The De Luxe War Baby
From Pigs to Pig Iron!
Fontana Steel Will Build a New World!
Kaiser Slogans, 1940s[30]
In that Indian summer before Pearl Harbor, Fontana's destiny seemed fixed forever on hogs, eggs, and citrus. While locals debated the hot prospects in the annual "Hen Derby" or fretted over rising mortality on "Death Alley" (Valley Boulevard), Fontana Farms publicists were boasting that the 1940 Census "Proves Fontana, Top Agricultural Community in the United States!"[31] A. B. Miller, now in partnership with giant Swift and Company, waxed more powerful than ever in state agribusiness circles and conservative Inland Empire politics. Then, with chilling punctuality, death struck down Fontana's founders: Miller (April 1941), followed within months by leading businessman Charles Hoffman, water system founder William Stale, and Fontana Farms Citrus Director J. A. McGregor.[32]
With the passing of the pioneer generation, and the growing awareness that California would soon become the staging ground for a vast Pacific war, boosters in spring 1941 began a xenophobic promotion of Fontana as an ideal location for war industry. Miller's Fontana Farms successor, R. E. Boyle, joined local supervisor C. E. Grier and congressman Henry Sheppard in cajoling Fontanans into accepting that their "patriotic duty . . . based on real American principles" was to create the new "Partnership of Agriculture and [War] Industry."[33] But six months of aggressive advertising and patriotic bombast yielded not a single munitions plant or aircraft factory. Instead, the hysteria that followed Pearl Harbor, when Japanese aircraft were daily "sighted" over Long Beach and Hollywood, prompted a sudden rush for "safe," inland residences. In the early weeks of 1942 Fontana Farms was selling two ranches per day to anxious refugees from Los Angeles.[34] Even supervisor Grier, chief advocate of the military industrialization of the Inland Empire, was forced to admit that Fontana would
contribute "in great measure to winning the war by the productivity of its poultry."[35] Then came the great bolt from Kaiser headquarters in Oakland.[36]
Prevented from building at tidewater, Kaiser was attracted to Fontana for two different reasons. On the one hand, his engineers and their military counterparts added up the ready-made advantages of Miller's infra-structural investments: cheap power from Lytle Creek (now augmented by Boulder Dam), excellent rail connections near two major railyards (San Bernardino and Colton), and, most important in a semi-desert, an autonomous, low-cost water supply.[37] The weak claims of local government over the unincorporated Fontana area were also considered an asset. San Bernardino was a "poor rural county" with an unusually large relief load, and Kaiser clearly preferred to deal with, and if necessary overawe and intimidate, its unsophisticated officials, desperate for any type of industrial investment, than face more powerful and self-confident public bureaucracies elsewhere.
On the other hand, Kaiser was personally captivated by Miller's utopia. As in Richmond, he placed social engineering on par with the priorities of production engineering, figuring that hens and citrus might mitigate the class struggle.
He saw advantages to building in a rural community. Workers at the steel mill had the opportunity to raise chickens on the side or plant gardens. Kaiser believed these "hobby farms" created a more relaxed atmosphere and the workers would be more content. It was something that could not be found in the Eastern steel towns [and, therefore, a comparative advantage].[38]
On the first anniversary of A. B. Miller's interment, Kaiser broke ground on a former Miller ranch a few miles west of Fontana township, his bulldozers literally chasing the hogs away.[39] Under the supervision of veterans of Grand Coulee and Richmond, the construction shock-brigades made breathtaking progress. By 30 December 1942 the acrid smell of coke hung over the citrus groves, and, as local radio announcer Chet Huntley officiated, Mrs. Henry J. Kaiser threw the switch that fired the giant, 1,200-ton blast furnace named in her honor ("Big Bess"). An even more elaborate ceremony in May 1943 celebrated the tapping of the first steel. Surrounded by Hollywood stars and top military brass, Kaiser—with typical bravado—announced that Fontana was the beginning of the "Pacific Era" and "a great industrial empire for the West." Fleets of diesel trucks began the long shuttle of Fontana-made plate to the steel-hungry shipyards of Richmond and San Pedro.[40]
The vast, mile-square plant—Southern California's "de luxe war baby"[41] —seemed to erupt out of the earth before Fontanans had a chance
to weigh the impact on their small rural society. Perhaps because of the rapidity of the transition, or because of patriotic consensus, there was no recorded protest against the plant construction. Kaiser spokesmen reassured residents that the plant "could be erected in the middle of an orange grove and operated continuously without the slightest damage to trees."[42] By the end of the first year, however, disturbing evidence to the contrary had become obvious. The coking coal first employed at Fontana had high sulfur content, producing acidic vapors that withered saplings and burnt the leaves off trees. Ranchers across from the mill picked grapefruit from their trees for the last time in the fall of 1942.[43] This was the beginning of the end of Miller's Eden, as well as the start of a regional pollution problem of major proportions.
While Fontanans were watching their trees die, Kaiser was shattering the illusion of starry-eyed San Bernardino County supervisors that the plant would be an enormous tax windfall. Assessed at normal rates in July 1943, the Company rejected the County's bill out of hand, warning that they "might be forced to close the plant." Although reporters scoffed at the obviously absurd threat to shutter the brand-new, $110 million mill, overawed supervisors obediently reduced the assessment to a small fraction of the original.[44] Their concession set a precedent that allowed Kaiser officials to protest any prospective tax increase as undercutting the economic viability of the plant. As a result, San Bernardino County saw its major potential tax resource evolve into a net tax liability (a fact that helps explain official apathy to the plant's closure a generation later).
As the experts had foreseen, the major difficulty in producing steel in Fontana was the organization of raw material supply. Kaiser could purchase limestone and dolomite flux from local quarries, but it had no alternative but to develop its own network of captive mines to source iron and coal. Although geologists reassured Kaiser that the nearby Mojave Desert contained enough iron ore within a three-hundred-mile radius to supply the plant for several centuries, exploitation of the richest deposits required costly investments in rail-laying and mining technology. Initially Fontana was supplied with ore from the Vulcan Mine near Kelso; after the war, the company developed the great Eagle Mountain complex in Riverside County with its own rail line and mining workforce of 500. Coking coal—the most difficult supply variable—had to be imported 800 miles from Price, Utah (in 1960 Kaiser Fontana switched to new mines in New Mexico). Overall, Fontana was refining low-cost iron ore with the nation's highest-cost coal, an equation that left its furnace costs well above other integrated mills (including US Steel's coalfield plant in Utah).[45]
Despite the burden of these supply costs, Kaiser by 1944 was making steel more efficiently than anyone had expected, to build ships in greater tonnage than anyone had dreamt possible. He was also smelting aluminum, assembling bombers, mixing concrete, even producing the incendiary "goop" with which the Army Air Corps was systematically immolating Tokyo and Osaka. At the pinnacle of his popularity, he was widely rumored to be Roosevelt's favorite choice for a fourth-term running-mate. Meanwhile, his alliance with the New Deal had catapulted the Kaiser companies to the top ranks of privately owned firms, and, unlike the California aircraft industry, his operations were totally independent of Wall Street and Eastern banks. (When he was not borrowing government money, his old ally Giannini made available the Bank of America's largest single line of credit.)[46] Buoyed by the successes of his shipyards and steel and aluminum mills, Kaiser surveyed a bold, coordinated expansion into postwar markets for medical care, appliances, housing, aircraft, and automobiles. In his wartime speeches, Kaiser was fond of adding a fifth "freedom" to Roosevelt's original four: "the freedom of abundance."[47]
He recognized, with singular prescience, that the conjuncture of rising union power (which he supported) and wartime productivity advances was finally going to unleash the mass consumer revolution that the New Deal had long promised. He also calculated that the pent-up demand for housing and cars, fueled by the fantastic volume of wartime forced savings, created an explosive market situation in which independent entrepreneurs like himself might find the opportunity of the century to compete with the Fortune 500. Everything depended on the speed of reconversion/retooling and the ability to offer the kind of streamlined products that Americans had been dreaming about since the 1939 New York World's Fair.
With characteristic hubris, Henry J. attempted to expand into all markets simultaneously. His venture into experimental aviation was short-lived, when he abandoned to the obsessive Howard Hughes the further development of their prototype super-transport, the notorious "Spruce Goose."[48] In the field of mass-produced housing, on the other hand, Kaiser had substantial success. For two decades he had been building homes for his dam and shipyard workers, even master-planning entire communities. He had also been discussing the national housing crisis with such seminal thinkers as Norman Bel Geddes, the designer of the famous Futurama exhibit at the 1939 World's Fair. Shortly after V-J Day Kaiser dramatically announced a "housing revolution": "America's answer to the so-called accomplishments of Communists and Fascists." Creating "a nearly 100 mile plant-to-site assembly line" in Southern California (where he predicted
that immigration would reach a million per year in the immediate postwar period), he launched construction of ten thousand prefabricated homes in the Westchester, North Hollywood, and Panorama City areas. Defying an acute shortage of ordinary building materiel, Kaiser engineers innovated with fiberglass board, steel, aluminum siding, and sheet gypsum, while "applying Richmond methods" to train armies of construction workers whom Kaiser promptly unionized.[49]
But Kaiser Homes, however important in demonstrating the feasibility of postwar "merchant homebuilding," were only a sideshow for their master. Henry J.'s real ambition was to challenge the Eastern corporate establishment on its own turf. Unfortunately, he chose to fight Detroit and Pittsburgh at the same time. "Tilting at the most dangerous and dramatic of American windmills,"[50] he launched Kaiser-Frazer Motors in a giant re-converted bomber plant in Willow Run, Michigan. Simultaneously, he brought Fontana steel into direct competition with Big Steel for control of Western markets.
Only one capitalist from the West had ever attempted such a brazen invasion of the East: Giannini in the late 1920s. For the impudence of staking a seat on Wall Street, Giannini was temporarily deposed in his own house, as J. P. Morgan mounted a retaliatory raid on Transamerica, the Giannini bank holding company.[51] (As a Morgan director told Giannini: "Right or wrong, you do as you're told down here.")[52] It was poetic justice, therefore, that Giannini was allied to Kaiser's postwar schemes, introducing him to Joseph Frazer, the rebel Detroit capitalist, as well as supporting the campaign to refinance Fontana steel.
The "debacle" of Kaiser-Frazer has been recently retold in Mark Foster's scholarly biography of Henry J. Fearing postwar layoffs as well as an anti-union backlash by the major automakers, the United Auto Workers had begged Kaiser to convert the Willow Run assembly lines (scheduled for closure after V-J Day) to auto production. Teamed up with Frazer, the former head of Willys-Overland, and cheered on by the unions, Kaiser and his engineers tried to duplicate the miracle of Richmond. Within a year of taking over Willow Run, they had built 100,000 cars and recruited an impressive national network of dealerships. The 1947 Kaiser-Frazer shock wave rattled nerves in the executive suites of Dearborn Park and the Chrysler Building. But, endemically undercapitalized in the face of the auto majors' billion-dollar plant expansions and model changes, the new company sank deep into the red. In the meantime Giannini had died, Wall Street had boycotted Kaiser's offerings, and Frazer had resigned. After the failure of a last-ditch remodeling in 1954-55, Willow Run was sold off to
General Motors and the dies were shipped to South America, where Kaiser-body cars were still being assembled as late as the 1970s. Although Kaiser continued for another decade to build Jeeps at his Willys-Overland subsidiary in Toledo, the Western invasion of Detroit was over.[53]
Fontana, by contrast, was an untrammeled success, despite bitter opposition from Big Steel and financial problems comparable to Kaiser-Frazer's. In the immediate reconversion period of steel shortages and turbulent industrial relations (1945-46), Kaiser's friendship with the CIO exempted Fontana from the bitter national steel strike. Expanding into new product markets, especially construction, Kaiser Steel strained at capacity during the steel drought, even briefly exporting to Europe. But, once the steel strike was settled and capacity had begun to adjust to demand, Fontana's inherent logistical and financial problems seemed to signal doom.[54]
Fortunately, Kaiser metallurgists produced the kind of technical breakthrough at Fontana that eluded the design teams at Willow Run. Just as Henry J. had brashly promised, his engineers offset their high coal costs by radically reducing coke loads and increasing blast furnace efficiency. Similarly at Eagle Mountain, Kaiser mining engineers pioneered new economies in ore extraction, reducing their iron costs even further below Eastern averages. By the mid 1950s Fontana was an international benchmark of advanced steelmaking, keenly studied by steelmasters from Japan and other high raw-material-cost countries.[55]
A more intractable problem was repaying the Reconstruction Finance Corporation (RFC) loan that had built Fontana. With Congress recaptured by the Republicans in 1946, and his New Deal allies leaving the Truman Administration in droves, Kaiser was politically isolated. Under fire in Congress for alleged profiteering on his wartime shipbuilding contracts (a calumny, he charged, that was spread by his Eastern corporate enemies), he was unable to persuade the RFC to discount or refinance any of his 1942 loan. Despite liberal support (the New Republic denounced the RFC for betraying the West's "attempts to build its own steel mills and free itself from control by the East"), and innumerable resolutions from chambers of commerce, Kaiser had exhausted his political IOUs. To rub salt in his wounds, the War Assets Administration auctioned the Geneva, Utah, mill to US Steel (the lowest bidder) for a mere twenty-five cents on the dollar of its cost.[56]
If steel demand had softened at this precarious point, Fontana might have floundered. Instead a big transcontinental gas pipeline deal provided
Kaiser Steel with invaluable collateral, while the sudden outbreak of the Korean War revived the West Coast shipbuilding industry. Following the advice of the Giannini family (who also extended Fontana's credit), Kaiser made his steel operations public. The Los Angeles business elite, led by Times heir Norman Chandler (who became a Kaiser Steel director) and old friend John McCone, rallied to the initial stock offering, allowing Henry J. to retire the RFC loan in 1950.[57]
With increased access to private capital, and with a Southern California market booming beyond all expectations, Kaiser Steel expanded and diversified. Two postwar expansions added a second blast furnace as well as new tinplate, strip, and pipe mills; a revolutionary pellatizing plant was installed at Eagle Mountain; and in 1959 Governor Brown joined Henry J. for the dedication of a state-of-the-art basic oxygen furnace. With a work-force of eight thousand, and plans on the drawing board for doubling capacity, Kaiser Steel was a national midget, but a regional giant. In 1962, in a move that "was a big step in the direction of eliminating that historic phrase 'prices slightly higher west of the Rockies,'" Kaiser Steel sharply reduced its prices. Eastern steel was virtually driven from the market, leaving Fontana, together with US Steel at Geneva, to co-monopolize the Pacific Slope.[58]
Equally reassuring, Kaiser Steel seemed to continue in the forefront of enlightened industrial relations. Although, unlike in 1946, Fontana was closed down during the long 1959 steel strike, it broke ranks with Big Steel to embrace the United Steel Workers' proposals for a gains-sharing plan to integrate technological change into the collective bargaining framework. First a tripartite committee, with a public member, was established to study conflicts between local work rules and the introduction of automation. Then in 1963 the company and union, with considerable ceremony, formalized the landmark Long Range Sharing Plan (loosely based on the so-called "Scanlon plan"), whose complex formulae and provisions were supposed to fairly compensate workers for accepting rapid productivity advance. The Plan, whose original backers had included the elite of academic industrial relations specialists and two future Secretaries of Labor (Goldberg and Dunlop), became the Kennedy Administration's prototype for New Frontier-era collective bargaining and was soon cited as such in every industrial relations textbook.[59]
This was the golden age of Kaiser Steel, Fontana—flagship of the West's postwar smokestack economy. Neither the captain on the deck nor the crew below could see the economic icebergs ahead.