No. 4

Nobody had to read far to find out what the announcement meant: "Subsidiaries of United States Steel Corp. have announced today new mill prices . . ." Thus last week did Big Steel's President Benjamin F. Fairless give his answer to the $100-a-month pensions won by the C.I.O. Steelworkers only five weeks before (TIME, Nov. 21). Because of higher operating costs, said Fairless, the company was raising the price of steel by an average of 4%, i.e., $4 a ton. Other steelmen scurried to their adding machines to figure out new price schedules themselves. But by week's end, the other big steelmakers had not yet gone along with U.S. Steel's fourth raise since war's end.

To many a businessman the latest increase, smaller than the preceding three, was hardly a surprise. But in Washington, it stirred up Democratic Senator Joseph C. O'Mahoney, who had not been at all critical while the Steelworkers were after their wage boost last summer. Cried he: "The steel industry is not justified in levying an increased tax on the whole economy of the U.S." Its leaders, he said, are doing more damage "to the free-enterprise system than all the crackpots have ever done." To get an explanation, O'Mahoney asked Ben Fairless to appear before a congressional committee right after New Year's. Fairless, who in the past has often had as little to say as Garbo, promptly said that he would "welcome the opportunity" to explain the rise in steel prices.

Rosy Future. Actually, in a free and once more competitive economy, Big Steel had a perfect right to raise its prices. But with the steel shortage over, it might not get away with it. Big Steel's customers certainly would not like the $80 million-a-year increase in their steel bill, especially in the light of steel profits. In the first nine months of 1949, U.S. Steel netted $133 million, 50% more than in the same period in 1948. And so far as Ben Fairless could see last week, the future looked rosy. Operations of Big Steel, he said, should continue at 100% of capacity for another six months, then slip off to perhaps 85%. To some it looked suspiciously as if Big Steel, trying hard to make up the profits lost during the strike, was raising prices temporarily because of the strong demand resulting from the month-long stoppage.

Could the price rise be justified by higher costs? Two freight-rate increases had boosted the cost of steel's raw materials; another boost in coal prices was in prospect. But scrap, which is a major cost in making steel, was selling at an average of only $27.25 a ton, compared with $43 a year ago. As for the new pension program--U.S. Steel officials could not, or would not, say what it would cost the company in the first year (guesses by outsiders ran as high as $80 million a year).

Past Performance. In any case, the steel boost did not necessarily mean another inflationary whirl for the economy. In three previous years--1920, 1929 and 1937--steel prices were raised each time at the tail end of the boom, when other prices were heading down. In those instances, steel was soon forced to follow. The $4 rise would not mean much of an increase in the cost of producing most items: $1 in the case of a refrigerator, 27-c- for a kitchen cabinet, about $10 for an auto. As they brought out their new models, both General Motors Corp. and Chrysler Corp. planned to absorb the increase without passing it on to the consumer in higher retail prices. With competition in full cry, it looked as if few manufacturers would dare raise prices. But it also looked as if few would now dare to cut them.

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