Charles Schwab and Steel in Cambria County, Pa. (Part 1)
From: History of Cambria County, Pennsylvania
By: John E. Gable
Historical Publishing Company
Topeka-Indianapolis, 1926

SCHWAB AND STEEL.

Charles Michael Schwab, who is still "Charley" in the Pittsburgh district, "C. M." about the offices of the Bethlehem Steel Corporation and its subsidiaries, and "Charles M." in the current history of steel making and the news of the world, will present few difficulties to a biographer of the future, but it is not easy to picture him today in a Cambria County setting, where he best likes to be. Mr. Schwab is still so very much alive and so very strongly addicted to doing unusually big things in unusual ways, that any story of his life is subject to extension and revision at any time.

Mr. Schwab for a number of years had two objectives in mind of great interest to Cambria County. He was carrying out with Mrs. Schwab the building of a home estate at "Immergrun," Loretto, with the idea of spending there more and more of their time. And he wanted to own or control the Cambria Steel plants at Johnstown by making them a part of the Bethlehem Steel Corporation, which he had brought out of the obscurity of rank as a minor plant into prominence as the leader of the independent steel concerns competing with United States Steel.

"Immergrun" is home to Mr. and Mrs. Schwab. The great Riverside Drive mansion in New York is still theirs, for occupancy part of the year. Mr. Schwab still makes many trips to Europe, and Mr. and Mrs. Schwab make occasional visits to the South, but the Loretto place is now "home" and the works at Johnstown are known as Cambria Plant of Bethlehem Steel Company.

Charles M. Schwab was born Feb. 18, 1862, at Williamsburg, Blair County. The family moved to Loretto. The first regular job of Charles had been the driving of the stage coach between Cresson and Loretto. When he decided to go to Braddock in search of work his capital consisted of a five-dollar bill given him by his father. He entered the employ of A. J. Spiegelmire in a general store at Braddock, salary $10 a month. Here, in 1880, began one of those strange associations of men which became historic in the steel making adventures of Andrew Carnegie, who was not a steel man. To Spiegelmire's came Capt. Bill Jones for a bit of tobacco, and young Schwab, "with the assurance of a raw country boy," as he now explains it to himself, asked for a job in the mill. There were no specifications as to what sort of a job would meet the requirements. The young man was fairly husky, looked as if he meant what he said, and it was much the regular thing in those days of growth at the Edgar Thomson steel plant to pick men for their evident desire and capacity for work, to start them somewhere and give them opportunity to find their proper places. The start was wherever men were most needed at the time they were hired.

"You can start in driving stakes and dragging chains for the engineers," said Captain Bill. "It pays a dollar a day." That was in 1880. It was not long until Captain Bill discovered that the new boy from Loretto understood that there was more to engineering than driving stakes and lugging chains. Young Schwab did his full share of the driving and hauling, but he also devoted his spare time to studying the mathematics of engineering. In six months he had become assistant engineer, and within three years was at the head of the whole engineering corps at $250 a month. Captain Bill was on his way to revolutionizing the mechanics of steel and to firmly establish Pittsburgh as the steel center of the world. Charles M. Schwab was at his right hand, with less of the mechanical genius of his boss, but a capacity for making good in the construction and operation of Jones' inventions and for going out into other fields of experiment and development which greatly enlarged the field of operations of the pair. Their daring was sensational but successful. Where Captain Bill was boss, he bossed, and the young engineer assisting him was of the same disposition and habit in this respect.

Capt. William Richard Jones had been a Cambria Iron Company machinist. He belonged to Johnstown. There is perhaps no better place than right here to briefly sketch his history, since Mr. Schwab so fervidly avows his debt to Captain Bill and Mr. Carnegie has recorded his acknowledgment of the value of the services of these two remarkable men, whose careers overlapped for only a few active years, but whose story carries the history of iron and steel in this country through the period of Carnegie Steel Company miracles and the formation of the United States Steel Corporation, to the present day, when Charles M. Schwab heads a corporation as large as was United States Steel at the time of its organization, which he began to build up in his own way after he had reached the top of United States Steel and found there a multiplicity of bosses cramping individual initiative and creating a feeling of lessening usefulness.

The following sketch of Captain Bill is taken from a pamphlet published to submit competitive subjects at the Pittsburgh International Eisteddfod of July, 1913, which was in itself a William R. Jones memorial, planned as a means to raise a fund for the William R. Jones Home for the Aged and Infirm, his friends firmly believing that Captain Bill would have preferred this form of a memorial to his memory. The sketch follows:

Captain Jones was born in Luzerne County, Pa., Feb. 23, 1839, and was the son of the Rev. John G. Jones, who, with his wife and two children, emigrated from Wales in 1832.

Owing to his father's ill health he was compelled to commence work when young, and hence was deprived of any but the most limited educational advantages. At the age of 10 he was apprenticed to the Crane Iron Company, of Catasauqua, Pa., in the foundry department, and later placed in the machine shop of that company. At the age of 16 he had made such progress that he was receiving the full wages of a regular journeyman mahinist.

About this time he entered the employment of William Millens in his machine shop at Janesville, Luzerne County, Pa. In 1856 he removed to Philadelphia, and worked at his trade as a machinist in the shops of Messrs. I. P. Morris & Co.

The panic of 1857 deprived him of work, and compelled him to endure many privations. In the search for work he reached Tyrone, Pa., where he engaged himself to a lumberman by the name of Evans, and went with him to Clearfield County, Pa., remaining with him first as a farm hand and lumberman, and later as engineer, until the spring of 1859, when he removed to Johnstown, Pa., working as machinist for the Cambria Iron Company under John Fritz, then general superintendent of that company. Later in that year he went to Chattanooga, Tenn., to assist Miles Edwards in the erection of a blast furnace. He remained at Chattanooga until after the breaking out of the rebellion, having in the meantime married Miss Harriet Lloyd, of that place.

In 1861 he was again employed by the Cambria Iron Company as machinist. In response to President Lincoln's call for nine months' men, he volunteered on July 31, 1862, enlisting as a private in Company A, One Hundred Thirty-third Regiment, Pennsylvania Volunteers. He was soon promoted to corporal. He served with his regiment in the Army of the Potomac, participating in the battles of Fredericksburg and Chancellorsville, in both engagements distinguishing himself by personal bravery. Upon the expiration of his term of service, May 26, 1863, he returned to Johnstown, resuming his position with the Cambria Iron Company.

Later he organized Company F, One Hundred Ninety-fourth Regiment, Pennsylvania Volunteers, and was mustered in as captain of the company on July 20, 1864. In accordance with Circular Order No. 56, A. G. O., he was mustered out as captain of an independent company, this being formed of members of the One Hundred Ninety-third and One Hundred Ninety-fourth Regiments„ P. V.

Captain Jones' company was assigned to provost duty in Baltimore, Md., under Col. J. Wooley, provost marshal, that city being in the Middle Department, commanded by Maj. Gen. Lew Wallace, with department headquarters at Baltimore.

While acting as commander of the provost guard at Baltimore, Captain Jones was called upon to perform many duties requiring tact and personal courage, as well as to exercise the qualities of a strict disciplinarian. So well did he and his command acquit themselves that they not only possessed the confidence of their superior officers, but were publicly complimented bye Gen. Lew Wallace. Captain Jones was mustered out on June 17, 1865, following the close of the war.

He returned to Johnstown, Pa., and again entered the employ of the Cambria Iron Company as assistant to George Fritz, the company's general superintendent and chief engineer, and as such assisted in the construction of the Cambria Iron Company's Bessemer steel converting and blooming mill plants.

Upon the death of George Fritz, in August, 1873, he resigned his position, and was soon afterward engaged by the Edgar Thomson Steel Company to take charge of their steel works and rail mill, then building from plans designed by A. L. Holley, at Bessemer, Allegheny County, Pa.

Upon the completion of the works Captain Jones was made the general superintendent, and afterwards given full charge of the engineering department, as well as the general management of the works. While this plant when erected was, perhaps, the most perfect one in the United States, the rapid advance in the art of steel making soon made it desirable to completely remodel it, which was done under his direction, the blooming mill being built in 1881, and the converting works in 1882.

This company also decided to build blast furnaces, completing Furnace "A," 15 feet 5 inches bosh, by 66 feet high, in 1879, and Furnaces "B" and "C," 21 feet bosh, by 80 feet high, in 1880. These were so successful under Captain Jones' management that he was authorized to build two more, completing Furnaces "D" and "E," 23 feet bosh by 80 feet high, in 1881, and again adding Furnaces "F" and "G," of the same pattern, in 1886 and 1887, respectively. Furnace "H" was in course of construction at the time of his death.

In 1885 Captain Jones attached automatic tables to the rail mill, thus doing away with a large number of skilled operatives, these tables being covered by his own and Robert W. Hunts' patents. The works were so successful that in 1887 Captain Jones received permission to build an entirely new rail mill, in the construction of which he departed from all precedent, and the result more than filled his most sanguine anticipations. In 1888 his duties were increased by his being made consulting engineer of Carnegie, Phipps & Co. The principal object of the appointment was to cover their extensive plant at Homestead, across the Monongahela River from Braddock and Bessemer, and a short distance downstream.

Captain Jones was an industrious inventor and covered many of his improvements by patents, among them being: "A device for operating ladles in Bessemer process," "improvements in house couplings," patented Dec. 12, 1876; "fastenings for Bessemer converters," patented Dec. 26, 1876; "improvements in washes for ingot moulds," June 12, 1876; "hot beds for bending rails," April 10, 1887; "machine for sawing metal bars," Aug. 7, 1877; "process and apparatus for compressing ingots while casting," September, 1878; "ingot mould," Oct. 1, 1878; "cooling roll journals and shafts," July 5, 1881; "feeding appliance for rolling mills," April 27, 1886; "gas furnace for boilers," May 4, 1886; "art of manufacturing railroad bars," Oct. 12, 1886; "appliance for rolls," May 15, 1888; "housing caps for rolls," May 15, 1888; "apparatus for removing and settling rolls," June 20, 1888; "apparatus for removing ingots from moulds," Jan. 1, 1889; "method of mixing moulten pig metal," June 4, 1889; "apparatus for mixing pig metal," June 4, 1889.

Captain Jones was a member of the American Institute of Mining Engineers, the American Society of Mechanical Engineers, Engineers' Society of Western Pennsylvania, and the Iron and Steel Institute of Great Britain.

In 1888 he was chosen senior vice commander, Department of Pennsylvania, G. A. R.

As soon as news was received of the terrible Johnstown, Pa., flood disaster, May 31, 1889, Captain Jones acted with his characteristic promptness and decision. He dispatched a trusted messenger to investigate and report to him the true situation. As many of the citizens of Braddock had, with Captain Jones, been former residents of Johnstown, they were intensely excited. The officials of the Pennsylvania Railroad Company requested him to assume command of the workmen whom they proposed sending there. He consented, and impressed upon them the magnitude of the undertaking. Upon reaching Johnstown, after a march of some miles, Captain Jones at once established his men in an organized camp. His dispatch to the relief committee of the Pittsburgh Chamber of Commerce, stating the work was beyond the limits of any volunteer movement and could only be successfully handled by the state, and also urging the general government to send a pontoon bridge train to bridge the streams, was the first comprehensive grasp of the situation.

Captain Jones was possessed of great physical strength and an indomitable will, but, overmastering all, a most generous nature, and a heart as tender as any woman's. While quick of temper, he was ever ready to acknowledge and repair a mistake Without the advantages of early education and associations, he cultivated a true love of the beautiful in nature, art and literature.

His life's success was most intimately identified with that of the Bessemer process of America. Alexander L. Holley's fame will always stand as having made the wonderful developments of that process possible, but without the co-operation of such practical mechanics and energetic developers as George Fritz and William R. Jones, Holley's convictions of the possibilities would, at least, have been later in realization. Fritz was called away just as the first triumphs were being attained. Holley lived to see what appeared to be complete victory, but Jones and others were spared to carry the process beyond Holley's most sanguine dreams. Jones loved Holley, and seemed to feel that each succeeding achievement of his was adding another garland to Holley's fame.

There are few living Welshmen who have accomplished more for the practical advancement of the Eisteddfod. He gave liberally of his wealth, not only in prizes, but was noted for his readiness to encourage competitors who failed in their efforts to secure a prize. To him the detailed work of the Eisteddfod and all its arrangements always proved fascinating, and his share in the work and all his Eisteddlodic efforts were characterized by the same thoroughness and whole-heartedness which marked his business life. He was an active member of the St. David's Society of Pittsburgh for many years, and was a prominent figure at the St. David's day celebrations.

As a philanthropist Captain Jones stood unique, as he gave beyond his means. His heart was larger than his pocketbook. There are many instances on record of his great generosity to the families of workmen fatally injured at the mills, as well as to employes meeting with accidents. To the widow Captain Jones would deed the house in which she lived, but his giving was always accomplished in a most secret manner, as he thoroughly abhorred publicity, and for that reason many of his good deeds were buried in silence.

As a result of injuries received on the night of Sept. 26, 1889, caused by the bursting of a blast furnace at the Edgar Thomson Steel Works, at Bessemer, Pa., Captain Jones died on Saturday, Sept. 28, 1889.

Captain Jones was beloved by all who knew him. The men under his management worshiped him, and the community in which he lived honored and respected him. The world is better for his life, but many hearts were made desolate by his death. If ever a man existed who was absolutely honest in every fibre of his being, such a man was William Richard Jones. In the words of James Gayley, first vice president of the Carnegie Steel Company, "Captain Jones' mechanical contributions to the development of the steel-making industry accomplished fully as much as Musket or Sir Henry Bessemer."

Picks Schwab as Successor.

When Captain Bill's expanding duties made him consulting engineer in the building of Homestead, Charles M. Schwab was still right behind him. After Schwab became head of the engineering corps at Edgar Thomson, he sought a wife. The girl was Emma E. Dinkey, daughter of the first steel works chemist in the United States. Mr. Schwab was interested in chemistry, too. As he tells the story of loyalty to Captain Bill, whose mechanical greatness he recognized, he determined to help him by learning chemical analysis. Captain Bill did not think much of the chemical end of the industry. "Charlie," he once said to his young associate, "this damn chemistry is going to spoil the steel business yet."

"I helped him," says Mr. Schwab, "but only he knew it, and he told Mr. Carnegie: 'This boy knows as much as I do. If anything happens to me, he is the man to take my place.' "

In seven years Mr. Schwab had become superintendent of the huge Homestead works of the Carnegie Steel Company, commanding an army of 8,000 workers. In 1894, when 32 years old, he was made president of the Carnegie Steel Company, and in 1900 he conceived the plan of the United State Steel Corporation. Under his management the mills had been enlarged and improved until they were the greatest producers of steel blooms, billets, structural iron, bridge steel, armor plate and ship steel in the world. In 1889 he had been induced to return to the Edgar Thomson works as general superintendent, but in 1892 he had gone back to Homestead with the responsibility for both plants on his shoulders and the whole job made more difficult because it was his work to put Homestead back into profitable production after the memorable strike of 1892. Within six months he not only had an effective force of steel workers, but his mechanics had built in new equipment, better designed, and the plant was turning out the greatest tonnages of products in its history.

Mr. Carnegie offered Mr. Schwab a vice presidency in the Carnegie Steel Company. Mr. Schwab declined, saying that he was a bigger man at the works and preferred to remain there for a while. But in 1896 he was elected a member of the board of managers, and the following year he succeeded J. G. A. Leishman as president, a position which gave him practical control of the steel business of America and made him a recognized factor in the trade of the world. He had determinedly worked away at the basic open hearth process. Today, it is said, 90 per cent of the world's production is by this process. The mechanical genius of Captain Bill and the courage of Schwab to strike out into new fields, with the capacity of both for handling men, had created a new era of which Pittsburgh was the new capital and Schwab the commander.

Mr. Schwab tells his friends and neighbors that he does not know why Andrew Carnegie chose him to run his growing works, except that Captain Bill's recommendations had seemed good to the keen little Scotch-man, but Mr. Carnegie has written the reasons, which were that Mr. Schwab always told him the truth whether the truth was pleasant or not, and was loyal to his employers. Mr. Schwab can not be persuaded himself that he had any unusual ability. He says now that he thinks he has not been the success he should have been. "There was never a time," he declares, "that I could not look around and see 25 or 50 better men, and I never promoted a man to my place who did not do a great deal better than I." He marvels only at his confidence and his good fortune.

Mr. Schwab, producer of steel, stepped into a new role at a dinner party in New York on his birthday in 1901, at which he was the guest of honor. Many of those present were not works men, but banking men. The late J. Pierpont Morgan sat beside him. Mr. Schwab, in his speech, talked Pittsburgh steel. He painted such a radiant picture that the big capitalists began to feel that they had overlooked something good. A few days later Mr. Morgan invited Mr. Schwab and the late John W. Gates to his home for a conference. Mr. Schwab gave them a rough plan of a combination or merger of steel interests and the possibilities in such a combination. He was asked to approach Mr. Carnegie and get his selling price on Carnegie Steel Company.

All that Mr. Carnegie wanted, as reported by Mr. Schwab, was a sum equal to 80 per cent of all the gold then in circulation in the United States — almost half a billion dollars. Mr. Carnegie would sell for $487,556,160. The Morgan interests carried the deal through at that fabulous price. They had been thoroughly sold by Mr. Schwab and they began to build around him, champion salesman of the world, the great -United States Steel Corporation. They were willing to hire the stake driver from Loretto at a million dollars a year.

But here there was a hitch. Mr. Schwab had the Carnegie idea that salaries were nominal and that a division of profits, when earned on a bonus system, was much better. He liked working to accomplish something much better than working for a salary. United States Steel, in the first year of its existence, was expected to earn $70,000,000, as the financiers figured the probable returns on their investment. Mr. Schwab asked whether Mr. Morgan would agree to pay him 2 per cent of all that was earned over the $70,000,000. It was a bet, on which Morgan, by making much more than he expected, paid to Schwab almost twice the million dollars he was willing to offer as a year's salary. Mr. Schwab once told a protesting director who objected to paying out 15 per cent of profits to department managers before dividends that Mr. Carnegie was the most successful steel man America ever had, and that Mr. Carnegie distributed half of his profits among his men. He knew because he had shared in them.

But Mr. Schwab was not quite happy as president of United States Steel Corporation. "When I left Carnegie I was czar," he says. "But in New York I found 48 directors. Each man thought that on some subjects his ideas were most important. Naturally I though my ideas were most important. I resigned and bought Bethlehem Steel. Mr. Morgan bought Bethlehem back from me and I remained with United States Steel another year. Then I bought Bethlehem again."

"Schwab is through," said many of the financiers. "He must either sit down and run a little old plant or buck the Corporation." But Schwab was just beginning another story in some ways more remarkable than that of Edgar Thomson, Homestead, Carnegie and United States Steel.

Schwab and Bethlehem.

Speaking as their honor guest to 200 residents of Ebensburg, July 28, 1926, Mr. Schwab, as their friend and neighbor, back at Loretto after the flight of 46 years, to be in his old home among old friends, declared that he intended to go on with the building of Bethlehem Steel. He repeated what he had often said before, that he had long desired to own the Cambria plants and that the acquisition of the Johnstown works was his latest and happiest big accomplishment. More than once, before and after the negotiations, Mr. Schwab, as a steel master, has said that "Johnstown is perhaps not the best place in the world for a steel works." But Charles M. Schwab, the Cambria countian, who has done many things which were not approved by the experts of iron and steel as the very best thing to do, told his neighbors at the county seat:

"So long as I have money or can borrow money, I am going on to make Cambria Steel works one of the greatest in the world because it is here in Cambria County."

Mr. Schwab told the story of the purchase of Cambria works through the acquisition of all of Midvale Steel and Ordnance Company except the old Midvale plant at Nicetown, Philadelphia, which was separately organized as Midvale Steel of Delaware and recently was taken over, through acquisition of stock control, by Baldwin Locomotive Works of Philadelphia.

"I could not bargain for Cambria with my old associate, W. E. Corey, so I sent Eugene G. Grace, president of Bethlehem Steel Corporation. Grace wired me, tan get it for ninety million.'

"I wired back, 'Get it for eighty-five.'

"Grace wired back, 'Can get it for ninety.'

"I wired back, 'Get it.'

"In three minutes came the message, 'Got it.' "

In 1922-1923 Bethlehem acquired Cambria, Midvale and Lackawanna plants.

"Within a few years," says Mr. Grace to the stockholders of Bethlehem Steel Corporation, "the corporation has become the second largest producer of steel in the world. In 1905 its steel properties comprised a single small plant at Bethlehem, Pa., engaged in manufacturing specialties. Since then it has by purchase of new properties and construction of new plants increased its steel tonnage capacity forty times Instead of a few specialties it now produces practically every important steel product with the single exception of pipe. The policy has been to establish commercial steel plants advantageously located to supply the steel needs of the eastern part of the United States, the country's largest steel market, and ship products by water along the Atlantic and Pacific Coasts, to the industrial centers on the Great Lakes and to foreign countries."

A program for modernizing the newly acquired plants to effect economies of operation and to add largely to the finishing capacities at these and at its other plants was nearing completion in the fall of 1925. This program involved the expenditure of $80,000,000, and a large part of the money went into Johnstown improvements. Cambria, Midvale and Lackawanna added much to the corporation's reserves of raw material, including great coal fields and ore bodies, limestone and other essentials to steel production, so that President Grace estimated these reserves as ample to supply its needs for more than 100 years.

"For 10 years," says Mr. Schwab, "I owned all the stock of Bethlehem. The earnings were turned back into the company."

The policy of building in the East has brought into Bethlehem Corporation many of the old landmarks of the iron and steel industry in the United States. Bethlehem, a principal settlement of the Moravians in Pennsylvania, 50 miles from Philadelphia and 90 miles from New York, is one of the Pennsylvania towns, like Johnstown, where iron was made many years ago. It was near bodies of South Mountain ores and there was a good supply of wood and of limestone, with anthracite coal near by. The Bethlehem plants there today are the modern developments of the little furnaces and forges of long ago. The same is true of the Cornwall iron ore mines, furnaces and plants at Cornwall and Lebanon. These ore mines were of enormous importance in the steel industry up to the time of the development of the ore beds of the Lake Superior region. All the traditions of the iron and steel industry in America therefore belong to and are a part of the modern Bethlehem Steel Corporation. These traditions are a great asset.

Johnstown has been strangely reluctant to own and manage its industries. It has had many opportunities to do so. It likes to talk about what might have been. It measures vaguely but longingly the money which might have remained here. It municipally owns no large public utility. It does not own its water, its light, heat and power, or its street car system. It was several times shocked and astonished to find that ownership of its principal steel industry had changed hands overnight. But it was somewhat prepared for the transition from Midvale to Bethlehem, and it welcomed the domination of Charles M. Schwab as the nearest approach to home ownership in a long while, with some prospects of permanence. Yet there survived the pride of Cambria workers and Johnstown people in the name of Cambria attached to steel products going into the world markets and the feeling that the best and largest thing in the community was being merged, absorbed, swallowed by an outside interest.

[ Continued in Part 2, starts with The New Bethlehem Steel ]

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