How to Make a Buck

In Dallas' Mercantile Bank auditorium last week, stockholders crowded in for the first annual meeting of Lone Star Steel Co. Texans were anxious to know how their first home-owned heavy metal industry (TIME, April 7, 1947) was doing. They heard the good news that Lone Star's stock, floated at $1.50 a share, was selling over the counter for as high as $7.50. Then came the bad news.

The man who smoked it out was Carl Estes, oilman, publisher, and one of the principal Lone Star organizers. Ailing Mr. Estes was brought to the meeting on a stretcher. While his doctor plied him with pills, he read off a ten-page blast at management for selling pig iron to outsiders at little more than half the Texas market price. Who were the buyers? Why were these money-losing deals made?

The Texas Way. President E. B. Germany ruefully admitted that the company had indeed made such deals--with Ford Motor Co., which promised to be a good, steady customer, and with Kaiser-Frazer Corp., which had advanced payment of $500,000 which Lone Star badly needed. But the deals that had set Estes ablaze were not with Ford and Kaiser-Frazer; they involved less imposing buyers.

Germany, who took over only seven months ago, undertook to explain them. To buy its blast furnace and plant from WAA last year, Lone Star had to show firm orders for pig iron. As big, established buyers were skeptical about Lone Star's chances, the company had to rely on small brokers. A typical deal: a contract with one Harry Gale, of Washington, D.C., to deliver 24,000 tons of pig iron at $39 a ton, then the current market price.

Less typical was another deal which red-faced Mr. Germany described as a "tremendous donation of the stockholders for the benefit of this woman." The woman is Miss Alice Hansen, 3 5-year-old blonde president of Manhattan's Pittsburgh Steel Mill Co., a brokerage firm. She had a contract with Lone Star to buy 105,000 tons of pig iron at $39 a ton. She had put no cash down, and, said Germany, there was no way Lone Star could have collected if she had failed to make good.

Just how she got the contract he didn't know. (The executive who handled it for

Lone Star, Vice President George Anderson, is sitting out his contract on an Arizona ranch, writing a history of the year-old company.) But, said Germany, she stood to make at least $2,000,000 and possibly $3,500,000 on the deal.

The American Way. Miss Hansen said there was nothing mysterious about it. She had been a steel broker for seven years (she got interested in steel while writing an M.A. thesis on Andrew Carnegie), and had gone to Texas to see Anderson. "Mr. Anderson asked me to sign up," she said; "he was very nice about it."

So far she has received 4,000 tons at $39 a ton and resold them. At current prices of $75 a ton, this has brought an estimated profit of $140,000. She is scheduled to get 10% of Lone Star's monthly production (current output: about 20,000 tons a month) until her order is filled. She didn't think she would make as much as Germany estimated. But, said she, "I certainly hope to make a lot of money. That's the American way, isn't it?"

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