How Much a Ton?

First major product whose price was dumped in Leon Henderson's lap was steel industry's biggest raw material and key to the whole U.S. price structure (see above). Last week C.I.O. and C.I.O 's archenemy, Ernest Tener Weir, combined to make many a steel producer talk about upping his price tags.

The Steel Workers Organizing Committee, which has gained no pay rises since 1937, began negotiating last month with U.S. Steel for a new contract. Its asking price: 10-c- an hour more pay (current rate: 62 1/2-c-). The company's bid: 2 1/2-c- an hour. There was plenty of room for compromise. Big Steel said the industry could absorb a $1 increase, would find 7 1/2-c- on the borderline, would have to up its prices if the 10-c- demand went through. When a threatened strike was postponed for more negotiations, everybody expected management and labor to meet halfway. They reckoned without Mr. Weir.

Of all steel companies, Weir's National (now No. 5 U.S. producer) could best afford a pay rise. A low-cost producer with a steady market in the auto and canning industries, National made a profit even in 1932, when the four biggest companies lost $109,800,000. Since National has a low exemption under the excess-profits tax, most of what it pays out in higher wages can be saved in lower taxes.

And Weir, who has no contract with C.I.O.

and wants none, knows well that high wages keep union organizers away. So Weir pulled a fast one: he announced a 10-c- wage rise, retroactive to April 1.

This week the consequences were felt.

To save face (by proving it could do as much for its members as anti-union Weir had done unasked for his employes), C.I.O. had to insist on the full 10-c- rise which it had proposed originally as a barganing point. Other steelmakers had no way out of following Weir's lead. This week not only did Bethlehem, Republic, Otis, Youngstown Sheet & Tube all grant a 10-c- wage increase, but U.S. Steel ended the fear of a Big Steel strike by settling with C.I.O. on the same basis. This will raise their labor costs around 16%. Their estimates on how much production costs would be raised: $1.60 to $5.20 a ton.

With operations now at 100% of capacity, big steel companies could absorb the increase and still make money at the prices the Government is trying to maintain. Once the industry's break-even point (now estimated at 60% of capacity) is passed, profits jump dizzily; last year, when U.S. Steel's operations rose to 80.2% from 60.7% in 1939, profits rose 150%. But the small, unintegrated companies that have to buy all raw materials lagged far behind Big Steel's record last year. These companies maintain that a 10-c- wage rise means higher steel prices or red ink.

Leon Henderson, pointing out that steel prices were already 5% above 1929, showed little sympathy last week with the idea that prices must permit marginal producers to make money. Reason: low-cost producers would then clean up and even at peak prices, marginal producers would not contribute much capacity. But whether or not steel can pay higher wages on present prices at present production rates, both industry and Government were already giving thought to what would happen after the rearmament boom. Before Weir came through with his outright wage boost, pro-labor New Dealers were suggesting a bonus plan which would cut workers in temporarily on the temporarily high profits of full production. Their suggestion : a sliding scale of wages based on the operations rate.

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