Tom Eagar's steel company experience

Tom's 1975 employment data point (45% labor, 45% materials, 10% profit, vs. 1980s 55% labor and 10% loss). Foreman pay comparison. Suicide-in-the-bath anecdote. Bethlehem PA hospital "for maimed steel workers." Bethlehem Steel near-bankruptcy in early 1960s. Burns Harbor as last US private integrated steel mill.

We went from labor-intensive in 1975, when I worked for Bethlehem Steel — labor was 45 percent, materials 45, and they actually made a 10 percent profit. In the 1980s it was 55 percent and they made a 10 percent loss. That's another story. Raw materials and energy intensive today. That's what it takes to make steel. Doesn't take much labor — we're down to 20 minutes per person-ton.

Tom recalls Bethlehem as a "dinosaur company" still doing ingot casting in the mid-70s with 63% yield. Mike Kimchuk (DMSE alum, BS VP-adjacent role, MIT Educational Council chair for eastern PA) was charged solely with improving yield by 1% — worth ~30% of profit. And the 1930s Eugene Grace bonus story: highest-paid US executives, bonus paid on tons *poured* not sold, during the Depression.

I worked for a dinosaur company. At Bethlehem Steel, when you do ingot casting, you get about two-thirds yield. If I have an ingot — we make ingots tapered, the mold looks like this, we pour the metal in, and when it solidifies it shrinks and we get a pipe. You have to cut off that top part and send it back to remelt. This is the only good part. Why do you make it tapered?

"By 1975, when Tom Eagar was working for a steel company" — used as a temporal anchor for sulfur-content benchmarks. Self-referential in third person, characteristic.

An ASM spec originally written in the 1920s or 1930s will say the sulfur must be less than 0.05%. By the 1940s they were saying less than 0.04%. By 1975, when Tom Eagar was working for a steel company, the sulfur was typically less than 0.01%. And the Japanese were making it at 0.005%. They had modern equipment and they were beating our socks off in quality of steel. 0.005%, 50 parts per million, was about the best they could do in the 1920s with any regularity. They didn't know how to control it until John Chipman told them what types of slags to use. I can go to an ASM spec today and they'll still say the sulfur has to be less than 0.05%. Are you kidding me? No one makes 0.05 steel anymore. They haven't made it since before 1950. Sulfur does a lot of bad things for toughness in steel, but we've learned how to make it better and better. We can regularly get down to 0.002 or 0.001 sulfur today if we want, but we don't usually need to.

I happen to have worked in the steel industry, and I will tell you that's not what destroyed the steel industry. Maybe they weren't as profitable as they wanted to be, but what destroyed it was bad management. For example, after World War II, the United States controlled seventy-five percent of the world's steel industry. Do you know why? They bombed out the rest. It's a wonderful thing to go to war and have your competition bombed out. In the marketplace you can become the best in the world. And they had that attitude. When I went to work for them in 1974, they still had the attitude that they controlled seventy-five percent of the world's steel market. At that time they controlled twenty-five percent. Today they control ten percent or less, actually less now.

First-person biographical anchor for the Bethlehem Steel case: Tom as one of 500 college hires in summer 1975, raising the contrarian hand at the financial VP's depreciation argument. ## Figures referenced (recurring numeric anchors)

I went to a training for the 500 new college employees of Bethlehem Steel in the summer of '75. We went to this two-week training in an auditorium, and we had countless vice presidents come in and give us talks. This one financial vice president comes in — they had just had their most profitable year ever a year and a half before — and he says, we are one of the most efficient steel companies in the world, because our blast furnaces were built in 1912 and our coke ovens were built in 1911. Out of 500 idiot newbies, I raised my hand and said, I don't understand why having old equipment makes you more efficient. He said, because it's fully depreciated. I said, oh. And he made some comment about how I didn't understand finance. So a year later I took a finance course and I learned I didn't understand finance — but neither did he.

Anecdotal evidence of management-class extravagance at mid-1970s Bethlehem Steel: peach-sized strawberries in the executive dining room, three Lear jets ferrying VPs to Florida golf weekends. Used to set up the structural argument about why Bethlehem's management failed.

At Homer Research when I was there, we had the corporate dining room, which was on a second floor with huge windows looking out on the vista of the steel mill. You could see the smog from the coke ovens over here, and the pollution from the blast furnace over here. They had an executive dining room, which I snuck into once at about 2:30 in the afternoon, just to say I'd been in there. This is where the big shots, like the Don Trautleins, would eat lunch. I remember seeing a strawberry the size of a peach. I thought, this is amazing, it was going into the executive dining room. If I told you all the stories of how the upper management took care of themselves — I lived near the airport, and they had three Lear jets which would fly the vice presidents down to Florida in the winter to play golf on the weekends. This is good corporate management in the United States circa 1975, which is one of the reasons that after 13 months I said, where do I want to be in 5 years? And the clear answer was, not at Bethlehem Steel. So I left and came back here.

Tom hired into Homer Research Labs in 1974 at Bethlehem. The loop course story — 500 new college grads, the VP of finance's claim that depreciated 1911 equipment made steel free, Tom asking the wrong question, the accounting course at Lehigh that taught him the VP was wrong. Thirteen months in, Tom decides to return to MIT.

Part of the best part of Bethlehem Steel, the Burns Harbor plant, was the last large-scale steel plant built by a company in the world. Bethlehem decided to build a brand-new greenfield steel plant in 1965, and it almost bankrupted them. At the same time they decided to build the Homer Research Labs for $600 million, which is where I was hired in 1974. A $600 million research lab in 1966 — it was a Taj Mahal of research labs.

Tom mentions taking a one-third pay cut leaving Bethlehem Steel to join the MIT faculty in 1976. Brief biographical anchor for the consulting story that follows.

One of the ways I learned failure analysis was — when I came back in 1976 from Bethlehem Steel, I had to take a one-third cut in pay to be a faculty member. At that point I had three children, and maybe a fourth one by the time I bought my house in '78. I had to buy it because my mother-in-law couldn't live alone anymore, and we had to move her in. She lived with us for 17 years. But I couldn't afford my house, and I never knew where the mortgage payment was coming from more than two months ahead, and I had to rely on some consulting to do this.

"When I worked at Bethlehem Steel forty-some years ago." Anchors Tom's authority on Charpy practice and the Alaska Pipeline steel work. Not a developed case. ## Figures referenced These are framing statistics, not cases:

[Tom holds up two Charpy bar halves.] Here I have half of a brittle Charpy bar and half of a tough Charpy bar that stopped the machine. You take your Charpy bar, machined, and after you hit it, if you have a really good steel, you can stop the Charpy bar — which the guys who run the test hate. When I worked at Bethlehem Steel forty-some years ago I was working on high-toughness steels, and I would stop the Charpy bar on a fairly regular basis. They have to recalibrate the machines, about five hundred dollars every time. They actually ran my samples at the end and wouldn't recalibrate — they'd just break my samples and give me the results, and who cared. But stopping the machine means you have a very tough steel. So that's a way to measure — it's not really the energy of fracture, but we measure it in foot-pounds.

Tom situates the Tekken test as a Japanese practice he encountered while a welding engineer at Bethlehem Steel in the mid-1970s.

Pretty crude tests. When I was a welding engineer at Bethlehem Steel in the mid-70s, the Japanese liked to use the Tekken test. You take a one-inch plate or a half-inch plate, and you cut one of them in cross-section like that. The other one you bevel straight across. So you do a double bevel on one and a single bevel on the other. You put a little weld right in here, and you see if it cracks. In the Tekken test there's tremendous residual stress here even though you're only using small plates. Tekken — anybody know what Tekken means in Japanese? Railroad. This was a railroad test. The Japanese were building lots of railroads, still in the 70s and 80s, for transportation, subways and things. That was the Tekken test. But there are dozens of these types of tests where you try to use a small amount of material and test the weldability of your steel, whatever strength level it is, whatever electrodes you're going to use. You do a quick test and see if you get a crack.

Tom's first-hand experience receiving the proprietary Bethlehem Steel WPS notebook as a welding engineer — used to illustrate what a WPS looks like in industrial practice.

When I worked for Bethlehem Steel, they gave me as a welding engineer a notebook of all the Bethlehem Steel welding procedures for the structural welding division, and it had things like this page after page. It was exciting reading. But if I had a particular type of steel, I could look up the type of steel, I could look up the process, I could go down and it would tell me the same type of thing. If I'm a welding engineer, I ought to be able to write one of these. You're not welding engineers, so don't expect to write one. Go hire some welding engineer to do it for you, someone graduated from Ohio State or something like that. This tells you how many inches per minute and amps and everything. Almost everything's filled in, very few blanks. It's not a tungsten process here, so they didn't fill in that. You have to interpass cleaning — you've got to remove the slag. There's no post-weld heat treatment on this one.

Tom's foundational autobiographical case for why he left industry — proposing a free quality improvement and being told "won't help us sell more steel."

I'll tell you this. My lesson on quality, when I worked for Bethlehem Steel — I don't even remember what it was, but I had come up with some process change they could do in the mill that would improve the quality at essentially no cost. I proposed this to my boss, who was an MIT PhD. He said, "Why do we want to do this?" I said, "We make better quality product." Remember, this was 1975. I had to spend a couple of days lobbying him on why we would want to make better product, even if it cost us nothing. Why should we ask for a change? He finally, sheepishly, went up to his boss, who was a PhD from Lehigh University, and got me an audience with the second-level-up boss. I went in saying, "Look, this will cost us nothing, we can make better quality." He says, "We don't want to do that." I said, "Why don't you want to make better quality?" He says, "Won't help us sell more steel." That was the attitude. Everything was how many tons of steel you poured.

Tom's 20-month tenure at Bethlehem Steel, 1975. The looper rotation program (Martin Tower vice-presidential lectures). The Lackawanna 1910/1911 coke ovens "fully depreciated, costs us nothing" misconception. The MIT-PhD boss / Lehigh-PhD manager who vetoed a no-cost quality improvement. The Homer Research Labs executive dining room with tennis-ball-sized strawberries. Six of the top ten paid US executives at Bethlehem in the 1930s while the company was losing money. Eugene Grace's tonnage-based compensation. Gulfstream jets to Florida.