Out of the Crucible
(See Cover)
Pittsburgh, Youngstown, Gary--they make their steel with men.
In the blood of men and the ink of chimneys
The smoke nights write their oaths:
Smoke into steel and blood into steel;
Homestead, Braddock, Birmingham, they make their steel with men.
--Carl Sandburg
Among the men who made steel in Pittsburgh, the strongest of all was "Hunkie" Joe Magarac. He was born in an ore mine and grew 7 ft. tall. He could gulp a gallon of prunejack in a single swig, hoist an 850-lb. steel dolly like a paperweight and twist it like a pretzel. One day, when Magarac took off his shirt, fellow workers discovered the source of his strength: Joe was made of steel.
Like legendary Joe Magarac, the U.S. finds the source of its strength in steel. The average American is awakened every morning by a steel alarm clock, hops out of a steel-springed bed, shaves himself with a steel blade, has breakfast cooked on a steel range, rides to work in a steel bus or car, works in a building whose entire skeleton is steel. Virtually every U.S. product is made of steel or from steel machinery, and 40% of all U.S. jobs depend upon steel and its users. Steel is the foundation of all U.S. military power, real and in the making. In this age of mechanized warfare, it is no longer the biggest number of troops that determines victory; it is, in the final analysis, the biggest number of blast furnaces. Thus, the fate of the U.S. may depend upon the question: How much steel can the U.S.. produce?
The clangorous plants, plumed with smoke by day and reddened with fire by night, are working round the clock. But still there is far from enough steel to give everyone all he wants. What are steelmen doing to supply it?
They are expanding--almost twice as fast as during World War II. The expansion will cost at least $6 billion. Even Washington bureaucrats, often critical of the industry's monolithic stubbornness in the past, concede that steelmakers cannot expand any faster without crippling civilian and defense production. And no one has set a higher target than the steelmakers' own Joe Magarac: the $2,829,000,000 U.S. Steel Corp., sired by J. P. Morgan the Elder, weaned by Judge Elbert Gary, and now, in its maturity, presided over by a miner's son from Pigeon Run, Ohio, named Benjamin Franklin Fairless.
From the Spinach Fields. On a six-mile peninsula in the Delaware River, a mile below Trenton, the largest steelworks ever built at one time is rising in the rural countryside. It is Big Steel's new Fairless Works. It will cost $400 million. Giant earthmovers are clawing across 3,800 acres of bean fields and tomato patches; 6,000 construction workers are laying 20 miles of paved roads and 75 miles of railroad. Huge shovels scoop out the river basin to dock ore ships that will come from Venezuela.
Near by rise the skeletons of two blast-furnaces which will smelt the ore into iron, and the chimneys of nine open-hearth furnaces where the iron will be turned into molten steel, spilled into a giant ladle and poured into ingots. Beyond are the "soaking pits," huge ovens where the ingots will be kept red hot while they wait their turn in the mills, where tremendous rollers will press the glowing ingots into slabs.
In a former spinach field, long grey sheds are building: there the slabs will be rolled continuously thinner, into plates for tanks and cruisers, sheets for autos and refrigerators, wafer-thin tinplate for cans, spewed out at 60 miles an hour.
Near by, Pennsylvania's peaceful Bucks County countryside is beginning to bloom with new towns to house 25,000 new workers: a new 16,000-home Levittown, and the smaller, more expensive 4,000-house Fairless Hills. By January, less than eleven months after ground was broken, the Fairless Works will roll its first steel. When the whole complex plant is completed, a year later, the Fairless Works will boost Big Steel's 34-million-ton yearly capacity by a whopping 1,800,000 tons, enough to make 900,000 autos--or 45,000 more tanks--a year.
From the Union. But amid the cheerful clatter and roar of expansion last week was an ominous note: the threat of a possible steel strike. Next week the C.I.O.'s 961,000 steelworkers, led by ailing Phil Murray, will formulate their wage demands. For the rearming U.S., as Defense Boss Charles Wilson warned, an industrywide strike is "unthinkable." But the prospects of a quick and amiable settlement are not reassuring.
In Birmingham last week, a minor dispute led to a walkout by 26,000 workers, which closed down Big Steel's Tennessee Coal, Iron and Railroad Co., the South's biggest steel producer (daily loss: 9,000 tons). Even a steel settlement might have serious consequences for the U.S. economy. If the steelworkers get a sizable raise, it will crack the stabilization program wide open, not only on wages but on prices. Said Charlie Wilson: "If steel wages go up, steel prices will go up also as sure as night follows day." Up with steel prices will go the prices of everything made of steel. Never was the old saying truer: "As steel goes, so goes the nation."
The Empire. Big Steel is both progenitor and offspring of the American industrial genius. Without its rails, nails, rivets and girders, the U.S. productive machine could not have grown. Without that growth, Big Steel itself might have foundered in its own watered stock after the company was created by Banker Morgan at the turn of the century.
U.S. Steel is now so big that it has no close domestic rival; it produces 32% of the nation's steel, more steel than Russia, or Britain and West Germany together. It is much more than a steelmaker. It plies the oceans with 45 freighters (Isthmian Steamship), the Great Lakes with 62 ore carriers (Pittsburgh Steamship), owns four railroads with 1,266 miles of track, builds houses (Gunnison), makes oilfield equipment (Oil Well Supply Co.), and is the second biggest coal digger in the U.S. Its Universal Atlas is the biggest U.S. cement company.
The Empire Builders. Banker Morgan, an orderly man, regarded price-cutting and dog-eat-dog competition as anarchic. He believed in "rationalizing" competition by mergers. Having rationalized railroads, he had gone a long way toward rationalizing steel before he conceived his master plan. He had merged two steel plants, an ore company and a railroad into the Federal Steel Co., with Illinois' Judge Elbert H. Gary at the helm, and merged 19 steel-fabricating plants into National Tube. Yet the whole steel industry was still dominated by Pittsburgh's sturdy Scottish rebel, Andrew Carnegie, who in 1900 turned out almost half of the nation's annual 10 million tons.
From young Charlie Schwab, Carnegie's right-hand man, Morgan learned that Carnegie, anxious to retire and devote his life to giving away his millions, might be in a mood to sell. "If Andy is willing," said Morgan, "go and find out his price." Soon Schwab came back with a slip on which Carnegie had scribbled the figure: $400 million. Merely glancing at it, Morgan said: "I accept." On Feb. 25, 1901, Morgan assembled Carnegie Steel and all the other companies into U.S. Steel--and floated $1,400,000,000 in capital, half of it in common stock. As newspapers observed at the time, the common had no visible assets behind it: it was almost pure water.
Big Steel grew up to match Morgan's grandiose dreams. For 26 years its czar was pious Judge Gary, a teetotaler who ran it like a Sunday school, and who, in the words of one bitter critic, "never saw a blast furnace till after he died." At his annual "Gary dinners," he set the prices for the entire industry. Later he established uniform prices by his Pittsburgh Plus and basing point systems, both now outlawed.* He also fought and licked the Government trustbusters who sought to break up the Steel Trust. He won primarily because in the growing U.S., newcomers were able to grow, along with Big Steel, until Big Steel's share of the total market dwindled from 65% in 1901 to 33% at the time of Gary's death in 1927.
Tradition Smasher. Gary had not only let the empire shrink; its plants had grown antiquated. To scurf the rust, the House of Morgan brought in Lawyer Myron C. Taylor, who had made $20 million, while still a young man, by putting rickety textile firms back on their feet. Taylor paid off $340 million of Big Steel's bonded debt just before the 1929 crash, thus enabling it to live through the depression, when--for the first time--it lost money. Taylor modernized equipment and, more importantly, changed Big Steel's labor relations.
For more than 30 years, blackjacks, black lists, and the coal & iron police had kept unions out of Big Steel, while labor leaders reviled the steelmakers and cartoonists made them the archsymbol of all fat-cat capitalists. Taylor astounded the industry, and his own plant managers, by signing up with the fledgling C.I.O., the first steelmaker to do so. He broke the line, in the bitter words of Republic Steel's President Charlie White, "in return for a promise [from Franklin Roosevelt] of an appointment to the Court of St. James's. Instead, he got that job at the Vatican."/- By 1938, Taylor was ready to turn the operating job over to a younger captain. He picked Ben Fairless, then 47, and boss of Big Steel's top subsidiary, Carnegie-Illinois.
Manager's Manager. Fairless has neither the creative genius of a Carnegie nor the empire-building drive of a Morgan. Yet under his administration, the empire has expanded more than in any comparable period of time. Capacity has already increased 17% (to 34,000,000 tons), and another 5.3% increase is on the way. Actual production has tripled. Compared to he operations of other giant corporations (e.g., General Motors, Du Pont), the business of making steel is relatively uncomplicated. And Ben Fairless is a relatively uncomplicated man. His biggest assets are a personal charm and warmth, a knack of getting the best out of men, and a great talent for settling high-level disputes. Command rides easily on his middling (5 ft. 8 in.) frame; at 61, his reddish-brown hair is untouched with grey, his ruddy, blue-eyed face is boyishly perky, his voice deceptively soft.
His command posts are in Pittsburgh's Koppers Building and at 71 Broadway in Manhattan. To operate Big Steel's 56 subsidiaries, he picks good deputies, gives them their heads, promotes them if they make good, and fires them if they don't. He inspires deep loyalty ("He could have my shirt, or my arm," says an ex-subordinate). He will go to any reasonable length to compromise a conflict, but acts ruthlessly if he can't. Once he fired the president of a subsidiary for refusing to obey an order. He gave the job to a deputy who had defended the rebel. "I knew you had every reason to dislike him," said Fairless. "I figured if you were so loyal to him, you would certainly be loyal to me."
For steelmen, who are often inarticulate or else incoherently profane, Fairless has become an able spokesman (thanks less to the corporation's old-fashioned idea of public relations than to the speech-writing help of Phelps Adams, ex-Washington chief of the late New York Sun). He is winning increasing recognition as a spokesman for the problems of industry in general.* Steelmen like him because he doesn't hesitate to stand up and talk back to congressional committees, and ably defends the industry against the critics of Bigness. Fairless labels them "Calamity Johns suffering from a midget complex . . . They think small." He is adept at cajoling the industry into a united front when necessary. Once, at an industry conference, a strapping steelman infuriated a small New Englander, and the tension imperiled the meeting until Fairless brought a laugh by saying: "Gentlemen, in the ring they never match a bantam against a heavyweight."
On the Road. He is a diplomat within his own company as well, constantly making the rounds among his 300,000 employees. Describing a forthcoming trip to a subsidiary, Fairless says: "I'll be met at the plane by the president. We'll go to my hotel, and next morning start visiting the plants. There are six plants, so it's a two-day job. So I'll be met again the next morning, and by this time the group may have grown to 25 or so, with a few vice presidents. But in the plant the officers will step aside; it's the foremen's show. I'll meet every foreman and his assistant, shake hands, inquire after their families. Wednesday night we'll have a family dinner, as we call it, and all the heads of the company will be there. It won't be boisterous; we're all business. I'll give them a little talk about things going on in other parts of the company that they wouldn't otherwise know. There'll be a question period."
Fairless hasn't got all the answers. On any top decision, he has to get the approval of Board Chairman Irving S. Olds, 64, and 60-year-old Enders M. ("Van") Voorhees, chairman of the powerful Finance Committee. Olds is a Yale man ('07) who distinguished himself at Harvard Law ('10), served as secretary to Justice Oliver Wendell Holmes, later worked for the Morgans, and now specializes in policy. Voorhees is a crack financier who did so well at Johns-Manville, another Morgan-influenced firm, that he was moved over to Big Steel; he has financed Big Steel's expansion out of earnings. Both Olds and Voorhees have offices at 71 Broadway, Big Steel's traditional nerve center, where Fairless joins them each Tuesday afternoon, commuting from Pittsburgh in his private car, the Laurel Ridge.
Fairless lives with his second wife, the former Mrs. Hazel Hatfield Sproul (his first wife died in 1942), and two servants in a rambling red brick, twelve-room house near Ligonier, 50 miles southeast of Pittsburgh. He had known Mrs. Sproul casually for years. In 1944, Fairless' only son Elaine married Caroline Sproul, Mrs. Sproul's only daughter. Three months after Blaine married Caroline, Fairless married her mother, a divorcee.
Ride into Steel. The town of Pigeon Run, where Ben Fairless was born, was a small cluster of sooty frame houses hard by the hillside coal pits where Fairless' father, David Williams, grubbed out a meager living for his wife and four children. Williams had such a hard time making ends meet that his wife's sister, Sarah Fairless, took five-year-old Ben to live with her in nearby Justus. In the front room of their house by the railroad tracks, her husband, Jacob Fairless, ran a grocery. The couple adopted Ben, and he took their name.
Ben started selling papers (the Cleveland Press), later worked as a janitor at the high school until he graduated, taught country school during the winters to pay for his summer schooling at Wooster college, a Presbyterian school noted for its earnest emphasis on hard work and scholarship. Wooster was full of young men equally determined to get ahead. Ben ate at a boarding house where Robert E. Wilson, now chairman of Standard Oil of Indiana, waited on table, and played on a baseball team (the "Never-Sweats") with Karl T. Compton, now chairman of the corporation of M.I.T., and Karl's brother Wilson, until recently, president of the State College of Washington. Deciding to become a civil engineer, Ben switched to Ohio Northern University, working summers as an attendant in an insane asylum. In 1913, with his hard-won degree, he returned to Justus to work as a surveyor for the railroad. He got into the steel business by accident. In Massillon, "General" Jacob Coxey was gathering an army of unemployed to make a second march on Washington in protest against the hard times. Ben took an interurban to watch the show, but never got to Massillon. Just outside the town he saw men clearing the site for a new plant for the Central Steel Company. He hopped off, asked for a job, and got it. He went to work even though it was a Sunday--and his 23rd birthday.
Pinch-Hitter. When the plant was finished, Ben talked General Manager Fred Griffiths into keeping him on as a field engineer. Ben knew little about steel, but a lot about baseball, and that knowledge came in handy. Ohio companies, rich with war profits, had organized the famed "outlaw" Midwest League, and were recruiting Big Leaguers for their teams. Fairless was given the job of rounding up a team, the "Agathons." He managed it so well--smoothing" over the constant squabbling of the stars--that the Agathons won the league pennant. Fred Griffiths, impressed by Fairless' peacemaking talents, threw him a trickier pitch.
The Army was complaining about faulty steel, and Fairless was told to settle the trouble. Fairless, demonstrating his ability to find common-sense solutions to problems, broke a paper clip in half, handed half to the Army inspector and suggested: "If any steel has pits big enough for us to poke this clip in, let's agree it's faulty." The officer, delighted with the idea's simplicity, agreed; most of the steel passed the test. Griffiths, who later became president of Central Steel was delighted too: he boosted this promising youngster to superintendent, then general manager.
Fairless' managing technique was to let men talk their grievances out, and if that didn't work, throw them out. Once he called two men in to talk over a quarrel. "When I made a grab for the other guy," one of the disputants recalls, "Ben grabbed me by the neck and threw me out of his office." He was tough in other ways. When pickets under William Z. Foster--then an A.F.L. organizer, now the top U.S. Communist--tried to close down the plant to organize it, Fairless decided that the best way to break up the picketing was to start a fight, and get the pickets arrested. Cursing and swinging his fist, he led the assault. The plan failed, but the pickets quit anyway. Years later, Fairless met a strike in another way. Although Griffiths, under pressure from other businessmen and churchmen, wanted to settle, Fairless brought in 500 strikebreakers and broke the strike.
When Central took over another plant, Fairless told its men: "No management in this plant has ever lasted 22 months. We've got a lot to do in 22 months." So saying, he fired unnecessary staffers, including a highly paid relative of a dominant stockholder, gave the job to the assistant of the discharged man. When the plant was ticking smoothly, Fairless called in the former assistant, gave him a fat raise and explained: "I was gambling my job on yours. If you hadn't made good after I fired the other guy, I'd have been fired. You came through."
Ruthless towards others' nepotism, Fairless showed no favoritism of his own. His father, sister and two brothers had come to work at Central Steel, but they got the pay of ordinary workers. His father, now 86, worked at the plant until his retirement in 1934.
Fairless became a crack salesman for Central Steel, thought up ingenious tricks to grab business, often from under U.S. Steel's nose. By the time he was 38, Fairless was president of Central. When Cleveland's Cyrus Eaton combined it with his new Republic Steel in 1930, Fairless became executive vice president of the new giant. Soon Big Steel's Myron Taylor discovered that wherever Big Steel was losing business, it was frequently losing it to Fairless. Taylor went after him, and hired him.
The Test of Bigness. Government trustbusters think, as they always have, that Big Steel is too big, and yearn to break it up. Yet twice the U.S. Supreme Court has refused to clip the company's growth, has permitted it to expand and buy Consolidated Steel Co., in 1946, the West Coast's biggest fabricator. Even the Attorney General approved Big Steel's purchase of the war-surplus $200 million Geneva, Utah plant, because Big Steel alone was big enough to buy it.
The paradox of steel's position, as Fairless frequently points out, is that if Big Steel lags in expansion, it is lashed for sabotaging defense; if it expands, the trustbusters want to shrink it. The fact is that a new measure of bigness is required to serve the rapidly growing U.S. economy. Only big companies can meet the tremendous costs of expansion. Where Big Steel once spent $80 for each ton of new capacity, it is spending almost $300 per capacity-ton for the new Fairless Works. Big Steel has expanded out of earnings, but under the new taxes, it is finding that much harder to do. Last week Chairman Olds reported that Big Steel's third-quarter profits, which were $59.7 million in 1950, had tumbled to $27.9 million--from $2.04 a share to only 83-c-. Reason: a $26 million boost in taxes.
The test of Big Steel's right to its size is the way it has shouldered its economic and social responsibilities. On the whole, it has acquitted itself well. Despite the fact that steel has had a sellers' market for eleven years, its prices have risen 82% while all prices of all commodities have shot up 126% on the Bureau of Labor Statistics Index. Big Steel has not throttled competition; its smaller rivals have grown even faster. The compelling reason for building the Fairless Works at tidewater was to meet Bethlehem's competitive edge on the East Coast, where its Bethlehem & Sparrow's Point plants can ship out steel by water, undercutting the higher-priced rail costs of Pittsburgh steel.
The steelworker's social gains, hard won though they often were, are equally impressive. He is the highest paid in the world; his $1.93 average hourly wage exceeds the average of all manufacturing industries ($1.61). Big Steel is now spending $300 million a year to provide $100-a-month pensions (including social security) at retirement.
The Tests of the Future. But in the technical field, slow-moving U.S. Steel has seldom led the pack. Republic was the first to introduce the "oxygen-pressure" process, which is boosting blast furnace efficiency by as much as 30%. It also joined with tiny Babcock & Wilcox to start the revolutionary method of continuous-casting (TIME, Aug. 30, 1948), which permits steel to be cast directly into billets without first going through soaking pits and blooming mills. Other rivals are jumping ahead with newer processes. Crucible Steel Co. is perfecting two new alloys which are hard enough for the tremendous heat of jet engines, but do not require cobalt, which is gravely short.
The gravest problem facing Big Steel--and the industry--is the tremendous rate at which today's production is eating up U.S. iron-ore reserves. Within 20 years, the richest ores of Big Steel's Mesabi Range will be exhausted. Big Steel is already acting to meet that fact. It has found a tremendous mountain of ore in Venezuela's Cerro Bolivar. Bethlehem is already tapping rich Venezuelan ores closer to the sea at El Pao. Republic is now importing 10,000 tons of Liberian ores a month. Republic and five other steelmakers are jointly spending $200 million to hack through the wilds of Labrador to reach another huge ore reserve. And even the dwindling Mesabi still has immense supplies of low-grade, rock-bound ore called taconite. Big Steel is about to put it to use, will soon complete its first two plants for separating the ore from the rock. It will thus open up an additional source of ore.
Guns & Butter. Big Steel has to hustle to keep up with the expansion parade, even though it is now spending another staggering $1 billion (on top of the $1 billion already spent in the last five years). In Pittsburgh last week, Jones & Laughlin's President Ben Moreell tapped the first steel from a new open-hearth furnace, the first major U.S. steel plant completed since the Korean war began. It is the first of eleven new furnaces which Jones & Laughlin will shortly finish, to expand its steel production. By 1952's end, Jones & Laughlin will have spent $390 million in six years, boosted its capacity by 32%. By the same time, Bethlehem--Big Steel's chief rival--will have spent $700 million, boosted its capacity 36% since 1946. Inland is spending $145 million, Republic $250 million, Wheeling $100 million, Allegheny Ludlum $60 million, Crucible $75 million, National $150 million, Kaiser $25 million.
By 1953, within the space of three years, the whole industry will have expanded its capacity by one-fifth. The nation's steel capacity will then be so vast that all the demands of rearmament (at current estimates) will take only one-tenth of the supply. Not only will the U.S. have steel for arms, but enough left over for more civilian production than ever before. Thanks to the men of steel, from the grimiest billet-scurfer to the captains like Ben Fairless, there will be blast furnaces enough for America's forge.
* Under the "Pittsburgh Plus" system, a buyer of steel in Birmingham had to pay the freight from Pittsburgh even though the steel was made next door. Its effect was to preserve Pittsburgh's competitive advantage.
/- For more comment on the current controversy over "that Vatican job," see NATIONAL AFFAIRS.
* Next week, Fairless will receive two awards: from the National Society of Industrial Realtors, in Cincinnati, for being "the outstanding industrialist of 1951," and from the Wharton School of Finance in Philadelphia for "outstanding contribution to American business."
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