War of Steel

During the long and peaceful reign of Judge Elbert Henry Gary, U. S. Steel and the whole steel industry seemed to have passed forever beyond their fighting days. But last autumn, with Judge Gary two years dead, it was evident that Steel's warlords were rousing for new struggles. Last week there began Steel's mightiest pitched battle for many a year. Bethlehem stood pitted against its new rival, Republic. The prize: Youngstown Sheet & Tube, which, for the first time, was divided against itself.

Not that Republic wants Youngstown. In fact there are good reasons (such as that both make great quantities of pipe) which make such a merger unlikely. BUT Republic's Founder Cyrus Stephen Eaton was determined that Bethlehem should not have Youngstown. Why? Not because Mr. Eaton is a dog-in-the-manger, but because he would like Youngstown to merge with another of his interests, Inland Steel; and because, since he owns or controls some 20% of Youngstown stock, he does not want it taken over by his nearest rival, Bethlehem.

Bethlehem had excellent reasons for wanting Youngstown. Superficially, the formation of Republic threatens its position as No. 2 steel company. Also, superficially. Bethlehem's irrepressible Charles Michael Schwab has never completely forgotten his old ambition to create a steel concern bigger than U. S. Steel.

In the immediate conflict which has given the thrill of a lifetime to the famed old Ohio town of Youngstown, round which muddy rivers pass, three figures are preeminent. Perhaps the truest steelman of them all is Eugene Gifford Grace, president of Bethlehem. Much as the late great Carnegie picked Charles M. Schwab to head Carnegie Steel, so Schwab chose Grace to be the star of Bethlehem. Tall, slender, faultlessly clothed, President Grace went to Lehigh University in Bethlehem, Pa., there captained the baseball team, there became acquainted with the long rows of mills that mark Steel Town. After graduating he became a crane operator at $1.80 a day (12 hours), started a rise that culminated (February, 1916) in his election to his present job. Under him, Bethlehem boomed through the War. Followed the depression of 1921--Bethlehem has never been depression-proof--and a remarkable period of rebuilding that ended last spring with the first dividend in five years. Last week Mr. Grace journeyed to Cleveland to try to keep his company second biggest among U. S. steelmakers.

Second of the figures is James A. Campbell of Youngstown, Ohio, an older hand in the industry than Bethlehem's Grace. In 1900 Mr. Campbell organized Youngstown Sheet & Tube, now fourth largest unit. A ruddy-faced man of 75, indulging in few extravagances beyond bright suits and tipping his barber 25-c-, he last winter resigned as president of Youngstown to become chairman. Until last week his word was sufficient to sway the company, was able to block a merger with Bethlehem two years ago. Last week he at first refused to comment on the proposed merger, but finally declared it "ideal," although last December he was quoted as favorable to a merger with Republic. Even the combination of Grace and Campbell did not, however, seem to concern the third figure, Cyrus Stephen Eaton.

No old steelman, Mr. Eaton's fame rests solidly on his organization of potent Republic Steel Corp. out of a group of "little fellows." Last fortnight he set out after Gulf States Steel, seemed thwarted. Then, on the eve of last week's scrimmage, acquisition of Gulf by Republic seemed assured. With this success behind him, he devoted himself to preventing the Bethlehem-Youngstown deal, probably in order that he might later acquire Youngstown for Inland.

The Bethlehem v. Eaton over Youngstown combat first began in a long conference, attended by the three chiefs and their seconds. Apparently Mr. Eaton convinced them that his was no feeble gesture, for at the end of eight and a half hours he came out grinning while Mr. Grace and Mr. Campbell clambered down 20 floors of fire-escape to avoid newsgatherers.

Although the directors of both Bethlehem and Youngstown proceeded to approve the deal, 66% of Youngstown stockholders must agree to it. To prevent this, Mr. Eaton traveled from Cleveland to Youngstown. rented a room in a hotel, announced: "We are prepared to wage one of the greatest battles for proxies in the history of the State. Youngstown Sheet & Tube will never merge with Bethlehem Steel Corp."

According to unofficial estimates, Mr. Eaton has control of 500,000 of the 1,200,000 shares outstanding, sufficient to block the deal. To get others, he has the legal resources of Squires. Sanders & Dempsey. potent Cleveland law firm. He has also many a convincing argument. Chief of the latter is based upon the pride of the city of Youngstown in Sheet & Tube, widely held in the community. Another argument is that the price offered is not high enough. Another point, that the deal would be demoralizing to the steel industry, is probably based on the belief that a union with Bethlehem would bring Youngstown into the battle now being waged in other sections by Bethlehem and U. S. Steel.

With Mr. Eaton as plaintiff, the case for Defendant Bethlehem remained to be heard.

As the battle for proxies began, steelmen reviewed these figures (approximate):

Assets Ingot Capacity

U. S. Steel $2,500,000,000 20,000,000

Bethlehem 640,000,000 8,000,000

Republic 335,000,000 5,000,000

Youngstown ...... 230,000,000 3,000,000

Obviously, Youngstown is a vital prize in the race for second place. During the week rumors involving almost every steel company were rampant. Most surprising was the report that the $100,000,000 Rockefeller-owned Colorado Fuel & Iron Co. is now being sought by Bethlehem. Only recently Republic was reported after it. On top of all this, U. S. Steel again announced it has $200,000,000 ready for expansion.

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