United States Steel: A Corporation with a Soul

by Arundel Cotter

What was the result of the Gary dinners? Simply that, whereas in previous panics gravestones of steel producer and middlemen had been numerous, not one important failure in the trade was recorded as a result of the 1907 panic. There is no question that this was due to the leadership of the head of the Steel Corporation.

Early in 1909—on February 18th—another meeting of the steel leaders was held, this time taking the shape of a luncheon. This occasion, in a sense, was the formal breaking up of the Gary dinner programme, as it was then that Judge Gary, satisfied that several of his competitors had departed from their intention to maintain for themselves respectively stability of business and prices, announced that the Steel Corporation would in future “go it alone.” That it would get what business it could and would not divulge its affairs to competitors. This was followed by the so-called open market in steel which sent prices down to a very low level.

And here might be inserted an interesting fact. Orders were sent out to the various sales managers of the different Corporation subsidiaries that they were to go after business and get all they could, orders particularly welcome to those who had longed for the flesh pots of Egypt, the old Carnegie methods, and who believed that the big company could force its competitors to the wall by such a course. A vigorous campaign for orders followed, both on the part of the Corporation subsidiaries and the independent companies, but the result went largely to prove that the big company did not have the power which its enemies claimed it had, of crushing competition. In the words of Colonel H. P. Bope, vice-president and sales manager of the Carnegie Steel Co., and a graduate of the Carnegie steel school, the result of the 1909 sales campaign was a disappointment to him, the Corporation failed to cut into its competitors’ business, losing a little to them in some lines as a matter of fact.

There was yet another dinner to come. On October 15, 1909, the steel makers of the United States and Canada joined together to honor the man who had first called them together during the stirring and dangerous panic times two years previous. The leader of the movement was Charles M. Schwab, and many of the most prominent men in the trade made speeches in honor of the guest of the evening. It was, as Mr. Schwab said, “the first time when the heads of all the big concerns in the United States and Canada had gathered to do honor to a man who has introduced a new and successful principle in our great industry.”

T. J. Drummond, vice-president of the Algomah Steel Corporation, in his address defined this principle as the doctrine that “what is good for my competitors is good for me.”

Referring to the Judge Gary leadership in the trying times the trade had passed through Mr. Drummond said: “Always the voice of our leader rang strong and clear, ‘Steady, boys, and play the game.’ And by the Lord, you played, and played it fair.”

A beautiful cup of gold was presented to the Judge by his steel colleagues at this, the very last of the Gary dinners.

The question of price restraint, or the Corporation’s influence in maintaining or depressing the price of steel, is suggested naturally by that of price fixing at the Gary dinners. This question is one seriously affecting the Corporation’s existence, being interwoven closely in that of the treatment of competitors. Getting down to basic facts the principal objection of the man in the street to trusts or monopolies is that the securing of unchallengeable power by one concern in any industry is likely to lead to higher prices or lower quality, either of which would swell the profits of the monopolistic corporation and would harm the public. It is therefore important to consider the Corporation’s general policy in the matter of prices.

During the Steel dissolution suit a number of competitors and of steel consumers testified that the big company had always endeavored to “steady” prices, a fact evidenced by the very holding of the celebrated dinners. That it had always been the last to advance, and was equally loath to reduce. They agreed, however, that the steadying influence was brought to bear, not to keep prices at levels where enormous profits could be reaped, but rather at such quotations as gave the manufacturer only a fair and equable profit on his investment, evidenced by the fact that the Corporation, unlike many of its competitors, fixed an approximate high-water mark for prices in boom times, and made no attempt, in fact refused to sell above these, although they were much lower, to use a phrase made familiar in the old days of railroading “than the traffic could bear.” These witnesses also asserted that the tendency of prices since the birth of the Steel Corporation had been downward and finally that the quality of the product, and these were men qualified to know whereof they spoke, had been appreciably bettered.

In its decision the U. S. District Court pronounced itself as satisfied that the Corporation did not have the power, even if it wanted to, to force prices to an abnormal level. The Court found it proven that steel prices could not be advanced arbitrarily above the level quoted by any important competitor in the field, and that the so-called independent companies were themselves too large and too powerful to be forced to the wall by the methods that have been employed by some “trusts” to secure monopoly.