Chesterton Tribune



Duneland Historical Society hears the riches-to-rags story of Bethlehem Steel

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Had it ever been Don Draper’s to pitch an ad campaign to Bethlehem Steel, the Madmen writers might have spun subplot gold out of these young lovelies: the scores of girls with stars in their eyes hired by Bethlehem for the sole purpose of escorting visitors through the company’s 13-story headquarters building.

And looking sweet and chic while they did it.

Coached in poise and manner by New York fashion models, no less--yet out of a job, deemed spoiled goods, just as soon as they became pregnant--the girls were, for the most part, the daughters of steelworkers, whose average hourly wage in 1956 was $1.96.

Meanwhile, to the gray-flannel denizens of the corner offices overlooking Lehigh Valley, running a stable of corporate stewardesses must have seemed like a pretty swell idea, a swanky move, as much a symbol of their status in the business world as their lobster-tail lunches and 18-karat gold nameplates, as much as President Arthur B. Homer’s salary in 1958, $511,249, the highest that year of any executive officer in the country.

And why not?

Since the Roaring Twenties Bethlehem’s Grey I-beam had been the spine of the modern American city, iconized in New York’s Rockefeller Center and Waldorf Astoria Hotel, Chicago’s Merchandise Mart, San Francisco’s Golden Gate Bridge. During World War II the company’s plate floated whole fleets of naval and merchant vessels, making it the world’s largest shipbuilder and arguably the Allies’ most vital armorer. And now, just past the midpoint of the 20th century, its flat-rolled was satisfying the rising middle class’ clamor for cars and appliances, the fruits of a post-war prosperity which the company was going to take to the bank forever. Bethlehem Steel had become a byword more than a brand, and for its executives that may well have been enough to justify the keeping of a black Angus herd at their private retreat, the Saucon Valley Country Club.

Yet only 20 years after President Homer scored his cool half-million, the company was foundering, a victim of its own complacency and insularity.

It’s a riches-to-rags story and perhaps one not well known to Dunelanders, whose earliest memory of Bethlehem Steel is likely to be that of a company already beginning its long slow slide into extinction well before the shiny new mill in Burns Harbor was even completed.

So it’s a good thing Jim Diffenbach is here to tell the tale.

Diffenbach hired into Bethlehem Steel in 1954, fresh out of college. He would work for the company for 43 years, not quite long enough to be on the payroll when it declared bankruptcy, in 2001. Diffenbach’s institutional memory is superb, though, and at the Duneland Historical Society’s last meeting of 2014 he spoke with authority--in a presentation entitled “The Local Steel Industry”--on a company which in the end rested itself to death on its laurels.

Diffenbach began his story at the beginning, with steel’s precursor, iron, which thousands of years before Christ was being extracted from hematite or meteorites and cold-hammered by Egyptian or Sumerian smithies into tools and weapons. Around 1100 B.C. the technology to smelt iron from ore was developed and then steel--an alloy of iron and carbon--was only a few accidental smelts away from being discovered.

Steel has always been prized for its strength and hardness and the ease with which it can be fabricated. Bladesmiths appreciated the edge it can take, craftsmen its formability. But it was an artisan’s job making steel, in small batches and haphazardly, and not until less expensive, more reliable techniques were developed could steel be mass-produced. The Bessemer process, then the Siemens-Martin process, both introduced in the mid-19th century, were just the ticket, Diffenbach said, and the heaviest heavy industry was born.

Established in 1860, the Bethlehem Rolling Mill & Iron Company made its bones supplying rail- and shipyards. Re-organized as the Bethlehem Steel Corporation in 1904, it made its name producing a revolutionary kind of I-beam, a “wide-flanged” beam developed by Henry Grey and rolled in a purpose-built mill whose construction the company’s first president and chair, Charles Schwab, pretty much bet the farm on. Schwab’s move proved hugely successful, as the new I-beam--also known as the Bethlehem beam--made the erection of buildings taller than 20 stories both structurally and economically feasible. The construction industry was transformed very nearly overnight and no metropolis’ skyline would ever be the same. Yet Schwab’s risk--he had to persuade friends to personally loan the company the necessary money to install the new Grey mill--may have been the last gutsy one every taken by a Bethlehem Steel executive.

Diffenbach, with his firsthand knowledge of the company, came in time to see it as stunted by an “inbred culture,” one in which executive officers automatically also had seats on the Board of Directors and whose salaries, if not as grand as Homer’s, were nonetheless grander than the pay of nearly every other suit in any domestic industry you could name. They were uninterested in innovation, dismissive of foreign competition, and--in the face of increased costs of production--content to wring profits from price hikes, rather than from rationalizing or synergizing.

When, in 1958, the U.S. Justice Department quashed Bethlehem Steel’s pending acquisition of Youngstown Sheet & Tube Company--whose facilities in East Chicago would have given Bethlehem a ready-made foothold in the Midwest market--the decision was made just to start from scratch. Four years later, in 1962, Bethlehem broke ground on the Burns Harbor facility, the last integrated mill ever built in this country, the last one, that is, to stream the entire steelmaking process under one roof, so to speak, from iron ore to finished plate or roll.

Yet by 1966, when Phase I of the Burns Harbor mill was completed, it was already too late for the company, the market was changing in ways management had never troubled itself to imagine, and so was the technology. By then the U.S. was importing more foreign steel--and of very high quality, Diffenbach offered--than it was exporting. Meanwhile, Nucur Corporation, under what Diffenbach called its “visionary leadership,” was only two years away from building its first minimill, which begins not with iron ore but less expensive recycled steel scrap and melts it not in a blast furnace but the less expensive electric arc furnace. Nucor is now the second largest domestic steelmaker, a title once owned by Bethlehem.

Perhaps the most disturbing sign of the times, though, was its loss, in 1970, of the contract to provide and fabricate the steel for the World Trade Center, Diffenbach added. Bethlehem Steel actually undercut the only other bidder, U.S. Steel, by $5 million, but the Port Authority of New York and New Jersey rejected the bid anyway. In the end, the contract went to a consortium of companies which, by using cheaper foreign steel, were able to undercut Bethlehem in turn by fully $34 million.

Bloatedness and stodginess, competition both foreign and domestic, and a crippling recession all combined in the Seventies to put the company into a slow-motion death-spiral, and the desperate measures in the Eighties and Nineties to dump and scrimp could not see it through the tectonic shakeout of the steel industry at the end of the 20th and opening of the 21st century.

In 1945, 300,000 employees were on Bethlehem Steel’s payroll. In 2003, no one was.


Posted 12/16/2014




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