New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1913-05-15
STEEL TRUST BOOKS
UNDERSTATE PROFITS
Report of Bureau Of Corpora.
tionS Shows Cost Of Produc.
ton Lower than Given.
CALLS RETURNS EXCESSIVE
Average Book Cost of Bessemcr
Steel Rails Put at S21.53,
While Report Finds Act.
ual Cost Is S16.67.

ual Cost Is S16.67.
Washington, May IL Part 3 OF the "a
port of the Bureau of Corporations ON
its investigation of the steel Industry
dealing particularly with the cost OF pro.
duction, was submitted TO the Presiden,
to-day by the acting commissioner Fran.
els Walker a discussion of the vas,
difference between book costs" and no,
costs featured the report, figures being
given to demonstrate that iron and steel
manufacturing companies usually include
in their statements Of costs of production
large profits paid to subsidiary ore and
transportation concerns.
For Bessemcr steel rails for instance
the report stated that the average book
cost Of the United States Steel Corpora
ton was s2l 5S a ton, while the actual net
cost, excluding intercompany profit on
transportation and material. was only
slo 81 Deducting only intercompany prof.
its from materials the bureau computes
the net cost at ST. 81 ton.
In his letter transmitting the report Mr.
Walker says:
ION the basis OF the bureaus estimate
of the average cost of ore property at the
time Of the formation or the Steel Cor
poration. together with due allowance for
subsequent investments OF the Steel Cor
poration therein. the average investment
Of the steel corporation in lake ore was
about 81 a per ton OF ore produced IN 1910
This Investment is computed on the basis
Of a thirty-year supply in reserves OF ore,
all additional investment in ore reserves
being excluded from consideration. The
profit of 81 80 per ton which was charged
bv the Steel Corporation In 1910 was
equivalent. therefore, TO rate OF y per
cent on the computed investment in ore.
Risk Small; Profits High.
considering that the Steel Corporation
owns or controls the great bulk Of the
lake ore supply: that in consequences oil
the number Of its mines its risks oil oper-
atlng them IS reduced to minimum tnat
il has an assured market for the sale Of
its ore TO its own manufacturing plants
and that its production OF iron ana steer
is Gu extensive and diversified and SO
widely sold throughout the world that
,.,rv large output is always practicable
/, IS evident that the risk OF this business
is comparatively small and that the pron'
is excessively high.
similar conditions are found with re-
gard 10 the profits from the transpor'a'
ton Of ore This appears at once "hen
%
expense to gross earnings Of The Steel
Corporations two railroads m me lake
ore mining district i'm 1910 are stateu'
namely. 90 per cent for the Duluth. Ms
sabe Il Northern Railway. and 5'o p''
cent for the Duluth & Iron Range E9'i'
road. The average ratio for all the ~
roads of the country in 1910 was GO yer
cent
ION the basis Of the total investment
dncluding net working capital. 'nd ne
total ret earnings reported by these two
railroads. the rates Of profit in 1910 Were
for the Duluth. Mi.sabe a. Northern Rail
way. about o per cent. and for the d.
luth & Iron Range Railroad, about ~
per cent. Such high rates Of profit from
business which is monopolisuc In char
acter. and also affected by public use
common carrier are obviously excessive
It should be noted. however. that uns
extraordinarily high transportation rates
on ore from which these profits were DE-
rived were considerably reduced by Inc
steel Corporation In 1911, shortly aIte'
the publication OF the first part OF 'ns
bureaus report on the steel Industry
Profit on investment.
In illustrating the rates OF prof, on m
vestment MIR. Walker SAYS:
For Bessemer steel rails the net eos'
Of the Steel Corporation in 1910 was
SIG 81 ton, including certain esun'a'eo
additional costs. as stated above INV
average selling price was 81 Is. giving
prof1t margin OF $40 IS. The investment
in raw materials, transportation fac'''
ties. manufacturing plants and net "o'A
ing capital required for the producuoA
OF rails was about SIS a ton OF produc1
according to the computations OF 'he ".
reau. This indicates a rate OF proh' o"
investment OF 1872 per cent on rails
ION a similar p3sls, llt bAiroN
putations indicate for plates rate o.
profit I'm 1910 OF 1919 per cent on the III
vestment. These different rates OF prom
illustrate Furthermore. certain differences
i'm price-malling conditions. which "e''
somewhat competitive for plates IN wv
while VIGOROUSLY non-competitive iV'
rails"
For the period 1902 TO 1906 the repO,'
shows the average costs for certain pro''
ucts by districts. This comparison sno"s
decided advantage In the cost Oh
sembling materials for the plants on VIZ
shores OF Lake Erie, as compared VIZ"
those IN the Pittsburgh district unoo
the prevailing railroad rates on ore i'''
Lake Erie ports To Pittsburgh.
For these same cost statements co"
parisons are also made between tIe d"
costs-but without deduction OF trahs'O
tation prohts-of large companies s's
small companies. which indicate uec'u'
advantage in favor of the former -
for Bessemer pig iron the net cost w
Guiding an assumed normal addition
furnace cost OF 30 cents averaged ga s
n ton for the large companies ana 60
for the small companies THIS dlnIoiste
was due i'm part to the more comp
integration of the large companies
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@nH cDONr CAL 8 TO-UHI'