Lackawanna Steel Company - Growth Years

Growth Years

In 1853, the firm reorganized yet again, doubling its capital investment and adopting the name Lackawanna Iron and Coal Company. Within a year, the company's assets had expanded to include three furnaces, a steel-making puddling mill, a foundry, two blacksmith shops, two carpentry shops, a saw mill, a grist mill, company store, 200 dwellings (to house workers), a boarding house, iron ore mines, coal mines, a tavern, and a hotel.

The company also expanded into the railroad business in 1853. Needing a secure way of getting products to market without having to pay the exorbitant fees charged by the railways, the company purchased a controlling interest in the Delaware and Cobb's Gap Railroad and the Lackawanna and Western Railroad, reorganizing the combined subsidiary into the Delaware, Lackawanna and Western Railroad.

A second generation of Scrantons took control of the Lackawanna Iron and Coal Company in the 1860s, bringing new technological innovations to the firm. William Walker Scranton, son of Joseph Scranton, was born in 1844. At the age of 23, William Walker Scranton had already become superintendent of one of the Lackawanna Iron and Coal Company's steel mills. After Joseph Scranton's death in 1872, William took control of the entire family business empire, which now included (in addition to large numbers of coal and iron mines) a bank and the City of Scranton's gas and water works.

During the 1870s, American railroads once more began buying track rails from Europe. The reason was the high quality of steel rail produced in Europe, thanks to the invention in 1855 of the Bessemer process for steelmaking—which drastically reduced the fuel costs and amount of time needed to make steel as well as significantly improving the quality of the steel produced. Scranton took a leave of absence from the firm and secretly went to Britain and then Germany, where he became a puddler and learned the secrets of making "Bessemer steel." But Scranton could not convince his business partners to adopt the Bessemer process. Meanwhile, industrialist Moses Taylor, a protégé of John Howland's, had organized the Franklin Iron Company to supply pig iron for rail tracks to the Midland Railroad and the Sussex Railroad (of which he was part-owner). Taylor wished to link his railroads with the Scranton-owned Delaware & Lackawanna, and believed the Lackawanna Iron and Coal Co. could turn his pig iron into finished steel—but only if the company adopted the Bessemer process. Together, Moses Taylor and William Walker Scranton convinced the company's other investors to adopt the Bessemer process in 1875 and to merge the Taylor and Scranton railways in 1881. The first "blow" (or pouring of molten steel from the Bessemer furnace into molds) occurred on October 23, 1875, and the first Bessemer steel rolled in the mill on December 29, 1875.

During the 1870s, the Lackawanna Iron and Coal Company also suffered from significant labor problems. The company was one of many which cut wages in its coal mines 30 percent in 1870. The Delaware & Lackawanna, the company railroad, also sharply cut wages for its workers. The first week of January 1871, a nascent mine workers union, the Workingmen's Benevolent Association, went on strike for higher wages. William Walker Scranton personally helped break the strike by leading strikebreaking miners to and from the mines each day. While escorting a body of miners from the mines one afternoon, he was attacked by a mob and in the ensuing fight two of the rioting strikers were killed. The state militia was called in to restore order, protect the strikebreakers, and help reopen the mines. The strike began to collapse in April 1871 as strikebreakers opened more mines and the strikers and their families began to starve. Violence flared again in early May, and state troops were once more called to restore order. Within a few days, the strike had largely been broken and most miners returned to work. William Scranton was arrested twice for his role in leading the strikebreakers, but acquitted at trial each time.

A second large strike hit the company in 1877. The Long Depression began with the Panic of 1873 and did not end until 1896. By 1877, thousands of miners, steel workers, and railroad employees were out of work and wages had been slashed repeatedly. On July 23, 1877, workers in the iron and steel mills owned by the Lackawanna Iron and Coal Co. struck, seeking a 25 percent wage increase. The strike spread to rail workers the next day, and on July 25 the company's mine workers also walked out and demanded a similar wage increase. The company asked Scranton Mayor Robert McKune for police protection the same day, and McKune asked Governor John F. Hartranft for troops. On July 26, Governor Hartranft asked President Rutherford B. Hayes for federal troops, and (with the Great Railroad Strike of 1877 already raging) Hayes agreed to send them at the governor's request. Violence broke out on July 29: The head house of the Penn Coal Co.'s short-line railroad was firebombed, a local bridge was burned, and many of the coal mines owned by the Lackawanna Iron and Coal Co. were flooded. The next day McKune threatened to call out the federal troops, but also offered his own services as an arbitrator. The two sides met throughout the day, and to everyone's surprise a tentative agreement was reached that evening. Although a majority of the steel workers appeared ready to accept the tentative agreement, a mob of 6,000 men formed on August 1 in downtown Scranton and resolved to reject it. When McKune appeared outside the mayor's office to try to calm the mob, shots were fired. McKune was clubbed and then stoned. His lower jaw broken and his upper jaw fractured, McKune tried to flee but was knocked unconscious when a member of the mob hit him in the head with a hammer. A few minutes later, the county sheriff and a hastily-assembled posse arrived and fired shots over the heads of the crowd to try to disperse the mob. Several people in the crowd returned fire, wounding the sheriff and a member of the posse. The posse then fired volley after volley into the crowd, killing four and wounding hundreds. Many of those killed and injured were shot in the back as they tried to flee. Mayor McKune, although badly injured, helped restore order around 2 p.m. The following day, 3,000 federal troops arrived from Pittsburgh and invested the city. Martial law was imposed, and the strike ended several uneventfully weeks later with no agreement. The sheriff and several posse members were arrested and tried on the charge of manslaughter, but were acquitted.

The company's labor troubles soon were supplanted by an internal struggle for control within the Lackawanna Iron and Coal Co. By 1880, the company was the second-largest producer of iron in the United States. Nonetheless, William Walker Scranton wanted the company to expand, a proposal which the board of directors rejected in 1881. Scranton quit the company and formed the Scranton Steel Co. with his brother, Walter Scranton, in 1881. Within 10 years, the Scranton Steel Co. had become so successful that the Lackawanna Iron and Coal Co. entered into negotiations to merge with the firm. The two companies merged on January 9, 1891, forming the Lackawanna Iron and Steel Company. Although the merger created nearly $1.2 million in debt for the new company, Lackawanna Iron & Steel proved to be so financially successful that it paid off the debt within a year.