Bethlehem Steel
Bethlehem Steel Corporation
ALTERNATIVE NAME: None
LANGUAGE: English
TIME: Incorporated December 10, 1904
LOCATION: Bethlehem, PA
CATEGORY: Industrial Corporation
DISCIPLINE: Steel
SHORT DESCRIPTION: One of the largest steel producers in the United States, renowned for rapid ship construction during wars
DESCRIPTION:
Bethlehem Steel was originally the Saucona Iron Co., founded in 1857 by Augustus Wolle, who planned to produce pig iron from an ore deposit near Saucona Creek, PA. A local lawyer persuaded Wolle that he could do better if he built his blast furnace near the Lehigh River and make rails for the Lehigh Valley Railroad.
The advice was sound. For the next 25 years, Wolle produced only rails, and made a handsome profit. In 1861, the Saucona Iron Co. became the Bethlehem Iron Co. In 1873, it introduced the Bessemer* process for producing steel, but an economic depression halted the demand for rails. Bethlehem survived the market downturn, and five years later business went back to normal.
Seeing the risk in producing only one product, Bethlehem manager John Fritz suggested the company diversify, and, with reluctance, the directors agreed to the production of heavy forgings for guns and engine shafts. What finally persuaded the directors was the promise of a customer who would take everything the firm could produce: the United States Navy.
In 1887 it awarded its entire contract to Bethlehem Steel. The company quickly proved itself with the quality of its gun forgings, and in 1888 opened its first William Siemens* and Martin open-hearth furnace to manufacture the low-phosphorus steel needed for armor plate.
Bethlehem habitually met schedules ahead of time and by 1891 was also supplying the United States Army. It also produced many more products: steel for axles, springs, screws and wire, as well as forging for armor plate, guns, ships' shafts and pumps. It also supplied foreign governments.
In 1898, Bethlehem hired Taylor*, a time-and-motion expert, who came up with a number of cost-cutting ideas. He recommended that three-quarters of the work force be laid off, jobs be specialized, work methods be standardized, and key personnel get higher salaries to discourage them from leaving.
The owners were shocked at Taylor's ideas and dismissed him.
In 1902, the newly formed U.S. Shipbuilding Co. and the president of the U.S. Steel Corp., CM Schwab*, began a see-saw competition for control of Bethlehem Steel. But Schwab won out, bought a controlling interest, and fought off U.S. Shipbuilding's attempt to buy it from him. When Schwab resigned from U.S. Steel in 1903, he bought out JP Morgan's* interest in Bethlehem Steel and set about transforming its structure.
In 1904, he established the Bethlehem Steel Corp., a holding company which also operated seven shipyards and one manufacturing company. As president of the corporation, Schwab went back to the way he liked to manage: by drive and incentive. He ordered a search for ore deposits in the U.S. so that Bethlehem Steel could be self-sufficient, and he established a new plant.
Like John Fritz before him, he realized the company could not rely forever on government contracts, and invested in a largely-untried new product: a type of structural steel, invented by Henry Grey, that could be rolled to make a wide-flanged beam in a single section that did not need riveting. The first major sale of these beams, later known as “Bethlehem beams,” was to Gimbel Brothers in New York, for their department store. But Chicago became the showcase for the beams, used in such high-profile buildings as the Chicago Opera House.
After 1909, major orders for military hardware came flooding in, including (the biggest order Bethlehem had ever received) one from the Argentine navy. During World War I, Bethlehem built more destroyers than all the other shipbuilding yards in the U.S. combined. It also produced submarines for Britain, building them in Montreal so as not to compromise U.S. neutrality.
Thanks to Schwab, Bethlehem Steel became one of the largest steel producers in the U.S. Foreign governments offered tenders, investors invested, research departments were set up, and the company began to attract newly qualified engineers, including the American-Norwegian explorer Ronne*.
ONELINER: Bethlehem Steel, an early industrial giant
BIBLIOGRAPHY:
Hessen, Robert, Steel Titan, The Life of Charles M. Schwab, Oxford University Press, 1975
Encyclopedia Americana 1977.