Mr. CARNEGIE. I think employers would pay the price that they could get competent men for, and I think if business was dull they would not need new men, that some would be idle, and the cost of labor would fall. Mr. DALZELL. Why should we go into all this academic discus sion Mr. COCKRAN. I think Mr. Carnegie is able to answer these questions. Mr. DALZELL. I think he is abundantly able to answer, these academic questions Mr. CARNEGIE. If you will excuse me, you will make much better progress if you will tell me what you want to know. Mr. COCKRAN. What I want to know Mr. CARNEGIE. You put a man here who has not been in business for seven years, and, naturally, his memory is not so good. Do you imagine that his memory can go back and fix dates? Dates are obliterated in my mind Mr. COCKRAN. I was not asking you about dates at all now. After I found your difficulty in remembering dates, I abandoned that. Mr. CARNEGIE. Because you really must remember I have retired for seven years, and to call upon me unexpectedly to go back thirty or forty years, I am unable to do that. Mr. COCKRAN. We have had our excursion into the past, and we have come back, with such information as we got. Mr. CARNEGIE. Tell me what you want. Mr. COCKRAN. I will ask you one more question, notwithstanding the objection of academic discussion. I understand you have given us as your opinion that putting steel on the free list would not in itself bring around much of a reduction in the cost to the consumer? Mr. CARNEGIE. Yes; that is quite true. Mr. COCKRAN. I think you said that of almost all steel products? Mr. CARNEGIE. Yes, sir; yes. Mr. COCKRAN. Your belief that they should be put on the free list. is to prevent possibilities of exactions in the future? Mr. CARNEGIE. Yes, sir. Mr. COCKRAN. And also, I suppose, to make sure that the cost of production is reduced here, and so that the consumer will get the benefit? Mr. CARNEGIE. I do not understand that. Mr. COCKRAN. I say, if the product is on the free list, if there should be a reduction in the cost of production both here and abroad, then the native consumer would get the benefit of any economies anywhere in the world, would he not? Mr. CARNEGIE. Certainly, as I understand your question. If there is any reduction Mr. COCKRAN. With steel on the free list Mr. CARNEGIE. Well Mr. COCKRAN. We would not only be protected against any arbitrary advance in this country, but against any arbitrary exaction— Mr. CARNEGIE. I am glad you asked that. Mr. COCKRAN. I want that clear. Mr. CARNEGIE. My opinion is, and I have stated it over and over again, that if I did not think this was true I would not be prepared to favor no tariff, taking it all off at once. My opinion is that the American steel industry is on such a foundation that even if the tariff were taken off I do not believe that any foreign steel rails or steel of any kind would come in here. Mr. COCKRAN. I understand that. Your idea is that we can defeat competition all over the world upon our own shores. That is your belief? Mr. CARNEGIE. Yes; my belief is that the steel makers of America who are properly equipped and manage their business well need not fear anything that producers abroad can do to affect their home. market. Mr. COCKRAN. So, with the goods on the free list, with this product on the free list, the native producer can hold his market if he improves his skill as much as the others--if he improves in his skill? Mr. CARNEGIE. Yes. Mr. COCKRAN. In other words, you put him to the improvement and development of his skill to maintain his market? Mr. CARNEGIE. Yes; he would be more alert to improve than he would be if he could make a great profit under the tariff. That is human nature. Mr. COCKRAN. That is all. Mr. HILL. Just one subject I would like to clear up in my own mind. So long as you were in business there was always free and open and keen competition, not only in rails, but in all other forms of steel products, was there not? Mr. CARNEGIE. No. Mr. HILL. Open competition in the market? Mr. CARNEGIE. No; I could not say that. Wars would break out, and we would compete with each other, and then sometimes they would meet and agree to be at peace. Then trouble would break out again. Mr. HILL. But there was no financial combination in any way that controlled it. If there was an agreement, it was simply an agreement such as men in the same industry often have now? Mr. CARNEGIE. Yes, sir. Mr. HILL. So far as financial combination, it was always free and open competition? Mr. CARNEGIE. Yes, sir; each manufacturer stood upon his own basis. Mr. HILL. Yes. Do you remember the price of steel rails the year you sold out, the year you sold your company out? Mr. CARNEGIE. I am sorry to say I do not. Mr. HILL. There has been a uniform price of $28 per ton for steel rails ever since, has there not? Mr. CARNEGIE. Oh, you mean steel rails? Mr. HILL. Yes. Do you not remember the price that year, before you sold out; you do not remember the price you were selling steel rails for then? Mr. CARNEGIE. I do not remember whether the uniform price did not prevail then or not. Mr. HILL. No; I think not. Mr. CARNEGIE. I could not answer that. Mr. HILL. The price has been uniform ever since. I wanted to know whether you knew that this agreement between the railroad companies and the combination was a prerequisite to the formation of the combination. Mr. CARNEGIE. I do not think it had the slightest influence. 'Mr. HILL. You do not think it had? Mr. CARNEGIE. Not the slightest bearing. Mr. HILL. And you sold out and took the bonds of the combination? Mr. CARNEGIE. Oh, no, no, no Mr. HILL. With the expectation that there was to be no uniform fixed price? Mr. CARNEGIE. I knew nothing, as far as my memory serves me; that never entered into my thoughts. The combination on rails would not be an important factor with any man selling out or not selling out; it is only one form of steel. Mr. HILL. Yes; but you will admit that the fixing of freight rates and the corresponding fixing of the price of rails would be a very important factor with reference to all other steel products, would it not, because the rates would apply just the same? Mr. CARNEGIE. Oh, I see your point. I wish to say that I knew nothing about that arrangement between the railroads Mr. HILL. And the steel companies? Mr. CARNEGIE. Yes, sir. Mr. HILL. And do not know when it was made, of course, if you know nothing about it? Mr. CARNEGIE. I knew nothing about it. Let me show you: We were western people at Pittsburg; and the Pennsylvania Steel Company and the Cambria Company, with its office at Philadelphia, they were the people that mostly conferred with the Pennsylvania Railroad Company, and we of the West heard of that agreement--the price fixed. Mr. Hill, I wish to assure you that I never heard it intimated that it was based on open rates in any way. Mr. HILL. I think that was stated by a previous witness, but not by you. Mr. CARNEGIE. I was no party to that agreement personally; I did not conduct it, but I did think it was a fair price. It did not strike me as unfair. Mr. DALZELL. I want to ask you a question to see whether or not I understand your testimony. Your opinion that steel can be put on the free list is not based on any figured cost, but on broad, general principles, taking into account that we do not import much steel, and we do export some steel, and taking into account also the great resources of the country and the business energy of our people. As I understand you, that is your position. Do I state it correctly? Mr. CARNEGIE. Yes; that is true. There has been a general consensus of opinion among steel men that the tariff was a back number; I have heard the remark Mr. DALZELL. I thought I understood you, and I am glad to have you confirm my understanding. The CHAIRMAN. I want to correct a false impression that my colleague, Mr. Cockran, got from a cursory examination of this report, the report made by Judge Gary. He spoke of the $160,964,000 of the gross earnings, and then he read provisions for the following purposes: "Sinking funds on bonds of subsidiary companies, $1.977,761.03, and so forth, leaving $133,244,929.28." Now, if he had turned to page 7 of this report, he would have found out what those earnings were [reading from sixth annual report of the United States Steel Corporation for the fiscal year ended December 31, 1907]: Earnings Less appropriations for the following purposes, viz: Extraordinary replacement funds (regular provisions for Special replacement and improvement funds.__ Total (net earnings in the year the amount deducted.) __ That makes net earnings in the year.. Deduct interest on United States Steel Corporation bonds outstanding Sinking funds on United States Steel Corporation bonds, viz: Interest on bonds and sinking funds... Leaving a balance of.. Less charged off for various accounts and adjustments__ Leaving a balance of $160, 964, 673. 72 1, 977, 761. 03 6,681, 746.03 15, 560, 237.38 3, 500, 000, 00 27, 719, 744. 44 133, 244, 929. 28 22, 860, 352. 82 4, 050, 000, 00 1,037, 497. 18 105, 247, 079. 28 GS1, 515.52 104, 585, 563, 76 Which would seem to be the net profits for the year. Now, on page 9 you find this memorandum: "The expenditures made by all companies during the year 1907 for maintenance and renewals, including the relining of blast furnaces, and for extraordinary replacements equaled the total sum of $55,828,253.12, an increase in comparison with the expenditures for the same purposes during the preceding year of $7,495,163.75, or 15.5 per cent. The expenditures in the year 1907 were the largest of any year in the organization's history. The annual expenditures since 1902 have been as follows:" I will not stop to read those figures. "The entire amount of the foregoing expenditures was charged to current operating expenses and to replacement funds reserved from earnings. A statement showing the principal items of replacement and betterment comprehended in the total expenditures for extraordinary replacements is included in the statistical tables printed in this report.' So that the total replacement for that year amounted to $55,000,000. Instead of charging all over, they charged over $27,000,000, and the other they carried along to a future replacement account, it would seem, from that. Now, the following table shows the amount of the expenditures made during the year for the above purposes by the respective groups of operating properties: Expenditures for ordinary maintenance and repairs, including blast furnace relining, expended on manufacturing properties, the total, except blast furnace relining. Blast furnace relining. $23, 265, 791. 26 1, 481, 975. 08 I want to get that in the record, and I want to show by you, Mr. Carnegie, if you will pay attention, that this was a proper charge against the income for the year and should be deducted before you get the profits per ton of the proceeds of the business. Now, in the next column are shown extraordinary replacements. These expenditures were paid from funds provided from earnings to cover requirements of the character included in this report, and it says-see page 10-this same list of items foots up $20,324,584.80. I want to get that in the record, so it can be seen just what the net profits of this corporation were, which will show that there was a profit of $10 a ton on the 10,000,000 tons of steel output instead of $15, as stated originally. That is all I desire at this time. I want to get at the exact truth in this case. Mr. CARNEGIE. That is right. Mr. RANDELL. It is developed, it developed this morning that some of the witnesses have testified that on the sales made abroad, the steel contracts, there was a loss; but on probing the matter they found it was a book loss, but an actual profit. Can you give us any enlightenment on what that means, where they have testified that there was a book loss, but an actual profit, in reference to foreign sales? Mr. CARNEGIE. I can only imagine that they mean that it enabled them to run their mill. I do not know how many times they sent abroad at a loss. Was it a great number? Mr. RANDELL. I do not know the amount, but would it mean that it was a book loss because they sold at a less price than they valued at here, but at the same time it was an actual profit because they got more than it cost them? Mr. CARNEGIE. You had better ask a member of the steel company; I am unable to explain that. Mr. RANDELL. Then, in reference to the export expenses that they claim they were put to now, special stress was laid upon one item especially, that the price of coal in the ground was so much more, a difference between $600 an acre and $3,000 an acre, making, as you calculate it, a difference of 30 cents in a ton of coke. That would be an extra cost in the manufacture of steel, would it not? Mr. CARNEGIE. Yes. Is Mr. RANDELL. I wanted to get your opinion on this matter. that extra expense, and all other extra expenses that you know anything of equal to the savings that have been made, such as utilization of gases, which they did not use before, and the using of slag, something which cost them something to remove before, and other matters of that kind, such as improved machinery; what relation would the cheapening of the product by these things have to the enhancing of its cost by the higher price of coal in the ground? Mr. CARNEGIE. I should be happy to answer your question if I could. Now, let me say once more, the chairman has just read a report of figures, and a very long report. Can any human being |