It is the summer of 1914 and Bethlehem Steel President Charles Schwab has a lot of concerns about Germany. Thanks to a new lower U.S. tariff German railroad rails are invading the market, cutting deeply into a profit-maker that Bethlehem had long dominated. It would, he pointed out to Congress before it passed the tariff reduction, lead to lower wages and eventually higher unemployment. But on the other side of the Atlantic another type of German invasion was about to occur, one which would change the course of world history and that of Bethlehem Steel.
On a sunny side street in Sarajevo, Bosnia, chauffer Leopold Lojka has inadvertently placed his passengers, Archduke Francis Ferdinand, heir to the throne of Austria-Hungary, and his wife Sophie in front of Gavrilo Princip, one of several members of a terrorist hit squad deployed by Serbian secret police to take out the royal pair in hopes of the creation of a greater Serbia. Jumping on the running board, Princip points his Belgian-made FN model 1910.380 caliber pistol and fires at point blank range. His first bullet hits the archduke’s jugular vein. The second wounds his wife in the abdomen. Being driven to the hospital the archduke is heard to say, “Sophie! Sophie! Don’t die! Live for our children!” But she is already dead, and he follows shortly after, muttering several times, “it is nothing.” It is 11:30 a.m. on June 28, 1914. What will become World War I has claimed its first victims. There will be many others.
By August all the alliances have clicked into place and most of the major powers of Europe are at war. In early September, the French, suffering heavy losses outside of Paris, halted the German invasion at the Marne. But Belgium has fallen and fighting continues across France. Trench warfare has begun. By mid-October the French and British have barely managed to keep the Germans from seizing Dunkirk and Calais.
On October 20, 1914, at his mansion in New York, Schwab receives a secret massage from the British Admiralty in London. They need him to come to London to confer with them as soon as possible. What form the message took Schwab never revealed. A coded transatlantic cable perhaps? Whatever it was, Schwab was apparently not surprised. Going back to the 1880s Bethlehem had supplied, first to the U.S. Navy and then to others, naval armor and cannon. In the Russo Japanese war of 1904-05 both nations fought using weapons purchased from Bethlehem Steel.
Believing it must be about ordering shells and other supplies for the Royal Navy, Schwab telephones Archibald Johnston, Bethlehem’s vice president in charge of foreign sales and its top ordnance expert. “Pack and come to New York immediately, but do not tell anyone where you are going,” says Schwab. Midnight finds them at the White Star Line’s pier to the liner Olympic. Schwab has taken the great liner, sister to the ill-fated Titanic, many times before. Now however there are no festive crowds. Covered in gray paint with her porthole windows blackened, Schwab must have barely recognized her. Carrying roughly 150 passengers, this was to be the Olympic’s last voyage before being converted to a troopship. The New York Times reported that the Germans said if its submarines spotted her, they would sink the Olympic.
The English Channel was already heavily mined and regularly patrolled by German U-boats. Fearing that the Germans would send submarines after her, the Admiralty advised the Olympic’s captain to avoid the channel entirely and go up around Ireland and dock at Glasgow in Scotland. While passing an Irish naval base, the Olympic began to receive distress signals. The battleship HMS Audacious had hit a mine. She was taking on water. The Olympic went to its rescue and managed to pick up the crew. But several attempts to tow the ship failed. Fearful of the German submarines in the area they cut her lose. Schwab biographer Robert Hessen states the German submarines fired a torpedo to sink what remained of the Audacious. Other sources claim a shell on the ship itself ignited and most probably caused the sinking.
Almost certainly Schwab and Johnston joined the rest of the Olympic’s passengers who came out on deck to watch and photograph the failed attempts to save the stricken Audacious. Fearful that the morale of the British public would be undermined by hearing of the sinking, Admiral Sir John Jellicoe gave orders that the Olympic and its passengers should be held in custody in Ireland. Schwab knew that the civilian leaders of the British Admiralty were waiting for him in London. He contacted Jellicoe, informing him of that fact and requesting he be put off at Glasgow. The admiral agreed but forbid him to tell the others about the fate of the Audacious. This Schwab agreed to do. He was forced to abandon Johnston, who stayed with the rest of the passengers who were later released in Belfast. He would join Schwab in London later. Although photos of the sinking of the Audacious were taken by a passenger and later appeared in the Philadelphia Public Ledger newspaper it was not until the war was over that an official notice of its fate was issued. Schwab kept his word to Jellicoe and said nothing.
In London, the wartime leadership of Britain was on hand to quiz Schwab. Among them was Winston Churchill, then the 42-year-old First Sea Lord of the British Admiralty. Also present was First Sea Lord John “Jackey” Fisher and Secretary of War Herbert Kitchener. They eventually placed an order for $135,000,000 for shot and shells, the largest single order ever placed up to that time of Bethlehem Steel. But there was another, even more important request that they made of Schwab. They wanted 20 submarines to join the 50 they already had at sea. Could Schwab do it and do so in a timely manner?
This briefly stunned Schwab. It was a tall order and of course was a direct violation of the U.S. policy of neutrality. But after a series of coded cables across the Atlantic to his people at Bethlehem and to the Electric Boat Company who would be a subcontractor, it was agreed that they could be built at the Fore River yard in Quincy, Massachusetts and at the Union Iron Works in San Francisco. It would be $10,000 per sub. Then Schwab made a daring promise to the British. It usually took Bethlehem 14 months to construct a submarine. He would guarantee delivery in six months. H.S. Snyder, Bethlehem’s vice president in charge of shipbuilding, began the process at once.
When Schwab and Johnston arrived in New York on November 20th the press wanted to know why he had gone to England. He put them off with a story about getting a loan for a project in Chile. But weeks later reports of the submarines appeared in the press. There followed a telephone call to Schwab from Secretary of State William Jennings Bryan asking for a meeting. Bryan was clear. President Woodrow Wilson would not allow any submarines to be shipped to England. But building the submarines, however, would be ok if they were not shipped. With that wiggle room advice in his head Schwab, went to Montreal, Canada. He found a British-owned shipyard called Vickers there that would be an ideal place to assemble the submarines. The problem was he could not do that on his own and needed British help. In December both Schwab and Johnson boarded the Cunard line’s Lusitania and returned to London.
Here, they found a furious Churchill. Pacing the floor and puffing on his cigar, the First Sea Lord of the Admiralty was smoking like one of his dreadnoughts preparing for battle. Having heard of Bryan’s and Wilson’s objection, he accused Schwab of lying to them. Think of all the time wasted. Now the whole project was blocked. Finally, Fisher intervened. “Schwab, what have you got to say?” he asked. It was then that the steelmaker told them of his plans to build the ships in America and send them to Canada. But he needed their help in getting a place to put them together. Could he have Vickers? With that Fisher sighed with relief. He would personally see that Vickers property was given to Schwab. “Start back at once and take the shipyard!” advised Fisher. On their return to America on the White Star liner Adriatic, Schwab sent his two top submarine engineers to Vickers. Secretly American shipyard workers were also sent to Canada for the assembly of the submarines. All the former Vickers employees were laid off and paid off.
By the summer of 1915 the submarines were at sea defending Britain. Ironically, some were sent to the Turkish coast to participate in the ill-fated Gallipoli campaign disaster in 1916 that was championed by Churchill would eventually torpedo his career at the Admiralty. The Kaiser was so impressed by Bethlehem Steel’s work for his enemy he sent his ambassador to Schwab, offering $100,000,000 for Bethlehem Steel. He turned them down cold. When the British made an offer of $150,000,000, Schwab turned them down as well. “There is not enough money in Germany or Great Britain combined to buy the Bethlehem Steel Corporation,” were his final words on the subject.
Schwab’s reluctance is understandable. Bethlehem Steel was making a fortune on the war. He was not about to give that up. Along with gaining Churchill’s later long-term friendship, Schwab also showed his gratitude to Admiral Jellicoe, later a war hero for his defeat of the German fleet at the battle of Jutland in 1916. In January 1920 when Jellicoe was visiting Canada, Schwab sent his private railroad car the Loretto to take him to New York. Walking on to the floor of the New York Stock Exchange with Schwab, Jellicoe was quickly surrounded by cheering brokers who rushed to shake his hand. Later they went down to the Brooklyn Navy Yard for a tour of the battleship USS Arizona, built by Bethlehem Steel, which happened to be in port at the time.
That evening Jellicoe was the guest of honor for a formal dinner at Schwab’s Riverside mansion. It included the U.S. Navy top brass and the Assistant Secretary of the Navy, a young fellow named Franklin Delano Roosevelt.