No Pledge

A favorite thesis of Franklin Roosevelt (a thesis also of his severe critic General Hugh Johnson), is that steel prices have been too high and would have to come down to assist recovery. Neither this oft-reiterated suggestion nor the fact that steel production last December fell as low as 19% of capacity appeared to dent the steelmasters' contention that prices could not be cut without a slash in wages. But Franklin Roosevelt was also explicitly on the record against wage cutting. In the face of reduced sales and mounting losses ($1,292,151 lost in the first quarter of 1938 against $28,561.533 netted in the first quarter of 1937), U. S. Steel on May 18 reaffirmed its old price schedule until September.

But if U. S. Steel was strong enough to take huge losses now, many a smaller steel company was not. Last week, with production at 28% of capacity, after a series of secret talks with John L. Lewis, Big Steel finally about-faced, announced reductions of 5% to 7% on important products without cutting wages.

This meant cuts of from $2.50 to $8.50 a ton, brought prices back to the pre-1928 days. As striking as this news was another aspect of the reduction: prices at Big Steel's Birmingham and Chicago plants were for the first time lowered to the Pittsburgh level. Announced reason for the change: "Increased production facilities and greater diversification of products" in these two steel centres. To the steel trade, however, it meant that Big Steel, sniped at by non-union independents since it made a wage contract with C.I.O. and pinched by their price concessions had finally abandoned its long time policy of playing ball, was going to squeeze them a little, possibly gaining in competitive advantage something to make up for the price cut.

Of conversations with John L. Lewis and the Steel Workers Organizing Committee, Big Steel last week said not a word, but the press reported that the company was trying to persuade Mr. Lewis to accept a wage cut as amicably as U. S. Steel accepted unionization a year and a half ago. Big Steel's subsequent action in cutting prices without cutting wages was thus more striking. It came also just as the Administration's monopoly investigation--whose first subject is likely to be Big Steel--got going. What was more, Big Steel's young Chairman Edward R. Stettinius Jr. made the announcement just before Franklin Roosevelt's fireside chat, then had dinner with Franklin Roosevelt's close advisor Tom Corcoran and several members of the Business Advisory Council. The President thereupon commented that he was "gratified to know that this reduction in prices has involved no wage cut."

This was a bit stronger than Mr. Stettinius had bargained for. As the steel industry quaked and the stockmarket paused over rumors of a definite pledge not to cut wages, Big Steel's young chairman announced flatly: "No official of the U. S. Steel Corp. has given any assurances that wage reductions will not follow the steel price reductions announced yesterday."

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