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Bethlehem Steel: Builder and Arsenal of America

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How does a great firm go bad? Was its demise due to incompetence, greed, bad luck, poor timing, or competition? Yes. Yes. Yes. Yes. And yes.

Bethlehem Steel grew from humble beginnings to become a major force in the world. Baltimore was an ideal spot to locate one plant, with iron ore shipped from Cuba, where Bethlehem built its own rail line to bring the ore out of the mines. My dad spent thirty years with Bethlehem Steel, joining its ranks after World War II, watching the majesty of steel making and the re-building of the post-war infrastructure and consumer society, and then witnessing the slow death of a once dominant firm -- the MicroSoft of its day -- due to all of the factors noted above. Complacency, environmental demands and constraints, foreign competition, government interference, and ill-advised union contracts led to entire plants sold off to foreign countries. I spent one long, hot, dirty summer working in the hot strip mill in 1970, where the most common advice I received as a college student considering a career was to avoid a career with steel. Even as production expanded, with Basic Oxygen Furnaces (BOFs), many workers saw no future in steel. Dad retired from Bethlehem in 1978 and were he alive today, learning that the former Sparrows Point Bethlehem plant is in Russian hands would probably kill him. Today, the remnants of the once magnificent Lackawanna (NY) plant is an environmental hazard and home to a wind farm.

And today we see similar fates befalling firms in the financial industry, many for the very same reasons. The primary difference was that Bethlehem produced tangible, traditional wealth, not mark-to-market malfunctioning mortgage-based mishaps.

Warren has a clear, detailed academic writing style, an eye and a brain for history, and an appreciation of nuance and anecdotes. Read it to appreciate history and to learn valuable lessons.

Kenneth warren provides a great account of the rise and decline of Bethlehem Steel in his work on what happened to the second largest producer of steel in the country. Professor John Smith in one of his articles titled "The improbable success of Bethlehem Steel" looked at all the factors that went against Bethlehem Steel and Warren confirms many of those as he assesses what happened to the company. Bethlehem's rise was driven by being one of the first to modernize and develop natural resources for the production of steel. What started out as a small company to make rails for the Lehigh Valley Railroad quickly developed into the premier supplier of battleship grade steel for the US Navy. Although growing pains would ensue at Bethlehem Steel, it would remain the supplier of steel to the United States Navy throughout the decades including World War II.
The downfall of Bethlehem Steel is attributable to any number of factors including unions, bad management, poor location, increased competition, and soaring pension costs coupled with falling steel costs. Bethlehem's management team was severely anti Union leading to further strife and causing the unions to be even greedier in their demands leading to widespread dysfunction within the company. Bethlehem was always further away from natural resources on the great lakes than its competitors in Pittsburgh and further away from the primary steel markets in Detroit. All of these factors together combined to make the perfect storm to take down an industrial giant
Warren does an excellent job of clearly explaining what happened to Bethlehem Steel and its outlying plants be they Youngstown, Johnstown or Lackawana and looking at the fall of the main corporation in Bethlehem PA. For those who want to understand how a huge corporation can collapse quickly this is a great book for understanding it.

I read between one and three books per week of varying genres and complexity. This book was assigned reading for a PA History undergraduate class designed to educate elementary school teachers in preparation for grade school teaching. "MINUTIA" is the word that comes to mind. The only people who would ever be interested in reading such a boring book would be the equivalent of a "Trekkie" of business history. I bet they even have conventions for people interested in this! Count me out! I used to work in banking. Contracts read like a steamy romance novel compared to this. Business mergers are less complex. My instructor chose this book as the coup de grace to a course I didn't think could get any worse. He found the perfect instrument to beat his students up with, his intention all along! If you have to read this book, don't just switch classes, switch schools!