_The following dispatch from Washington, dated June 8, 1915, appeared
in The Chicago Herald:_
President Wilson and his Cabinet considered today the known fact that
German interests, reported backed by the German Government, are
negotiating for the purchase of the great gun and munition of war
plants in this country.
Secretary McAdoo of the Treasury laid the matter before the Cabinet.
He had information from Secret Service agents of the Government who
have been following these German activities for some weeks. It is
reported today, confirming The Herald dispatch of last night, that the
plants for which negotiations are on include that of Charles M. Schwab
at Bethlehem, Penn.; the Remington small arms works at Hartford,
Conn., and the Cramp works at Philadelphia, which, it is said, Schwab
is about to acquire; the Metallic Cartridge Company, the Remington
Company, and other munition and small arms works.
Included in the Schwab plant holdings are the Fore River Shipbuilding
Company, Massachusetts, and the Union Iron Works, San Francisco, where
it is reported parts of submarines are being made for English
contract, shipment being made through Canada.
This new move of the Germans involves the outlay of hundreds of
millions, a gigantic financial operation in the face of war needs and
conditions. It is one of the most sensational developments of the
present conflict in connection with the United States. Its
consummation inevitably would lead this country into serious
disagreement, if not conflict, with Great Britain and the Allies.
The latter will demand the fulfillment of their contracts with these
concerns. The German move is to prevent this delivery of munitions of
war. With the consummation of the purchases, the German owners could
refuse to fill these contracts. They will not fear suits for broken
contracts.
The whole matter is fraught with such possibilities of danger to this
country that Attorney General Gregory and the experts of the
Department of Justice have taken up the question with a view to
interposing legal obstacles. It may become necessary, it was suggested
today, to prevent such a sale on the grounds of public welfare because
of strained relations with Germany.
Secretary McAdoo will not disclose who are the agents for the German
interests seeking to purchase the munitions plants, or who are the
financial backers. The Secret Service men are believed to know these
details, having been on the investigation for three weeks. Rich
Germans in the United States are believed to be interested.
Charles M. Schwab, head of the Bethlehem Company, came here two weeks
ago in response to an urgent summons. He saw Secretary McAdoo,
Secretary Daniels, and other officials. At that time it was given out
that he was conferring as to details of supplies to be furnished this
Government under contracts for new warship construction about to be
awarded. It is now understood that Secretary McAdoo sought information
as to the negotiations under way at that time for the purchase of the
munitions plants in this country by the German interests.
The report of Secretary McAdoo today stirred the Cabinet as deeply
almost as the resignation of Secretary of State Bryan. Complete
reports were asked and the Secret Service arm of the Government will
be required to furnish immediately more complete and detailed
information.
_Of the efforts to obtain control of the munitions companies, The
Providence Journal of June 9, 1915, reported:_
Acting under the personal instructions of the German Ambassador,
several German bankers of New York have been working together for the
last week on preliminary negotiations for the purchase of every large
plant they can lay their hands on which is now engaged in turning out
munitions of war for the Allies.
Count von Bernstorff, Dr. Dernburg, and two well-known German bankers
held a conference at the German Embassy in Washington on Tuesday, June
1. At that conference the Ambassador outlined in detail instructions
he had received the day before from Berlin to proceed with this
propaganda, and he declared to the three men there present that his
Government considered the success of the plan as of vital importance,
superseding every other phase of the war situation.
The bankers at once returned to New York, and at a meeting next day
with Captain Boy-Ed and several other men at the German Club outlined
their plan of campaign.
For months past the German Ambassador has been in possession of a list
of factories all over the country engaged in turning out munitions of
war for the Allies. Last Saturday a concerted movement was begun
toward securing a majority control of many of these plants.
When one of the bankers at the conference in Washington asked the
Ambassador if he had any conception of the magnitude of the financial
problems involved in the scheme he replied that his Government was
fully prepared to pay everything necessary, and repeated that the fate
of the empire might rest on the success or failure of the plan. He
then added these words:
"There is no limit, gentlemen, to the amount of money available."
The activities of the representatives of Count von Bernstorff in this
matter have already brought them up to the point of negotiation, or
attempted negotiation, with the Fore River Shipbuilding Company, the
Remington Arms Company, the Bethlehem Steel Company, and the Union
Metallic Cartridge Company.
Government officials, when notified of this new propaganda yesterday,
were a unit in declaring it was impossible to believe that such a
scheme could be carried through successfully. In the first place, they
pointed out that activity of this kind would be a direct violation of
the Sherman act, and, secondly, a case of conspiracy would lie against
individuals attempting such a movement for wholesale violation of
contracts, which would become necessary in order to carry the plan to
its successful conclusion.
The moment the German agents in New York began to disclose their
purpose, several cunning individuals who have had some slight
connection with the contracts for supplying the Allies with various
materials have deliberately put themselves in the path of these agents
under the pretext that they already had contracts, or were about to be
given contracts, and have already mulcted the German Government of
many thousands of dollars.
In two specific cases men have talked of having contracts for picric
acid--the manufacture of which necessitates the most skilled training,
with most expensive and complicated machinery, and which is only being
attempted in four places in this country, and were promptly paid off,
on their pledge that they would violate these alleged agreements. One
of these deals was made in the Waldorf-Astoria Hotel last Saturday.
Another case, which is fully authenticated, is that of a Western
dealer in horses, who delivered 1,500 horses to the port of New
Orleans for the British Government last January. As soon as he
ascertained what the German agents were doing, he produced his receipt
for delivery of his first and only order, and declared he was now
searching for 5,000 horses, in addition, for the British Government.
On his pledge to abandon this search, he was given $2,500 by German
agents.
The keen anxiety of the German Government, acting through the embassy
in Washington, to deprive the Allies of any shipments of war materials
that they can possibly stop is based on the result of calculations
made in Berlin and forwarded to this country two weeks ago, which
profess to show that the Allies cannot possibly arm their increasing
forces or secure ammunition for their great numbers of large guns from
their own resources, and that they must have the help of this country
in order to accomplish their purpose. The German representatives also
thoroughly believe that without this assistance the Allies cannot
continue and complete an aggressive campaign, driving the Kaiser's
armies out of Belgium and France.
_In_ THE NEW YORK TIMES _of June 9, 1915, appeared the following
statement of counter-negotiations to checkmate the German operators in
America:_
Negotiations for the purchase of arms and ammunition manufactories in
this country have been under way for some little time, it is asserted,
but so quietly have they been conducted that no hint of them became
public until yesterday. Yet, coincident with their disclosure, came
yesterday, also, announcement of a contract for the manufacture for
the Allies of shrapnel and high explosive shells on the greatest scale
yet undertaken by an American corporation, which revealed as could
nothing else how carefully these supposedly secret dealings had been
discovered, watched, and checkmated by the Allies.
This contract, all but the smallest details of which are said to be
settled, is to be taken by the General Electric Company, directors of
which admitted that the total involved would be at least $100,000,000
and might run far in excess of this figure. In fact, the order was
spoken of as limited more by the capacity of the General Electric's
plants than by any restricting order of the Allies.
The significance of this contract does not lie wholly, or even
chiefly, in its size, for the American Locomotive Company recently
closed a $65,000,000 contract with the Allies for shells. What is
considered of especial note is that less than a week ago an official
of the General Electric stated emphatically that his company had not
taken any orders and was not negotiating for any despite the fact that
for some time a proposal to specialize in war orders had been under
consideration. Less than a week ago the company had reached a negative
decision and less than a week ago there was no reason to suppose that
it would rescind this decision.
J.P. Morgan & Co., fiscal agents for Great Britain and France in the
matter of war supplies, then entered the field. Charles Steele, a
partner in the banking house, is a Director of the General Electric
Company and negotiations went forward rapidly. These were conducted
with a secrecy which exceeded that even of the German interests with
the other arms and ammunition companies, but there are several factors
which, it is known, were of prime importance in effecting the General
Electric's change of policy.
In the past much valuable time has been lost in the distribution of
orders among a score or so of concerns which have had facilities for
making shells, ordnance, and so forth. Competitive bidding for parts
of contracts has held back the finished product and successful bidders
have frequently been handicapped by inability to obtain necessary
machinery.
Now plans for accelerating manufacture in all war lines have been
launched by David Lloyd George, the new British Minister of Munitions,
and in the shadow of his influence J.P. Morgan & Co. have practically
brought to a conclusion plans to centre future war orders in a few
great companies, with the General Electric Company as the dominant
unit.
The extent to which the banking house used its tremendous influence is
problematical, but it is history that Mr. Lloyd George has been
bringing all pressure to bear to increase England's supplies, and with
them the supplies of the remaining allies, since British purchasing
agents are, to a large extent, looking after the interests of France
and Russia, and it may be inferred that the Morgan firm has been as
active as possible in carrying out the wishes of the European nations.
Persons in touch with the progress being made in war orders state that
the British authorities have become greatly concerned over their
supplies of ammunition at hand and in process of manufacture. While
orders aggregating many hundreds of millions of dollars have been
placed in this country and Canada, deliveries have been disappointing.
Canadian plants got to work early in the war, but the delay in
ordering supplies in the United States and other neutral countries has
seriously affected the efficiency of the allied armies in France and
Poland, it is said.
The experience of the American Locomotive Company is typical of the
situation. After negotiations which covered several weeks, the company
procured a contract which is said to amount to approximately
$65,000,000 for shells. During the discussion of terms, and even
before, the Locomotive officials were busy buying the necessary lathes
and other machinery, but installation of equipment and the training of
men could not be done in a few days. The contract was definitely
closed six weeks ago, but the company has only begun to turn out the
shells at its Richmond plant, and it was said in authoritative
quarters that several weeks more would pass before anything like a
substantial output would be possible.
The centring of manufacture in a single, or a few, great plants
carries the additional and chief advantage to Great Britain and the
Allies, that no efforts of Germany can now cut off their ammunition
supply. The stoppage of this supply has been one of Germany's chief
concerns since the war began, and by embargo propaganda here and by
the attempt to create sentiment she has tried to cut down the supplies
reaching the Allies from this country.
Well-founded gossip in Wall Street has had it that early rises in the
stocks of munition-making concerns were occasioned not so much by the
acquisition of war orders as by efforts of German agents quietly to
buy up control of these companies in the open market. These devices
failing, it is said, orders for ammunition and other supplies have
been placed by Germany with no hope of receiving the goods, but merely
to clog the channels against the Allies. With the General Electric and
other co-operating companies pledged to the Allies this danger will
cease to exist.
The concerns selected to join with the General Electric for what will
thus amount practically to a combination of resources for rapid
manufacture will be those whose equipment, with a few alterations, can
be adapted to the new work.
The General Electric Company, according to a Director, is in a
position to begin turning out shells at a high daily rate, and, under
present plans, the company will not sublet any of the $100,000,000
order. There are facilities available in the plants at Schenectady,
Lynn, Harrison, Pittsfield, and Fort Wayne to carry on the work
rapidly and without interfering with the ordinary electrical
manufacture now being conducted.
Wall Street offered one of the first evidences that things of moment
were occurring in the war supply situation. Bethlehem Steel shot
forward 10 points, to 165, a new high record, although Mr. Schwab's
company was not mentioned in connection with fresh contracts.
It is believed that when the proposed concentration of munition making
occurs the Bethlehem Steel Corporation and other companies which
already have booked sufficient contracts to keep them busy for some
time will not be included.
Stock of the Studebaker Corporation was in large demand as the result
of reports that about $7,000,000 of additional war orders had been
taken for artillery wheels, motor trucks, and harness. Tennessee
Copper shares were strong after it became known definitely that the
concern had arranged with the du Pont Powder Company for an increased
monthly supply of sulphuric acid. Toward the close of business stocks
generally reacted, being influenced by the desire of many traders
to keep out of the market until the tenor of President Wilson's note
to Germany was known.
But despite the many physical manifestations of unusual activity,
officers and Directors of the companies mentioned as those on which
Germany had set her eyes were uniformly non-committal when they did
not positively deny that there was truth in the story.
William J. Bruff, who is President of the Union Metallic Cartridge
Company and a Director of the Remington Arms and Ammunition Company,
said:
"I don't think there is any truth in it. Yes, I am certain that no
offer of any kind has been made by Germany to buy the two companies. I
would know if such offers had been made and I haven't heard of them,
except such reports as I have read in the newspapers."
Henry Bronner, a Director of the Bethlehem Steel Company, said:
"I have not heard that Germany or any one else has offered to buy the
Bethlehem Steel Company. If such an offer were made, Charles M. Schwab
would be the man who would know it."
THE NEW YORK TIMES _of June 10, 1915, included this report of Charles
M. Schwab's purposes with respect to the control of the Bethlehem
Steel Company:_
There is not the least danger of German interests getting control of
the Bethlehem Steel Company and breaking the concern's contracts with
the British for arms and ammunition, it was made known yesterday from
an authoritative source. This same authority had no information that,
as alleged by The Chicago Herald and The Providence Journal, and
quoted in THE NEW YORK TIMES yesterday, the same interests were
seeking to obtain control of other companies.
What blocks the attempts of the German agents, in the case of the
Bethlehem Steel Company, for one thing, is that the majority of the
stock of the concern is not in the market. Contrary to rumors that
have lately been floating about hotel corridors and into and out of
the brokers' offices adjacent to them, Charles M. Schwab still owns
the majority of stock. This much Mr. Schwab emphatically confirmed to
a TIMES reporter yesterday at the St. Regis. That he had no intention
of selling he asserted just as emphatically.
At the same time the information is authoritative that agents
representing the German Government or German interests have approached
Mr. Schwab, not once, but several times, since the beginning of the
war, asking that negotiations be opened. It has been intimated that
interests, private or Governmental, were willing to pay any price that
Mr. Schwab would name for his controlling interest.
Figures running into scores of millions have been named in offers, it
being the understanding that the prospective owners simply wished to
buy the big plant--the only one in the world that now compares with
that of the Krupps, with the possible exception of that of the
Schneiders at Creusot--and shut it up, in order to stop the vast sales
of munitions of war to the Allies, and the filling of contracts so big
that their delivery has hardly begun. Mr. Schwab, it is understood,
could get today $100,000,000 or more for his stock in the Bethlehem
Company.
It was established yesterday that more or less directly the visit of
Mr. Schwab to England last Fall, on the Olympic, was due to the
activity of German agents in this country in their efforts to buy the
Bethlehem Steel Company.
Word of the attempts of the German agents to obtain control of the
Bethlehem Company soon found its way to England, and the result was
that Mr. Schwab was invited to London for a special conference with
the War Office. He renewed his acquaintance with Lord Kitchener, and
his previously formed intention not to sell out was fortified with a
guarantee of orders large enough to keep the big plant at Bethlehem
going steadily for eighteen months or more.
When rumors were prevalent about New York that the visit of Sir Trevor
Dawson, head of a great English steel concern, had as its object an
attempt to obtain control of the Bethlehem Company so as to insure
that it would continue turning out supplies for the Allies, the
German agents here were making a strong bid for the control of the
concern, and their efforts have since continued.
A TIMES reporter put to Mr. Schwab yesterday the direct question as to
whether he was in actual control of the Bethlehem Steel Company.
"Absolutely," he said. "The only way anybody else could obtain control
would be to get my interest. I would never sell my interest without
making for the men who stood by me with their support when I was
struggling to put the Bethlehem Company where it is today the same
terms that would be offered for my share. As a matter of fact, my
interest in the Bethlehem Company is not for sale. Indeed, I could not
sell. I have contracts that I cannot break."
It was said yesterday that the Germans had been trying to conduct
their negotiations for the Bethlehem Company in much the same fashion
as they recently had employed in their diplomatic negotiations, and
that if they had been successful in getting the Bethlehem Company they
would have found themselves with contracts on their hands which they
would have had to carry out. The mere closing of the plant and the
refusal to continue the further manufacture and delivery of munitions
of war already contracted for would not save them from a situation
which would be the equivalent of jumping from the frying pan into the
fire.
Not only the courts would be promptly invoked to see that legal
contracts were carried out, but, if necessary, the Federal Government
could step in and insist that the manufacture and delivery of supplies
contracted for be continued, in order to prevent a breach of
neutrality. Then would be presented the spectacle of German interests
turning out vast quantities of guns, shells, and shrapnel to be sent
to Europe to be used in fighting their own troops.
According to the authority already mentioned, the Bethlehem Steel
Company is the only plant in the United States that can turn out
shrapnel shell complete. Most of the contracts that have been given
here have been taken for various parts of the ammunition by different
firms. One thing necessary for the turning out of shrapnel and shells
is a twelve-mile proving ground, and the only privately owned range of
the kind in this country is that of the Bethlehem Company.
Mr. Schwab has insisted to his friends who have questioned him about
the rise in Bethlehem stock that the only valid reason, aside from
whatever might be the intrinsic value of the property, is the
tremendous war orders that have been obtained. On this account, as
well as on account of his knowledge that the majority of the stock was
safe in his possession, he was able to enjoy his trip to the Pacific
Coast regardless of rumors at one time prevalent that a big market
operator, who was supposed to retain an ancient grudge against him,
was trying to wrest from him the control of the company he had built
up.
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