HOW A ROLL-UP BECAME A ROLLBACK

Speaking in Austin for the President, then ensconced on the Texas ranch, White House Press Secretary George Christian declared the end of the Great Steel War of 1968. The President, said Christian, welcomed the relatively modest 2.5% price increase on many items just announced by U.S. Steel. After all, it was a "substantial improvement from the general inflationary threat" originally posed by Bethlehem Steel's across-the-board increases of nearly 5%.

Going well beyond that analysis, Presidential Adviser Joe Califano pronounced Big Steel's action a "major victory." Just seven days after Bethlehem, the No. 2 producer, announced its price hike, the steel industry had been forced into a partial "rollback." Minutes after U.S. Steel announced its move, Arthur Okun, chairman of the President's Council of Economic Advisers, summoned reporters to his Washington office and pronounced himself gratified. Spread industrywide, Bethlehem's increase would have filtered through the economy as a $1.1 billion rise in consumer prices. Now, he said, "the American consumer has been saved $500 million in inflation."

Unwanted Role. Never has a price roll-up been so eagerly declared a price rollback--not, anyway, since the Administration joined the steel fight of 1966, which followed much the same script. There was the same hero, U.S. Steel and its chairman, Roger Blough, who undercut by roughly 50% the price increases posted by the same villain, Bethlehem and its chairman, Edmund Martin. And there was the same Lyndon Johnson, who declared himself pleased with the denouement.

This time, however, the plot was rather more turgid. For one thing, if the Administration was anxious to portray U.S. Steel as a model of industrial statesmanship, the company did not care for the role. U.S. Steel made it clear that its price increases fell far short of covering the cost of the 6% labor wage-and-benefit package negotiated last month, warned that other price changes would be coming from time to time. Aiming a lance at the White House, the company said it was "almost, but not quite universally recognized" that steel prices do not cause inflation, insisted that the cost-of-living culprit lay elsewhere. One place: labor costs, which have risen some 25% over the past ten years, while steel prices have gone up only 5 1/2%.

The Administration's campaign had begun soon after the Bethlehem announcement. Arguing that a 5% across-the-board increase was unreasonable, Johnson ordered Government agencies to buy steel only from companies that held the price line. Spearheading the attack was the Defense Department, whose 3.7 million-ton annual steel consumption (half of which goes for ammunition) accounts for nearly 4% of the industry's output.

The Key Word. White House telegrams went to all directors of all steel companies, and the Federal Trade Commission briefly threatened to open an investigation. Over the weekend, the heads of three big defense suppliers--Bethlehem's Martin, C. William Verity of Armco and Thomas Patton of Republic --were summoned to Washington for talks with Navy Secretary Paul Ignatius. Before long, their companies were issuing statements that across-the-board did not actually include shell steel, bomb casings, barbed wire and other military items. Defense, for its part, quickly claimed victory.

Nevertheless, steelmen were watching not the U.S. Government but U.S. Steel to see how prices would ultimately shake out. The industry leader, with 24.5% of total production, U.S. Steel had led off the price increases with a modest change in one item, tin plate, and the President publicly approved the "selective" move. When it came time to move again last week, U.S. Steel was as polite as its competitors had been imprudent. Cannily using the key word, it announced increases on "selected" products. All told, they covered 63% of the industry's output, included such important items as hot and cold rolled sheet, which is heavily used in the auto and appliance industries.

No Deal. Within hours, Bethlehem and smaller competitors stepped into line with selected price adjustments of their own. Rumors flew among metalmen that U.S. Steel's Blough, who had been John Kennedy's chief protagonist in the stormy steel rollback of 1962, had personally concluded that industry's peace with the President. Blough did, in fact, come in for earnest entreaties from Defense Secretary Clark Clifford about steel and the national interest, but the Administration denies that any deal was struck.

Actually, few steelmen ever expected Bethlehem's original price move to survive natural market forces, including inventories built up as a strike hedge and foreign imports, both of which are at record levels. As things stand, the effect of the new prices on consumer products is expected to be modest, amounting to an increase of about $6 in the cost of a new car.

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