Bethlehem Steel plant at Sparrow's Point

Maryland Historical Society

In 1907, Charles Schwab proclaimed “I’ve thought the whole thing over, and if we are going to go bust, we will go bust big.” Although Schwab--according to this oft-repeated anecdote by Eugene Grace, his successor as president of Bethlehem Steel--was referring to his commitment to build the I-beam, the steel man prophetically predicted the history of a corporation that grew from a small iron works in the Lehigh Valley of Pennsylvania to become the second-largest steel producer in the world. It indeed went bust big--becoming the largest bankruptcy of modern times on December 31, 2003.

Originally called the Saucona Iron Company, for a nearby creek that was a source of iron ore, a group of railroaders and investors in Bethlehem, Pennsylvania, founded the company in 1857 as a blast furnace to produce rails for the Lehigh Valley Railroad. Renamed Bethlehem Iron Company in 1861, it converted to the Bessemer process in 1873. Bethlehem became a major corporation in 1904, when Schwab bought control of the company and created a holding company that eventually became--after U.S. Steel--the second-largest steel producer in the world.

In 1905, Schwab became interested in the I-beam, a structural component for new buildings. Henry Grey developed the I-beam in 1897 as an alternate to riveting separate pieces together. Despite the Panic of 1907, which made raising capital difficult, Bethlehem Steel built a new mill and created a market for the beam. Used for such prestigious projects as Gimbel’s headquarters and the Empire State Building, the I-beam became Bethlehem Steel’s trademark product.

Bethlehem developed into a major armaments supplier, as well. After producing armor plate in 1886, the company moved into artillery gun production in 1900. At the turn of the nineteenth century, Bethlehem engineers Frederick Winslow Taylor and Maunsel White developed a new type of heated tungsten-chromium steel that permitted metal-cutting at high speeds—doubling or tripling machine speeds and revolutionizing the design of cutting tools.

In October 1914, Schwab met secretly about submarine contracts with British officials, including Winston Churchill, to circumvent U.S. neutrality agreements. By the end of World War I, Bethlehem Steel had become a major weapons supplier and Schwab, despite working as a “$1-a-year man,” had become enormously wealthy.

Bethlehem Steel’s purchase of the Pennsylvania Steel Company in 1916 not only doubled the company’s capacity but also brought a subsidiary of particular interest to residents of Maryland: the Maryland Steel Company owned a steel mill and shipyard at Sparrows Point, located on a peninsula jutting into Chesapeake Bay in eastern Baltimore County. By 1957, this mill was the largest in the world, employing 35,000 workers and providing Beth Steel with a monopoly in the eastern United States.

Throughout the following decades, Beth Steel maintained its position as the world’s second largest steel producer, but failed to invest in new technology and new products. As a result, other companies’ new products, such as aluminum cans, began to erode Beth Steel’s market share in the late 1950s, although officials from Schwab to the present day have loudly blamed the company’s problems only on imported steel.

Bethlehem Steel also participated eagerly in the antiunionism that pervaded the steel industry. After breaking a steelworkers strike in 1910, Schwab established a company union called the Employee Representation Plan, but on September 26, 1941, the Steelworkers Organizing Committee won a National Labor Relations Board election and has represented the workers ever since.

Reutter, Mark. Making Steel. Sparrows Point and the Rise and Ruin of America’s Industrial Might. Champaign: University of Illinois Press, 2004.