Bethlehem Steel

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Bethlehem Steel (1857-2001) was a major producer in the U.S. Steel industry, based in Bethlehem, Pennsylvania. It went bankrupt in 2001.

Charles Schwab (1862- 1939) and Eugene Grace (1876–1960) made Bethlehem Steel (so named in 1899) the second-largest American steel company by the 1920s. Schwab started with Carnegie Steel and by 1897 was its president. He became the first president of US Steel in 1901; Judge Gary was his boss. He left to become head of Bethlehem Steel in 1903.

Bethlehem concentrated on government contracts, such as ships and naval armor, and on construction beams. From 1945 to 1959, Bethlehem's capacity rose from 13 million tons a year to 23 million tons from 1945 to 1955, reflecting the widespread optimism in the steel industry. However the company refused to invest in new technologies then being developed in Europe and Japan. Seeking labor peace in order to avoid strikes, Bethlehem like the other majors agreed to large wage and benefits increases that obliged them to raise prices at a time when the foreign steel companies had just begun to challenge their American counterparts. As Bethlehem's comptroller explained, "We're not in business to make steel, we're not in business to build ships, we're not in business to erect buildings. We're in business to make money." The company's president Arthur Homer explained in 1962, that Bethlehem was profitable enough and did not need to innovate. All the plants were making money. "We have a nice business as it is," he boasted. The problem was that short term profits meant avoiding innovations and that led to long-term competitive weaknesses.

The 1980s were hard on the steel industry, as imports flooded the market. Bethlehem was still #3 largest when in 1982-86 it had its first string of losses since the 1930s, losing $2 billion. Under the leadership of Donald Trautlein, an accountant, it started closing plants, such as the giant facility in Lackawanna, NY, in 1983, and ended its shipbuilding program on the West Coast. It cut raw steelmaking capacity from 25 million tons in 1977 to 17.5 million in 1985. Employment fell from 115,000 in 1975 to 48,500 in 1985 and 30,000 in 1991.

By 1995 the company closed its base in Bethlehem, Pennsylvania, leaving only 10,500 active workers in Indiana, New York, and Maryland.

Further reading

  • Cotter, Arundel. The Story of Bethlehem Steel (1916) 65 pages; full text online
  • Hessen, Robert. Steel Titan: The Life of Charles M. Schwab (1990) 376 pages; excerpt and text search
  • Hogan, William T. Economic History of the Iron and Steel Industry in the United States. (1971) 5 vol.
  • Scheuerman, William. The Steel Crisis: The Economics and Politics of a Declining Industry (1986) online edition
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