New Ownership and the Depression Sloss Furnace - Sloss-Sheffield Steel & Iron Company, Birmingham Alabama
In the fall of 1886, with Sloss intending to retire, options to buy the company were extended to John W. Johnson, president of the Georgia Pacific Railroad, and to Joseph Forney Johnston, president of the Alabama National Bank and later Alabama Governor and U. S. Senator. Since sufficient capital to exercise the options could not be raised locally, the two men traveled to New York, to see financier, J. C. Maben. Maben raised three million dollars from Wall Street sources, and in February 1887, the Sloss Iron and Steel Company was formed with J. F. Johnston as president. Northern capital, once again, helped to underwrite the district's development.
With the additional capital, two furnaces were built in North Birmingham. The new company began to buy extensive coal land, an effort at vertical integration and self-sufficiency; acquired the Coalburg Coal and Coke Company, about eight miles from Birmingham; built 300 new coke ovens; and increased their total acreage to 38,000 acres. Under the handicap of a heavy mortgage caused by too rapid expansion, Johnston resigned after one year to begin his political career.
The new president was Virginia-born, Thomas O. Seddon. Like Sloss, he was a railroad entrepreneur. Seddon remained president until his death on May 10, 1896. These were trying years for the company and the fragility of the district's industrialization was underscored. Efforts to stabilize the firm's shaky financial structure required reorganization and recapitalization. Those efforts, eventually successful, took place in the context of a national depression and a militant miners' strike.
Increasing Northern competition, marked by the "Duquesne Revolution" of the mid-1890s with its use of advanced and integrated technologies, accentuated two of the district's serious problems - high transportation costs and the lack of a local market. Sloss, while president, had shipped no iron to the East, although he had shipped to buyers in the Northwest, West, and South. He considered the development of a larger Southern market a high priority. As a railroad man, he did not believe freight rates were too high and recognized the need for more railroads. Sloss' successors, with fewer ties to railroad capital, would view the situation quite differently.
The lack of applied scientific knowledge may have raised costs and reduced marketing potential. Ore was bought without adequate checks on iron content, raw materials were mixed in the furnace without chemical analysis, and the grading system for pig iron was "illogical, cumbersome, and ridiculous."
There is also evidence that real labor costs were higher than most of the district's publicists wished to admit. This was true despite the reality that average hourly wages in the South were generally lower - 13 cents for blast furnace workers in 1907, compared to 13 1/2 cents in the East, 15 cents in Pittsburgh, and 16 cents in the Great Lakes. However, average rates are deceptive. They tell us nothing about total labor costs. One expert, the author and chemist, William Battle Phillips, believed Alabama labor costs for late-19th century iron production were not as low as in competing states. High levels of absenteeism raised production costs and skilled labor had to be recruited at rates higher than those paid in the North. Other complaints occasionally surfaced in trade journals arguing that the district's labor was cheap but inefficient. Insofar as such comments were true, they reflected less on the district's workers than on the companies, like Sloss, whose continued reliance on manual labor retarded technological innovation.
Southern textile promoters were known to advertise the cheapness and the docility of their labor. No one, however, argued the docility of steelworkers, miners, or blast furnace laborers. In 1894, an interracial miners' strike over wage reductions lasted four months, involved 4,000 miners, and was broken only by the intervention of the state. A strike by 1,200 miners at Sloss1 Coalburg, Brookside, and Blossburg mines reduced production "far below" pre-strike levels. Striking miners were eventually ejected from company housing, and the mines were operated with 300 to 300 "blacklegs." At Coalburg, however, Sloss employed 589 convicts, 438 of them at jobs in the mine.
The use of convict labor was one means to lower production costs. The Sloss Company seems to have had first bid on state convicts in January 1888. The company's bid was evidently too low, for an exclusive ten-year contract was offered to the Tennessee Coal & Iron Company. There were county convicts available, and in 1891, Sloss contracted with Jefferson County (Birmingham) for the least of males at $9 to $10 per month, while simply providing food and shelter for convict men and boys. Sloss employed convict labor into the 1920's, as long as it was legally permissible.
Sloss unquestionably benefitted from convict labor. In 1901, they found the capital necessary to build a "large new prison" at their Flat Top Mine. A few months after the prison was built, they reported to their stockholders that Flat Top "should prove the most profitable of the Company's coal mines."
The survival of the convict lease system reflected an attitude toward labor contaminated by the virus of a slave society. The convict miners, subject to harsh and documented abuse, were an affront to the "free" miners, who vigorously organized against their use and who continuously raised the issue to the level of electoral debate. The "free" miners protest was sufficient reason for the Canadian government to ban the importation of Alabama pig iron from companies employing convict labor. The system was retained because it provided companies, like Sloss, with a cheap and regular labor supply, an inexpensive apprenticeship system, (it was estimated that 50% of the state's black coal miners were ex-convicts), and a critical resource during strikes or lock-outs.
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During the 1890s, the Sloss Company was so preoccupied with the effects of depression, the miners' strike, and its own internal difficulties, that it neglected to take advantage of an innovation of genuine importance - Uehling's pig casting machine. No records have been made available which would tell us precisely why both Uehling and his inventions were allowed to slip away.
We have argued that as long as there was a plentiful supply of black labor, there was no reason to innovate, but in the 1890's there were at least three other factors which may have influenced the company's decision. First, unlike Northern steel plants, Sloss did not have a pressing need for integrated, high-production technologies. When Northern furnaces were producing 300 to 400 tons of iron per day, a rate almost beyond the physical capacities of loaders and iron carriers, Sloss probably produced no more than 100 tons per day. Northern steel plants required rapid and consistent movement of molten pig iron to the converters or pig machines; Sloss produced only pig iron and could afford a less integrated system of technology.
Second, many southern foundrymen continued to prefer sand-cast iron. In a period when small-scale foundrymen could not afford, or did not wish to hire chemists, the grading of pig iron was done by fracture, not by analysis. Sand-cast iron cooled more slowly than machine-cast iron, and exhibited on fracture an open grain, large crystal configuration. This was a configuration valued by foundrymen, who did not like the close grain, small crystal iron produced by cast iron molds.
Third, the company may not have had sufficient capital to invest in labor-saving innovation. And even if they had, they might have been reluctant to invest it in an area where returns were not apt to be great. Despite the existence of labor costs relatively higher than previously believed, labor did not constitute a major cost of production. In the mid-1890's Phillips estimated it at no higher than 15% of total production cost. With a figure that low, an investment in labor-saving machinery might not justify itself, since it could make itself felt only in a time of labor surplus. Once labor became scarce, the calculus of self-interest changed.
