by Lance E. Metz

Bethlehem Steel Corporation was once America’s second largest steel company, a titan in one of the nation’s most powerful and historically important industries. Founded as a quasi-subsidiary of the Lehigh Valley Railroad, under the direction of Robert H. Sayre and John Fritz the company pioneered production of steel products and gave birth to the modern American defense industry. Reorganized in 1904 by Charles M. Schwab, a protégé of Andrew Carnegie, Bethlehem Steel became a manufacturing giant possessing steel mills, coal mines, and shipyards throughout the country and even the world. It introduced the famous Grey Mill or H-section steel structural members, which became the frameworks for many of the nation’s most significant skyscrapers and long-span bridges. From the Spanish-American War through World War II, Bethlehem Steel was the single most important source of military products for our armed forces. During the final decades of the 20th century, Bethlehem Steel became notable as one of the most dramatic casualties of free trade policies.

On July 4, 1840, the blast furnaces of the Lehigh Crane Iron Company, in what is now known as Catasauqua, Pennsylvania, began production under the direction of Welsh immigrant ironmaster David Thomas. Due to a number of favorable geographical and geological factors and to the success of Crane, between 1850 and 1880 Pennsylvania’s Lehigh Valley became America’s most productive iron-making region. By 1873 the region boasted more than 50 blast furnaces at 18 different locations. It was within this context that the story of Bethlehem Steel began.

In 1860, a group of executives headed by Robert H. Sayre, from the recently completed Lehigh Valley Railroad, purchased control of a paper corporation and transformed it into a functioning enterprise renamed the Bethlehem Rolling Mill and Iron Company. The company would focus on the production of high-quality wrought-iron rails for the Lehigh Valley and other railroads. To construct and manage this plant, Sayre lured John Fritz, an ironmaster and mechanical-engineering genius, to Bethlehem. Fritz arrived during the summer of 1860 and brought with him his patent for the three-high rail mill, which he had invented at the Cambria Iron Company in Johnstown, Pennsylvania. Fritz’s mill made it possible for the first time to mass-produce wrought-iron rails of consistently high quality. Between 1860 and 1863, Fritz and Sayre collaborated to build a plant in South Bethlehem at the strategic junction of the North Pennsylvania and Lehigh Valley railroads. The Bethlehem plant was a great success and the company was reorganized as the Bethlehem Iron Company in 1861.

The Bethlehem Iron Company made its first critical contribution to the defense of the nation just a few years later when, in 1863–64, John Fritz designed and had manufactured a special mill to reroll damaged railroad rails. Taken to Chattanooga, Tennessee, this mill aided the Union forces in the Civil War by keeping the vital supply railroads running, despite constant attacks by Confederate raiders.

Following the Civil War, Bethlehem Steel Company pioneered the production of steel rails. Sayre discovered that steel rails imported from Britain were more than 16 times as durable as Bethlehem’s best wrought-iron rails. Using the financial resources of the Lehigh Valley Railroad and his own determination, Sayre convinced Fritz to begin work on a steel mill that would employ the cutting-edge Bessemer or pneumatic process. Completed in 1873, this revolutionary mill combined, for the first time, the production of steel with the rolling of rails in an integrated process in a single building.

The production of steel rails brought new prosperity to the Bethlehem Iron Company, which lasted until the early 1880s, when coke began to replace anthracite as the preferred blast furnace fuel. While anthracite was abundant near the Lehigh Valley, coke was produced from the bituminous coal prevalent in southwestern Pennsylvania. By 1885 the steel makers in and around Pittsburgh, led by Andrew Carnegie, dominated the steel-rail market. No longer competitive in steel rails, Bethlehem Iron Company’s managers determined to build a plant that would manufacture large steel forgings for ordnance and armor plates.

The decision was a timely one due to the U.S. government’s desire to build a modern navy of steel-armored steam-propelled warships, which would be armed with breech-loading ordnance. Beginning in 1885, Bethlehem Iron Company began to build the needed facilities, such as open-hearth steelmaking furnaces and steam forging hammers. The company needed hydraulic presses and monumental machine shops to produce warships and coastal defense batteries for a rapidly expanding army and navy. By the time of his retirement in 1892–93, John Fritz had designed and supervised the construction of Bethlehem’s defense plant, the largest in the world. In 1898, warships equipped with ordnance and armor produced at the Bethlehem plant won the naval victories of the Spanish-American War.

By 1899, Sayre, Fritz, and the other managers had grown old or wished to retire, so they reorganized the Bethlehem Iron Company as the Bethlehem Steel Company and placed it on the market. Charles M. Schwab, who had facilitated the creation of the U.S. Steel Company and was its first president, purchased the Bethlehem Steel Company in 1901.

The following year, Schwab merged Bethlehem Steel with a group of seven shipyards to create the short-lived United Ship Building Company. By withholding the Bethlehem plant’s profits from this holding company, Schwab caused its collapse within two years. In 1904 Schwab resigned as president of U.S. Steel and combined the more valuable of the shipyards with the Bethlehem Steel Company to create Bethlehem Steel Corporation. Schwab determined to make this new entity a true competitor to the monolithic U.S. Steel.

The key to Schwab’s plan was adoption of a radical new rolling mill invented by English engineer Henry Grey. The Grey Mill can roll H-section steel structural members that are wider, lighter, and cheaper to produce than conventional, riveted I-section beams. Bethlehem Steel began producing Grey beams in the winter of 1907–8. These new beams made possible the erection of taller skyscrapers and longer-span bridges, while greatly diversifying Bethlehem’s product line and lessening its almost exclusive dependence on military orders.

As the Bethlehem plant grew, so did its workforce, attracting immigrants of many nationalities. Until 1910, the Bethlehem plant remained relatively free of workplace violence or conflict, but in that year workers staged their first major strike over the issue of forced overtime. Schwab, no friend of organized labor, used the newly organized Pennsylvania State Police to end the 180-day labor stoppage.

The outbreak of World War I in 1914 proved to be a bonanza for Bethlehem Steel. Orders for military products from Great Britain, France, and Russia soon filled the company’s coffers and the plants workforce swelled to over 35,000. Wartime profits enabled Schwab to undertake an expansion campaign, purchasing major steel plants in Steelton and Lebanon, Pennsylvania, and Sparrows Point, Maryland. By the time the United States entered World War I in 1917, Bethlehem Steel had become the third largest industrial company in America. By the end of hostilities in November 1918, Bethlehem Steel had produced 60 percent of all American gun forgings and 40 percent of the nation’s artillery shells. For Britain and France combined, it supplied 65,000 pounds of forged military products, 70 million pounds of armor plate, an incredible total of 1.1 billion pounds of steel for shells, and 20.1 million rounds of artillery ammunition. Bethlehem Steel also produced more than 65 percent of the total number of artillery pieces manufactured by all of the allied nations.

Flush with its wartime profits, Bethlehem Steel purchased the large and highly productive Lackawanna Steel Company in 1922. With its plant on Lake Erie near Buffalo, New York, this acquisition doubled Bethlehem’s steelmaking capacity and gave it ready access to the rich ore deposits of the Great Lakes region. A year later, Bethlehem Steel purchased the majority of the Midvale Steel Corporation, which included the Cambria Steel plant in Johnstown and extensive coal mines in Pennsylvania, West Virginia, and Kentucky. Bethlehem Steel Corporation was now the second largest steel maker in America. Having reached his goal of creating a worthy competitor to U.S. Steel, Charles Schwab stepped back and turned the company’s management over to his hand-picked successor, Eugene Grace, who had become president in 1916.

Despite the cessation of armaments production during the 1920s, Bethlehem Steel Corporation continued to prosper, for this was the age of the skyscraper. Bethlehem supplied steel for such notable buildings as the Woolworth Building, the Chrysler Building, and Chicago’s Merchandise Mart. During the 1920s and ’30s, Bethlehem Steel played key roles in the construction of the Holland and Lincoln vehicular tunnels as well as the George Washington and Golden Gate bridges.

Like other American industrial giants, Bethlehem Steel suffered hard times during the Great Depression. This gloomy period was tempered, however, under the administration of President Franklin Delano Roosevelt, by the resumption of warship construction, which placed Bethlehem Steel once again at the forefront of American military industries. The outbreak of World War II in 1939 brought renewed prosperity, as the company once again became a major arms supplier to the Allied war effort.

In 1941 Bethlehem Steel was confronted with the explosion of long-simmering labor unrest and a violent strike. Despite management intransigence and pressure from the federal government, which wanted no interruption in the fulfillment of its vital defense contracts, the workers won. Soon the Steel Workers Organizing Committee, one of the organizations which became the United Steelworkers of America, represented all of the workers of the Bethlehem Steel plants.

Later that year, the Japanese attack on Pearl Harbor propelled the United States into World War II, and Bethlehem Steel Corporation resumed its role as the most important American defense contractor. Its shipyards constructed more than 1,085 ships, including the famed aircraft carrier Lexington and the battleship Massachusetts.

Bethlehem Steel was the nation’s largest source of ordnance, shells, and armor plate. Its drop-forge division produced 80 percent of the parts needed to build the radial air-cool aircraft engines that powered the majority of America’s fighters, bombers, transports, patrol planes, and naval attack aircraft. The Bethlehem plant produced almost all of the air flasks that were used by the submarines that destroyed the Japanese navy and merchant fleet. By 1943, the Bethlehem Steel Corporation employed more than 283,735 workers, and in 1945 Bethlehem Steel had assets of $881 million, revenues of $1.3 billion, and a net income of $35 million.

In the years after World War II, Bethlehem’s management became conservative in its outlook and actions, demonstrating a new reluctance to fully embrace new innovations in steelmaking technology. In 1957, Arthur B. Homer replaced an ailing Eugene Grace as chairman of the corporation. In 1959, steelworkers throughout the country staged a strike that lasted for 116 days, opening the way for imported steel to take over a significant part of the American steel market. At the same time, Bethlehem and other American steel companies raised their product prices to pay for negotiated workers’ pay and benefit increases. These developments, including Bethlehem management’s accommodation with the union, contributed to a downward cycle that would lead to increased costs and an eventual lack of competitiveness.

Yet despite these setbacks, Bethlehem Steel did continue to expand. In 1959, it unveiled the Homer Research Laboratories on South Mountain in Bethlehem. Its ultramodern facilities consolidated research efforts that had been located in various plants.

More significantly, Bethlehem opened the Burns Harbor Plant in 1964, located along the shore of Lake Michigan near Chicago, to meet the sheet-steel demands of the automobile and appliance plants located in the Midwest. Burns Harbor would prove to be the last integrated steel mill built in the United States. In 1972 Bethlehem Steel Corporation opened its newly completed 21-story, $35 million headquarters, named Martin Tower, in its home city of Bethlehem.

Even before completion of Martin Tower, however, Bethlehem Steel had begun its slow, descending spiral into oblivion. The corporation lost the contract to build the monumental Twin Towers of the World Trade Center in New York City to small agile subcontractors who used cheaper imported steel, setting a pattern that would lead to the closure of all six Bethlehem Steel fabricated-steel construction plants. During the 1980s, Bethlehem Steel shuttered entire divisions and instituted massive layoffs.

In an attempt to compete with the profitable mini-mill type steel manufacturers, which remelted scrap steel and recast it into new products, Bethlehem Steel proposed a joint venture with the British Steel consortium. This project would convert the Bethlehem plant into an enlarged mini-mill configuration. Financial problems and an inability to reach concessionary contracts with the union prevented its implementation. In 1995, steelmaking ceased at the Bethlehem plant, and within two and a half years the remaining parts of the plant and coke works shut down.

By 2000, Bethlehem Steel Corporation reported an annual loss of $118.4 million. Its stock value depreciated, and it was dropped from the standard Fortune 500 index. Robert S. Miller, a noted savior of troubled companies, took charge in 2001 but to no avail. Bethlehem Steel filed for Chapter 11 bankruptcy on October 11, 2001.

The year 2002 did not bring any improvement in Bethlehem Steel’s financial status, and on December 18, 2002, the U.S. Pension Benefit Security announced that it would take over the company’s pensions, assets, and obligations. The newly formed International Steel, which had earlier purchased the assets of Acme Steel and LTV Steel, purchased Bethlehem Steel for $1.5 million in 2003, making it the second largest steel producer in America. After a campaign of drastic cost cutting, International Steel merged with the European Mittal Steel Group. Mittal Steel has recently made strong profits at the former Bethlehem Steel’s Steelton, Burns Harbor, and Sparrows Point plants. One small portion of the Bethlehem plant remains in operation, the forging division, which, under the management of Lehigh Forge Company, continues to produce nuclear reactor vessels, turbine rotors, and propeller shafts for the U.S. Navy.

Despite this tragic end, Bethlehem Steel Corporation and its predecessor companies have left an important legacy to our nation. Fortunately, all of it is not yet lost.

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Image: Bethlehem’s armor-plate machine shop, ca. 1890s. From Bethlehem Steel Company, South Bethlehem, Pa., U.S.A. (Philadelphia, 1900).