intention to abandon the lease in two years.

Comprised in the Great Northern ore land were some of the richest and best iron deposits in the country. Of a total area of more than 65,000 acres owned or leased by the Hill interests, 39,296 acres with an estimated ore content of something like half a billion tons were included in the lease to the Great Western Mining Co., a Steel Corporation subsidiary and the nominal lessee.

The volume of ore to be mined and the royalties to be paid were arranged on an ascending scale. In 1907 the Western company was to take out 750,000 tons of ore and this tonnage was to be increased by as much again every year the lease continued up to 1917, when the tonnage to be mined was fixed at 8,250,000 tons, at which figure it was to remain thenceforward until the contract expired by reason of ore exhaustion.

Royalties on the ore mined were based on a price of eighty-five cents per ton of dried ore with a metallic content of 59 per cent. for the first year of the lease, this base price being increased by 3.4 cents a ton each year—i.e., to 88.4 cents in 1908, 91.8 cents in 1909, etc. To this royalty was to be added transportation charges of 80 cents a ton to the docks at Superior, Wis., the contract providing that all the ore was to be shipped via the Great Northern Railway. For each variation of 1 per cent. above or below the 59 per cent. metallic content, it was further stipulated, the base price was to be increased or diminished by 4.82 cents a ton.

Critics of the Corporation have charged that the Hill lease was entered into with a view of giving the big company a practical monopoly of the ore reserves of the country. Those responsible for the deal have strongly asserted that their sole object was to ensure an adequate ore reserve for the future. The question resolves itself into one of motives and is therefore not susceptible of proof. But whatever were the motives of the Steel Corporation’s management the fact remains that, according to the opinions of the best-qualified experts outside the Corporation itself, the big company, at the time the lease was made, did not have a supply of ore such as its vast output demanded, and probably does not now have such a necessary supply although it has acquired large reserves in Cuba and elsewhere. Further, it is doubtful if, outside of the Hill holdings, a large enough reserve of commercially available ore is to be obtained in the United States.

The claim that the royalties paid under the Hill lease were too high is supported by the undisputed fact that royalties paid on other ore deposits in the same territory at the time of the signing of the contract were much lower than those paid under the lease by the Corporation. Unusual conditions governed this transaction, however. The lessors were well aware of the Corporation’s need of ore and that they were probably the only ones in a position to fill this need. They were therefore able to drive a hard bargain. The price originally demanded by Mr. Hill and his associates, it is understood, was one dollar a ton and it took some years’ negotiations before a price which both parties to the matter would accept could be arrived at.

What was the reason for the cancellation of the lease? It is generally thought that the directors of the Corporation were impelled to their decision by the report of Commissioner of Corporations Herbert Knox Smith, who conducted a searching investigation into the Corporation’s activities and severely criticized the lease, and by the fear that it would be made much of by the Federal Government in its suit for the dissolution of the “Steel Trust.” This suit, it is true, had not actually been filed when the lease was abandoned; but it was so imminent that the Corporation’s directors must have believed it was about to be instigated. And these considerations did have weight in bringing about the decision. But the more cogent reason was a purely business one—the lease had not proved as profitable as had been hoped. The iron content of the Hill ores had not measured up to expectations, the cost of concentrating the ore proved too high, and on the whole the deal had become rather a burden than otherwise to the lessee.

Up to the end of 1906 the United States Steel Corporation had spent more than $200,000,000 in the acquisition of new properties, the construction of new plants and the extension of old. Its productive capacity had been increased enormously. Its plants were now in excellent shape, its organization in perfect working order. Prices were high and it had, at the close of the year, nearly 8,500,000 tons of business on its books. Its early difficulties were past and it seemed about to enter into the heyday of its prosperity.

CHAPTER IV
THE TENNESSEE PURCHASE

On the events of the year 1907 the United States Steel Corporation must, to a certain extent, stand or fall at the bar of public judgment. This was the year of the panic and of the Tennessee Coal, Iron & Railroad purchase.

The panic, enemies of the Corporation have asserted, was precipitated by the big “trust” by the immoral use of its immense financial resources to enable it to “gobble up” the properties of the Tennessee company, a competitor said to have been making big inroads into the business of the larger concern and which it had therefore become necessary either to destroy or absorb.

The friends of the Corporation, on the other hand, are emphatic in asseverating that the competition offered by the Tennessee company was not such as to cause anxiety to the management of the Steel Corporation, that it was not a very valuable property, and that the Corporation purchased its stock only upon solicitation by the interests controlling the company and their assurance that a refusal to do so would result in the failure of an important security house, which would add greatly to the severity and danger of the panic. They claim further that the price paid was more than the actual value of the stock and that, far from using any advantage it may have had to squeeze the smaller concern, the “Steel Trust,” against the better judgment of its management and with the single purpose of alleviating the panic dangers, paid for the securities it took over something like 60 per cent. more than good business practice seemed to warrant.

If the claims of the first are correct and the Corporation did use its power to force a competitor to the wall, regardless of the fact that in so doing it was bringing misery and calamity to the ninety millions of people of the United States, this act alone must be more than sufficient to convict it on a more serious charge than “monopoly in restraint of trade”—of high treason and betrayal of the trust which big business, willy nilly, undertakes. But if the Corporation, through its directors, put the national welfare before all other considerations this, conversely, should prejudice public opinion, properly informed, in its favor. And this is why the year was by far the most important epoch in the Corporation’s history and its events are worthy of careful consideration.

After a careful search made by the writer through all the evidence submitted by the Government to this end in its suit against the big company, he failed to find one iota of evidence which connected the Corporation with the panic or upheld the charge that it conspired to force the Tennessee stockholders to sell. A man who had been a member of the syndicate that controlled the fortunes of the Tennessee company before it was absorbed and who, if the allegations referred to are correct, was one of those who suffered at the Corporation’s hands, in reply to the question: “Did the Steel Corporation use its power to create the panic of 1907 so as to gain possession of the Tennessee stock?” replied: “Absurd. The charge is baseless—except in politics. The sale of the Tennessee company was an incident arising in the course of the panic, not a cause. The Corporation was offered a chance to get what I consider a valuable property and seized it. But let me tell you,” he added, “the Corporation did not get the property cheap.”

And the Supreme Court, in its opinion, said on this subject:

“There is, however, an important circumstance in connection with that of the Tennessee Company which is worthy to be noted. It was submitted to President Roosevelt and he gave it his approval. His approval, of course, did not make it legal, but it gives assurance of its legality, and we know from his earnestness in the public welfare he would have approved of nothing that had even a tendency to its detriment. And he testified he was not deceived and that he believed that ‘the Tennessee Coal and Iron people had a property which was almost worthless in their hands, nearly worthless to them, nearly worthless to the communities in which it was situated, and entirely worthless to any financial institution that had the securities the minute that any panic came, and that the only way to give value to it was to put it in the hands of people whose possession of it would be a guarantee that there was value to it.’ Such being the emergency it seems like an extreme accusation to say that the Corporation which relieved it, and, perhaps, rescued the company and the communities dependent upon it from disaster, was urged by unworthy motives.”

Mine Stables

The Tennessee Coal, Iron & Railroad Co. was a reorganization of an earlier concern of the same name located in Alabama. The reorganization brought into control of the company new and powerful interests, and these spent a good deal of money in improving the plants, so that, about the beginning of 1907, it was pointed to as a probable important competitor of the Corporation. It was also considered as the nucleus for a possible merger of the steel-making concerns of the South such as would be able to cut severely into the Corporation’s business. Not long before the panic broke the company secured an order from the railroads controlled by the late E. H. Harriman for 150,000 tons of steel rails and it was supposed by some that the loss of this order had caused considerable worriment to the heads of the Steel Corporation—which doubtless it did. Then came the panic, and when its dust cleared away the Tennessee company was a subsidiary of the “Steel Trust.” The sequence has served to lend plausibility to the charges made against the Corporation in connection with the purchase. But a full recital of the events bearing on the deal tends to throw a different light on the matter, and an attempt to set down the more important of these details will be made here.

Modern Coal Mining by Machinery

Emphasis has been laid on the Harriman order, particularly because the Tennessee company had contracted to supply the lines controlled by the great railroad magnate with the new open-hearth steel rail, then coming into popular favor with the railroad experts and which to-day are used almost exclusively by the larger transportation systems. It has been alleged that the Corporation was very desirous of adding to its properties the plants making this new kind of steel rail and getting immediate control of their manufacture. The facts are that the southern company did not make a pure open-hearth rail, its steel being made by a combination of the Bessemer and open-hearth processes, and the Corporation at the time was engaged in building its new plant at Gary, a plant which was to include a large rail mill to make open-hearth rails exclusively. When the Corporation took charge of the Tennessee properties it was found that the company’s rail mill was being operated at a loss of nearly $4 a ton. Further, a very large percentage of the rails which had been supplied the Harriman roads before the transfer of the properties proved defective and the new management had to bear the loss of replacing these.

It is unnecessary and futile, in this brief chapter, to go fully into the story of the panic of 1907, or of the events that preceded it. Suffice it to say that the panic followed a period of enormous expansion and of extension of credit eventually carried to a point where business overreached itself and, in a country lacking an elastic currency system, such as the United States then was, financial stringency was bound to follow. The first rumblings of the coming storm went unheeded, and it was not until late in the year that there was any realization of the desperate state of affairs. Then one big trust company closed its doors and was followed by others. Banks stopped specie payments, stocks tumbled headlong on the exchanges of the country, industry halted, throwing thousands out of employment, and the financial hurricane swept over the country, leaving ruin in its wake and making its effects felt over the whole world.

While the panic came like a thunderclap to the average citizen, without warning, the big bankers had seen the danger threatening and had made an effort to prevent any occurrence which might precipitate matters. In the latter part of October rumors gained circulation that the Knickerbocker Trust Co., one of the leading financial institutions of New York City, was in trouble and the late J. Pierpont Morgan, who had assumed the leadership of the country’s bankers in the crisis, and others had an examination made of the company’s affairs with a view to rendering it assistance. Apparently the result of this investigation was unsatisfactory. Anyway, the Knickerbocker Trust Co. was abandoned to its fate and, at fifteen minutes to one, on October 22nd, closed its doors after a sensational run, many stock exchange firms being overwhelmed in the crash.

Thus did the panic storm break. Rumors of trouble in connection with other institutions then came thick and fast, and one concern, the Trust Co. of America, was especially talked of. This institution had a capital of $2,000,000 and resources of $74,000,000, including $12,000,000 cash in its vaults at the time. Under normal conditions it was perfectly solvent and able to meet its depositors’ claims, but that it was not in a position to withstand a prolonged run was proved by subsequent events. Realizing that the failure of the Trust Co. of America would make the crisis far more acute Mr. Morgan and his associates resolved to come to its assistance, provided it could prove that its statements of condition were correct.

Meanwhile, George Cortelyou, Secretary of the United States Treasury, had hurried on to New York from Washington and on the night of the 22nd he held a conference at the Hotel Manhattan with Morgan, George W. Perkins, one of his partners, James Stillman, and Henry P. Davison of the National City Bank, and others. After the conference, which lasted over the greater part of the evening, Perkins and Davison adjourned to the Union League Club, where they were met by Oakleigh Thorne, president of the Trust Co. of America, who had been summoned by telephone.

These were strenuous days for bankers. No coming downtown late and leaving early. The confab at the club started at nearly midnight and lasted until long after. Thorne made a statement of the financial condition of his company and the others promised that, if the facts were as represented, he would be assisted. No time was to be lost. Perkins immediately arranged for the examination and Thorne was at his desk at half-past six on the morning of the 23rd. By seven the examiners were at work.

But the newspapers were on the watch, and the fact that the Trust Co. of America was in need of assistance was known and discussed over the breakfast tables of New York, and, in fact, of the country. By the time the company opened its doors that day there was a clamorous mob outside, each individual seeking to save himself before the crash came, and the crowd surged through the doors and up to the paying teller’s window, demanding its money.

In vain did the officers of the company put seven tellers to work instead of the usual one, in vain were all deposits paid promptly and unhesitatingly. Denser and denser grew the crowd of depositors, and it became obvious that the millions that had been passed over the counters in the morning hours would not suffice to stem the tide. Thorne hurried over to the Morgan offices and there succeeded in obtaining $2,500,000 immediately. This loan was subsequently augmented by another of $10,000,000 made a few days later, and a third of $15,000,000 made early in November.

On this one day, October 23rd, $13,500,000 was paid out over the trust company’s counters! But this was not enough to stem the run which continued for more than a week and did not abate until, so far as can be estimated, something between $30,000,000 and $35,000,000 was paid to depositors.

But the Trust Co. of America was saved. It has been claimed that the price of its salvation was the surrender by its president of some 5,500 shares of Tennessee Coal, Iron & Railroad stock which he owned. It seems plain, however, that the suggestion that the Steel Corporation should take over the control of the Tennessee company came first from the people who had the majority stock of the company and after the beginning of November, before which time the bankers, headed by Morgan, had loaned the trust company $12,500,000 without any mention of or question regarding the stock. It also appears that the transfer of Thorne’s stock to the Corporation had no connection whatsoever with the trust company’s difficulties and its extrication therefrom, but was part of a separate and distinct transaction.

Particular attention has been given here to the affairs of the Trust Co. of America, because of the allegations connecting the help rendered the company with the Tennessee purchase. But it really constituted only a small part of the situation with which Morgan and his fellow-bankers were faced. There were many others that needed help, banking institutions, investment houses, brokers, and so on. The whole financial community had turned to Morgan as its Joshua to lead it out of the desert. Upon his shoulders fell the burden of saving the country from financial ruin.

The Morgan library became as the headquarters of an army. Here were congregated at all hours of the day and night bankers, brokers, business men of all kinds, both those who needed help and those who could assist the banker in the work he had thrust upon him and the arduous duties which he had assumed. Men rushed in and out of that library, pleaded for help, begged for information and, awaiting their turn, slept in its luxurious chairs.

The task that Morgan and his associates had undertaken was one of exceedingly great difficulty. Despite all that had been done to dam the torrent of financial disruption and the fact that each weak spot was strengthened as soon as discovered, the banker knew that his herculean efforts might be brought to nothing by one big failure which would let loose the panic fears it was sought to allay. Hence it may be imagined with what consternation the financier received the news, brought to him by Lewis Cass Ledyard, a prominent lawyer and a close friend of his, that Moore & Schley, one of the leading brokerage firms in the “Street,” was in serious difficulties and needed several millions of dollars to save it from disaster.

Moore & Schley was deeply mixed up with the affairs of the Tennessee Coal, Iron & Railroad Co. One of the members of the firm was a member of the syndicate that controlled the company, and Tennessee stock constituted a considerable proportion of the collateral which it had put up to secure loans for itself and its customers. This stock, considered good collateral in normal times, failed to find favor with the bankers to whom Moore & Schley was heavily committed in the time of stress, and the brokers were called on to replace the securities with others of a more approved character—which they were unable to do—or to suffer the calling of their loans and consequent bankruptcy.

Only two courses were open to the brokers, either to borrow a sum large enough to meet their loans or to negotiate an exchange of the Tennessee stock for some other security which the banks would accept. They chose the latter and, realizing that the United States Steel Corporation was the only possible buyer of the Tennessee stock, approached Morgan through Ledyard to that end.

Suggestions that the Steel Corporation should purchase control of the Tennessee properties had been made in the past to the Corporation interests by one or more of the directors of the southern company. It does not appear, however, that these suggestions were authorized by the Tennessee syndicate as a whole. Be that as it may, they came to naught, as the directors in question seemed to have a very high idea of the value of the Tennessee stock, and the divergence of opinion on this question between them and the possible purchasers was so great that no middle ground was possible. Never did the tentative offers to sell reach a point where they were worthy of the term “negotiations.”

One of the reasons alleged for the Steel Corporation’s supposed fear of the Tennessee company’s competition was that the company was the potential basis for a merger of the steel concerns in the South which would not only be strong enough to offer a stubborn fight to the “trust” for business in the section below the Mason and Dixon line, but would have a distinct advantage over it in exporting steel to Mexico and Central and South America.

John A. Topping, head of the Tennessee Coal, Iron & Railroad Co. and of the Republic Iron & Steel Co.—dominated by the same interests—had actually taken steps for the establishment of a market on the Gulf coast. In the Rivers and Harbors Act of 1899 the construction of locks and dams and other improvements on the Warrior River so as to give slack water communication between Birmingham, Ala., near which city the mills of the Tennessee company were situated, and Mobile, was decided on. But the matter rested there until Topping, by his efforts, secured an appropriation to carry out the improvements, since completed. Not only would the water route have been important to the Tennessee company in regard to the markets mentioned, but it would have enabled the company to enter the markets on the northern Atlantic coast of the United States, from which it had been debarred by the high rail freight rates.

Reports that a steel merger in the South was contemplated or actually under way had been circulated from time to time. The three companies mentioned as constituting the consolidation were the Tennessee Coal, Iron & Railroad Co., the Republic Iron & Steel Co., and the Sloss Sheffield Steel & Iron Co. Other less important concerns were also suggested. The Sloss Sheffield company was engaged entirely in the manufacture of iron and was a rather small concern as compared with the steel giants of the day. But it was conservatively capitalized and managed and had at the time an unbroken dividend record in respect to its preferred stock. At its head was Colonel J. C. Maben, a veteran iron maker and one of the best known and most respected figures in the industry. Colonel Maben was approached by one of the Tennessee directors with a merger proposition, but refused to consider it because, as he has since said, he did not think the financial condition of the Tennessee company sound. If there had ever been any possibility of the merger going through Colonel Maben’s attitude would have effectually stopped it.

From this it would appear that the proposal to merge all the larger steel and iron companies of the South never developed beyond the nebulous stage. However, a consolidation of the two largest of these concerns, the Tennessee and the Republic companies, had been definitely decided on. The two concerns were controlled by the same financial interests and their managements were practically identical. While it is not unlikely that some of the directors of the companies, among whom were John Warne, or “Bet You a Million” Gates, looked upon their investment therein first and foremost as a speculation and would, in consequence, have regarded favorably the opportunity to sell out at a fair figure, there were others who had implicit belief in the possibilities for the expansion of the steel industry in that section and considered that they had in their hands the opportunity to build up a southern steel empire. The amalgamation of the two companies, naturally, would have been the first step to this end, and, as has been stated, it had been decided on and its consummation was being delayed only until what seemed to be a favorable time should arrive. But their dream of empire was doomed to disappointment.

Another reason advanced for the Steel Corporation’s supposed anxiety to get its clutches on the Tennessee Coal, Iron & Railroad Co. was that the latter concern owned ore mines estimated to contain some three quarters of a billion tons of iron ore, besides coal resources placed at two billion tons, as well as limestone and other raw materials necessary in the manufacture of steel. The company also enjoyed the undoubted advantage of having both its coal and iron in the ground within a twenty-five-mile radius of its ovens and furnaces—it was “sitting on its raw material”—whereas the steel mills in the North were great distances from their raw supplies—Pittsburgh, for instance, depending for its ore on the vast iron ranges of northern Minnesota.

The proximity of its mines is, of course, a material advantage to the Southern company, as transportation charges on raw material play a very important part in the cost of steel making. It is perhaps not so generally known that this advantage is to a large extent counterbalanced in other ways. Were it not for the saving thus gained it is questionable whether it would be possible to manufacture steel commercially in the South.

In the Hill lease the price which the Steel Corporation was to pay on the ore taken out of the Great Northern holdings in the Mesaba region was based on an iron content of 59 per cent. Northern ore averages well over 50 per cent. metallic content and that yielding much under 50 per cent. is not considered commercially available, although some of the lower grade ore is treated by a concentrating process and made so. Moreover, much of the ore of the Great Lakes region lies in immense bodies within a few feet of the earth’s surface and is mined by the simple process of removing the top layer of soil—technically known as stripping—and then putting a steam shovel to work.

But the ore beds from which the Tennessee company draws its raw supplies average well under 40 per cent. in iron, actually from 36 per cent. to 37 per cent.; nor does the ore lie near the surface, and the process of making it into iron and steel is necessarily more tedious and more costly than is the case with the richer and more easily reached northern iron.

In the first place, more labor is required, particularly in winning the raw materials, as the coal fields are badly disturbed geologically, making the expense of mining very much higher. And the ore is nearly all hard ore, requiring to be drilled, blasted, and crushed. Further, the low iron content requires the use of about one and three quarter times as much ore per ton of pig iron, and the poor quality of the Alabama ore necessitates the use of about half as much again of coke to make a ton of iron as compared with that coming from the Lake Superior district.

The high phosphorous content of southern pig iron prevents the use of the cheaper Bessemer process which is used on the low phosphorous pig iron of the northern district and the fact that no Bessemer steel industry exists in the South to furnish the scrap required in the straight open-hearth process prevents the economical use of this process in the South, a disadvantage which does not exist in the North, where scrap is available. Hence it is advisable in the Birmingham district to use a combination of the two processes, the iron being first bessemerized, then worked through the open-hearth furnace. And this adds greatly to the cost of converting a ton of pig iron into steel.

Another difficult problem with which the Tennessee company had to contend was that of labor. The large majority of the common labor supply in the South is made up of negro labor and, while the colored man often makes a satisfactory worker if properly “bossed,” he is unreliable and too often has as his motto “never do to-day what you can put off until to-morrow.” Given assurance of enough to eat for a day or two and a dollar in his pocket, he is likely to refuse to work until again urged by the spur of necessity—childlike, his vision of the future is limited. And this disposition to take life from day to day is, to put it mildly, trying to the manufacturer who needs a full force to get out tonnage.

And even when the negro is reliable he is seldom fitted to take positions of responsibility, so that workmen must be brought from the North to undertake the skilled work or that requiring managerial ability. And as the opportunities for such men are greater in the North, the keeping of an efficient organization together means a constant struggle on the part of the manufacturer, becomes an ever-present and pressing problem.

The expansion of the steel industry in the South is further limited by the fact that it is an agricultural, not an industrial, section. A steel mill does not, in the main, make products to be sold direct to the ultimate consumer. Its output must be manufactured by other companies into machinery, locomotives, and a thousand and one other things. Its customers are other industries, and there are comparatively few industries in the South. Thus it would seem that the formation of a great southern steel merger or the expansion of the Tennessee company to a size sufficiently large to cause apprehension to the “Steel Trust” was a very remote contingency.

It might not be out of place here to point to the significance of the fact that the Republic Iron & Steel Co., which owns important tracts of ore and coal lands in the South just as conveniently situated to its furnaces as are the Tennessee’s holdings, has not made marked use of the supposed advantages which it obtained from its southern properties. The company’s expansion since 1907, under John A. Topping’s able management, has been great, but it has been almost entirely in the North.

These things, the conditions that surrounded and influenced steel making in Alabama, were well known in the steel trade. Therefore it was hardly to be wondered at that when Ledyard, through Morgan, suggested to the directors of the Steel Corporation that the controlling interest in the Tennessee company should be purchased by its bigger and richer rival, the proposal was not enthusiastically received. The deal, for any other reason than the saving of the financial situation, was opposed by both Gary and Frick. The latter, in particular, seemed to think that almost any other course was to be preferred to an absorption of the Tennessee company, and it was he who suggested that a loan of $5,000,000 be proffered Moore & Schley to save them from bankruptcy. But the members of the firm rejected this offer.

It was not a time for delays, for dickering. The financial situation was a seething volcano which might erupt at any minute. From Friday, November 1st, when Ledyard first presented the matter to the banker, meetings of the Steel Corporation’s finance committee and conferences between Gary and Frick and representatives of Moore & Schley were held almost continuously until Sunday, November 3rd, on which date the Steel Corporation management finally yielded to the insistence of the brokers and agreed to purchase the controlling stock of the Tennessee Coal, Iron & Railroad Co. at par, or $100 a share, about twice the value that had been set on the stock by Gary in his earlier talks with Ledyard.

Followed the now famous visit to Washington. The deal, though practically completed on Sunday, was not formally closed. Gary insisted that the President of the United States should be consulted and that his attitude should be ascertained, and Frick demanded and received an assurance from Morgan that every assistance possible would be rendered other companies which were in difficulties before the purchase should be consummated.

At midnight Sunday a special train left Jersey City bearing the two Steel Corporation directors and they were delivered at the national capital shortly after daybreak Monday. Theodore Roosevelt, then President, was breakfasting when the two arrived at the White House, but he gave them immediate audience and to him the steel men explained the situation and asked whether the Government would be antagonistic to the absorption of the southern company. Gary, who was spokesman, told the President that he and his associates realized that the deal might be used as a handle to attack the Corporation for attempted monopoly—prophetic words—that they were only considering the purchase because of the strained financial situation which it would tend to alleviate, and finally that the taking over of the Tennessee properties would still leave the big company with less than a 60 per cent. control of the country’s steel trade. This percentage, Gary explained, was the limit which the Corporation had set for itself and was one, incidentally, from which it was gradually receding, its percentage of the steel production of the United States having shown an almost uninterrupted decrease from year to year.

With President Roosevelt at the interview were his private Secretary, William Loeb, afterward Collector of Customs of New York, and Elihu Root, Secretary of State. The President consulted with the head of the State Department and decided that it was not in his province to give formal approval to such a transaction. He nevertheless gave satisfactory assurance to Gary and Frick that the Federal Government would put no obstacle in the way of the completion of the transaction. These views Mr. Roosevelt later repeated in a letter to Attorney-General Bonaparte.

No sooner was Gary satisfied as to the President’s attitude than he informed Morgan by long distance—a ’phone having been kept open in readiness—of the course of the interview, and the banker announced to the financial interests of New York that the Steel Corporation had arranged to purchase control of the Tennessee Coal, Iron & Railroad Co.

That memorable morning, Monday, November 4th, had dawned dark and gloomy for the financial world for which Wall Street is the nerve centre, but no sooner had Morgan’s announcement become known than, as Mr. Morgan often stated, a marked change toward a more optimistic sentiment, a genuine improvement in the situation, became apparent.

Immediately on the return of the two steel directors to New York the purchase was completed, Moore & Schley turning over to the Corporation 157,700 shares of common stock of the Tennessee Coal, Iron & Railroad Co. and receiving therefor $18,774,000 in second mortgage bonds of the Corporation, it having been agreed that the stock was to be paid for at par, in bonds at a market value of 84. Other common stockholders of the Tennessee company were offered the same terms, and the Corporation has since acquired all but $68,092.50 of the outstanding common stock of the southern company; $72,500 preferred stock and $123,100 guaranteed preferred is still held outside the Corporation.

George G. Crawford, manager of the plants of the National Tube Co. at McKeesport, was appointed president of the Tennessee Coal, Iron & Railroad Co. under the new management. Crawford accepted somewhat hesitatingly at first, knowing that a great deal of money was required before it would be possible to put the company on a satisfactory earning basis. Indeed, he had previously refused to consider an offer of the position of manager under the former control. Under his guidance the company did rather better than expected and by about the end of its second year as a “Steel Trust” subsidiary was showing a small profit. All earnings, however, were put back into extensions and betterments, as was also a large amount of cash supplied by the controlling Corporation, and it was not until the year 1914 that the first dividend on the common stock, 1 per cent., was declared.

By that time the expenditures made by the Corporation in extending the Tennessee properties and enhancing their earning power had begun to show visible results, and when the enormous war demand for steel started to make itself felt early in 1915, the southern company was in a position to take full advantage of it and to reap large profits therefrom.

The Corporation does not make public the operating results of its separate subsidiaries, hence it is impossible to more than guess at the probable earning power of the Tennessee company. But there is reason to believe that its future operations will justify the expenditures of the Corporation, both for purchasing and improving its plants—that the investment will prove a paying one.

UNITED STATES STEEL
A Corporation With a Soul

PUBLISHER’S NOTE

FOREWORD

CONTENTS

LIST OF ILLUSTRATIONS

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

UNITED STATES STEELA Corporation With a Soul

PUBLISHER’S NOTE

FOREWORD

CONTENTS

LIST OF ILLUSTRATIONS

UNITED STATES STEEL

PROLOGUETHE MAN AT THE HELM

CHAPTER ITHE WHY AND HOW OF THE BIG COMPANY

CHAPTER IITHE BIRTH OF THE BIG COMPANY

CHAPTER IIIEARLY HISTORY AND GROWTH—1901 TO 1907

CHAPTER IVTHE TENNESSEE PURCHASE

CHAPTER VMEN WHO MADE UNITED STATES STEEL

UNITED STATES STEEL
A Corporation With a Soul

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