Clouds and showers to start, then clearing and drying from north to south during the day with a little bit of sun in the afternoon. Still a bit sticky..
Clear to partly cloudy, cooler, and more refreshing.
“My father always told me businessmen were sons of bitches, but I didn’t believe him until now.” - President John F. Kennedy to his aides during the steel crisis of April, 1962.
“We’re not in business to make steel, we’re not in business to make ships, we’re not in business to erect buildings. We’re in business to make money.” - Frank Brugler, Controller of Bethlehem Steel Corporation (Fortune magazine, April, 1962).
On Wednesday afternoon, April 11, 1962, President John F. Kennedy strode into Washington’s State Department Auditorium. In front of him was the Washington press corps, who had been called together for this previously scheduled news conference. Kennedy was always at his best in these events, facts at his fingertips, humor and charm at the ready. But today these were on hold as he took the microphone, clearly angry. “I have several announcements to make,” he began. “Simultaneous and identical actions by United States Steel and other leading steel corporations increasing prices by some $6 a ton constituted a wholly unjustifiable and irresponsible defiance of the public interest. In this serious hour of our nation’s history, when we are confronted with grave crises in Berlin and Southeast Asia, when we are devoting our energies to economic recovery and stability, when we are asking our reservists to leave their homes and families for months on end and servicemen to risk their lives -and four of them were killed in the last two days in Vietnam-and asking our union members to hold down their wage requests…will find it hard as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profits exceeds their public responsibility… Sometime ago I asked each American to consider what he could do for his country, and I asked the steel companies. In the last 24 hours we had their answer.”
There is an impression, gauzy with the past and the tragedy that followed, that the administration of John F. Kennedy was all Camelot, a time of glamour and elegance. There was that to be sure but there were also tensions, and they were not all Cold War confrontations like the Bay of Pigs, the Cuban Missile Crisis and the Berlin Wall. Among them, and one that had a focus in part on the Lehigh Valley’s major industry- Bethlehem Steel- took place in the spring of 1962. It began when a group of the nation’s leading steel companies reached a decision to raise the price of their basic product in the aftermath of the steel strike of 1959.
Early in April of 1962 they announced that they were going to raise the price of steel by $6 a ton. This infuriated Kennedy. In a way that is hard to imagine today, when steel mills have been repurposed as entertainment venues and gambling casinos, a strong domestic steel industry was considered the most important factor in national defense.
In the midst of the Cold War, steel had already been the focal point of clashes between government and the industry. During the Korean War President Harry Truman had attempted to nationalize the steel industry but was blocked by the Supreme Court. President Eisenhower’s attempts to prevent a steel strike failed miserably in 1959 as he feared it was a direct threat with the Soviet Union in the arms race. It took his vice president Richard Nixon to “jawbone” a deal that got concessions from labor and management to end the standoff.
Although there were some in Congress and labor leaders who might have wanted them to be aggressive, Kennedy and his brother Robert the attorney general would not go there. Millionaires almost from birth thanks to their father’s stock market speculations they were as far from radicals as can be imagined. When labor leaders gave him a list of choices of who would be a good Secretary of Labor, Kennedy turned them all down. He chose Arthur Goldberg, a labor lawyer who publicly said he now worked for the president and not union leaders.
Kennedy saw himself as a pragmatic problem solver. By raising the price of steel, he felt the companies had double-crossed him and put their own profits ahead of the good of the country. In the Cold War world, the U.S. faced many challenges, and it did not need the risk of rising inflation on top of it.
Kennedy entered the White House, according to columnist Kenneth Crawford of Newsweek, “predisposed to accept the business community’s own idea about the proper relationship between government and private enterprise.” He appointed an Eisenhower Republican, C. Douglas Dillion (Nixon had planned to name Dillion as his Secretary of State) as his Secretary of the Treasury. He announced that it would be his aim to balance the federal budget, fight inflation, stand by gold as the medium of international payments, encourage economic growth and depend upon free collective bargaining to regulate industrial relations.
The steel companies saw it differently. They had been through a long strike in 1959. It had cost them time and money but most of all it had begun to cost them market. The post-war days when bombed-over European and Asian steelmakers basically left them the only game in town were over. In 1957, told by a business writer from the World-Telegram and Sun newspaper that foreign steel was coming back, Bethlehem’s Arthur Homer exclaimed, “I don’t believe it.”
And the strike of 1959 had already done its work. Several large customers of steel, including automakers, were looking at European steel producers that promised cheaper steel that would not block their assembly lines’ production schedules. This put the steel producers in a bind as they saw it. To battle those foreign steelmakers, they felt $6 a ton was a modest way for them to increase profits. When U.S. Steel announced it was making that move, Bethlehem Steel was next in line and the others followed suit.
Some at Bethlehem Steel with long memories felt that Kennedy’s antagonism was also personal. It was remembered in some circles that Kennedy’s father, Joseph P. Kennedy, had run-ins with company management during World War I when he ran the Bethlehem’s Fore River shipyards. In a dispute over sending four ships to Argentina that had not been paid for, his chief antagonist was the young Assistant Secretary of the Navy, Franklin Delano Roosevelt.
Whatever the reason, Kennedy felt betrayed. That April edition of Fortune magazine, devoted to Bethlehem Steel, which had been on the newsstands for about a week, quoted the company’s controller Frank Brugler that prospects for the year were excellent. “Unless the steel industry goes to pot, which it won’t, Bethlehem isn’t going to plateau out. We’re going to make more money than ever.” Now they were all in with U.S. Steel for a price increase.
On April 12th Associated Press business reporter Lee Linder got a visit from the FBI. They wanted to know if Linder was correct when he quoted Bethlehem Steel president Ed Martin at a stockholders meeting saying he was opposed to a price increase. A spokesman for Bethlehem said later Martin had been misquoted. Linder defended his quote to the agents. They then talked to a series of other reporters. Finally, Bethlehem issued a statement they hoped would stop the issue saying Martin had never made the statement. That quieted the issue.
But it was soon clear to the steel companies that Kennedy’s move against steel was popular. In the way he phrased it he represented the will of the country in the fight to keep inflation down. Here was something a wide variety of Americans of both parties could agree on. So, when it became clear that the other companies- particularly Inland Steel- would not go along the price increases, they were pulled back.
Kennedy, busy holding talks that week with the visiting Shah of Iran, was thrilled with the outcome of the crisis. But the steel companies were furious and convinced that Kennedy had in a way blackmailed them. They said it was a violation of the free market system. He had used no less then dictatorial powers against them. In his book “The Steel Crisis: 72 Hours That shook the Nation,” journalist Roy Hoopes writing in 1963 summed up the feelings of Bethlehem Steel’s Arthur Homer in late April of 1962:
‘‘At a news conference in which Bethlehem reported its first-quarter earnings, Homer stressed the fact that the failure to win a price increase earlier that month did not rule out the possibility of a future increase. He also said that during the crisis no one contacted Bethlehem, and he wanted to make it clear that his company rescinded the price increase not because of pressure from the Administration, but solely because two of its more important competitors had not backed U.S. Steel. After Inland and Kaiser refused to go along Bethlehem knew that the price increases for our products were not competitively feasible at that time. We could not ask our customers to pay higher prices for our steel than were being paid by the competitors who obtain their steel from other sources.”
Did the actions by the Kennedy administration in 1962 lead to the future demise of the American steel industry? Some business writers today think that it did. Others argue that it was perhaps a minor factor in the decline of early 20th century technology whose time had passed.
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