Bethlehem Steel

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Bethlehem Steel Corporation's flagship manufacturing facility in Bethlehem, Pennsylvania, in the United States.
Bethlehem Steel Corporation's flagship manufacturing facility in Bethlehem, Pennsylvania, in the United States.

The Bethlehem Steel Corporation (1857–2003), based in Bethlehem, Pennsylvania, once was the second largest steel producer in the United States (after Pittsburgh, Pennsylvania-based US Steel). But following its 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 often is 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.

Contents

[edit] Founding

The company began on April 8, 1857 as the Saucona Iron Works in South Bethlehem, Pennsylvania. Then, on May 1, 1861, the company changed its name to Bethlehem Iron Works. Alfred Hunt was elected president by the board of directors on July 15, 1860. In its early years, it produced railroad rails 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 formed the Bethlehem Steel Corporation with Schwab becoming its first president and chairman of its board of directors. 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.

[edit] Behind American landmarks

In 1916, Eugene Grace became the company's president, and, in 1945, he became its chairman, leading the company until 1957. Grace acquired a number of additional steel plants in the 1920s, and Bethlehem produced the steel for many of the country's most prominent landmarks, including New York City's Rockefeller Center and Madison Square Garden and San Francisco's Golden Gate Bridge.

[edit] The steel for American armed forces

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'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.

[edit] Shipyards

[edit] 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 of 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.

Johnstown America has since expanded with the accquisition of a second manufacturing plant in Danville, Illinois and a public offering on the Nasdaq under the new name FreightCar America Corporation. FreightCar America is the only American-owned part of the former Bethlehem Steel that remains publicly-traded. The Freight Car America company has since acquired facilities in Virginia and seemingly aims to remove themselves from the hard working steadfast Johnstown labor market. This move seems to revolve around a motivation to find less costly labor with management benefits more in mind than appreciation to the city and work force that made the company what it is.

[edit] Facing foreign competition

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 steelmaking 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 steelmaking operations.

[edit] Management failings

Jim Collins, in the book Good to Great, compares the long term decline of Bethlehem with the meteoric rise of Nucor. Based upon the data gathered by the research team, Collins concludes that cheap imports were not the only reason for Bethlehem's decline. The failure of management to innovate, embrace technology and improve labor relations contributed to the company's demise.

Ironically, the subject of cheap imports has continued to be an issue for American steel producers. Recently, the Chairman and CEO of Nucor has testified to the US Senate concerning the problems caused by cheap imports.

[edit] Closing and bankruptcy

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, were erected on the site.

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.

[edit] References

  • Hall, P. J. (1915), "History of South Bethlehem, Pa.", Semi-centennial, the borough of South Bethlehem, Pennsylvania, 1865-1915, Quinlan Printing Co.

[edit] See also

[edit] External links

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