History of US Steel Industry
The first iron works in America, Hammersmith, began its operation in 1647 in Saugus, Massachusetts. The operation only lasted for several years due to the low level efficiency to fuel the furnaces. But upon the discovery of charcoal as opposed to wood or coal in the early 1800s, larger operation became possible. The discovery of huge iron ore deposits in the northern Great Lakes region during the 1840s gave a further boost to production. It was also the steel industry that boosted the industrial economy in the early to late 1900s. Railroads, armaments and automobiles were largely dependent on steel. The increasing availability of steel pave the way to greater demand for various aspects of economic development—ship building, construction, agriculture and auto industry (Rogers, 2009).
The contribution of steel industry in the US can be examined in three categories—economic, historical and political. Steel’s economic importance is its power to influence other parts of the economy. I.e. industries that rely heavily on manufactured steel as material on their products. Another is that steel’s market structure is a typical example of the modern industrial markets. Historical importance of the steel industry provided growth and changes to the United States. From providing steel for subway development, factories, highways, bridges and construction materials to armaments, canning, steel drums, bicycles and machinery. Labor demand also increased. Basic and grand innovations that had lasting impact on history. Lastly is the political aspect. Because of the great labor demand concentrated on steel company employment, it made politicians responsive and aware to the welfare of both unions and steel companies. Government made sure that it protects its steel companies from outside competitors because of the economic benefits for both parties. Moreover, trade barriers where in effect such as quotas, trigger prices regulations, and locality preference in government procurement (Rogers, 2009).
United States Steel Corporation
Integral to the history and development of the steel industry in the US is the U. S. Steel Corporation. Started in 1901, it was the largest business enterprise ever launched during that period. The company was founded by prominent businessmen—Andrew Carnegie, J.P. Morgan, Charles Schwab and Elbert Gary. Gary was U. S. Steel’s first chairman. In its first year, the company supplied almost 70 percent of all the steel produced in the country. In the years that followed, it developed a wide array of steel making procedures and technology and raw material subsidiaries, many of which were related or grew out of the firm’s initial steel operations. Through time, the company experienced various restructuring and conglomeration from other steel company thought it retained its name as U. S. Steel Corp (U. S. Steel Corporation [USS], 2009).
However, no solid company was prepared for the great depression that the United States experienced during the start of the 1980s. On 27 December 1983, U. S. Steel Corporation announced that it will cut back 20% of its steel production. Along with the austerity measures, came rounds of lay-offs among thousands of steel workers. The company cut back on its domestic raw steel production and made several restructuring. Moreover, it also entered several joint ventures to both domestic and foreign partners and non-steel corporations (Wall Street, 1983).
In the late 1986, the significant diversification and restructuring of the company recognized that it became a vastly different corporation and found the need to change its name from United States Steel Corporation to USX Corporation. The company ‘s conglomerate during that time included a joint enterprises on the fields of chemical, agri-business, oil field supply, and domestic transportation. In 2001, USX Corporation underwent reorganization yet again. This time, the plan was to separate USX Corporation and United States Steel Corporation. The separation became effective on 01 January 2002 that marks the date of the independent operation of the two companies. United States Steel Corporation concentrated its efforts in going back to its original business, to make steel products (USS, 2009).
Bethlehem, the strongest competitor of U. S. Steel Corporation, was not able to adopt the changes of the economic and industrial needs. Founded in 1899 in Pennsylvania, Bethlehem Steel expanded rapidly during the 1920s and became the second-largest US steelmaker by the eve of World War II. Bethlehem was responsible for 1,127 ships of World War II and the Golden Gate Bridge. The company supplied metal on almost all of the bridges and tunnels between New Jersey and Manhattan. The company’s operation was at its peak in 1955, making it a top eight on Fortune 500 (Loomis, 2004).
Then Bethlehem started to fall. Fifteen years of unstoppable decline did not stop Bethlehem from expanding in hopes that its company will be able to weather the storm. In 1962, Bethlehem built a large new plant at Burns Harbor, Indiana. And by the mid-1970s, about 7,000 people worked there; at the time, this amounted to only about 5 percent of Bethlehem's total workforce. As the American steel industry declined and Bethlehem cut back, the Burns Harbor plant continued to operate. By the end of the 1990s, it accounted for half of the company's total revenues (Loomis, 2004).
In May 1998, it acquired Lukens Inc, that helped increased the company’s production of carbon and alloy plate. It gave Bethlehem the bragging rights to be the top plate producer in the country. 1998 was a good year for Bethlehem because it is finally seeing the silver lining. But good things abruptly came to a screeching halt for Bethlehem. Over production beyond the required capacity for plates altered the trade pattern. Imports of cheaper plates had reduced its profitability and the company started cutting back work schedules and inventories. This continued till 1999 that resulted to almost 60 percent drop on the company’s income. Bethlehem tried to stay afloat tapping the government by filing, together with four other US companies, an antidumping lawsuit (Sheridan, 1999).
In Early 2000, Bethlehem signed a contract with General Motors Corporation for a long term partnership. This enabled Bethlehem to continue its modernization strategy for plates’ production after GM invested $60 million for Bethlehem’s production upgrades (ibid).
With all the company’s effort to continue its steel business, in May 2003, it filled for bankruptcy and all its assets were acquired by the International Steel Group (Loomis, 2004).
Smith & Loveless Incorporated
Smith & Loveless Inc is not a steel company per se but an example on how steel industry has diversified over time. The company is a great illustration on how spillover of technological advancement on the use of steel has created a company that specializes in factory assembled pump stations.
In 1946 Alden Smith and Compere Loveless saw the opportunity for a complete factory assembled pump stations in the water waste industry.In 1950, the business was such a hit with demands expanding throughout the US. To address, the increasing demand, Smith and Loveless partnered with Union Tank Car of Lincolnshire III as one of its conglomerate. The acquisition of the company proved to address the demand and to be able to continue research and development made Smith & loveless the forefront company in waste management (Smith & Loveless Inc, n.d.).
With the continued demand on water waste product, further restructuring and modernization was needed to continue to deliver the high expectations of the company’s consumers. One of its major moves was the acquisition of SCIENCO®, Inc., St. Louis, Missouri, and DI-SEP® Systems International, Inc., of Santa Fe Springs, California and other companies related to the water treatment technology and water waste management. Further expansion was expected by the company in the latter part of 1990 when Smith & Loveless was able to license their product to be sold in New Zealand and Australian Markets, and later on in The UK. Finally in 2003, the company was able to acquire the Biomixer Corporation of California and was able to get hold of the company’s state-of-the-art aeration and mixing technology (ibid).
Weathering the Storm
U. S. Steel Corporation’s survival of the ups and downs of the economy through a century of dealing business was due its resilience and flexibility to change and adopt through time. It did not limit itself solely on ‘manufacturing steel’ but made necessary adjustment and joint venture in order to survive. In the end, it went back to being just a steel industry, focusing its development and expansion solely to pursue its vision—making steel. Now the company is back at its feet, a model of a stable firm that has weathered the economic storms.
Smith and Loveless was able to meet the demand of its consumer of a competitive and quality water waste system. Continued development and assessing lucrative business ventures made the company succeed in the water waste management industry that they are now even actually pursuing patent license to all of their products (Smith & Loveless Inc, n.d.). The company maximized its opportunities in continually elevating and improving their product to make sure that what they sell are relevant to the needs of the clients.
Bethlehem on the other hand was not attuned to the changing economic market. Bethlehem focused itself into mass producing steel, concentrating mostly on its volume and quantity output. Eugene Gifford Grace, Bethlehem CEO in 1943 for instance promised President Roosevelt a ship a day- but beat his own mark and delivered 15 ships a day (Loomis, 2004). It was good for business especially since America was at war during that time. But after the end of World War II, that lucrative business of building ships are not so in demand anymore.
Bethlehem Steel should have taken its time on exploring other options and business ventures when steel was not on demand. Like United State Steel did.
Lessons on Entrepreneurship
What can be learned from the success of Smith & Loveless and United States Steel Corporation and from the failure of Bethel Steel Corporation?
One is the ability to evaluate lucrative business ventures. Salt & Loveless is a great example on how the company was able to turn around the need for a much needed financial capital into an opportunity to grow and improve their product. United State Steel also utilized business ventures to keep the company afloat but it went wayward from its expertise—which is making steel. Though it was able to go back to its original line of business, the company has to start from square one to truly develop and go back to manufacturing steel. Its latter business shift made lucrative business and is now continually exploring on developing steel products.
Second is the ability to respect the market and its law of supply and demand. It’s quite simple really; a product will sell as long as there is a need for it. Increasing the volume of product output does not necessarily, in most cases, increase the demand. An allegory of it could be the use of transportation. No matter how many taxis there is in the road, a person will still use one taxi to take him/her from point A to point B. Smith & Loveless was a pioneer on its use of steel to produce a waste water system so the demand for it, since there is little and no completion, was high. Steel industry was a bit crowded during the 1800s and the 1900s so increase of production does not necessarily translate to increase in sales.
Third is to learn from the past mistakes of failed attempts. Bethlehem Steel lacks the wisdom to learn from its numerous business pitfalls. An aspect of this could be the management style of existing CEO. Increasing production, upgrading production system to further increase production was a continued cycle for the company. GM did not know any better and just took the lead of the Bethlehem Steel.
Of all the lessons in entrepreneurship, passion and constant innovation is the key to success. Smith & Loveless is the best example among the three companies in truly understanding the essence of passion and innovation. It is passion from the leadership that trickles down to the grassroots level to affect everyone of the importance in being passionate towards work and business. Its constant business ventures and reconstructions are all directed to improve a product.
U. S. Steel is now rediscovering that passion when they dissolve the USX conglomerate to go back to the steel industry. It can be a calculated business maneuver on their part, but nonetheless a good one. Bethlehem steel could have had the passion and innovation but lacks effective leaders to run its company.
It cannot be denied that the steel industry greatly affects the totality of the country’s economy. It is with the country’s interest and that of the consumers of steel that productivity should be increased among steel companies. But on the other hand, steel companies would likely to prefer and produce below the probable demand to lessen the risks of surplus and increased expenditure on new plants that might be redundant from time to time based on demands. This will ensure that the limited quantities of steel products are sold in good prices (Halsall, 1998).
Technological spillover is also a byproduct of technological advancement of steel industry. Developing new steel products will help alleviate sales and operational costs during periods wherein steel is not in demand. Macsteel Service Centers USA for example, diversified its metal products that include carbon, stainless, aluminum products, tubing, and piping. Not to mention its array of metal building products and specialty/ custom-made products (Macsteel, n.d.). Technological potentials of steel are continuously being explored and studied. These industrial potentials of steel benefit not just the company through probable increase in revenue but also the consumers, and the economy.
Failure to adapt to the changing demands and needs of the steel industry can result to its downfall. Flexibility and continued development for steel product opportunities will help with continued expansion of steel industry. Creating and forecasting needs for specific steel products would be advantageous to all stakeholders.
American steel is symbolic of the economic might of United States in the twentieth century. From Andrew Carnegie to Henry Ford, American steel enabled men to make fortunes. Indeed, the steel industry is a crucial part of the United States history.
Halsall, P. (1998). Modern History Sourcebook: G. R. Strauss, Minister of Supply: Speech Delivered on Nationalizing the Iron and Steel Industry, November 15, 1948. Retrieved 19 August 2009, from http://www.fordham.edu/halsall/mod/1948-ironsteel-nationalisation.html
Loomis, C. J. (2004). The Sinking of Bethlehem Steel A hundred years ago one of the 500's legendary names was born. Its decline and ultimate death took nearly half that long. A FORTUNEAutopsy. CNN. Retrieved 19 August 2009, from http://money.cnn.com/magazines/fortune/fortune_archive/2004/04/05/366339/index.htm
Macsteel Service Centers USA. (n.d). A Single Powerful Entity. Retrieved 19 August 2009, from http://www.macsteelusa.com/about-us.asp
Rogers, R. P. (2009). An Economic History of the American Steel Industry. Taylor & Francis Group, 1-6
Sheridan, J. H. (1999). Bethlehem Steel Corp. Two steps forward, one step back: the sting of imports. Retrieved 19 August 2009, from http://www.industryweek.com/articles/bethlehem_steel_corp-_384.aspx
Smith & Loveless Inc. (n.d.). S & L History. Retrieved 19 August 2009, from http://www.smithandloveless.com/t-history.aspx
US Steel Corporation [USS]. (2009) History of U. S. Steel. Retrieved 19 August 2009, from http://www.uss.com/corp/company/profile/history.asp
Wall Street. (1983). Recession takes toll on Steel Industry. Retrieved 19 August 2009, from http://www.history.com/this-day-in-history.do?action=Article&id=6357