El Paso herald. (El Paso, Tex.) 1901-1931, 1911-07-01

Herbert Knox Smiths Re
port on the Steel Industry
Submitted to Taft.
TELLS OF FORMING
OF MONSTER COMBINE

ton of competition is declared to have
been the prime object of the organizers
of the United States Steel corporation.
which is capitalized at s1.402, 100000,
and tangible properly worth only $685.
oO0,0 900. The corporation having concen-
trated its efforts to secure ore proper
ties, now owns rs percent of the lake
ores, upon which the present steel in
dustry is based. These are some Of
the conclusions reported in the long
expected report of commissioners OF cor
porations Herbert Knox Smith on the
steel industry, part of which was sub
mitted to the president today
Discussing how +the impending
struggle of the giants as averted, al
most overnight, by the formation of the
great combination, taking in 250 sub
sidiary companies controlling 80 per
cent of the total crude and finished
steel production of the country, the re-
port says:
Until 1908 the bulk Of business was
distributed among a very considerable
number of concerns. There was sharp
competition modified by frequent pools
of greater or less duration and effect
iveness. y
The Err of Combination.
'sThen came an era OF great comb1-
nation" the report continues, with
oapitalizations ranging from $4,000
600 to 800, GOO, 600, mergers of many
smaller companies. which instead OF
eliminating competition threatened TO
begin price cutting on a larger scale
than ever before.
I'm 1S99-1900 there were three great
companies-the Carnegie company,
Federal Steel and National Steel-dom-
mating the production Of crude and
semi-finished products. and six con-
cerns-the American steel and Wire,
American Tin Plate. American Steel
Hoop. American Sheet Steel. National
Tube and American Bridg@controling
the lighter finished products.
Struggle of Giants.
"This was the. period when the
struggle Of giants was impending and
when the formation Of the United States
Steel corporation was brought about.
All nine of the companies named were
combined, and later the United Steel
company. the Clarion Steel company,
and in 1907, the Tennessee Coal, Iron &
Railroad. company. were taken over.
The promoting syndicate putting the
deal through Melted $500. 600 cash.
During the ten years OF its opera
ton" the report says, the trust has
paid average annual profits of y per
cent on the money invested. Attention
is called to the fact that a considera-
bic part Of the investment is an unde-
veloped or unworked property. showing
that dividends from paying properties
must be much larger than the average
would Indicate Insisting upon COM
putting profits upon a tangible proper
ty value basis, the report say that the
steel corporation in defending its book
valuation undoubtedly would claim
that was merger value AS to this
the commissioner says:
cit is probably true that the various
properties acquired by the steel corpor-
alton, taken together with the organi-
zation of this company as going con-
Germ. do have a value in excess of the
sum of their values as, separate en-
titles. The coordinatin and indignation
made possible by the combination OF
such properties under the single con-
troll undoubtedly viii reduce costs eth
er through economy or through remov-
ing the necessity Of paying profits TO
others.
Further, in so far as the concentra-
ton of industry under the control OF a
single concern gives to 1t a monopolis-
tic power over prices and production.
this may in a cause increase IN its
crease in its value as a going concern.
This involves, however. the reduc-
ton of actual or potential eompeti-
ton To allow single company
! which has secured the bulk Of a given
industry credit for such merger value
as basis on which to earn profits
raises a question of far reaching re-
suits The valuation so arrived at as
justifying these conditions will be rea-
soning in circle because the question
is whether the profits themselves used
to determine the capitalization were
reasonable"
Production Decreases.
Since the corporation has been d.
recting its efforts particularly toward
acquiring and extending complete COR
troll over properties, its percentage OF
production has increased. "As against
so percent Of all crude and finished
productions in 1901. the report says,
the corporation has not much over so
percent, Indicating clonclusively the
continuous percentage Of strength and
increasing independent production"
However, the commissioner finds that
I competition, so far as prices are con-
lcerned. has been modified by the poll
cy of "cooperation'' inaugurated.
The advantage of controlling IS per-
cent of the lake ores on which the in
dustry is based, is materially enhanced
by control Of railroads from the lake.
In his letter accompanying the report,
commissioner Smith says that in ca
pacity rather than in actual production
the corporation Is materially stronger
than the production figures Indicate,
and suggests that in case OF continu-
Gus trade depression, this strength
probably would show itself in in
creased control.