In the discussion of business and industry, occasionally we all hear the phrase “too big to fail” being thrown around when talking about large corporations or industries.
It’s been shown time and time again that there shouldn’t be too much faith put into that.
What better of an example is there other than the story of Bethlehem Steel?
First, before I go into detail about my take on this, some background history on Bethlehem Steel and how it came to an end, is in order:
Bethlehem Steel Corporation was an American steel-making company headquartered in Bethlehem, Pennsylvania.
Incorporated in 1904, it had up to 22,000 employees at it’s peak.
Annual sales reached a high point of $4.0 billion and it was even listed on the NYSE and NYSE Chicago stock exchanges. However, that was not meant to last…
It was America’s largest and also one of the world’s largest steel producing and shipbuilding companies until its closure in 2003 due to bankruptcy. 1
Bethlehem steel had many customers and supplied for the majority of the American industries heavily reliant on steel. It had major roles in making large projects possible, from structural steel for the now famous bridges and skyscrapers being produced in the USA.
As was standard with nearly every industry during both world wars, Bethlehem Steel switched over to supporting the war effort and had an instrumental role in manufacturing ships, weapons and any other items made of steel. Ranging from large to small, it produced nearly every steel end-product imaginable for the U.S. armed forces and U.S. Navy. 1 2
This was a great boost to the industry, although it had a negative effect also, when the war was over. All the production needed to be picked up by some other industry or secured by contract. Not an easy task, for certain.
Aside from the war-time production, Bethlehem Steel was instrumental in the ability to even think of producing many of America’s largest and most famed structures. New York’s skyscrapers and structures like the Golden Gate bridge may not exist without the capacity and capabilities only such a large-scale steel producer could provide. 2
In the early 1990’s, with a strong recession taking its toll, another significant negative effect on Bethlehem Steel’s operations was in the works. With a slowing demand for steel products and over-expansion of operations at the company’s peak years, the closure of numerous facilities was unavoidable. The recession dampened the results from management’s modernization, streamlining and diversification efforts, causing profits to sink to all-time lows. 3 4
Through the post-world war two period to the closure in the early 2000’s, Bethlehem Steel faced several major challenges during its operations, ultimately leading to its closure in 2003.
The major challenges Bethlehem Steel faced:
- Competition from Foreign Steel: By the 1970s, imported foreign steel became cheaper than domestically produced steel, posing a significant challenge to Bethlehem Steel. 1
- Competition from Mini-Mills: Having no large-scale competitors in the USA, the domestic competition for Bethlehem Steel came from mini-mills. Being more cost-effective and efficient in steel production, there was little that could be done to stop their growth in the market. 1
- Labor and Pension Costs: Rising labor and pension costs contributed to the company’s financial difficulties. 1
- Environmental Cleanup Costs: Being such a large operation, inevitably enormous costs of environmental cleanup of the lands and waters around the many production plants would appear, cutting deeply into the company’s profits and cash reserves. Surely made even worse by all the decades of non-existent environmental regulations where everything was done without a care for the environment. 4
- Complacency and Legal Issues: Decades of unlimited growth, expansion, and profits had made Bethlehem’s leadership complacent. Additionally, antitrust and price-fixing suits against several U.S. steel producers, including Bethlehem, only added to the challenges. 4
Even though it ended up joining the long list of companies which became complacent and met eventual downfall, Bethlehem Steel’s legacy lives on in the city of Bethlehem.
Also, the impact it made on the rest of the country is still visible to this day. 2
These realities, among others, contributed to the decline and eventual bankruptcy of Bethlehem Steel, marking the end of its storied history. 1 4.
A frequent trend I’ve noticed in reading and learning about companies or industries that have ceased to exist is that they had been too big for too long and had a monopoly to some level.
All of this combined leads to relaxation and inflexibility.
Unfortunately, that’s a cancer in businesses and industries that doesn’t stop growing, and few people have had success stopping and reversing.
There is lots to be learned from history, although people are too prone to repeating the same thing over and over, regardless of how much they learn, study, invest or prepare ahead.
I’ve learned that the best practice is always to plan ahead for what could come, rather than think that something like that will never happen.
Also important is making sure to prevent the loss of the drive and desire to be innovative, flexible and able to adapt on the go, which almost every company and industry loses after decades of being too profitable and having too much of a market share.
The lasting and enduring examples in business and industry are the ones that found a way to never lose that which they had in their initial period of struggle to gain market share and a reputation.
Hopefully more people find it in themselves to keep that drive and energy going, even passing it on to future leaders.
Aside from the fact that, with this actively implemented, growth will happen no matter what comes, simply the boost to innovation that will benefit everyone will be worth all the effort.
Sources
1 – https://en.wikipedia.org/wiki/Bethlehem_Steel
4 – https://www.referenceforbusiness.com/history2/45/Bethlehem-Steel-Corporation.html
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