United States Steel: A Corporation with a Soul. Arundel Cotter
Steel stock.
Last of the Reid-Moore companies to be organized was the American Sheet Steel Co., chartered in February, 1900. This company acquired 164 sheet mills, nineteen puddling furnaces, and a number of open-hearth furnaces and bar mills. It had a capacity of about half a million tons. Its earnings, from the time it began business to April 1, 1901, amounted to $1,676,480 and its surplus on the latter date was $705,757. Its stock was exchanged for Steel Corporation securities on the same basis as those of the Steel Hoop Company.
The National Tube Co., organized in June, 1899, was a merger of thirteen smaller concerns having an aggregate capacity of about 850,000 tons of steel-wrought tubing. Its principal plants were located in the Pittsburgh district. In the year 1900 the company reported net profits after depreciation of more than $14,600,000, or about 35 per cent. on its preferred capital stock. National Tube preferred stockholders exchanged their holdings at the rate of $100 for $125 of U. S. Steel preferred, while the junior stockholders received $8.80 in preferred and $125 in common stock of the corporation for each $100 they held.
The Federal Steel Co., second only in size and importance to the Carnegie Steel Co., was chartered late in 1898, as a merger of the Illinois Steel Co., Minnesota Iron Co., Minnesota Steamship Company, Mount Pleasant Coke Company, Lorain Steel Co., Elgin, Joliet & Eastern Railway Co., and the Johnson Co. of Pennsylvania. The steel companies it controlled brought to it some of the best-equipped steel mills, manufacturing various products, in the country, as well as a number of ore vessels and the principal ownership of the Duluth & Iron Range R. R. Its earnings in 1899 were approximately $9,100,000, or about 17 per cent. of its preferred stock, and in 1900, $11,722,000, or about 22 per cent. Federal Steel preferred stockholders received new preferred stock at the rate of $110 for each $100, and the common stock was exchanged at the rate of $100 of Federal common for $4.00 of preferred and $107.50 of the common stock of the U. S. Steel Corporation.
The Lake Superior Iron Mines, dominated by the Standard Oil interests, was formed in 1893. It was merely an ore company and had ore reserves, owned or leased, estimated at nearly 400,000,000 tons. The company also owned the Duluth, Missabe & Northern Railroad, and it was affiliated with the Bessemer Steamship Co., afterward purchased by the Steel Corporation. The earnings of the Lake Superior company were enormous, having been nearly 58 per cent. on its capital in 1900. For each $100 of its stock—there was only one class—$135 each of preferred and common stock of the U. S. Steel Corporation were exchanged.
The American Steel & Wire Co., of New Jersey, was a consolidation effected in January, 1899, of the majority of the country’s wire mills. It had a rod mill capacity of more than 1,100,000 tons and a wire nail capacity of more than 10,000,000 kegs, or more than 500,000 tons. It also owned extensive ore and coking coal properties. In the first year of its operation the wire company earned nearly $19.00 a share on its common stock after an allowance of $1,200,000 for depreciation, and in 1900 its earnings applicable to the common stock were $4,202,129, or nearly 8½ per cent. on the issue. Its preferred stock was exchanged on a basis of $117.50 U. S. Steel preferred for each $100, and its common stock on the basis of $102.50 of Steel common for each $100 of Steel & Wire.
We come now to the largest and most important of the ten companies originally merged into the monster Steel Corporation—the Carnegie Steel Co., the great organization ruled by the Monarch of Steel and turning out from its furnaces and mills practically one fifth of all the steel made in the United States; and, incidentally, pouring undreamed-of wealth into the pockets of Carnegie and his associates. A company that realized profits in 1899 of nearly $24,000,000 and in 1900 of approximately $40,000,000!
The Carnegie Steel Co. was a merger of the Carnegie and Frick interests. By its absorption the new corporation secured possession of the greatest steel organization of its time, as well as of the important coke holdings of the H. C. Frick Coke Co.—owning about 40,000 acres of coking coal lands, 11,000 coke ovens, and other property—a controlling interest in the Oliver Mining Co. with its large ore possessions, and the controlling interest in the Pittsburgh, Bessemer & Lake Erie Railroad, not to mention a number of other concerns and interests of less importance.
Unlike most of the other merged companies, the Carnegie Steel Co. had all its steel-making plants concentrated in the Pittsburgh district. It was in this locality that Carnegie had built up his great business machine and his fortune. He had never attempted to build elsewhere, with the exception of his threat to erect a tube plant at Conneaut. Carnegie believed in the future of Pittsburgh. And he himself did more than any one else to assure that future. Carnegie it was who had made Pittsburgh the steel centre of the universe. And his plants there, at the time they were taken over by the Corporation, had an annual capacity of some 3,500,000 tons of steel ingots and more than 3,000,000 tons of finished products.
When the Carnegie company was reorganized in March, 1900—at which time the merger with the Frick company took place—its capital was placed at $160,000,000 in stock and a like amount in bonds. All the stock and all but $50,000 of the bonds were taken over by the organizers of the Steel Corporation and for these, as has been seen, a total of $492,006,160 was paid, as follows: for $159,450,000 Carnegie bonds an equal amount of bonds of the new company was exchanged; another $144,000,000 in new bonds was employed to take up $96,000,000 of the Carnegie stock while $98,277,120 Steel preferred and $90,279,040 Steel common paid for the remaining $64,000,000 Carnegie Steel stock.
In order to provide for the exchange of new stocks and bonds for the securities of the constituent companies the new organization, which it had been finally decided to name the United States Steel Corporation, was given an authorized capitalization of $550,000,000 each in common and preferred stocks and $304,000,000 in bonds, a total of $1,404,000,000. To ensure sufficient working capital at the start a sum of $25,000,000 was put up in cash by the syndicate, headed by the Morgan interests, which had financed the transaction. This syndicate also turned over to the corporation $174,000 in securities of the merged companies which had been acquired by means other than exchange, and expended some $3,000,000 as syndicate expenses. For the cash, stock, and its services the syndicate received 648,987 shares of preferred stock and 648,988 shares of common stock.
Practically all the stockholders of the old companies, satisfied that with the Morgan backing the new company its success was fairly well assured, took advantage of the exchange offer, with the result that at the end of the first nine months of its existence less than 1 per cent. of the old securities were still held in the hands of the public and of the Corporation’s capital as authorized $1,319,229,000 had been issued. To-day only about three hundredths of one per cent. of the stock of the ten companies is still held outside the Steel Corporation.
The steel-producing equipment controlled by this vast aggregation of capital comprised 149 steel works of various kinds, having an annual capacity of 9,400,000 tons of crude and about 7,700,000 tons of finished steel; 78 blast furnaces with a pig iron capacity of 7,400,000 tons; more than 500,000 acres of coking coal lands; more than 1,000 miles of railroad and a fleet of 112 vessels engaged in traffic on the Great Lakes, not to mention large areas of ore-bearing property with uncounted millions of tons of developed and undeveloped ore, as well as docks, natural gas, and limestone properties, etc.
Just as the Corporation’s capital, wealth, and resources had never before been approached by any industrial organization so its board of directors surpassed in aggregate wealth that of any other company. The list of the men who guided the Corporation’s destinies included J. P. Morgan, John D. Rockefeller, and a host of others whose gigantic fortunes were exceeded only by those of the two kings of finance named. The others were: Elbert H. Gary, H. H. Rogers, Charles M. Schwab, Robert Bacon, Edmund C. Converse, Francis H. Peabody, Percival Roberts, Jr., Charles Steele, William H. Moore, Norman B. Ream, Peter A. B. Widener, James H. Reed, Henry Clay Frick, William Edenborn, Marshall Field, Daniel G. Reid, John D. Rockefeller, Jr., Alfred Clifford, Clement A. Griscom, William E. Dodge, Nathaniel Thayer, and Abram S. Hewitt.
Their fortunes, if it were possible to add them together, would amount to a sum greater even than the huge capital of the “Steel Trust.”
Of the original directorate of the Corporation only seven still survive and only two are still directors. These are Gary and Roberts.
Charles M. Schwab was chosen president of the Corporation,