Business: War Threatened

In its field, Bethlehem Steel is second only to U. S. Steel. A “trade war” between these two is predicted, for U. S. Steel has apparently challenged a Bethlehem monopoly—the production of a broad-flange structural beam.

This is the Grey or Bethlehem beam, invented by Henry Grey (1849-1913). Weight for weight it is lighter and stronger than ordinary I-beams, and so is preferred by constructors, who gladly pay a bonus of $2 a ton to Bethlehem which has the patent and production rights. Incidentally they do not object when a Bethlehem salesman wants all their structural business.

U. S. Steel is now remodeling its Homestead plant to manufacture beams of this type. Anent this, Judge Gary said, in the Iron Trade Review: “We are building a mill which will be prepared to manufacture a wide flange beam.” Bethlehem President Grace countered: “Bethlehem has an exclusive license under numerous patents which have several years to run, and which cover the process for rolling the so-called broad-flanged sections as a product.” It may be that the Judge, always perspicacious, is looking far years ahead. Yet the ingredients of a fight already exist.

The differences between U. S. Steel and Bethlehem Steel lie deeper than ordinary competition. They are exemplified by the differing personalities of two men— Judge Elbert Henry Gary and Charles Michael Schwab. The Judge, for all his kindliness of heart, is ruled by his head; Mr. Schwab, for all his hard sense, is emotional. The clash of their natures showed itself at the very formation of the U. S. Steel Corp. in 1901. The late John Pierpont Morgan attracted Judge Gary, the legalist, to organize his iron and steel consolidation plans, and to give them grace. The late Andrew Carnegie was the biggest steel maker in the U. S., and Mr. Schwab was to all purposes Andrew Carnegie, being president of the Carnegie Steel Co. and Carnegie’s prime partner. They could wreck the Morgan schemes. But they wanted to sell out—for nearly a half billion dollars. “Charlie” Schwab consummated that deal by persuading first Judge Gary, then Morgan. He became the first president of the U. S. Steel Corp.

Then began the Schwab-Gary tussle. The Judge wanted to operate the whole organization through an oligarchy, an executive committee. President Schwab wanted sole control. He objected to hearing an influential director ordering him to build a steel plant at Chicago, when he, the direct operator, needed a plant at Pittsburgh. The Judge was further irritated by President Schwab’s behavior at Monte Carlo. Reports came that the very President of the U. S. Steel Corp., that “good” corporation, was reveling on the Riviera, that he was playing roulette, vingt-et-un, chemin-de-fer and baccarat for stakes of thousands of dollars. Mr. Schwab has never smoked. He has drunk sparingly. He has been a devoted husband. Yet he has always liked a pleasant game of cards. If he did gamble a bit at Monte Carlo, the stakes meant little to him and he had earned relaxation.

From the day he first ran his father’s stage-coach over the five miles between Loretto and Cresson Station, Pa., his life had been work, work, work. Such working, made gay by his lightheartedness, his joviality, his singing and his pianoplaying, took him from grocering for oneA. H. Speigelmire at Braddock, Pa., to driving stakes for Captain “Billy” Jones, superintendent of the Edgar Thompson works, a Carnegie Steel subsidiary. At 24 he headed Carnegie’s engineering organization; built the Homestead Steel Works where raw material went in at one end and came out in continuous process at the other, a finished product; had 6,000 to 7,000 men under him. He helped quell the vicious Homestead Strike of 1892 and at once turned about to conciliate his workers. At 39 he was the “boy President” of the U. S. Steel Corp.

President Schwab resigned in 1903, to be succeeded by another “Carnegie boy,” William Ellis Corey, and in 1911 by James Augustine Farrell, who had come through the American Steel & Wire Co., which was not a Carnegie organization. The Monte Carlo episodes were no real cause for the resignation. They merely intensified the dispute between One-man Schwab and Boardman Gary. “Charlie” Schwab turned to the dilapidated Bethlehem Steel Corp. and made it into the greatest U. S. competitor of the U. S. Steel Corp.

Bethlehem Steel, under the chairmanship of Mr. Schwab and the presidency of Eugene Gifford Grace, is completely a vertical organization. It has its own ore mines, notably in Cuba and South America, its own ocean docks. It mines its own coal, cokes it and utilizes the by-products it does not sell. Its pig iron is refined to its own steel; and its steel goes into a multitude of products—ships, machinery, rails, plates, structural shapes.

Two years ago Mr. Schwab, tired of Judge Gary’s moralizings, ceased attending sessions of the American Iron & Steel Institute. Friends, out of the affection they have for him, wanted him back. They told him, in effect, not to be childish. The Judge was the elder (by 16 years) and it would become the junior to defer to the other’s dignity. Mr. Schwab returned—on the occasion of the Institute dinner which Queen Marie of Rumania attended. Mr. Schwab sat beside her. As usual, the Judge, with his suave benignity, gave one of his little lectures; and, as aforetime, concluded by saying: “Gentlemen, the meeting is now in your hands. Whom do you want to hear from?” At once came the old rumble, the roar:

“Charlie! Char-r-r-lie!!!”

He is the best loved man in the industry, as Judge Gary is the most revered.

From his seat beside Queen Marie he rose, like a huge iron ingot prized up by a crowbar. The cheering, the hand clapping pattered into silence. His kindly brown eyes that once were bright with swiftest thought were dimmed a trifle from his 64 years of vigorous living. Yet they could still twinkle with the mischievous, Schwabian jest he was about to utter. Looking down at Queen Marie, he said: “If I were King Ferdinand, I would not let a wife like her go on a three months’ vacation.”