Carnegie Steel
Andrew Carnegie, the foremost steel industrialist of his era in America, watched the anti-Semitic fervor sweeping Europe with a look of pure contempt.
Jewish conspiracy theories? Even the Romans two thousand years ago wouldn't have swallowed that nonsense.
Carnegie snorted at the Europeans' antics, yet every nerve remained taut for the rebound profits this crisis might deliver.
With France's recession dragging down French and British steel output, the drop is certain. This is the moment we surge ahead.
He laid bold plans to expand steel production. In hard times Carnegie always poured more capital into the business, widening the gap on his rivals—that was simply his style.
"Start by finding mines that can supply our company with iron ore in bulk."
Absorbing a few minor steel firms along the way would be a bonus.
"Good."
Carnegie issued the orders and began sketching out the economies of scale he intended to build.
Then came the snag.
"Mr. Carnegie, we have a problem."
"What problem?"
"A great many of the iron-ore mines we looked into have already been sold—every one of them—to some foreigner."
"What?"
The claim was absurd. Carnegie Steel was no blind beggar; they could not possibly have missed mines changing hands in bulk.
"In truth, men posing as local mine operators handled the deals and secured the properties. At the early stages they simply inherited the existing contracts and kept shipping ore, so no one in the trade thought anything of it."
Once they had bought enough mines, they dropped the mask.
Carnegie tasted bile rising in his throat.
"Did you try offering them a deal?"
"We talked. Their terms never changed. Payment has to be in Carnegie Steel shares—nothing else."
"Those bastards—worse than dogs!"
The news that they were after his own equity shattered Carnegie's composure; rage boiled over.
"Mr. Carnegie, what will you do?"
He ground his teeth for a moment, then made his decision. The businessmen of the Gilded Age were hard men who never yielded easily. Carnegie stood at the very summit of that breed.
He slammed his fist down on the desk.
"No negotiations! If those bastards want iron ore, let them choke on it!"
He was certain that without Carnegie Steel to absorb the ore, the newcomers would bleed red ink. They would not last long.
Carnegie's arithmetic was not wrong—had the other side been ordinary mine operators.
"If Carnegie refuses to talk, our next move is simple. Prepare to build a steelworks."
"Sir?"
Waldemar did not hesitate; he bluffed at once by ordering a steel plant of his own.
Word of the construction order reached Carnegie's ears before long.
"What? The bastard's building a steelworks?"
It was a truly shocking move. Denied a share of the company, he meant to seize the entire industry? Only a robber baron could think so brutally.
"He's a ruthless one, I'll give him that."
With the opponent answering this way, a long fight was hard to avoid.
I can't allow that.
Carnegie had no desire to drag the matter out. He decided to reach for less-than-legal means.
"They trespassed on my territory first."
Though Carnegie wore a moderate face, he was every bit a robber baron himself—a man cruel enough to crush labor unions in blood when the need arose.
"What are your orders?"
"Contact the miners at their pits. Stir them up to demand higher wages. If they have no union, help them form one. If they lack guns, get them some. The moment blood is spilled, make sure every newspaper in the country prints the story!"
"Yes, Mr. Carnegie."
Carnegie's support became a powerful weapon for mine workers who had long endured exploitation for want of any bargaining power.
"We demand a fair wage for our labor!"
The voices of men who had suffered years of low pay thundered through the pits.
Waldemar's side showed no reaction at all. Far from suppressing the protests, they even withdrew the guards who had been stationed at the mines.
Instead they reached for the law.
"From this moment until the demonstrations end, the mines are closed."
"What?"
"Any further interference with private property will be met with lawsuits—every single one of you."
America was a paradise for litigation. And anyone who sued a corporation in this country usually ruined three generations of his family.
The miners had the courage to face armed guards. Before the legal papers a lawyer carried, they could not even lift their heads.
"I don't know about anything else, but if we get sued our families are finished for sure."
Before the weapon called law the miners were helpless. Had there been a living man to shout at, they might at least have pleaded; all that stood before them were scraps of paper. And those thin scraps were far more terrifying than any man.
The mine workers' protest collapsed almost at once.
"S-so if we just stop the strike, we're all right?"
Carnegie was left speechless by the other side's cunning.
These people understand the power of public opinion.
He resolved to try another approach.
"Then we have no choice but to shatter their expectations."
Carnegie Steel poured money into new iron-ore prospecting. Discover even one fresh deposit and the opponents would have to yield.
Once they realize they can't win the competition, they'll fold and walk away.
That was the hope he nursed. The result was anything but good.
It was not Carnegie Steel that struck a new colossal deposit—it was the other side.
"The Gogebic Iron Range?"
"Yes. They've taken the entire Gogebic Range, and the whole district is reportedly laced with iron ore."
At those words Carnegie felt his fighting spirit snap. He spent an entire night alone in his office, weighing whether he could simply ignore them and continue in steel.
Regrettably, the scale of the deposits they now controlled was simply too vast. If they threw themselves fully into the steel industry, those immense holdings would become a noose around Carnegie Steel's neck.
He had no choice. Carnegie decided to sit at the negotiating table on the terms they had first demanded.
He did not intend to go in unprepared.
"We need to strengthen our bargaining position first."
"How, sir?"
"We'll bring Morgan in."
The financier who had bought French government bonds after the Franco-Prussian War—when French prestige lay in ruins—and reaped enormous profits, Morgan now enjoyed towering renown throughout Anglo-American finance. With the support of Wall Street's most powerful capitalist, Carnegie Steel had no reason to lose ground at the table.
While Carnegie conducted preliminary talks with Morgan, Waldemar's side launched the final groundwork for reaping steel itself.
"You want to obstruct Carnegie Steel's railroad construction?"
"Isn't that how the robber barons do business?"
Waldemar began buying up land along the routes of the private railroads Carnegie meant to build—classic holdouts. Detours were still possible, of course, but the costs would explode.
"You enjoyed backing our miners' strike, didn't you?"
Waldemar's people also funneled money to the labor unions inside Carnegie Steel. He made no effort to hide the fact from Carnegie's camp.
"What the hell is this madman trying to do?"
Carnegie shuddered under the endless assault. This was not negotiation; it was blackmail. Negotiate with me or I will destroy you without fail.
After making substantial concessions to Morgan and securing his cooperation, Carnegie proposed "discussions" to Waldemar's side.
"Ah, so now you feel like talking."
Waldemar agreed rather than drag the matter out further. Both parties gathered at the Fifth Avenue Hotel—the finest in New York—to bargain over the future of the American steel industry.
"Let us be clear on one point from the outset. Carnegie Steel will not grant more than thirty percent of its equity."
John Connor and the rest of Waldemar's agents immediately pushed back.
"Carnegie Steel is a company capitalized at a mere five million, is it not? Offering only thirty percent values our assets at no more than six million marks. That is simply unreasonable."
"Nonsense. Given the scale of our facilities, our know-how, and our profit margins, we are overvaluing your holdings as it is."
Neither side yielded an inch. The marathon talks stretched across several days before, under Morgan's mediation, they finally reached an agreement.
"Euro Bond—Waldemar's investment company—shall own forty percent of the entire equity of Carnegie Steel. In all future capitalizations Carnegie Steel shall grant Euro Bond preemptive rights to new shares so that its stake is never diluted."
"In return, Euro Bond shall invest an additional eight million marks in cash, over and above the mines, into Carnegie Steel."
Carnegie Steel left the table dissatisfied, yet congratulated itself on having avoided the worst.
"At least we kept control of the company."
Both sides shook hands and closed the deal. At that stage Carnegie felt certain he had taken a loss, though he had no precise idea how large it was.
Waldemar knew that part better than anyone.
In 1901 Carnegie sold his seventy-seven percent stake to Morgan for four hundred eighty million dollars.
And the Carnegie Steel of this world, swollen by Waldemar's capital, would grow far larger still. Forty percent of that empire would be worth at least two hundred fifty million dollars—easily more than a billion marks.
Waldemar felt a smile rise unbidden.