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Bethlehem Steel

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Bethlehem Steel Corporation
Company typePrivate
IndustrySteel, Shipbuilding, Mining
Founded1857
Defunct2003
FateBankruptcy
SuccessorInternational Steel Group
HeadquartersBethlehem, Pennsylvania
SubsidiariesBethlehem Shipbuilding Corporation
Bethlehem Steel Corporation's flagship manufacturing facility in Bethlehem, Pennsylvania

The Bethlehem Steel Corporation (1857–2003), based in Bethlehem, Pennsylvania, was once the second largest steel producer in the United States after Pittsburgh, Pennsylvania-based US Steel. After a decline in the U.S. steel industry and management problems leading to the company's 2001 bankruptcy, the company was dissolved and the remaining assets sold to International Steel Group in 2003. In 2005, ISG merged with Mittal Steel, ending U.S. ownership of the assets of Bethlehem Steel.

During its life, Bethlehem Steel was also one of the largest shipbuilding companies in the world and was one of the most powerful symbols of American industrial manufacturing leadership. Bethlehem Steel's demise is often cited as one of the most prominent examples of the U.S. economy's transition away from industrial manufacturing and its inability to compete with cheap foreign labor.

History

Bethlehem Iron Company, as it appeared in 1896, on the south bank of the Lehigh River.

Founding

The company's roots go back to 1857 when The Saucona Iron Company was first organized under the leadership of Augustus Wolle.[1] Due to the Panic of 1857, a national financial crisis, further organization of the company and construction of the works came to a halt. Eventually, organization of the company was completed, the original site for the works was changed to another in South Bethlehem, and the company's title was changed to The Bethlehem Rolling Mill and Iron Company.[1] On June 14, 1860, the board of directors of the fledgling company elected Alfred Hunt president.[1] On May 1, 1861, the company's title was changed again, this time to The Bethlehem Iron Company.[1] On July 1, 1861 construction of the first blast furnace began, going into operation on January 4, 1863. The first rolling mill was built between the spring of 1861 and the summer of 1863, with the first railroad rails being rolled on September 26. A machine shop, in 1865, and another blast furnace, in 1867, were completed. During its early years, the company produced rails for the rapidly expanding railroads and armor plating for the US Navy. In 1899, the company assumed the name, Bethlehem Steel Company. In 1904, Charles M. Schwab (then recently resigned from US Steel, and unrelated to the stockbroker Charles R. Schwab) and Joseph Wharton (who founded the Wharton School of Business in Philadelphia) formed the Bethlehem Steel Corporation with Schwab becoming its first president and chairman of its board of directors.

The Sparrows Point Industrial Complex, one of Bethlehem's primary steel making and ship building plants.

The Bethlehem Steel Corporation ascended to great prominence in American industry, installing the revolutionary grey rolling mill and producing the first wide-flange structural shapes to be made in America. These shapes were largely responsible for ushering in the age of the skyscraper and establishing Bethlehem Steel as the leading supplier of steel to the construction industry.

In the early 1900s, the corporation branched out from steel, with iron mines in Cuba and shipyards around the country. In 1913, it acquired the Fore River Shipbuilding Company of Quincy, Massachusetts, thereby assuming the role of one of the world's major shipbuilders. In 1917 it incorporated its shipbuilding division as Bethlehem Shipbuilding Corporation, Limited., also known as BethShip.

The Military-Industrial Complex

Although the company continued to prosper during the early 1880's its share of the American railroad-rail market began to decline as a result of increasing competition from growing Pittsburgh-based firms such as the Carnegie Steel Company. Clearly, if the company was going to remain viable long term, a new product line needed to be developed. Once the U.S. Navy decided to rebuild and modernize its fleet, Bethlehem built a heavy-forging plant. This new demand for a modern American navy of steam-driven steel warships soon began to shape the course of the Bethlehem Iron Company's future development.

Even though the United States had been among the world's strongest and and most innovative maritime forces during the Civil War, the end of hostilities had brought about rapid naval disarmament. National energies were deflected toward settlement of the West and the rebuilding of the war-ravaged South. The nation's ironclads, steam cruisers, and gunboats were mostly sold abroad or tied up to rot in the generally inactive navy yards. Almost no new ordnance was produced, and new technology was neglected. By 1881 a series of embarrassing international incidents highlighted the deplorable condition of the U.S. fleet. The growing perception that a strong navy was needed to protect U.S. trade and prestige made possible the beginnings of what would become a sustained effort create a modern battle squadron.

In 1883, Secretary of the Navy WIlliam E. Chandler and Secretary of the Army Robert Todd Lincoln appointed Lt. William Jaques to the Gun Foundry Board. Jaques was sent on several fact-finding tours of European armament makers and on one of these trips he formed business ties with the firm of Joseph Whitworth of Manchester, England. He returned to America as Whitworth's agent and, in 1885, was granted an extended furlough to pursue this personal interest. This type of activity where government employees become linked to private concerns, marked the beginning of what would be come known as the military-industrial complex.

Jaques was aware that the U.S. Navy would soon solicit bids for the production of heavy guns and other products such as armor that would be needed to further expand the fleet. Jaques contacted the Bethlehem Iron Company with a proposal to serve as an intermediary between it and the Whitworth Company, so that Bethlehem could erect a heavy-forging plant capable of producing ordnance for the U.S. Navy. In 1885, John Fritz, accompanied by Bethlehem Iron Company directors Robert H. Sayre, E.P. Wilbur, WIlliam Thurston, and Joseph Wharton, met with Jaques in Philadelphia, where they discussed the feasibility of Whitworth's supplying the technology that Bethlehem needed. In early 1886, a contract between Bethlehem Iron and the Whitworth Company had been executed.

During the spring of 1886, Congress passed a naval appropriations bill that authorized the construction of two armored second-class battleships, one protected cruiser, one first-class torpedo boat, and the complete rebuilding and modernization of two Civil War-era monitors. The two second-class battleships (the USS Texas and the USS Maine) would have both large-caliber guns (12" and 10" respectively) and heavy armor plate. Bethlehem successfully secured both the forging and armor contracts on June 28 of the following year.

Between 1888 and 1892 the Bethlehem Iron Company completed the first heavy-forging plant to be built by an American steel company. It was designed by John Fritz with the able assistance of Russel Wheeler Davenport (1849-1904), who had entered Bethlehem's employ in 1888. By the autumn of 1890, Bethlehem Iron was successfully delivering gun forging to the U.S. Navy and was thus able to devote its energies to the completion of the facilities that would be necessary to provide armor plate. [2]

Facing foreign competition

The Burns Harbor, Indiana plant built by Bethlehem Steel.

While the US steel industry prospered during World War II, the steel industries in Germany and Japan were devastated by Allied bombardment. As a result, they had to be rebuilt after the war, but were rebuilt with more modern techniques such as continuous casting in their now newer plants. This efficiency, plus the high benefit concessions given to US steelworkers during the two decades that the US steel Industry operated without significant foreign competition, and unwillingness of the US steel industry to invest their profits into newer technology, set the stage for a significant price differential in the 1980s.

Cheaper foreign steel began being imported in the 1980s, negatively impacting Bethlehem Steel's market share in the U.S. steel industry. In 1982, the company reported a loss of US$1.5 billion and was forced to shut down many of its operations. Profitability returned briefly in 1988, but restructuring and shutdowns continued through the 1980s and 1990s.

In the mid-1980s, the market for the plant's structural products began to diminish, and new competition entered the marketplace. Lighter, lower construction styles, resulting in low-rise buildings not requiring the heavy structural grades produced at the Bethlehem plant, caused Bethlehem Steel to discontinue its coal mining operations (under the name BethEnergy) in 1991, and its steel-making activities at the main Bethlehem plant by the end of 1995. After roughly 140 years of metal production at its Bethlehem, Pennsylvania plant, Bethlehem Steel ceased operations in Bethlehem. Bethlehem Steel exited the railroad car business in 1993 and ceased shipbuilding activities in 1997 in an attempt to preserve its core steel-making operations.

Closing and bankruptcy

Demolition of the original facility in Bethlehem in 2007 to create a parking lot for the the Sands BethWorks Casino Complex.

With the closing of its local operations and its extraordinary ensuing impact on the local Lehigh Valley area, Bethlehem Steel decided to help revitalize the South Side of Bethlehem, and hired outside consultants to develop conceptual plans on the reuse of the massive property. The consensus was to rename the 163-acre (660,000 m²) site Bethlehem Works and to use the land for cultural, recreational, educational, entertainment and retail development. The National Museum of Industrial History, in association with the Smithsonian Institution and the Bethlehem Commerce Center, consisting of 1,600 acres (6.5 km²) of prime industrial property, would be erected on the site along with a casino and large retail and entertainment complex.

Inexpensive steel imports from other countries and the failure of management to innovate, embrace technology and improve labor conditions helped contribute to the Bethlehem's demise. In 2001, Bethlehem Steel formally filed for bankruptcy. Two years later, in 2003, the company's remnants, including its six massive plants, were acquired by the International Steel Group.

In 2007, the Bethlehem property was sold to Sands BethWorks, and plans for a casino to be built where the plant once stood were drafted. The casino is expected to be completed by 2009 and construction began in fall 2007. Ironically there was difficulty in securing the structural steel needed to begin construction of the casino. A global steel shortage and pressure to build Pennsylvania's tax-generating casinos contributed to the problem of meeting the project's demand. 16,000 tons of steel will be needed to build the $600 million complex.[3]

Major projects

American landmarks

Eugene Grace was president of Bethlehem Steel from 1916 to 1945, and chairman of the board from 1945 until his retirement in 1957. During Grace's tenure the company manufactured the steel for many of the country's most prominent landmarks:

Furthermore, Bethlehem Steel fabricated much of the steel used in the Dome over the ice rink of the George Meehan Auditorium at Brown University, and the largest electric generator shaft in the world produced for General Electric in the 1950s.

American armed forces

"The High House", in Bethlehem, PA, a heat treatment facility for 14-inch battleship guns.

During World War I and World War II, Bethlehem Steel was a major supplier of armor plate and ordnance products to the U.S. armed forces. Many of the nation's fighting ships used armor plate and large caliber guns supplied by Bethlehem Steel.

During World War II, Bethlehem Shipbuilding Corporation's 15 shipyards produced a total of 1,121 ships, more than any other builder during the war, employing as many as 180,000 persons in the process (company total employment was 300,000). When peacetime came, the plant continued to supply a wide variety of structural shapes for the construction trades and forged products for defense, power generation and steel-producing companies.

Bethlehem Steel's high point came in the 1950s, as the company began manufacturing some 23 million tons per year, and it built its largest plant, at Burns Harbor, Indiana, between 1962 and 1964. In 1958, the company's president, Arthur B. Homer, was the highest paid business executive in the US.

Shipyards

Construction of two warships: HMS Calder (K349) as USS Formoe (DE-58) and USS Foss (DE-59) on the right.
Old Bethelem Steel Headquarters in San Francisco.

Freight cars

From 1923 to 1991, Bethlehem Steel was one of the world's leading producers of railroad freight cars through their purchase of the former Midvale Steel and Ordinance Company, whose railcar division was at Johnstown, Pennsylvania. Despite its status as a major integrated steel maker, Bethlehem Steel Freight Car Division pioneered the use of aluminum in freight car construction. The Johnstown plant was purchased from Bethlehem Steel through a management buyout in 1991, creating Johnstown America Industries.

Rolling uranium

From 1949 to 1952, Bethlehem Steel had a contract with the Federal government of the United States to roll uranium fuel rods for nuclear reactors in Bethlehem Steel's Lackawanna, New York plant. Workers, however, were not aware of the dangers of the heavy metals they were rolling and were not supplied with radiation detectors or protective suits. In 2000, the United States Congress passed legislation allowing workers who developed cancer from exposure to radioactive material in similar situations to receive up to $150,000 in compensation. However, most of the workers have not been able to get compensation from the Labor Department.[4]

References

  1. ^ a b c d Davis (1877), "Bethlehem Iron Company", History of Northampton County, Pennsylvania, Philadelphia and Reading: Peter Fritts, Chapter XLV, p. 212-213
  2. ^ Garn, Andrew (1999). Bethlehem Steel. Princeton Architectural Press. pp. p. 14. ISBN 156898-197-x. {{cite book}}: |pages= has extra text (help)
  3. ^ Assad, Matt (2007-06-27). "BethWorks Says Beam Me Up: Project Officials Scurrying to Get Steel to Bethlehem Steel Site in Time". The Morning Call. Redorbit. Retrieved 2008-01-18.
  4. ^ "Heroes Of The Cold War Out In The Cold". CBS. CBS News. 2006-06-19. Retrieved 2008-01-16.
  • Hall, P. J. (1915), "History of South Bethlehem, Pa.", Semi-centennial, the borough of South Bethlehem, Pennsylvania, 1865-1915, Quinlan Printing Co., p. 12-13

See also

Wikimedia Commons has media related to Bethlehem Steel.
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