After taking a tour of Bethlehem
facilities near Buffalo, New York,
in 1924, a college student concluded that "the steel industry is of fundamental importance to mankind," and she was right.1
As any survey of American economic, military, or social history will reveal, steel has been particularly important in this
country's national experience. Therefore, as Edmund Martin, a Bethlehem Steel
President, argued in 1967, it was in America's
national interest to have a "strong and prosperous steel industry."2 For
much of the twentieth century, the United States did have that sort of
steel industry, and Martin's own company, the second largest in the nation, was one of the strongest and most profitable with
its facilities in Bethlehem, Lackawanna, Sparrows Point near
Baltimore, and elsewhere.
However, even when the steel industry and corporations such as Bethlehem
were prospering, steel was a contentious industry. It had a history of labor-management
disputes ranging from the pitched battles between strikers and Pinkertons at Carnegie's Homestead works in 1892, the struggles
between the companies and Phil Murray's SWOC (later the USW) in the 1930s, the 116-day strike that occurred in 1959, and the
acrimonious negotiations during the 1980s that led to the near-collapse of the
industry and many plant closings during that decade and the 1990s. Using Bethlehem
Steel as an example, especially during its formative period during the early- and mid-twentieth century, it can be argued
that--in Bethlehem's case--many of the divisions between the industry's management and its workers can be traced not only
to labor-management disputes per se but also to that corporation's and its surrounding community's social, cultural, and geographical
circumstances and development.
In his History of Bethlehem,
Pennsylvania: 1741-1897, Joseph Levering refers briefly but proudly to the industrial development of the south bank of
the Lehigh River known as South Bethlehem. He devoted only a little more than
two of his book's more than 800 pages to the history of the Bethlehem Iron Company, as it was then known, followed by eight
pages describing the beginnings of South Bethlehem's fire companies, churches, and schools, including Lehigh University. But Levering was well aware of the Company's importance in Bethlehem's history. Since iron was first cast
at the site in the 1850s, he said, the company had grown into an "enormous works" over a mile long and a quarter of a mile
wide that included mills producing heavy forgings, military ordnance, and armor. "Erected and equipped at a cost of more than $5,000,000," said Levering, ". . . these works have fulfilled on a vast scale the thoughts of 1854, and have become famous beyond the
bounds of the United States."3 As if to apologize for the brevity of his comments on the Iron Company and South Bethlehem's
institutions, Levering added in a footnote that his intention was "to merely sketch their beginnings" and that the compilation
of their history "may properly be left for writers of future years" who would have better access to the "recollections[s]
and participation of present actors on the scenes."4 Levering was
right; in the same year that his book was published, 1903, one of the most colorful,
controversial, and forceful of Bethlehem's "present actors," Charles Schwab (1862-1939), had recently arrived on the scene
and was about to begin the process of transforming and expanding Bethlehem Iron and the surrounding community of South Bethlehem.
As its size suggests, Bethlehem
Iron was already a substantial presence in Bethlehem in 1903. First incorporated and organized in the 1850s, it hired a "noted" iron master, John
Fritz, as its General Superintendent and Chief Engineer in 1860 and began casting iron rails for the Lehigh Valley Railroad
in 1863.5 As America's industry, population, and railroads expanded
following the end of the Civil War, so did Bethlehem Iron. The owners began constructing
a larger steel mill in 1868 with Bessemer furnaces and joined
the Bessemer Association, an eleven-member trade group that shared patent rights and refrained from competing in each other's
territories. In October 1873 it began rolling its first Bessemer steel rails, which are far stronger and more durable than iron ones. In 1885, at Fritz's urging, it began to diversify by producing military products: armor plate and shafts
for US Navy ships and heavy forgings for guns (Illustration 1).6 To
do this, new Siemens-Martin open hearth furnaces, which became operational in 1888, were built to manufacture low-phosphorous
steel, and by 1896 the decision was made to phase out rail production and dismantle the Bessemer furnaces,7 since
the Bessemer process cannot remove phosphorous, an impurity that weakens steel.
Unfortunately for the Company,
the new technology needed to produce armor plate proved difficult to develop, and the Navy was sometimes a difficult customer. Though it at first had an exclusive contract for armor plate, Bethlehem
was unable to meet deadlines in the late 1880s and the early 1890s as the United
States built up its Navy in the decade before the Spanish-American War. Consequently, it had to share the armor-plate business with Carnegie Steel's Homestead mill, and, along
with Carnegie, it had to haggle with the Navy over armor-plate prices.8 The
company was also burdened with a Board of Directors that was cautious, conservative, and had an "aversion to any form of risk
taking"; nevertheless, it was considered a "well-managed" company, and its earnings
as a relatively small and specialized steel producer were "solid and profitable" in the 1890s.9 That image changed dramatically in the three decades after Schwab became its chief stockholder and President
in 1901 and took over direct control of the company in 1903.
Schwab's own rise in the steel
industry had been swift. He had a high school education from St. Francis, a small
Franciscan academy in Loretto, Pennsylvania, and was first hired as a laborer and then as a draftsman at the Edgar Thomson
Steel Works in Braddock, Pennsylvania, near Pittsburgh, when he was eighteen. There
he was noticed by the Works' general superintendent, Captain Bill Jones, who appreciated his energy and intelligence.10 Jones ordered Schwab to design and build a railroad bridge in 1885 when he was only
twenty three, and then made him his messenger to Andrew Carnegie who owned the Thomson Works. When he was twenty four, he
became a protege of Carnegie, who appointed him general superintendent of the Homestead works in Pittsburgh and sent him to
Germany and France to visit the Krupp and Schneider works to learn more about their techniques.11 Between 1897 and 1901 Schwab became President of Carnegie Steel, helped to negotiate the consolidation
of that company into U. S. Steel, and became the first President of U. S. Steel, America's first billion-dollar corporation. However, he was deposed from that position and resigned in 1903 after conflicts with
the corporation's Board of Directors, particularly Judge Elbert Gary, who became Chairman of the Board in 1903. Schwab's downfall was aggravated by bad publicity resulting from colorful media reports that he had gambled
heavily at Monte Carlo,12 and he also had participated in an abortive, badly-planned
effort to merge Bethlehem and a group of shipbuilding companies
into a trust that was intended to be a kind of maritime U. S. Steel.13
Having, in effect, lost U. S. Steel, Schwab turned to Bethlehem and set about reorganizing and expanding it until it
became the second largest steel company in the country and one that was capable of earning immense profits, especially during
the early 1900s, World War I, and later World War II, when its production of munitions and weapons, plus ships from its shipyards,
was spectacular. According to Levering, in the 1890s, Bethlehem Iron's entire
works had cost $5 million to construct and equip; in 1910 it received a single
contract of $10 million for arms, munitions, and spare parts from the Republic of Argentina.14 In addition, before World War I began, Schwab and Bethlehem's chief arms salesman, Archibald Johnston,
had closed other deals with the governments of Chile, Greece, Guatemala, Cuba, England, France, and Russia.15 But when World War I began, contracts like the one with Argentina would seem modest. As early as October 1914, Bethlehem Steel announced that it had received an order
for $25 million from the French government for artillery, and a little later, Schwab personally made a deal with the British
for $40 million worth of heavy guns, caissons, and a million rounds of ammunition, plus a contract for twenty submarines at
a price of $500,000 each for a total of $50 million that was announced in November. 16
Bethlehem's orders for armaments would eventually total $884 million for World War I,17 and three
decades later, during World War II, the United States government was also an
eager customer for Bethlehem's products. During that war, its orders totaled
$1,327,500,000--the largest amount received by any corporation in the country and about $100 million more than the number
two contractor, General Motors.18
Nick-named "Champagne Charlie"
because of his opulent life style,19 Schwab was a compulsive gambler and spendthrift who would eventually die insolvent
in 1939 in his Park Avenue apartment. At that
time his liabilities and obligations outstripped his assets by more than $300,000, including $25,000 he had borrowed from
the priests of St. Francis who had the misfortune to believe their most famous alumnus when he told them he would leave their
academy two million dollars in his will.20 In the early decades of
the twentieth century, however, Schwab was one of the classic--though more flamboyant--examples of the type of American industrialists
who were considered "titans," "giants," "geniuses," and sometimes "robber barons" in the national media. Men such as Carnegie, Harvey Firestone, Walter Chrysler, and
Henry Ford, along with Schwab, were perceived as being personally responsible for the growth of their corporations' productivity
and profitability and for the material expansion of the United States.
Moreover, as his successor Eugene Grace emphasized in his memoir about his mentor, Schwab, "was a figure quite different from
what the financial world had seen before. He was cheery, talkative, and
had an open door for the press." Therefore, Grace said, "Schwab was a continual
missionary to the public" for Bethlehem Steel, because he "was magnetic, engaging and . . . could debate serious issues in
a way that won people to his cause."21
In Schwab's case, several significant
features of his managerial techniques and entrepreneurial style also can be traced to the influence of Carnegie who was his
mentor during the formative years of his career. According to Eugene Grace, "Carnegie's methods . . . played a great part
in the shaping of Mr. Schwab's ideas."22 Like Carnegie, he was an
apostle of growth, expansions, and mergers in the steel industry that would make his company larger, more productive, and
more profitable. During his career as a steel-maker, which started in 1875, Carnegie
had built Carnegie Steel into an industrial giant that, by 1899, produced twenty-five per cent of the steel in the United
States, and he had done this mainly by acquiring smaller and/or less profitable companies and consolidating them into what
would eventually become the main components of US Steel. As for Schwab, in a
1916 speech in Baltimore, after Bethlehem had absorbed the Pennsylvania
Steel company and its works at Sparrows Point on the Maryland
tidewater, he proclaimed, "I glory and rejoice in the opportunity to expand." When
he had entered the steel business thirty-five years earlier, he said, America had consumed one million tons of steel annually; in 1901, when US Steel was created, the country consumed twelve million tons; by 1916 it was consuming forty, but this was not the "zenith," Schwab said. Consumption of all kinds of steel products would increase, he prophesized, and America would go "onward and upward" to become "the greatest manufacturer in the
world of iron and steel."23 Nine years later he made a similar but even more specific prediction when he claimed, "the next twenty years will see the greatest
expansion and the greatest accomplishment American industry has ever known," a prophecy that would eventually become a reality--but
only after the Depression and World War II.24
To make sure that Bethlehem Steel
received its share of this expansion, Schwab would later not only expand the South Bethlehem and Sparrows Point works; he
would also make major acquisitions in the early 1920s of companies such as Lackawanna Steel in Buffalo, New York, and Midvale
Steel in Johnstown, Pennsylvania, which were the third and fourth largest steel producers in the country respectively before
their mergers with Bethlehem.25
To achieve these mergers and acquisitions,
Bethlehem followed the vigorous cost-accounting procedures
used to keep manufacturing volume high and costs low that Schwab had learned as a Carnegie executive. Extremely detailed cost and production figures were compiled daily and monthly for each works so that increases
and economies could be monitored rigorously.26 Using this system,
Carnegie was famous (or infamous) in the 1880s and 1890s for its ability to undersell its rivals by monitoring its costs,
including labor costs, and keeping them so low that it could cut prices, even during recessions, keep its mills running, and
still make profits. It would then use these accumulated profits (Carnegie Steel
was often as stingy with dividends as well as wages) to expand its own works
and make technological changes--such as installing first Bessemer and then open hearth furnaces--so that it could become even
larger, more profitable, and more productive when the recessions ended.27
Or, it would use its profits to buy out smaller, more specialized companies who were less efficient or had the misfortune
to be producing the wrong product at the wrong time--such as rails during recessions when railroads would cut back or cancel
Schwab at Bethlehem followed the same strategy and used it to acquire Pennsylvania Steel, its subsidiaries,
and its Sparrows Point works, which were designed to manufacture rails for the international market. Before World War I the two companies were approximately the same size and their profits were comparable:
Bethlehem's earnings were $4,846,814 or 6.26% on preferred stock and 3.43% on common in 1912,
and Pennsylvania's were $3,113,819 or 7.80% on preferred
and 1.53% on common.28 But Bethlehem received enormous contracts after
the war began because of Schwab's aggressive salesmanship. Its net earnings increased by 184% from 1913 to 1915 by selling
munitions, guns, and ships to the English and French, and its stock went from a "normal price" of $30 a share to $600. In contrast, Pennsylvania's
sales plummeted 82% in 1914, and 2,000 of its 4,000 workers were laid off because European nations and their colonies almost
completely stopped expanding their railroads for the duration of the war, so domestic demand was "lackluster."29 Consequently, since Schwab had not distributed any of Bethlehem's earnings ($9 million)
from 1907-1912 as dividends, and he distributed only $44 million of his company's $150 million earnings as dividends between
1915 and 1921, he was able to begin buying up other companies during the war and the early 1920s. In the case of Pennsylvania Steel and its subsidiaries, he bought them for $49 million in 1916.30
A second and eventually more controversial
element of Carnegie's managerial methods that Schwab adopted and adapted was his reliance on proteges who were rewarded for
their loyalty, hard work, and successes with rapid promotions and lucrative bonuses.
Starting with Carnegie Steel's superintendents, the company had its "young geniuses," as Carnegie called them, who
were awarded rather complicated "partnerships" in Carnegie Steel. A form of profit-sharing,
each partnership would be credited with a small, fractional percentage of the company's annual dividends that would be applied
to the original cost of the individual's partnership share. Only after that amount
was paid off did the partner start receiving cash dividends.31 The
policy was intended to encourage ambitious and capable men to have long-term careers with the company, since the plan was
arranged so that they lost much of a partnership's value if they resigned or were fired.32
Schwab himself had been a protege
who'd been promoted rapidly first by Bill Jones at Edgar Thomson and then by Carnegie.
After he took control of Bethlehem, he had his own proteges whom he promoted and rewarded handsomely, most notably
Eugene Grace, an Electrical Engineering graduate from Lehigh, who started as an electric crane operator at Bethlehem Steel
in 1895 and became its President in 1916 when he was thirty-nine years old.33
Schwab's incentive plan, however, was simpler and more lucrative than Carnegie's and the bonuses were much more quickly
available. According to company policy, the bonuses had to be "impressive, palpable,
and not . . . a measly 5 or 10 per cent."34 Schwab believed "in the
policy of great rewards for great efforts," said Eugene Grace, and he initiated Bethlehem's
bonus plan soon after he acquired the company.35 Individual employees
and executives received commissions if they lowered costs or raised profits more than a base rate. But the commissions were on a sliding scale so that the recipients earned "not merely part of any improvement
but progressively larger percentages" if costs were further reduced or profits increased." Moreover, except for those of the top executives, these bonuses were paid at the same time or shortly after
monthly salary checks, not annually.36 In addition, Bethlehem had a much more modest incentive plan for its other employees. According to Fortune in 1941, a foreman who earned $200 a month could raise it to $275 if his part
of Bethlehem's operations became more economical or profitable,
and a supervisor with a $10,000 annual salary might receive a $5,000 bonus in the same way.37
The size of Bethlehem's top executives' bonuses were a well-kept secret until 1930 when they became extremely
controversial. Schwab was in the process of trying to take over Youngstown Sheet
and Tube, but a group of Youngstown's minority stockholders,
led by Cyrus Eaton, launched a lawsuit to prevent the merger. They argued that
the Bethlehem stock they would receive for the deal was overvalued,
because of the company's policy of withholding dividends so that it could pay exorbitant bonuses to Grace and other top executives. Only after being questioned relentlessly by Eaton's lawyers, and after strenuous objections
by Bethlehem's lawyer's were overruled, would Grace admit that he had received a bonus of $1,623,753 for 1929 (plus a salary
of $12,000) and that his bonuses for the past five years totaled $5,431,684.38 Since the Presidents of U.S. Steel, Bell Telephone, and Standard Oil of New Jersey
received salaries of $500,000, $250,000, and $125,000 respectively during approximately the same period,39 Grace
was almost certainly the country's--and probably the world's--best-paid executive. Other
executives' bonuses were smaller, but many had received ones of six figures so that the average for 1929 was $244,665 per
man.40 Eventually in
December, 1930, the court ruled in Eaton's favor, and, though this verdict was overturned by a Court of Appeals the next year,
the merger collapsed.41 Confronted by lawsuits from angry Bethlehem
stockholders, Schwab was forced to modify the bonus plan so that it was less secretive and less lucrative,42 but Bethlehem's top executives continued to be very well paid. According to a 1959 Business Week survey of executive salaries, seven of the top ten positions were
occupied by Bethlehem men, including the company's chairman, Arthur Homer, who was ranked first with a salary and bonuses
of $511,249.43 In addition to high salaries, Bethlehem executives
enjoyed considerable job security, since virtually all promotions were from inside the company: another management principle,
Grace said, Schwab adopted as soon as he took control of the company.44
What Bethlehem Steel received for
these high salaries and bonuses was a management that was considered distinctive for its loyalty and dedication. Schwab insisted
on absolute loyalty to Bethlehem, says Mark Reutter, and he
received "a level of fidelity to the company extreme even in the close-knit steel industry. A Bethlehem
executive was required to live in Bethlehem," and he "was
forbidden from engaging in any business activities outside the company . . . Schwab wanted no conflicting loyalties."45 In addition, the company's planning and operations were very hierarchical, since Schwab's
"organization plan" was designed "so that every thing would flow upward to central authority."46 This policy continued after Schwab's death in 1939. "Mr. Grace
sets the example for all the men who now or ever hope to share in the management," said Fortune in 1941. "They are on call twenty-four hours a day; the important interest
in life is the company. No Bethlehem
official may act even as a director of a local bank, and none is active in politics."47 As a result of these policies, the magazine also implied, the management was also somewhat insular and
isolated from the larger currents of American life and business. Since "Bethlehem's management lives in Bethlehem,"
it said, "by day it works together, and by night it strolls across the street to visit . . . .
In spite of its tremendous size, Bethlehem has more
in common with little business than it does with big business." On social issues
in particular, relative to the "social responsibilities of modern American industries," Fortune thought the company's
thinking was "provincial."48 Moreover, though Fortune acknowledged
that Bethlehem had not allowed any of its light or heavy steel
facilities to become obsolete, the magazine said it was not "the leader in the kind of pure research that a light steel company
should well have on tap." And, Fortune
implied, this was due to the company's concern with cost-cutting, because it is "devoted to such things as keeping
down costs . . . by making the supply of lubricating oil go twice as far, the research department has produced few notable
Where Schwab departed from Carnegie's
methods, especially during the early part of his career at Bethlehem,
was in his boldness in taking risks, including, in one major instance, a technological one.
One of Schwab's "basic principle[s]," said Grace, "by which he operated was that of daring."50 In this respect Grace and Schwab functioned as an excellent team.
The former was the meticulous production expert and engineer who kept the mills running; Grace also kept costs low
and made sure deadlines were met. Schwab was the "visionary" charismatic entrepreneur
and aggressive salesman who could make risky deals and decisions knowing that Grace and his other "boys" at Bethlehem could make them succeed. As Schwab
gradually relinquished direct control of the company and became Chairman of the Board after he made Grace President in 1916,
he gradually became a kind of a corporate spokesperson for his corporation and the steel industry in general who gave speeches
and interviews in New York and elsewhere telling America how it could prosper and have a "Bright Future."51 Grace, on the other hand, usually stayed in Bethlehem
and handled Public Relations on a more local level by explaining, for example, how the company's Employee Representation Plan
was improving working conditions, reducing waste, and promoting "the interests of the company by careful attention to the
quality of the products shipped."52
When Schwab and Grace had opportunities
to expand their corporation's assets and profits, they were often particularly successful, especially when good luck or history
was on their side. In 1913, for example, Schwab was able to buy the Fore River
Shipbuilding Company of Quincy, Massachusetts,
for a bargain price of $750,000, because its owners were in severe financial straits, even though its stock was valued at
nearly $5 million. An established contractor of ships for the U.S. Navy, Fore River was a perfect outlet for Bethlehem's armor plate and forgings.53
After World War I began, it was
even more important that Fore River
owned patent rights for submarines and had been successfully building H-class vessels of that type for the American navy.
Thus, when Schwab made his $40 million munitions sales trip to England in October 1914, mentioned earlier, he met with Sir
John Fisher and Winston Churchill, First Sea Lord and Lord of the Admiralty, and the British were so eager to add submarines
to their fleet that they were willing to pay $500,000 apiece, double the usual price, for twenty of them to be constructed
at Fore River.54 The submarine part of the order was announced on
November 10 in a brief news item in the New York Times in which Fore River officials "refused information as to the
identity of he power for which the submarines were intended," though they did confirm that the deal was worth $10 million
and had been arranged by Schwab.55 A November 26 news story about
the entire $50 million deal was slightly more forthcoming, since it noted that the English were buying the submarines.56
After Schwab closed the deal, however, he was informed by Secretary of
State William Jennings Bryan that, unlike selling munitions, building submarines probably violated President Woodrow Wilson's
interpretation of America's neutrality policy, and the contract should be cancelled57--though a December 3 news
story emphasized that a decision regarding the legality of deal had not yet been
reached by the State Department.58 On December 24th Schwab
dramatically announced that he had followed Bryan's advice and had gone to Europe to cancel the contract because "the building
of any vessel or sections of a vessel in one country for a belligerent country in time of war was a violation of the neutrality
zBut this story was untrue, since
Schwab had found a loophole: manufacturing ten of the submarines' component parts
at Bethlehem facilities and shipping them to a shipyard in Montreal,
which was owned by Vickers, the British arms manufacturer, to be assembled. Though
the Vickers management supported this claim in public, much of the work was actually being done by a team of over five hundred
Bethlehem managers, supervisors, and workmen who were rushed to Canada, housed in a special barracks, fed at their own canteen, and sworn to secrecy. To compensate for these expenses, Schwab raised the base price of the submarines to
$600,000 each. The remaining ten submarines were assembled at Fore River.
Despite the deception, the German government knew what was happening and protested vigorously.60 But the Wilson administration, as Grace later revealed, "tacitly winked" at the scheme.61 It did nothing to hinder Schwab's machinations--presumably because of its own complicity
or fear that the laxness of the enforcement of its neutrality policy would be exposed.
risks to Bethlehem were obvious. The Montreal ploy violated the spirit of Wilson's
neutrality policy and stretched its letter to the breaking point; the construction
of the ten submarines at Fore River
was clearly illegal. A decision by the Wilson
administration to enforce its neutrality policy more effectively, a newspaper account by an investigative journalist with
pro-German sympathies, a Congressional hearing or investigation--any of these factors might have jeopardized the contract
and given Bethlehem some negative publicity as well. Andrew Carnegie, who highly disapproved of Schwab's Monte Carlo
gaming,62 would almost certainly not have approved of his submarine gamble.
A much longer-term and far more
significant example of Schwab's risk-taking was Bethlehem Steel's development of the Grey beam, later known as the Bethlehem beam. Schwab's
willingness risk Bethlehem's future and vast sums of his own
money on the beam were a good example of how his company's policies, in this instance, differed slightly from Carnegie Steel's. Though Carnegie and his company kept up with technological innovations, they usually
did so mainly to economize or increase production, because, according to Andrew Carnegie, "pioneering don't pay,63
and it was often easier to buy patent rights than do the actual "pioneering." Carnegie's
change from Bessemer to open hearth furnaces, for example,
was motivated largely for economic reasons, to take advantage of the Minnesota Mesabi range ore deposits which, though cheap
and abundant, contained too much phosphorous and sulfur to make high-quality steel.
The open hearth process was also more economical, because the hearths were much larger than the converters, and scrap
metal could be added to the furnace mix. But the breakthrough came in 1878 when
a process was discovered by an English chemist, Sidney Thomas, that removes phosphorus by heating the iron five hundred degrees
hotter and adding limestone--which then combines with the phosphorous to form a slag that can be drained off.64 Carnegie purchased the American rights to the Thomas process, but it did not work in
Bessemers. Only after he visited an English steel mill in 1885 and saw the process
working successfully, in open hearth furnaces, did Carnegie order it used in his newly-built open hearth furnaces at Homestead.65
Schwab's development of the Grey
beam was more adventuresome, since it was both a new product and a new process. Invented
by Henry Grey, the general superintendent of a Cleveland steel
mill, in the 1890s, the beam is a wide-flanged structural girder rolled directly in a single section from an ingot in an elongated
H-shape, not riveted together in overlapping sections like previous beams. Therefore,
as Schwab explained, it would "enable consumers to effect a savings on their buildings . . . . Columns which are now riveted
together at an expense of $9 to $14 per ton will be rolled in one solid section, facilitating time of delivery as well as
adding to the efficiency and the strength of the material."66 Though
it was lighter and stronger than competing beams, and though it had been produced in 1896 on an experimental basis when a
Duluth mill hired Grey to make it, American steel makers showed
no interest in the new beam. In 1902 a German-owned steel works in Luxembourg built a Grey beam mill, and when Schwab--who
was then President of U.S. Steel--learned this he tried to persuade that company to produce it. Turned down by Elbert Gary and U.S. Steel's Finance Committee, he decided in 1905 to manufacture it at
Bethlehem after he became President there. Since he had learned
of the invention when he was a U.S. Steel executive, he notified Gary
of his intentions and was informed in 1906 that U.S. Steel did not want to develop the new beam.67
Schwab then faced considerable
difficulty in raising the $5 million needed to build a Grey mill and to purchase exclusive patent rights. When his attempt to raise that sum by issuing bonds in 1907 failed because of a stock market panic, he
resorted to more creative and risky strategies. He took out large personal loans
from rich friends, using his Bethlehem stock as collateral. He persuaded construction companies and suppliers to bill him after the mill was completed
and operational, and he arranged with the directors of the Lehigh Valley and Reading Railroads that Bethlehem would pay only
fifty percent of their monthly freight charges, the other half to be redeemed with Bethlehem notes issued by the Drexel Bank.68 Finally, he turned to Andrew Carnegie with whom he had resumed his friendship after
their quarrel over Schwab's gambling at Monte Carlo. Carnegie not only lent Schwab
U.S. Steel bonds to use as collateral for loans from banks, he also said publicly in 1908 before a Congressional Committee
that Schwab was a "genius" and that his new beams would be radically superior to conventional ones.69
Fortunately, for all concerned,
Schwab and Carnegie were right, and the Grey beam did all they claimed it would. In
1924 U.S. Steel's Sales Department acknowledged that their "standard" girders could not compete with Grey beams, because "architects
and fabricators generally consider that these sections mark a distinct advance in building construction . . . involving as
they do a great reduction in riveted work."70 A brilliant salesman,
Schwab soon persuaded architects and builders to use the beams in skyscrapers and more prosaic buildings, such as taxi garages,
as well as in such landmark constructions as the Gimbels Brothers department store and the Chase National Bank in New York, the National Gallery of Art in Washington and the Merchandise
Mart in Chicago.
"It is no exaggeration," Edmund Martin claimed in 1967, "to say that the New
York skyline is a monument to those [Grey] mills."71
manufacturing the Grey beams, beginning in 1908, Bethlehem
greatly diversified its product line by becoming a major manufacturer of structural steel, as well as rails, munitions, and
ships. Schwab also had the mixed pleasure of learning in 1926 that Elbert Gary
and U.S. Steel had built their own Grey mill, but without notifying Bethlehem
or paying for patent rights. After a bitter quarrel with Gary, a partial reconciliation,
and a legal battle, Schwab and Bethlehem prevailed, and U.S. Steel settled out of court and began paying royalties to Bethlehem
in 1929.72 As for the process itself, it was so reliable, and the
machinery producing the beams was so durable, that the Grey mill in South Bethlehem functioned for eighty-seven years, from
1908 to 1995, when it was finally shut down.73
Before the decline of the steel
industry and Bethlehem's corporate fortunes in the 1970s and 1980s, steel was a cyclical industry, and during flush times
"the Steel"--as Bethlehem's citizens called the company--contributed substantially to the town's growth and prosperity. In 1925, for example, Bethlehem's
New Year began with an up-beat message from Schwab himself in the local newspaper predicting good times because of the results
of the 1924 election. By electing Calvin Coolidge, said Schwab, "the American
people showed . . . that they were in favor of government along safe and sane
channels" that would give "confidence and impetus to business men all over the country to go ahead with production and normal
expansion."74 Another reason for Schwab's optimism was revealed on
January 23 on the front page of the Bethlehem Globe when it reported, "Steel Report Shows Gains," in an article saying
Bethlehem Steel's increased quarterly dividends and production figures for December indicated that the steel industry was
recovering from a "depression" that had occurred in the summer and fall of 1924. Then, production had fallen to 31% of capacity,
but by the end of year it had risen to 73%, a clear sign of "recovery."75
On March 11 the New York Times announced Schwab's plans to enlarge and improve his plants,76 and
by late August, the Bethlehem Globe was reporting, in another front-page headline, "More Signs of Prosperity in This
City." Bethlehem Steel's Fabricated Steel Division had enough orders to run its facilities at full capacity until December,
said the Globe, with over "40 erection jobs in all part of the East [that will] keep a maximum force at work." Within Bethlehem itself, contractors were remodeling
an Opera House on the South Side and building houses, elementary schools, the Lehigh Valley National Bank, a Masonic Temple, a Jewish Community Center,
and Holy Infancy High School.77
With the wages and profits from
submarines and Grey beams, as well as their substantial bonuses, Schwab, Grace, and the other Bethlehem executives not only
contributed to the town of Bethlehem's material growth and prosperity. They also
created their city's corporate culture that John Strohmeyer describes in his Crisis in Bethlehem. This culture was
clustered in Bethlehem's North Side, where Grace's mansion was known as "Bonus Hill," so that part of Bethlehem became identified
with wealth, success, dinner parties, and degrees from universities, such as Lehigh.78 And, since the company's top officials were "expected to locate in certain preferred neighborhoods," many
lived near one another or near a golf course, such as the Saucon Valley Country Club.
Indeed, that Club was so popular with executives that the road leading to it was called "Vice President's Row."79
Within Bethlehem Steel itself,
this corporate culture took the form of a managerial system that was strongly hierarchical and focused on the policies and
decisions made by the top management and executives, such as Schwab and Grace. As
long as those decisions were good ones, including risky decisions such as the World War I submarine deal and the production
of Grey beams, the company was able to grow and expand. The pace and profitability
of this expansion, however, were also dependent, to some extent, on historical events and developments, especially World Wars
I and II. But because the company was so close-knit and rewarded conformity so
highly through its bonus system, its management became somewhat ingrown and separated from the larger community and presumably
its own workers, a tendency reinforced by the corporation's policy of forbidding executives to engage in any business or community
activities outside Bethlehem Steel.80 In the meantime, another, considerably
different culture was being created in South Bethlehem where many of the company's steelworkers and their families lived. Like Charles Schwab, many of these workers were risk takers, but the many of the risks
they confronted were different from those on the North Side.
“There are different kinds of work [in America], heavy and light, but a man from our country
cannot get the light." (Letter from an immigrant steelworker quoted in David
Brody, Steelworkers in America81)
If one is tempted to apply the
maxim, "character is destiny" to an individual like Charles Schwab, a maxim such as "topography is destiny" might be applied
to the community of South Bethlehem and its culture where so many of the steel company's working-class employees lived.
In Bethlehem the division between light and heavy, between the jobs performed and the residences
inhabited by Grace and his managers and those of their company's workforce was clearly demarcated geographically. Bethlehem is a river town with the Lehigh River separating South Bethlehem from the North and West Sides
of the city, and this north-south division explains many aspects of Bethlehem's
social history and character (Illustration 2). 82
Grace and the top executives, as
mentioned earlier, had their mansions and clubs on the North Side; their workers lived in row houses on the South Side that
can be seen wedged between the steel mills and South Mountain in Walker Evans's 1936 photograph (Illustration 3). 83 Thus, North was management, and South was union, at least after 1941 when Bethlehem Steel was unionized
by the SWOC (Steel Workers’ Organizing Committee, later the USW, United Steel Workers of America). North was salaried employees, starting with foremen and supervisors; South was hourly workers. Even the sports were different. North was sometimes tennis
but more often golf at the area's country clubs, and South was wrestling and team sports, football, basketball, and especially
soccer. In fact, in the 1910s and 1920s soccer was so popular that Bethlehem
Steel had its own professional soccer team that won league championships and regularly defeated teams from Philadelphia and New York.84
Moreover, like most factory, mill,
and foundry industrial towns of the period, Bethlehem had a workforce largely made up of immigrants
or their first-generation descendents who were, in Bethlehem's case, often from near-by Pennsylvania "coal patches."
The growth of the steel industry expanded both the population of South Bethlehem and
its diversity. "The Steel," as the people on the South Side called it, says Illick,
"created jobs for lower-class laborers; immigrants from nearby farms and faraway countries rushed to fill them."85
The town's population more than tripled between 1860 to 1870, and it tripled again from 1870 to 1890. The foreign-born were only a third of its 3,000 residents in 1870, and only a fourth of the 10,300 inhabitants
in 1890. "But by 1910 foreign-born persons and their American-born children comprised
two-thirds of South Bethlehem's 20,000 inhabitants, well above the national proportion (two-fifths) and that of Bethlehem
across the river (one-sixth)," which had almost 13,000 residents after it was consolidated with West Bethlehem in 1904.86
Thus, the city's north/south, manager/worker
division was also often a language and ethnic divide as well. North was Anglo-Saxon,
or sometimes German or Irish in origin, and spoke English; South was "foreign"
and spoke Austrian German, Slovak, Hungarian, Slovene, a Neapolitan dialect of Italian, and Greek.87 Unlike many such communities, however, Bethlehem's immigrant workforce, mainly from Central and Southern
Europe, were not congregated in ethnic residential ghettos clustered around their respective parishes, parochial schools,
and fraternal organizations. Such churches, schools, and organizations existed
in South Bethlehem. But, as Joseph Illick points
out, the topography of that part of Bethlehem prevented residential
clustering and separation by ethnic groups because of "the scarcity of real estate . . . . The steel works and the railroad
occupied most of the level land on the south bank of the Lehigh River, leaving a residential area on the slopes of South Mountain
approximately a mile in length and only a quarter of a mile wide. This limited space made for a chronic housing shortage;
people found living quarters where they could, not necessarily where they wanted."88
Moreover, the South Bethlehem ethnic groups were further united by the fact that, in the 1890s and 1900s, they
all had to confront the hostility of more entrenched Irish and German immigrants who had arrived earlier, and that hostility
fostered "a friendliness among Slovaks, Magyars, Poles, and Slovenes which otherwise might not have existed."89
The close economic as well as geographic
relationship that existed between the steel mill and the community of South Bethlehem--often called, "the Heights," by its
inhabitants--is revealed by the company's owners' reaction to Frederick Taylor, the pioneer of time studies and "scientific
management." Though Bethlehem Iron hired Taylor and his assistants to do time-and-motion studies to learn how work methods
could be improved in 1898, they refused to implement his ideas and dismissed him in 1901, shortly before Charles Schwab took
control. The reason, according to Taylor, was
that when he recommended changes in work methods that would have reduced the workforce by approximately two thirds, the owners
"did not wish me, as they said, to depopulate South Bethlehem," because "they
owned all the houses in South Bethlehem and the company stores."90 In other words, more efficient and "scientific" working practices might have been good, but continuing
to receive rents and profits from company stores in South Bethlehem was even better.
South Bethlehem's increasing ethnic
diversity, as well as its growing population in the late nineteenth century, can be seen in the growing number and kinds of
its churches. Ones founded there in the 1860s and 1870s after the Bethlehem Iron
works began casting rails in 1863 were the Irish Roman Catholic Holy Infancy--because of "the large increase in membership
in the south side"91--in 1863, Lutheran, and Protestant Episcopal churches also in 1863, Moravian in 1866 (German
congregation) and 1868 (English congregation), Dutch Reformed in 1867, and Presbyterian in 1870.92 The Roman Catholic Holy Infancy was rebuilt and enlarged in 1882-86, and other specifically ethnic churches
began to be built and consecrated in the 1880s and 1890s, such as the Austrian-German Saint Bernard's (later Holy Ghost) and
Saints Cyril and Methodius "for the Slavic population" in 1891.93 As
other ethnic nationalities arrived, Bethlehem would eventually have Saints Peter and Paul for Greek Catholics, Saint John's
for Lutheran Slovenes, Holy Rosary for Italian Catholics, and Saint Joseph's for the Windish (Slovenes).94 In fact, South Bethlehem's Catholic parishes were so closely associated
with their respective ethnic groups that their members spoke of parishioners who went to Saint Anne's and Saints Simon and
Jude on Bethlehem's North Side as being "Americans," rather than Catholics.95
The ethnic identifications of these
churches were dictated by religious reasons as well as ethnicity per se. Slovaks
could scarcely appreciate the religious element of the masses they attended at Holy Infancy when the Irish forced them to
stand at the back of the church during services, and sometimes pelted them with stones as they left.96 Moreover, parishioners needed to have services or hear sermons in their native languages. For the Catholics there was the additional need to be able to make their confessions to priests who were
at least bi-lingual. As long as substantial numbers of parishioners either spoke
little English or did not speak it fluently, this language factor would contribute to the parishes' ethnic cohesion throughout
much of the twentieth century. It was not until 1950, for example, that the pastor
of Saint John's was able to schedule a majority of his services
In some instances the ethnic churches
established explicit alliances with the company that was the employer of so many of their parishioners. The Reverend Frantisk Vlossak, pastor of Saints Cyril and Methodius from 1898-1907 and 1911-1929, was especially
successful in doing this. He became a friend of Vice-President Archibald Johnston
of Bethlehem Steel, "supplied him with Slovak workers, had the Steel Company deduct a dollar a month from their wages for
church dues, and voted Republican while the vast majority of his flock supported the Democratic party. . . . Needless to say,
Vlossak opposed any strikes against Bethlehem Steel."98 When Father
Vlossak's flock outgrew their original church building in 1902, they turned to the Steel Company; each member pledged $25,
plus $1 a month to be deducted automatically from the Catholic Slovaks' pay, plus an additional $600 contribution from the
Company to the building fund.99
At the steel mills themselves,
jobs were often allotted according to ethnic background. Joseph Mangan, a union
official, explained to Strohmeyer that the system was roughly organized so that the Germans became machinists because they
were supposedly "smart." The Hungarians were sent to the blast furnace because they were "tough," and the "Slovaks (diligent
and religious) went to the small mills where Slovak was spoken." The Irish, "gutsy but lazy," were put on the plant patrol,
and "the Mexicans, Portuguese, and other Hispanics (boat jumpers) were put to work where it was hottest and dirtiest."100
Besides company policies and ethnic
stereotypes, however, there was another reason for these ethnic work clusters. Despite
their dangers, jobs at Bethlehem Steel were considered desirable, and workers often had to compete for them. For many men from the South Side, and those in Chicago and Pittsburgh as well, as Strohmeyer points out, "a job in steel was the achievement of the
American dream. The industry was the melting pot for hundreds of thousands of
immigrants with willing muscles and a strong work ethic."101 But sometimes
willing muscles and a good work ethic were not enough, and the influence of a relative, priest, or member of a fraternal organization
was also needed to help the American dream come true. "Fathers encouraged sons
to vie for jobs at the furnace," says Strohmeyer. "They worked alongside each
other, as did uncles, brothers, and cousins."102 As one former steelworker, a war veteran, explained to Joseph
Illick, after he returned to Bethlehem, he went "down to the
Steel to get my old job back, because that was the only place we had to go, really.
There was no other place you could go for work." When "the Steel" wouldn't
re-hire him at first, he tried again through a family connection, and "then, finally, again through people you know--it's
not what you know, it's who you know--her [his wife's] father got me back in there.
He got me to go through apprenticeship school there. It did a lot for
me . . . ."103
Another reason for these ethnic
clusters was favoritism. According to one veteran steelworker, "most of the different
ethnic groups all worked together and got along." But whatever ethnic group the
supervision belonged to, he added, "it seemed that they treated their own with better jobs, quicker promotions, and better
overtime," because "they looked more favorably upon their own." Additional distrust was produced by language differences,
and "there was nothing more annoying than when a foreman would talk to other workers in Windish [Slovene] or Pennsylvania
Dutch [German]. You always felt that they were saying something behind your back."104
But besides favoritism and family
connections bordering on nepotism, there were probably other, more positive reasons why different ethnic groups wanted to
work together. Steel-making is an extremely
hazardous occupation, and even though Bethlehem Steel had a good safety program, one worker recalled, fatal accidents
and serious injuries happened frequently, so there were deaths from "breathing gases, falling from crane runs, being burned
to death with hot metal or slag," being electrocuted, and being caught "between machinery in pinch points."105 Moreover, steel-making is often a teamwork, as well as a dangerous, job. An open hearth furnace crew, for example, has a melter foreman, a first and a second helper, and three
or four third helpers, all of whose efforts must be coordinated to produce steel efficiently and to avoid accidents.106 Blast furnace crews also had to have good teamwork, David Kuchta emphasized, since
they were working with iron melted to 3,000 degrees in 110-foot high furnaces that had to
be tapped every three or four hours. When that happens, a clay-plugged
tap hole has to be drilled out with an air hammer, then lanced with an iron bar so the molten metal races out with a deafening
roar and clouds of smoke and dust, runs through a trough to a dammed "pool" where slag can be separated from the liquid iron
by being skimmed off. Then it is channeled through more troughs to slag pots while the iron runs into hot metal cars beneath
the cast floor. To do this safely at Bethlehem,
said Kuchta, the men worked as a team, because when a furnace was tapped "one wrong move or step [by anyone] could mean death
. . . . Not only for themselves but also for their fellow workers."107 For these reasons it would have
been reassuring to work along-side relatives whom one could trust. Moreover,
especially in the 1890s and early twentieth century when many workers spoke little or no English, it would have been important
to work with a foreman and co-workers who could speak the same language.
However, despite this "clustering,"
there was an additional factor in Bethlehem's social make-up
that encouraged ethnic workers and their families to have a strong sense of solidarity with one another. Many of them were, after all, from the South Side, and they were well aware that this meant they were on
one side of a social as well as a geographical divide that could probably not, in many cases, be crossed. As one of Joseph Illick's friends, the son of a foreman who did cross the divide by graduating from Lehigh,
bluntly explained: "That river between the North and South sides really divided the city. . . . Many kids [at Liberty High School on the North Side] just
accepted the division. They resented it, but they didn't want to bridge the gap."108 A classmate from the same school made a similar point when he told Illick: "Maybe
some people on the North Side felt the South Side was a rough place, even when I was a kid [in
the 1940s]. But the distinction between the two places was income. We knew the North Side kids were in a higher income bracket."109
Moreover, even though Bethlehem
Steel was willing to hire thousands of immigrant and first-generation ethnic workers for skilled and unskilled labor, there
was a clearly understood steel ceiling for persons whose surnames ended in certain vowels or whose English was spoken with
certain accents: "By all accounts it was impossible for a man whose name ended in -sky or -ini to be appointed
above the job of general foreman."110 Since one needed to have a college
degree, preferably from a prestigious university, to enter Bethlehem Steel's "loop" management training course, that road
to upward mobility, and the Saucon Valley Country Club, was even more improbable for someone from the South Side. This discrimination reinforced the South Side ethnics' identification with one another, and made them more
aware that they were united by class. "When I lived in the Heights, that was
the League of Nations," a man of Hungarian descent told Illick. "We had Mexicans, we had colored, we had the Italians and Hungarians and the Slovaks and Russians and all
that. It was mixed," but it was still "a real good community at that time," he
said; " I never felt, as a Hungarian, that I was separate from the others. The
difference at that time was class. We were supposed to be of the lower class;
anybody on the South Side was that way"111
This steel ceiling existed well
before Illick and his classmates entered the tenth grade of Liberty High in 1949 and graduated from that school in 1952. Much
of Bethlehem's educational system, Illick realized later, was geared so that it would generally,
though not always, reproduce Bethlehem's North/South divide. There were two High Schools, Liberty was on the North and had a diverse curriculum,
including courses that would prepare students for colleges; the South Side had a Technical
High School, which was vocational and trained its students for jobs at "the Steel" and other industries: courses for
becoming a draftsman, machinist, electrician, mechanic.112 There were
four junior high schools, two in the North and West, and two in the South that also probably influenced students' eventual
academic and vocational choices. There were two libraries, the main one in the
North and a branch in the South, and students knew which was "their" library." My
mother taught me where I belonged," the daughter of a Slovak factory worker recalled.
"Foremen lived on the North Side, laborers on the South Side. . . .'Your library is down here, that's where you go'
[on the South Side] . . . . My mother didn't want me traveling that far, but I guess she was also trying to keep me in my
But these differences between Bethlehem's North and South did not mean that the latter always felt
themselves wronged or inferior. They had their own values, goals, and accomplishments,
and some of them judged their accomplishments accordingly, not by the standards of Vice President's Row. Sports, for example, were a source of pride to South Siders, and, as one of them told Illick, who was from
the North Side, "when we were kids, down on the South Side, . . . we were always known as tough characters. . . .We took all
the championships in football, basketball, wrestling. . . . But we never went into tennis--that was for you."114
Similarly, many steel jobs were
so dangerous or so physically demanding that workers felt proud of their ability to do them, even when these jobs had low
pay and status. "Chipping checkers," for example, meant working in rotating teams
of men who clean out ovens under open hearth furnaces, when they are being rebuilt or repaired, in which bricks arranged in
checkerboard patterns are clogged with slag and dirt. Chipping and jabbing at
these bricks with a five-foot steel bar to unclog them may not "sound too bad," according to one steelworker, but because
of the heat:
Believe me, it was a living hell!
We would have three or four crews of workers that would work in spells. . . . One furnace was so hot that we timed
the length of time one of the other crews stayed in and chipped: a total of 45 seconds. . . .When my buddy and I went in we
stayed for at least three or four minutes. There was a reason for this. My buddy . . . was definitely from the old school and believed hard work would never
kill anyone. . . . I think it had to do with being "macho." It sure didn't have
anything to do with money. The laborer's salary was the lowest in the plant .
. . I think back, maybe we worked like this for pride. Pride in accomplishment.115
During much of the twentieth century
both sides of Bethlehem had much to be proud of. Schwab, Grace, and their successors had built a small, specialized company into the second largest steel
producer in the country, and their steel workers had contributed their skills, muscles, and intelligence to that process.
Together they manufactured steel for the Golden Gate and George
Washington Bridges, skyscrapers,
ships, and immense amounts of armaments and other steel products. On the other
hand, as this paper shows, they had more difficulty bridging the differences that existed in Bethlehem as a community. Though the two sides
might meet in certain respects within the mills of "the Steel," in other respects they occupied two different castes and worlds. Both of these worlds would change drastically in the final decades of the twentieth
century as the American steel industry, including Bethlehem Steel, fell into bad times.
After the bitter and prolonged
116-day strike of 1959, American steel companies, including Bethlehem, were beleaguered by competing foreign companies, mainly
in Japan and Europe, by competing materials such as aluminum (cans) and reinforced concrete (construction and bridges),116 and slightly later by competition from mini-mills--small, specialized steel facilities
that operate with non-union labor and only a tiny fraction of conventional steel companies' managerial and administrative
costs. (The mini-mills, one Bethlehem
ex-worker said, rather bitterly, had "fewer white-collar workers and no country clubs, executive jets or . . . Taj Mahal-type
offices."117) Nevertheless, during the 1960s and 1970s, Bethlehem
sought to expand and modernize by building a new, integrated works at Burns Harbor near Chicago and by belatedly replacing
some of its open hearth furnaces at various facilities with Basic Oxygen Furnaces (B.O.F.'s), first developed in Austria in
1952, which are more economical and need smaller work crews than the open heaths.
At the same time Bethlehem's top management began implementing cost-cutting and downsizing programs that were
at first substantial and painful under Edmund Martin and Lewis Foy in the 1960s and the 1970s and then massive and traumatic
under Donald Trautlein in the 1980s. Bethlehem's Fabricated Steel Construction Division, headquartered at Pottstown,
Pennsylvania, was closed in 1976. In
1977 thousands of blue-collar workers were laid off as portions of its Lackawanna and Johnstown, Pennsylvania, works were closed, and 2,500 salaried workers
were downsized from various facilities, including 800 from the Bethlehem headquarters.118 The Lackawanna plant was largely closed in 1982-83, and the Cambria plant at Johnstown was closed completely in 1992.
Finally, between 1995 and 1998 the Bethlehem plant
itself was gradually shut down, and in October of 2001 Bethlehem Steel filed for a Chapter 11 Bankruptcy. Some of the corporation's facilities are still operating and producing steel at Burns
Harbor and Sparrows Point, however; its home offices are still located in Bethlehem, and portions of its facilities there will be preserved as
part of a National Museum of American Industry.119
As John Strohmeyer's and John Hoerr's
interviews with the Bethlehem veterans and casualties of those decades reveal, this painful process was often characterized
by differences in values and priorities, angry distrust, and failures of communication between the company's top management
and both its workers and its salaried employees. White-collar workers who were
either let go or fearful of losing their jobs confided to Strohmeyer that the management had violated its own personnel guidelines
and "handed department heads a 'hatchet' to settle old scores," a theory that increased the anxieties of the survivors. Scores of upper- and middle-echelon managers joined the exodus in the 1980s by taking
early retirement either voluntarily or involuntarily. "'It was not leaving the company that hurt ,'" a vice-president's wife
said, "It's how they did it. My husband still doesn't know where he failed or sinned.'"120
At the same time, along with many
USW members at other companies, Bethlehem's blue-collar workers
angrily defended their contracts and work rules and often refused to make any concessions that might have helped to restore
profitability. When Lewis Foy asked for concessions to try to save the Fabricated
Steel Division, for example, the union would only give up its dental plan and nothing more, and Foy's response was, "'Shut
it down.'"121 As the crisis continued, communications among top management,
workers, and USW officials did not improve. By the early 1980s virtually all
the traditional steel companies were in dire financial straits, and in 1982 the companies' managements launched an industry-wide
PR campaign to help persuade workers and the USW that they should agree to wage concessions to restore profitability and save
some of the jobs at stake. A video and slide show was prepared, presenting the
companies' position with graphs, charts, and statistics, and shown to workers and union leaders in the summer of 1982. The effort in general was not very successful, since the USW rejected re-writing the
contract in August of 1982; however, as Hoerr suggests, the Bethlehem USW officials were especially negative, since they refused
even to see or hear the presentation. Four times in mid-July, the Bethlehem negotiators met, and the management team tried to present its
show; on "each occasion the dozens of local union officers walked out," and one of them told Hoerr, "'We didn't want to see
slides and graphs. We've had enough of that Madison Avenue stuff."122
Thus, even in--or perhaps especially
in--this time of crisis, North and South Bethlehem had difficulties bridging their differences
and communicating with one another, but both suffered. Among the salaried employees,
when departments or their executives were eliminated, retinues of managers or assistants also left as their jobs were cut
or consolidated, and "For Sale" signs proliferated in Bethlehem's North Side neighborhoods as their owners migrated to places
such as Arizona and Florida.123 At the same time the South Side was
"being deserted by the children" of the immigrant families that it had once "nurtured," Illick wrote in the late 1980s. One
of the couples whom he interviewed, who had moved to the West Side of Bethlehem, lamented the South Side's loss of its community
cohesion, neighborhood schools, and recreational facilities: "the [ice] rink isn't there anymore, or Washington School. .
. . I could cry when I go through the Heights--everything's gone. . . . It makes
me sick. It was a real community. We never locked our doors. . . . It's a shame they did away with the neighborhood schools. They brought the parents together too. But
I guess times always change." "Let's face it: our type of people that lived down
there, we've moved all over the city," the husband told Illick, and then he offered his explanation for this change: "The
Heights is no longer; now it's the B.O.F.--Basic Oxygen Furnace."124
The so-called deindustrialization
of America that has taken place during
the past few decades has had a variety of causes and has been accompanied by a great deal of finger-pointing. For the man Illick interviewed, who lamented the decline of South Bethlehem,
the problem was technology: because B.O.F.'s have smaller crews, there are fewer blue-collar
jobs for neighborhoods like the South Side and their communities disintegrate. For many managers and executives, the problem
was the failure of hourly workers and their union leaders to accept pay cuts and work rule changes, and the workers responded
in kind by blaming managements for spending money on "executive jets . . . and Taj Mahal-type offices." And both sides have blamed foreign steelmakers for "unfair" competition, or they have blamed American politicians
for not protecting steel industry jobs and profits. What this study concludes
is that, especially in Bethlehem's case, additional reasons
for the industry's decline can be discovered within the communities and the corporate cultures that were produced by the industry's own successes. That is, the divisions
and disputes that made it so hard for executives and workers to cooperate in
times of crisis may be related to the divisions between Bethlehem's
North and South Sides that came into existence when Bethlehem Steel was expanding during the early twentieth century, World
Wars I and II, the 1920s, and the 1950s. In particular, the phenomenal profits,
salaries, and bonuses earned by the company's top management during those periods served to deepen the city's north/south
divisions and made the top executives a kind of caste, separated from their workers not only topographically but socially
and educationally as well. And these divisions made it all the more difficult
for the two groups to communicate and cooperate when it was so desperately important for them to do so in the late twentieth
1. Industrial Research Class, A
Study of Steel (Buffalo, NY: Bryant & Stratton College, 1925), 110.
2. Edmund Martin, Promise for the Future (New York: American Newcomen Society, 1967), 14.
3. Joseph Levering. A History of Bethlehem, Pennsylvania:
1741-1897 (Bethlehem: Times Publishing Company, 1903), 725.
4. Levering, 726.
5. Levering, 724-25.
6. Illustration 1. "Interior View of Bethlehem
Gunshop." Arundel Cotter, The Story of Bethlehem Steel
(New York: Moody Magazine and Book Company, 1916), 34. Martin, Promise, 9.
7. Robert Hessen, Steel Titan: The Life of Charles M. Schwab (New
York: Oxford University Press, 1975), 164-66.
8. Hessen, 45-46, 91-92.
9. Hessen, 148, 165-66.
10. Eugene Grace, Charles M. Schwab (New York: American Iron and
Steel Institute, 1947), 6.
11. Hessen, 29.
12. Grace, 27.
13. Hessen, 134-35, 145-61.
14. Mark Reutter, Sparrows Point
(New York: Summit, 1988), 92.
15. Reutter, 92.
16. "Big Order for Guns Here,"
New York Times, 22 October
1914; "Schwab's War Orders," New York
Times, 26 November 1914.
"Bethlehem Steel," Fortune (April 1941), 68.
Joseph Illick, At Liberty (Knoxville: University
of Tennessee Press, 1989), 6.
Hessen, 303; Reutter, 287.
Grace, 22-23, 24-25.
24. "Schwab Predicts Bright Future,"
Bethlehem Globe, 9 April 1925.
David Brody, Steelworkers in America:
The Nonunion Era (Cambridge, MA: Harvard University Press, 1960), 18-19.
27. Hessen, 26.
Reutter, 103, 106. Also see Cotter, 34-35.
Reutter, 107; "Bethlehem Steel," 68, 139.
Brody, 24-25; Hessen, 70-71.
"Bethlehem Steel," 139.
Grace, 4, 31.
Emphasis in original. "Bethlehem Steel," 139.
"Bethlehem Steel," 139.
"Grace's 1929 Bonus Reached $1,623,753," New York
Times, 22 July 1930.
39. Reutter, 197-98.
"Bethlehem Bonuses Are Cut by New Plan, Salaries Increased,"
New York Times, 3 July 1931.
John Strohmeyer, Crisis in Bethlehem (New York:
Penguin, 1987), 29.
46. Grace, 31-32.
"Bethlehem Steel," 61-62.
"Bethlehem Steel," 149.
See, for example, "Schwab Predicts Bright Future."
"Grace Praises Men for Plant Economy," Bethlehem
Globe, 22 April 1925.
The Employee Representation Plan was a kind of company union that management started in 1919. It was replaced by the SWOC in 1941. See Reutter, 290-99;
"Order for Submarines Here," New York Times, 10 November
56. "Schwab's War Orders Rated at $50,000,000," New York Times,
26 November 1914.
57. Reutter, 97-98.
58. "Bryan Asks Schwab about Submarines," New York
Times, 3 December 1914.
59. "Schwab Cancels Submarine Order," New York Times, 24 December 1914.
Reutter 100-02; Hessen 215.
61. Grace, 42.
62. Hessen, 134-35.
63. Reutter 267.
64. Hessen, 23-24.
Grace, 33-34; Hessen, 175.
Martin, Promise, 10; Strohmeyer, 110; Hessen, 183.
73. David Kuchta, Memoirs of a Steelworker (Easton, PA. Canal History and Technology Press 1995), 70-71.
Charles Schwab, "People's Edict Gives Confidence to Industry," Bethlehem
Globe, 1 January 1925.
75. "Steel Report Shows Gains,"
Bethlehem Globe, 23 January 1925.
"Schwab Back Home, to Improve Plants," New York Times, 11
77. "More Signs of Prosperity in
This City," Bethlehem Globe, 28 August 1925.
78. Edmund Martin with David Morrison, Bethlehem Steelmaker (Bethlehem, PA: BMS, 1992), 75; Strohmeyer, 46-47.
79. Strohmeyer, 47.
80. "Bethlehem Steel," 140. In addition, until the
1960s there were no members of the corporation's Board of Directors who were not Bethlehem
executives, and its own officers did not serve on the boards of other companies. Martin,
Bethlehem Steelmaker, 108-09.
81. Brody, 99.
82. Illustration 2. Map of Bethlehem. Illick, 13.
83. Illustration 3. Walker Evans,
Library of Congress. Illick, 10.
Swamps N. Y. Giants," Bethlehem Globe, 6 April 1925;
"Steelworkers Show Speed," Bethlehem Globe, 23 March
166. For Taylor's
theories, see his Principles of Scientific
York: Harper, 1911).
91. Levering, 733.
733; Stolarik, 44.
Strohmeyer, 117, 125.
"Bethlehem Steel Financing," New York
Times, 6 November
Garn, Bethlehem Steel (Princeton: Princeton
Architectural Press, 1999), 44-46.
Strohmeyer, 126, 148.
122. John Hoerr, And
the Wolf Finally Came: The Decline of the
American Steel Industry (Pittsburgh: University of Pittsburgh Press, 1988), 228-29.
123. Strohmeyer, 148.
124. Illick, 88-91.
Bonuses Are Cut by New Plan." New York Times, 3 July 1931.
Bethlehem Census, South Bethlehem 1910, Census
Steel." Fortune (April 1941): 61-69, 139-56.
"Bethlehem Steel Financing," New York
Times, 6 November 2001.
"Big Order for Guns Here." New York Times, 22 October 1914.
Asks Schwab about Submarines." New York Times, 3 December 1914.
Cotter, Arundel. The Story of Bethlehem Steel. New York:
Magazine and Book Company, 1916.
Garn, Andrew. Bethlehem
Steel. Princeton: Princeton Architectural Press,
Charles M. Schwab (New York: American Iron and Steel
"Grace Praises Men for Plant Economy." Bethlehem Globe, 22 April
"Grace's 1929 Bonus Reached $1,623,753." New York
Times, 22 July 1930.
Ilick, Joseph. At Liberty.
Knoxville: University of Tennessee Press, 1989.
Industrial Research Class, A Study of Steel. Buffalo, NY:
Bryant & Stratton
Kuchta, David. Memoirs of a Steelworker. Easton, PA. Canal History and
Technology Press 1995.
Martin, Edmund F. with David Morrison. Bethlehem Steelmaker: My 90
in Life's Loop. Bethlehem, PA:
BMS Press 1992.
Promise for the Future. New York: American
Newcomen Society, 1967.
"More Signs of Prosperity in This City." Bethlehem Globe, 28 August 1925.
Census 1890, Access Genealogy/ Pennsylvania
"Order for Submarines Here." New York Times, 10 November 1914.
Schwab, Charles. "People's Edict Gives Confidence to
Globe, 1 January 1925.
"Schwab Back Home, to Improve Plants." New York Times,
11 March 1925.
"Schwab Cancels Submarine Order." New York Times,
24 December 1914.
"Schwab Predicts Bright Future." Bethlehem Globe, 9 April
"Schwab's War Orders Rated at $50,000,000." New York
Times, 26 November
"Steel Report Shows Gains," Bethlehem Globe, 23 January
"Steel Swamps N. Y. Giants," Bethlehem Globe, 6 April
"Steelworkers Show Speed," Bethlehem Globe, 23 March
Principles of Scientific Management. New York: Harper,
Barraclough, K. C. Steelmaking
before Bessemer: Volume 1 Blister Steel,
the birth of an industry. London:
The Metals Society, 1984.
Barraclough, K. C. Steelmaking before Bessemer:
Volume 2 Crucible
Steel, the growth of technology.
London: The Metals Society, 1984.
Bodsworth, C. Editor.
Sir Henry Bessemer: Father of the Steel Industry.
London: IOM Communications Ltd, 1998.
Brody, David. Steelworkers
in America: The Nonunion Era. Cambridge, MA:
Harvard UP, 1960.
Gordon, Robert. American Iron 1607-1900. Baltimore: Johns Hopkins
University Press, 1996.
Hessen, Robert. Steel Titan: The Life of Charles M. Schwab.
New York: Oxford
University Press, 1975.
Hoerr, John. And the Wolf Finally Came: The Decline
American Steel Industry. Pittsburgh:
University of Pittsburgh Press,
Levering, Joseph. A History of Bethlehem, Pennsylvania: 1741-1897.
Bethlehem: Times Publishing Company, 1903.
Reutter, Mark. Sparrows Point. New
York: Summit, 1988.
Stolarik, M. Mark. Growing Up on the South Side.
University Press, 1985.
Strohmeyer, John. Crisis in Bethlehem. New York: