Sorry Steel

Most significant industrial news of last week (and of many a week) was the drastic drop in quarterly earnings reported by the six biggest steel companies. Ranged in order of productive capacity, the companies reported their net incomes thus:

Second Quarter, Second Quarter

1931 1930

U. S. Steel. . . . . .$7,391,355 $32,126,717

Bethlehem . . . . . . 1,452,743 7,691,495

Republic . . . . . . . 1,092,305d 285,472

Jones & Laughlin. 391,823 3,403,687

Yonngstown . . . . . 1,176,444d 2,810,345

Inland . . . . . . . . . 772,757 2,620,300

Such a record as this is the smoke which betrays a serious fire in the House of Steel. Three points to be considered in steel's present crisis are:

Prices. "Steel men generally must realize that they can ill afford to sell their products even at current prices after they have studied the second quarter earnings." Thus did President Grace, after last week's Bethlehem meeting, put his finger on the industry's sore spot: prices. He said "even at current prices"' because since President Farrell of U. S. Steel told his colleagues two months ago that it was "immoral" to cut steel prices as they were doing, there has been a perceptible rising and firming of prices. Bars, shapes and plates, for example, were last week holding steady, and sheets seemed to be keeping the advance they made a month ago. But the rise has been far from spectacular. Last week the price of all types of finished steel averaged 2.116-c- per lb. against 2.171-c- a year ago. The most that can be said for current prices is that they are slightly better than they were June 2. Yet even this must be qualified, for no one knows how deeply prices are shaded at the insistence of big buyers.

Production. Closely bound up with unstable prices is the extremely low capacity at which the industry is running. From 48 1/2% of capacity three months ago the rate of steel operations declined steadily week after week until last fortnight, when it stayed at the same level (31%) as the week before. Last week a slight rise, to 33%, was registered, somewhat to the surprise of the statisticians. For tin plate output, long the brightest spot in the steel picture, declined last week: three more blast furnaces (two at Birmingham and one at Chicago) were blown out; the summer decline in automotive steel buying had set in strongly./- Last week's rise, slight as it was, in the face of all these unfavorable factors may well have been a portent that steel production has reached the irreducible minimum, the rock bottom below which no depression can sink it.

Wages. When U. S. Steel cut its great 40% stock melon in 1927, Judge Gary drew up the Board in two long lines and jubilantly invited reporters in to see his potent directors "in the flesh." But at last week's meeting the directors, confronted with the poorest quarterly statement since the pre-War era, cut the common dividend from a yearly rate of $7 to $4 (TIME, Aug. 3). They left the meeting hastily, silently, Morgan-Partner Lamont forgetting his hat in his hurry. But President Farrell had something to tell reporters. Four words: "Wages were not touched." There was a bit of triumph in his voice. He has fought hard to keep up wages in the steel industry; it was highly pleasing to him when his fellow-directors voted to cut salaries but not wages. Also well-pleased was President Hoover, who had begged once more that a wage cut be averted (see p. 11). The next few weeks will determine the fruitfulness of the Farrell-Hoover victory. If price and production factors grow more favorable, the company's wages will probably stay where they are. Otherwise, wages will probably go the way of salaries. At its meeting two days after U. S. Steel, Bethlehem reduced its common dividend from $4 yearly to $2, but took no action on wages. To date President Farrell's vehement declaration last year, "Oh, no! Wages in the steel industry are not coming down," remains uncontradicted, though the "stagger system," whereby more men work fewer hours, has been generally adopted. In wages, as in price cuts, bulky earnest Mr. Farrell has so far been able to marshal his colleagues. The near future may see another test of his leadership.

*Includes $7,160,966 special income. d=deficit. /-Last week 75,000 Ford employees were temporarily out of a job owing to a shutdown of practically all the Ford plants. Rumors of a new eight-cylinder model in progress were persistently circulated, as persistently denied.

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