When Metal Was King, Part One: Andrew Carnegie and the Rise of the Iron and Steel Industry

This article was written by James Wudarczyk and was posted to this site on August 26, 2007.

For the introduction to this series see:
http://www.lhs15201.org/articles_b.asp?ID=41

Much has been written about Andrew Carnegie as both the great philanthropist and the great robber baron of American history. However, not much has been written about his Lawrenceville ventures in iron and steel. Although he was not the father of the steel industry, Carnegie successfully capitalized on this metal. His rise from poverty to wealth is legendary. Since this part of Carnegie’s life has already been explored in great detail, only those aspects relating to Lawrenceville need to be addressed.

Although it was John Edgar Thomson who was responsible for perfecting a cost accounting system for railroads based on highly detailed statistics, it was Thomas Scott and Andrew Carnegie who modified the system. Andrew Carnegie divested himself in areas besides railroads. In 1861 he joined with William Coleman in oil exploration; but by 1862, in spite of the fact that he made a substantial amount of money in oil, he found the business too chaotic.

Carnegie was a man of foresight. He realized that as the railroads expanded, there would be a need for iron to replace wood bridges. In 1862 Carnegie became involved in a venture with several managers from the Pennsylvania Railroad and formed the Keystone Bridge Company. Because of the affiliation the men had with the Pennsylvania Railroad, they believed the Keystone Bridge Company could rely upon the Pennsylvania for orders. Carnegie resigned from the Pennsylvania Railroad in 1865 to concentrate his efforts on managing the bridge building industry. He was successful in securing a number of major contracts for bridges across the Mississippi and the Missouri.

It appears that Carnegie was constantly going through a series of mergers and reorganizations in order to expand business. Since the Keystone Bridge Company needed structural beams and steel plates for its operations, Carnegie thought it was prudent to be in a position to control its own supply of these materials. Thus, his next venture was the creation of the Cyclops Iron Company, which was a joint partnership involving the partners from the Keystone Bridge Company, Piper and Linville. This company was formally organized on October 14, 1864. Thomas Miller and Carnegie deduced that their rivals Harry Phipps and Anthony Kloman were at a disadvantage because their mill was still geared up for war production, and it would take their competitors some time to retool their facility for a peacetime market. The rivalry between Thomas Miller and Harry Phipps pitted two former friends against one another. Miller was vindictive and wanted to run Phipps and Kloman into bankruptcy. Work on the Cyclops Mill progressed rapidly during the winter of 1864 –1865. The mill was strategically located just one half mile up the Allegheny River from the Kloman plant on lands leased from the Denny estate. While Miller wanted to destroy Phipps over a previous business feud, it was Carnegie who saw opportunity in a merger. Although he could buy machinery and raise capital, Carnegie realized that the mechanical genius of Kloman and the business talents of Phipps and his brother, Thomas Carnegie, were not commodities to be had on the open market. Since both Andrew and Tom were on speaking terms with all of the parties involved with both companies, they employed their negotiating skills to combine the rival mills into a new concern known as the Union Iron Mills. Although Harry Phipps was a partner in the new firm, Thomas Miller’s bitterness kept Phipps from occupying a seat on the board of directors. Although Miller believed Phipps to be capable of securing loans without adequate collateral, one of Miller’s conditions in consenting to the merger was that he would not have any contact with Phipps. Thomas Carnegie always felt that Phipps was never treated fairly. When there was an opening on the board in the spring of 1867, the Carnegie brothers invited Phipps to accept the position. They did so without Miller’s knowledge, mistakenly assuming that the bitterness that Miller harbored against Phipps had been erased with time. Both Carnegies were wrong. When Miller saw Phipps, he grabbed his hat and coat and stormed out of the meeting. Shortly thereafter, Miller severed his ties with the Union Iron Mills, selling his 2,203 shares to Andrew Carnegie for $32.75 per share. Although the sale netted Miller an aggregate $71,362, he would have reaped many times that amount if he would have held his stock and had not let the stubborn feud interfere with business. After Miller pulled out of the company, it was renamed Carnegie, Kloman & Company, although it was still referred to as the Union Iron Mills.

Interestingly enough, Andrew Carnegie continued his involvement with other iron mills. Thus, he did not devote his undivided attention to the Union Iron Mills. It is equally interesting to note that the start up associated with the Union Iron Mills created a series of unexpected problems for the new firm. As soon as the ink on the corporation papers were signed, Phipps found himself flooded with cash. He suggested that Andrew Carnegie and John Vandevort join him for an extended trip to Europe. While they were away on a nine-month walking tour of Europe, Kloman was put in charge of the mills. Thomas Carnegie remained behind to assist Kloman. Soon Kloman discovered that the new mill was even more flawed in its construction and design than he thought. His recommendation to demolish the mill and start from scratch was flatly rejected by Andrew Carnegie, who suggested that $30,000 be spent to remedy the numerous flaws.

The project might have been hopelessly doomed but Thomas Carnegie tapped into the expertise of William Coleman, a pioneer in the iron business. (Coleman later became Thomas Carnegie’s father-in-law. For more information on the Carnegie-Coleman connection, refer to In Loving Memory and Still More Lawrenceville Stories, published by the Lawrenceville Historical Society). This, coupled with Kloman’s determination and skilled mechanical abilities, as well as loans from Thomas Miller, enabled the Upper Mills to roll beams large enough for bridge purposes. James Howard Bridge, author of The History of the Carnegie Steel Company (1903), also credits the salvation of the Union Iron Mills with “Tom Carnegie’s ability to make friends and then promptly to convert them into cash.” Thomas Carnegie demonstrated an impressive ability to deal with crisis. His work surprised everyone, including his brother Andrew. However, some historians believe that his alcoholism in later years was attributed from his inability to emerge from his more famous brother’s long shadow.

When someone suggested to Andrew Carnegie that he should acquire a pipe mill next to the Lower Union Mills, the elder Carnegie leaped at the opportunity to acquire the facility for $36,000. Andrew Carnegie believed that the acquisition would allow the Union Mills another outlet for its product. However, Thomas Carnegie opposed the idea, contending that the type of iron used in the pipe works was not the same kind of iron produced by the Union Mills. Andrew Carnegie fluffed his brother’s recommendation, stating, “Tom was born tired.” Soon after the acquisition, a fire destroyed the pipe works. Since the facility was only insured for $11,000, the loss cost the partnership $25,000. After the fire, Phipps contended he was glad to get $11,000 and equally glad to get rid of a “white elephant.”

Andrew Carnegie never accepted the excuse that customers could not be found because of a downturn in the economy. He pushed his sales force harder to find new customers. Although the economy improved and there was greater demand from the railroads for more building materials, the Union Iron Mills failed to show a profit.

In later years, when workers called for a strike, Carnegie did not hesitate to import foreign workers. Carnegie employed the tactic of utilizing foreign workers long before the infamous battle at Homestead. He rationalized that since the workers did not have a formal contract with the Union mills, management could hire whomever it pleased. Carnegie preferred Germans since Kloman spoke the language and could keep them in line. However, it was not the importing of foreign labor that transformed the Union Iron Mills. It was the efforts of Kloman and Phipps. Phipps never hesitated to go into the mill to study the way workmen labored, and he was instrumental in developing efficiency studies. He also utilized the skills of chemists to insure consistency in the product. In many respects, Kloman was the brains of the mechanical operations. He was constantly perfecting devices that resulted in improved output and economy. James Bridge credits Kloman with creating a machine for “upsetting the ends of the eye-bars, which had previously been made by forging and welding. At the Upper works he put in a twenty-inch beam-mill, the first ever built in Pittsburgh that was planned and fitted complete, the rough casting style having been the rule; and on this were rolled the first beams made in Pittsburgh. He also created the first Siemens regenerative gas-heating furnace in Pittsburgh. He invented a machine for straightening and bending beams, channels, etc., cold; and the disc-saw for cutting beams, etc., cold, was first introduced by him. In designing rolls for unusual shapes he showed a rare capacity. Indeed, his ingenuity in this line of work was unequalled by any master mechanic in the country, and made his connection with the Union Mills valuable beyond compute.”

Phipps carefully calculated that by expanding the Upper Union Mill, the facility could be more productive, and the Lower Union Mill could be sold off as an independent operation. He introduced his brother-in-law, John Walker to invest in the newly formed company. Among the investors in the new firm were Walker, Alexander Leggate, Howard Morton, John T. Wilson, and Andrew Carnegie. After initially purchasing the Lower Union Mills for $230,000 the new firm of Wilson, Walker & Company successfully purchased patents and the business rights from the firm of Berry, Courtney & Wilson when that firm dissolved. Wilson, Walker & Company engaged in the manufacturing of bar-iron, railroad car forgings and plates. It ran as an independent company until 1886, when it became part of the firm of Carnegie, Phipps & Company, Limited.

Additional light was shed on the Union Iron Mills in Manufactories and Manufacturers of Pennsylvania of the Nineteenth Century. This book noted, “Originally, four puddling furnaces answered all their demands; to-day, thirty are necessary to work up the products of the Lucy Furnace. These appliances enable them to run from 525 to 550 tons of mill metal per week, in the production of which, as connected with the works only about 1300 employees are engaged. The works, proper, cover an area from eighteen to twenty acres, and are situated within the limits of the city of Pittsburgh. They manufacture heavy iron for bridges, rolled beams, girders, etc., to all of which they devote their special attention, and to such perfection have they attained in these productions that, even with their seemingly unlimited capacity, the supply is at times unequal to the demand; and recently have been forced to enlarge their buildings, beside making extensive additions and improvements in gas furnaces, cranes, etc., in order to meet the wants of the Keystone Bridge Company, which is one of their principal patrons.”

Carnegie was constantly bringing in new partners and forming new companies until eventually all of his business ventures were brought under the umbrella of the Carnegie Steel Company. Eventually his ventures outside the city dwarfed his initial investments in Lawrenceville. In order to form the Carnegie Steel Company (Limited), Carnegie consolidated the Carnegie Bros. & Company (Limited), the Carnegie, Phipps & Company (Limited), the Allegheny Bessemer Steel Company, the Pittsburgh Bessemer Steel Company, the Hartman Steel Company, and the Keystone Bridge Company. According to Pittsburgh and Environs, Carnegie Steel Company was also the proprietors of the Edgar Thomson Furnace and the Edgar Thomson Steel Works, Bessemer; the Duquesne Steel Works, Cochran; the Homestead Steel Works, Munhall; the Lucy Furnaces, the Keystone Bridge Works, Upper Union Mills, and Lower Union Mills, Pittsburgh; the Beaver Falls Mills, Beaver Falls; Larimer Coke Works, Larimer; Youghiogheny Coke Works, Douglas; and the Scotia Ore Mines, Benore. In spite of Carnegie’s impressive holdings, Lawrenceville may be credited as the birthplace of the Carnegie empire.