The first article of the three-part series on the Hanna industrial complex (see NACLA Newsletter, May-June 1968) described how Hanna Mining Company, as the result of the coup overthrowing Goulart in 1964, acquired control over the worlds richest iron ore deposit in the state of Minas Gerais, Brazil. The success of Hanna Mining Co. in gaining this concession to develop the lucrative mineral deposit is one illustration of how the locus of political-economic decisions on the use of Brazilian resources shifted decisively from Brazil to the United States after the coup. A crucial question therefore becomes who specifically are the ultimate beneficiaries of such a shift - who, that is, are the U.S. citizens who are making the decisions which so definitely affect the development of the Brazilian economy. This article will attempt to answer this question in part by examining the powerful Cleveland-based industrial complex of which Hanna Mining Co. is the nucleus, and the men who control and reap, through their Large stockholdings, great profits from its operations.
The chart on page 6 focuses upon the four family dynasties (the Hannas, Humphreys, Weirs and Loves) which form the crux of what the business press calls the "Humphrey Establishment." The founder of the Hanna family dynasty, Marcus Alonzo Hanna, while a Republican senator from Ohio, engineered McKinley's rise to prominence in the Republican Party and secured his nomination for the president in 1896. In 1885, M.A. Hanna founded and gave his name to the precursor of the Hanna Mining Company - M.A. Hanna Company* - a small family holding concern composed of iron ore mines in the Mesabi Range (Michigan), Great Lakes shipping fleets and Pennsylvania coal mines.
The descendants of M.A. Hanna and their spouses retain large interests in Hanna Mining Company and hold several seats on its board (see chart), but are not its major policy makers. Rather, the key architect of the industrial empire which grew out of the original company was George M. Humphrey, who joined the firm a a partner in 1920 after serving as its counsel for two years. Humphrey was the key strategist in reorganizing the firm into a public corporation in 1927 after it had suffered severe losses. With the new influx of capital from the stock flotation, Humphrey (as president, 1929-52 and as board chairman, 1958-61) carried out an aggressive policy of expansion, through mergers, and streamlining, by unloading unprofitable assets.
Using Hanna iron ore and coal properties as a base, Humphrey also organized what has become the fifth largest U.S. steel company, National Steel (which supplies 7.3% of the market), and the largest U.S. soft coal company, Consolidation Coal (which supplies 10% of the market). Hanna Mining Company has retained controlling interests in both concerns, owning 22% of National Steel's and 19% of Consolidation Coal's common stocks.
National Steel was formed in 1929 by consolidating several Hanna iron ore properties with Weirton Steel of West Virginia and Great lakes Steel of Detroit. All three firms combined assets to resist forced incorporation into the large steel trusts controlled by Wall Street finance - Bethlehem Steel (Rockefeller controlled) and U.S. Steel (Morgan controlled). Hanna, as one of the few remaining independent iron ore producers, needed Weirton and Great Lakes steel works as guaranteed markets for its ore. Similarly, the two steel companies needed a reliable source of iron ore supply because most previously independent iron ore mines were now under tho control of its steel competitors.
The Great lakes Steel plant in Detroit - the only one there at the tine - assured National Steel access to one of the most rapidly developing steel markets which the ossified steel giants tended to overlook - the automobile industry. National Steel geared its product specifically to the needs of automobile manufacturers, specializing in the light, flat-rolled sheets which provided the main structural component of autos (and tin cans). In so doing, the company avoided the profit losses suffered during the Depression by the steel giants because of their dependence on the heavy steel products needed by the most slumped industries of all - railroads, shipyards and construction.
The deal arranged by G.M. Humphrey gave Ernest T. Weir, Weirton Steel's founder and head, a 50% interest in the new company (National Steel) as well as the position of board chairman. E.T. Weir, the archetype of the rugged individualist, was famous for his contemptuous resistance to the attempts by U.S. Steel to buy him out and for his ruthlessness in preventing the unionization of his workers.2 George R. Fink, founder and head of Great lakes Steel, received 25% of the stock and assumed National's presidency. M.A. Hanna acquired the remaining 25% of the stock and Humphrey placed himself in the office of executive committee chairman while remaining president at Hanna. In later years, as the company's ownership broadened through new stock flotations, Hanna's interest became dominant.
Both the Weir and Humphrey families continue to occupy the top executive positions of National Steel. E.T. Weir remained board chairman until 1957 when Humphrey, returning from his post as Eisenhower's Secretary of the Treasury, replaced him. When Humphrey retired in 1961, T.E. Millsop, Weir's chief associate and husband of Weir's brother's widow, took over the position. The current president is George A. Simpson, Millsop's son-in-law who, before his marriage, was a partner in the prestigious Wall Street firm, Cleary, Gottlieb, Steen and Hamilton.
George M. Humphrey formed Consolidation Coal, the giant of the U.S. coal industry, by merging M.A. Hanna's coal mine into potentially profitable coal companies that were running at a loss. His shrewd merger strategy created a highly efficient profit-maker out of a depressed industry fragmented into inefficient and unprofitable family companies. The first of the three major mergers which resulted in the present company, took place in 1929 between one of Hanna's mines and a bordering mine owned by the Love family firm, Union Collieries. Neither mine as making a profit so Frank Love, head of Union Collieries, and his nephew George Love, proposed a joint operation to Humphrey. Humphrey arranged for M.A. Hanna to turn over its mine to the Loves in exchange for an equity interest in Union Collieries and a seat on Union's board which Humphrey himself filled.
The second merger took place in 1942 when National City Bank (a predecessor of First National City Bank of New York) offered M.A. Hanna a large bloc of stock in one of the two major coal producers of that time: Consolidation Coal, a company with extensive holdings in the rich Fairmont coal fields of West Virginia. The stock held in National City's trust department formerly belonged to the Rockefellers who disposed of it at a large loss. With the purchase, Hanna gained a controlling interest in the company and placed its own men in top executive positions. Humphrey himself assumed the chairmanship in 1947, while George Love served as executive vice-president. Love subsequently merged his Union Collieries into Consolidation Coal, thus thoroughly intertwining the Love family fortunes with those of Hanna.
George Love rose to the presidency of Consolidation Coal in 1945, after successfully engineering the third merger - with the Mellon-owned Pittsburgh Coal Company, the second of the two largest U.S. producers. The merger brought Hanna interests into close alliance with those of the Mellons. Such is clear from the numerous interlocks between the companies they control. The Mellons have at least three representatives on the boards of Hanna-controlled companies, two of whom represent their holdings in Consolidation Coal:
George W Wyckoff, a director of Gulf Oil and ALCOA (both Mellon-controlled) and Mellon National Bank and Trust Co., sits on the boards of Hanna Mining Co. and Consolidation Coal;
N.W. Pearson, a vice-president and governor of T. Mellon & Sons, sits on the board of Hanna Mining Company;
A.B. van Buskirk, a director of the Koppers Co. (Mellon-controlled) and a vice-president and governor of T. Mellon & Sons, sits on the board of Consolidation Coal.
George Love likewise acts as the main spokesman for Hanna interests to the Mellons through his directorship of Mellon National Bank and Trust Company.
The Hanna-Mellon alliance is further cemented by other business ties. The Mellon National Bank and Trust Co., for instance, owns a small interest (.786%) in the Hanna-dominated National City Bank of Cleveland. And recently, Hanna Mining Co. and ALCOA have incorporated a joint venture to develop a high grade bauxite deposit in Minas Gerais, Brazil.
As president of Consolidation Coal, George Love revitalized the depressed industry by mechanizing mines on an unprecedented scale, introducing in particular the efficient strip shovel which leveled whole mountains at less cost than hauling coal from underground. In so doing, Love demonstrated that coal mining was again a profitable investment for large companies with enough capital to automate. But he did so at terrible cost by turning acres of beautiful country into heaps of dirt and impoverishing thousands of workers by putting them out of jobs.
George Love used the large cash reserves generated by twenty years of Consolidation Coal profits to acquire a controlling interest in the third largest automobile company in the United States - Chrysler Corporation. He was able to do so because the market value of Chrysler stock had plummeted to an all-time low as a result of a management crisis precipitated by two events: 1) the drop in Chrysler's share of the automobile market from 27% in 1950 to 9.4% in 1962; and 2) a 1960 stockholder's suit against president Newburg, accusing him of illegally profiting from his interest in a major supplier of Chrysler parts.
Love, who was serving as a director of National Steel, Chrysler's major steel supplier (which provides up to 40% of its needs), Joined the Chrysler board in 1958. During the management crisis, Love emerged as the strong man on the board. He took charge of selecting a new president, Lynn Townsend, and of reorganizing the company so that it could regain its traditional share of the automobile market. Love left day-to-day company operations to Townsend but, as chairman of the board,3 made all major policy and financial decisions. Love's policies were so successful in restoring investor confidence that the market value of Chrysler stock soared. Consolidation Coal realized a paper profit of $114 million on the block of Chrysler stock it acquired between 1958 and 1965. The stock for which it had payed $87 million was, as of 1965, worth $201 million.
In 1965, Consolidation Coal tunned the financial world by announcing a forthcoming merger with Continental Oil.4 According to the announcement, Consolidation Coal agreed to exchange the bulk of its mining properties for 2 million shares of Continental Oil stock to be distributed among its stockholders - that is, primarily among the members of the Humphrey Establishment who hold a majority of Consolidation Coal shares. This block of Continental Oil stock exchanged for Consolidation Coal properties constitutes a significant enough percentage (5%) of all outstanding shares to assure Hanna interests a prominent voice in policymaking and at least one seat on Continental's board (filled in 1966 by George Love). The merger deal does not include the transference of Consolidation Coal's holdings of Chrysler stock to Continental Oil's portfolio. These shares will be distributed among Consolidation Coal stockholders (again, members of the Humphrey Establishment), thus assuring them continued control of Chrysler.
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* M.A. Hanna Co. became Hanna Mining as the result of corporate reorganizations in 1960 and 1965. In 1960, M.A. Hanna Company divided its assets into two new companies: 1) a closed-end investment company (the nations largest) - M.A. Hanna Co. - which acquired Hanna's securities portfolio; and 2) an operating company controlled by the investment company - Hanna Mining Company -- which took over Hanna's mining and shipping properties. The reorganization of Hanna's assets into two separate companies failed, however, to achieve its objective. The new M.A. Hanna Company was unable, as the Humphreys had hoped, to qualify for the tax advantages by the Investment Company Act because over half its securities were invested in companies it controlled. In 1965, therefore, the Humphreys liquidated M.A. Hanna and reconsolidated its portfolio with the operating properties of Hanna Mining to form the present company.
2 Weirton Steel, now a division of National Steel, is to this day one of the few steel plants not organized by the AFL-CIO.
3 While board chairman of both Consolidation Coal and Chrysler, Love was the only major U.S. businessman to chair two major companies in widely separated fields.
4 The cause of the startling merger of such a good profitmaker lies in the development of a technology which promises, in the near future, to transform coal into oil at commercially feasible costs.
NOTE: There is no ascertainable relationship between George Humphrey and the Hubert Humphrey family. **** * *** ***** The third installment of this three-part series will show how the Hanna industrial complex (the Humphrey Establishment) functions as an important financial base of Midwestern Republican politics. It will further show how the political connections of the Humphreys were crucial in securing Hanna's control over Brazil's major iron ore reserves.
Aside from Who's, Who, Poor's Register of Corporations, Directors and Executives, Moody's Industrial Manual, Current Biography and annual reports of corporations, the following provided most of the documentation for the above article:
The Basie Papers of George M Humphrey, 1953-57, Western Reserve Historical Society, Cleveland, Ohio. Business Week, June 2, 1957, "Humphrey Back in Steel". May 31, 1958, "Humphrey Gets Back at the Company Helm". October 14, 1961, "M.A. Hanna Recasts its Shape". January 2, 1962, "Ore Leader Looks Overseas to Grow". October 16, 1965, "Consol, Hanna Selloffs Stun Street". February 3, 1968, "National Puts on its own Stamp". Forbes, November 1, 1965, "Where do the Humphreys go from Here?". Forbes, July 15, 1966, "National Steel". Fortune, October 1957, "Millsop of National Steel". " January 1958, "Moore of Bankers Trust". September 1962, "Coal Man at Chrysler". Nations Business, January 1967, "Uniting for Strength". New York Times dispatches for Nov. 24, 1965, Dec. 10, 1967 and Sept. 13, 1967. Public Utilities Fortnightly, Oct. 13, 1966, "Coal and Oil Unite on New Energy Approach". Time, July 5, 1963, "Corporations, Coal Cars and Love".
