Mr. HILL. You say you will file with the committee an itemized statement of that cost of the open-hearth steel rail?

Mr. SCHWAR, Yes.

Mr. UNDERWOOD. I would like to have you do that.

Mr. SCHWAB. I will do that.

Mr. UNDERWOOD. If any bill that this Congress may pass goes out to the country and meets with the approval of the country, it has to have facts behind it.

Mr. SCHWAB. I propose to give you the facts. You can do with the tariff, of course, as you see fit.

The CHAIRMAN. I wish you would give us the items-the cost of pig iron, what you allow for waste, the cost of labor, the cost of manganese, the cost of fuel, the cost for steel, the cost for ore

Mr. SCHWAB. Do you want me to give them to you as you read them off?

The CHAIRMAN. No.

Mr. SCHWAB. I can give them now; I can give every item of cost that enters into it.

The CHAIRMAN. And repairs and maintenance and supplies and tools, miscellaneous and general expenses; the general expenses of the factory, and depreciation.

Mr. SCHWAB. You will have to give me that list.

The CHAIRMAN. I will give it to you.

Mr. SCHWAB. Now, I would like to state this: There has probably not been two months in the last two years in any two mills when rails have cost the same each month. So I will give you a good average cost, not the low cost or the high cost, but a good average

cost.

Mr. DALZELL. I think it would be well to give us a statement as to the same things when you wrote that letter in 1899, giving us the items as applying to that time.

Mr. SCHWAB. You mean in writing?

Mr. DALZELL. Yes.

Mr. SCHWAB. I should be very glad to do so.

The CHAIRMAN. Then I would like the details of making pig iron. Mr. SCHWAB. I have given those.

Mr. CRUMPACKER. Do you know about the cost of manufacturing pig iron and rails in detail in England and other foreign countries? Mr. SCHWAB. Not as much in detail as I do about the cost in this country.

Mr. CRUMPACKER. Do you know any of the elements of difference in cost and their significance?

Mr. SCHWAB. I am afraid you will have to be a little more specific. Mr. CRUMPACKER. Well, do you know the comparative cost, as a general proposition, of making pig iron and rails in this country and in foreign countries?

Mr. SCHWAB. To-day?

Mr. CRUMPACKER. Including these years.

Mr. CALDERIEAD. Let him come to that later.

Mr. SCHWAB. I am quite familiar with the other.

Mr. CRUMPACKER. I suggest he put that in his statement.

Mr. SCHWAB. I will offer what I have already said as an explanation of that letter.

The CHAIRMAN. Now, you put the total cost of steel rails-have you got the figures there?

Mr. HILL. $20.93, I make it now.

Mr. SCHWAB. It ought to be in the neighborhood of $21.50. It will approximate $21.50.

The CHAIRMAN. Now, Mr. Schwab, how near is that to the average cost from 1902 down to the present time?

Mr. SCHWAB. I don't know; I would have to go through that. I couldn't give you that from memory. Suffice to say this, Mr. Chairman-let me say this: That in every year since 1900 up to date, in every year the average earnings of the employees of the steel corporation, while I was president, that the average earnings of my own employees have increased each year; there has never been one year that the average has not increased. I have not given the figures for this year yet

The CHAIRMAN. Do you mean to say that the cost is higher for this year than for the average of the preceding years?

Mr. SCHWAB. I say I have not the figures for this year; this year has not ended yet. But up to this year the earnings of the employees in the steel works

The CHAIRMAN. What year do you refer to when you speak of the cost as about $22?

Mr. SCHWAB. This year; the present time.

The CHAIRMAN. What I was trying to get you to do was to compare the present year with the six or eight years preceding this year. Mr. SCHWAB. The real cost of making rails this year is the highest in ten years, because we have had so few rails to make. In my opinion rail makers will not have made any money on rails this year. That is the reason it is difficult to make a comparison in a year like the present.

The CHAIRMAN. This will answer the question. Do you mean to say that the average cost has not exceeded $21.50 for the eight years preceding this year?

Mr. SCHWAB. For the eight years, I think it was less than that in 1900. I think the cost has gradually increased.

The CHAIRMAN. Each year?

Mr. SCHWAB. Each year.

Mr. CALDERHEAD. Why is that?

Mr. SCHWAB. Because everything that enters into the cost of rails has gradually increased in that time, and as I stated to you before, the average earnings of the workmen have increased every year since 1900. And so it is with freight.

The CHAIRMAN. Now, can you tell us the average price you have obtained

Mr. SCHWAB. It has been $28, always.

The CHAIRMAN. That has been the uniform price?

Mr. SCHWAB. Yes, sir.

The CHAIRMAN. For how long?

Mr. SCHWAB. I can not recall.

The CHAIRMAN. For five or six years?

Mr. SCHWAB. More than that.

The CHAIRMAN. Ever since the organization of the United States Steel Corporation?

Mr. SCHWAB. No. And before.

The CHAIRMAN. Before?

Mr. SCHWAB. Yes; I can not tell you the exact year, but I should

say

The CHAIRMAN. That has been the uniform price?

Mr. CALDERHEAD. Notwithstanding the increase in wages.
Mr. SCHWAB. Notwithstanding that.

Mr. LONGWORTH. What was the price in 1899?

Mr. SCHWAB. I can not recall, but I think $28.

Mr. HILL. You do not mean to say that the price of rails was $28 before the organization of the United States Steel Corporation? Mr. SCHWAB. I do.

Mr. HILL. How long?

Mr. SCHWAB. I don't know.

Mr. HILL. Well, a year?

Mr. SCHWAB. Yes.

Mr. HILL. A year before?

Mr. SCHWAB. Have you the figures?

Mr. HILL. Yes. [Reading: "In 1897, $18.75; in 1898, $17.62; in 1899, $28.12."]

Mr. SCHWAB. That is right. But let me ask you to go back of that Mr. HILL. In 1896 the price was $28.

Mr. SCHWAB. That is the point I want to make. I will tell you. the reason for that. In the year we made rails so cheaply we had, as you well know, a very great steel-rail war between all the manu facturers, and prices went the lowest in history.

Mr. COCKRAN. They were not sold at a loss during those years? Mr. SCHWAB. I think they were by most manufacturers.

Mr. HILL. They would not be sold at a loss according to your figures.

Mr. SCHWAB. They were not sold at a loss to my companies; I stated that in my letter to Mr. Frick.

Mr. COCKRAN. So those figures read by Mr. Hill showed a profit to your concern?

Mr. SCHWAB. A very small profit. When I say $12 cost, that was mill cost.

Mr. COCKRAN. That was in 1899?

Mr. SCHWAB. Yes, sir. Oh, we made a profit. I said we made a profit.

Mr. COCKRAN. You say a very small profit. Now, you sold them at how much-$18, was it, Mr. Hill, in 1899?

Mr. HILL. That was the generally quoted price. In 1899 they were $28.12. In 1898 they were $17.62.

Mr. COCKRAN. Seventeen dollars and sixty-two cents?

Mr. HILL. In 1897 they were $18.75.

Mr. COCKRAN. You charged $28, then, at the time they cost you $12, and you are charging $28 now, and now they cost you $21?

Mr. SCHWAB. That is right. That is absolutely correct. Now, 1 want to say something about that cost that Mr. Hill has of $17.62. It is probably the average selling price of rails that year. You want to know why we made a small profit. I said we; I mean the Carnegie Company. The most of the rails we sold that year were sold deliv

ered at Chicago at $17.12, and we had to pay the freight to Chicago and didn't have much profit.

Mr. COCKRAN. But some?

Mr. SCHWAB. Yes; I said some profit.

Mr. COCKRAN. You got $17 and then you go to $28 without any corresponding increase at all in the cost of production. How do you account for that extraordinary rise?

Mr. SCHWAB. Well, it was time we were making some money.
Mr. COCKRAN. You had been making some before?

Mr. SCHWAB. Any manufacturing concern that goes into business and does not expect to make from 20 to 25 per cent had better not put their money in manufacturing.

Mr. COCKRAN. But here was over 100 per cent.

Mr. SCHWAB. In that special year

Mr. COCKRAN. I am speaking of that.

Mr. SCHWAB. Yes; quite right.

Mr. COCKRAN. What I want to get at is this: Whether the relation between the law of supply and demand was what fixed your price, or whether you fixed the price at just what you were able to get? Mr. SCHWAB. That year?

Mr. COCKRAN. I am speaking generally. Take that year. According to your figures, it actually cost about $12.50 to produce steel? Mr. SCHWAB. Yes.

Mr. COCKRAN. And you charged $28 for it?

Mr. SCHWAB. Right.

Mr. COCKRAN. Now, that particular year there had been a combination of some steel manufacturers, had there not?

Mr. SCHWAB. Quite right.

Mr. COCKRAN. There was the Federal Steel Company incorporated, I think.

Mr. SCHWAB. There was.

Mr. COCKRAN. And there was an American Steel and Wire Company incorporated?

Mr. SCHWAB. Yes, sir.

Mr. COCKRAN. And that was the first year when there had been a consolidation of steel manufacturers?

Mr. SCHWAB. There had been no consolidation of steel-rail manufacturers at that time.

Mr. COCKRAN. Did not the Federal Steel Company produce steel rails?

Mr. SCHWAB. Yes, sir.

Mr. COCKRAN. But they were themselves a combination of other companies. What I want to get at is this, and I will ask you to correct me if I am wrong. This jump in prices-I do not want to use any expression that is too strong.

Mr. DALZELL. Rise.

Mr. COCKRAN. Well, it was a little more than a rise, a rise in price, gradual ascent; this was at least a little more than gradual; we will call it a jump. This jump from $17 to $28 a ton followed a consolidation of several minor companies into some larger companies, did it not?

Mr. SCHWAB. May I correct you?

Mr. COCKRAN. Certainly, if I am wrong.

Mr. SCHWAB. If you will look back several years before that I think you will find the price was $28 a ton.

Mr. COCKRAN. That was not my question. Mr. SCHWAB. But you said it took place at that time. It did not take place at that time.

Mr. COCKRAN. I will have to repeat my question. Between the charge of $17 by the producers, or thereabouts, and $28, was there not a consolidation or had there not been several consolidations of minor companies into larger companies, of several minor companies into a few larger ones?

Mr. SCHWAB. I can not give you that from memory.

Mr. COCKRAN. About that time?

Mr. SCHWAB. You are probably

Mr. COCKRAN. Just to refresh your memory

Mr. SCHWAB. I will tell you very frankly, without all those questions, that we had the steel war in the years already mentioned, and it was ruinous, and the manufacturers got together and agreed to restore the price of rails to their old basis.

Mr. COCKRAN. To end competition that was ruinous would be one thing, but to take advantage of that combination to increase their profit to 100 per cent, or such a matter, would be another thing. I take it that from the small profit that you say you were making under these prices of $17 and $18, you then made 100 per cent?

Mr. SCHWAB. That is probably true.

Mr. COCKRAN. Then, to get back to my question: This jump, this leap, from a moderate profit to 100 per cent was coincident with a consolidation of several minor companies into some larger companies? Mr. SCHWAB. Your conclusions are right, but your premises are

wrong.

Mr. COCKRAN. Why are my premises wrong?

Mr. SCHWAB. Because the price of $28 was established some years before there was any consolidation such as you speak of.

Mr. COCKRAN. Mr. Schwab, I can go back to a time when they were selling at $60 or $70, I think.

Mr. SCHWAB. That is true.

Mr. COCKRAN. But I am not

Mr. SCHWAB. Your conclusions are entirely correct.

Mr. COCKRAN. I am entirely correct as to that?

Mr. SCHWAB. Entirely correct.

Mr. McCALL. When was the United States Steel Company formed? Mr. COCKRAN. I am coming to that. After this combination of several minor companies into the few larger companies, another war, I think, was threatened, about 1901 or 1902, by the purchase of some land at a place called Conneaut, and an announcement of the Carnegie company that they were going into the tubing business. Mr. SCHWAB. You are conversant with that?

Mr. COCKRAN. Perhaps somewhat so, but I want to get it accurately from you.

Mr. SCHWAB. The consolidation, as you term it, of the steel corporations in about the year 1901 came about in this way.

Mr. Morgan asked me if Mr. Carnegie wanted to sell his interests in iron and steel; that he then had large interests in the Federal and other companies. I approached Mr. Carnegie, and Mr. Carnegie said he would sell, and we sold our company to Mr. Morgan under conditions with which you are all familiar. We knew the properties