The Arrogance of Inco – by Val Ross (Originally Published in May 1979 – Part 2 of 4)

“The Arrogance of Inco” was originally published as the cover story in the May, 1979 issue of Canadian Business. Reporter Val Ross, who died in 2008, spent two and a half months researching and writing this lengthy expose of the then Inco Limited. It has become a “classic must read” for anyone wishing to understand the often bitter history between Sudbury and the company that defined the Canadian mining industry.

2-The Monopoly Years

Whether the 20th century would belong to Canada, as Laurier had promised, was anybody’s guess, but it was clear from the start that it would have a place for the nickel from Canada.

No one was under the illusion that its control wasn’t solidly in American hands. The International Nickel Company’s chief executives were American, its refining operations were located in America, and so were its marketing policymakers.

When, in 1890, US Navy tests demonstrated that nickel-steel plate was impervious to shells fired at a velocity of 1,700 feet per second, the Glasgow Herald prophesized the dawn of a new age. “When irresistible nickel-plated breach loader confronts the impenetrable nickel-plated ironclad [vehicle], then…war as a fine art will have come to an end.”

On the contrary, nickel flourished in war-making and war-making flourished with the help of nickel. The Spanish-American War of 1898 demonstrated the invincibility of US nickel-steel-plated ships. Soon nickel was almost entirely a military material. Demand for it quickened in the dreadnought-building races between the Great Powers. Then, in 1914, the guns of war sounded, and nickel boomed. Between 1914 and 1918, the output of the Sudbury area mines more than doubled.

How awkward when it was learned in the middle of the war that some of this product was destined for German guns!

The news broke in the summer of 1916, the year before the US entered the war. The German submarine Deutschland had picked up nickel from an American port and was carrying it back to German factories. The Toronto Telegram stormed, “Not an Ontario boy goes into action except at the risk of having to face bullets barbed with nickel…of which his own native province has a monopoly.”

In November, 1916, it was learned that the Deutschland was making a second trip.

The Canadian government actually defended these textbook examples of supranational amorality. The government explained that because the Allies were buying their nickel war material from the US, stopping the nickel shipments to American refineries would have hurt the Allies as much as the Germans.

But this time the Canadian economic nationalists would not be silenced. Amid a clamour for the expropriation of all of its Canadian assets, Inco’s New Jersey headquarters announced that it would set up a refinery at Port Colborne on Lake Erie under the management of its new branch company, the International Nickel Company of Canada Limited. Then in 1917, two decades after Sam Ritchie had argued that the company should be discouraged from exporting its ore to US refineries, the Ontario government felt bold enough to pas a new mining tax act that disallowed tax deductions on the export of raw matte.

The Deutschland incident is significant for several reasons. It marked the first time that the power of the company was checked by government and by the wrath of public opinion. It also paved the way for the company’s full re-incorporation in Canada in 1928.

By the 1920s, the American trust-busting movement had gathered enough momentum to turn to the Morgan trusts. In 1928, the International Nickel Company of New Jersey was advised by its lawyers, Sullivan and Cromwell, to relocate officially in Ontario. Thus it became the only Morgan trust to escape unbusted.

Since then, Inco has insisted on its Canadian citizenship and has publicized the fact that its head offices are in Copper Cliff and Toronto. The reality is somewhat different. It has always had Americans as CEOs, and New York is still the centre of its financial and marketing decision-making. Who really controls Inco is a matter of ongoing speculation. The ghost of that magnificently ruthless patriarch, J.P. Morgan, who died in 1913, haunted the company into the 1920s and beyond, and some observers have speculated that the ultimate power has continued to rest with US Steel. Inco does not disclose any information on that subject beyond what is contained in its annual reports, which show that many of the shareholders are very small and more than half are Canadian. Shareholders who own less than 1%, of course, do not have to state who they are at all.

Though the war brought International Nickel certain embarrassments and dislocations, it also confirmed for R.M. Thompson the importance of one’s relationships. Thompson had always been a great booster of the Navy. An Annapolis alumnus, he never missed an Army-Navy football game. From hobnobbing around Europe with the Kaiser, The Rothschilds, the Prince of Wales, he’d return to the States each season, charter a special train, deck it in Navy colors, and ferry his friends to the event. Then, in top hat and cane, he’d lead the team onto the football field. One of the similarities among company leaders down through the generations is the US Navy connection; current Inco Limited president Charles F. Baird, tall, Henry Fonda-esque, is a former United States Undersecretary of the Navy.

There are many other similarities in the style of Inco’s leaders. R.M. Thompson was an alloy of the components of his successors: naval man, low-key lawyer, fascinated by technology, full of team spirit. Thompson, incidentally, became first president of the American Olympic Association; the current chairman of Inco Metals Company, John McCreedy, is a former Stanley Cup-winning Maple Leafs hockey star. McCreedy helped implement Inco’s major layoffs and staff parings of 1972-74.

Lawyers have been prominent in the company since R.M. Thompson’s time. Lawyers form the New York firm Sullivan and Cromwell helped orchestrate Inco’s 1928 relocation in Canada and its absorption of the British Mond Nickel Company the same year. Sullivan and Cromwell men have sat on Inco’s board ever since its formation. Current representatives are AshbyMcC. Sutherland, formerly with S&C and now a senior vice-president, and William Ward Foshay, an S&C partner. Two lawyers, R.M. Thompson and Henry Wingate, have become CEOs. Their chief role on the board and in the boss’s chair has probably been to advise the company on the fine line it has trod as a near-monopoly.

Too bold a move, in pricing, diversification or contract negotiation, and the US department of Justice trust-busters are once again breathing down its neck, as happened in 1928, 1946 and 1975. Too cautious a move – the company has continually been fearful of establishing customer contracts – and it loses market share. Run in part by lawyers, the company has tended more and more to err on the side of precedent.

These lawyers have contributed more than judicial caution to the company character. They were religious men (Wingate’s parents were missionaries in Turkey); patriotic, yet coolly and predominantly pro-company. The best example of the type was John Foster Dulles, Sullivan and Cromwell’s man on the board in the 1930s and 1940s. Dulles is said to have wept openly for “the loss of substantial profits” when his law firm de3cided to close its German offices in 1935; happily for the business-conscious lawyer, his nickel firm continued to supply Nazi stockpiles until late into the 1930s.

The greatest strength and predominate quality of Inco’s leaders was and is in their passionate commitment to their product. In some cases it was their fathers’ commitment too. A current vice-president of Inco Metals, Walter Curlook, is the son of an immigrant who found work as a nickel miners, so is Mel Young, assistant to the president of the Ontario division. When in 1977 the company decided to stop posting the official price of nickel in order to become more competitive, “It was a helluva decision,” says Johannes Schade, a senior vice-president of Inco Metals. “Breaking with tradition, with history. We were asking men who were second-generation company men to take that step.”

For the men who built it, Inco is as tangible as a family. They give it their care, even their names: in 1956 Thompson, Manitoba, was christened in honor of CEO Doc Thompson, in honor of his 50th year of service to the company. The  company as dynasty. That’s its strength. And its weakness.

Through the company’s pricing and marketing policies have erred on the side of conservatism, it has always been technologically innovative. R&D people have usually headed the imperial line. After World War One ended and the bottom fell out of nickel’s military market, R&D became the only route by which the company could expect to survive.

The full impact of the postwar recession hit the world economy in 1921. By then, most of Sudbury’s roast heaps had fallen cold, and the mine shafts were virtually empty. Inco faced a deficit of $800,000 and the likely prospect of going belly-up. That year the ailing company’s board voted a new fact to the presidency – Robert Crooks Stanley, a mining engineer whose claim to fame was his interest in the development of multi-purpose nickel-copper alloys. The new president’s first acts were to establish a research lab at Bayonne, in New Jersey, and to turn the new rolling mills at Huntington, West Virginia, over to the production of alloys. By 1934, Inco made a $5-million profit in its first quarter. Not bad for the Depression.

Under Stanley, nickel’s role changed totally, from military applications – “Thank God we don’t have to depend on that business any more,” as Stanley told Fortune in 1934 – to a literally indispensable part of everyday life. Small wonder that Inco leaders have regarded the company as synonymous with the product.

Consider Monel Metal, Stanley’s personal creation, the two-thirds-nickel, one-third-copper mix he’d developed back in 1904. Nickel in its raw state is usually found with copper. The company loved Monel Metal because it bypassed the complex nickel-copper separation stage. That wasn’t its selling point, however; Monel Metal was also corrosion-resistant in water, saltwater, sulphuric acid and chlorine. It was perfect for sulphuric acid pickling tubs (a key part of steelmaking), for all kinds of pipes, steam tables and hospital equipment – everything in fact, including the kitchen sink. The Ex-Lax Company was just one enthusiastic user of Monel Metal. The alloy enabled Ex-Lax to mix its chocolate and laxative ingredients with no danger that dissolved metal would reduce the product’s efficacy.

Monel Metal was a wonder metal that could withstand the corrosive powers of just about anything – except the chemical properties of milk. So the researchers came up with Inconel (78% nickel, 15% chromium) for dairy equipment. Then they found alloys notable for magnetic properties. Any wall can opener now has a magnet of nickel-aluminum-iron, and magnetic nickel alloys are also used in speedometers, radios, radar, and televisions. Other products were developed for their electrical resistance, or for their heat-conducting capabilities.

Electric blankets have nickel heating elements; so do most stoves. Thanks to the company, the 28th element began to appear everywhere. No one scoffed when Inco ran a massive ad campaign in the the 1940s with the theme “Nickel, Your Unseen Friend.”

Your unseen friend’s biggest consumer was the auto industry, which accounted for more than 20% of Inco’s output. Nickel appeared in steam shovels and plows for heavy-duty vehicles, and in the axles, crankshafts, gears and bumpers of all cars. The bridges and overpasses that all this traffic required were hungering for nickel too. San Francisco’s Golden Gate Bride ate up 200,000 pounds of it.

Under R.C. Stanley and his successors, the company’s creations were aggressively produced and marketed through an international network of information bureaus, technical field centres and free consulting services to nickel users. Inco footed the bill for trade shows and even for the promotion of other companies’ products that contained its metal. One financial journalist, complimenting the company for its “missionary work in the use of nickel alloys,” hit on an apt phrase to describe its dedication.

The problem, though it wasn’t a problem at the time, was that the company was proselytizing for nickel-your-unseen-friend, and not for itself or its services. That strategy made sense as long as the company had 90% market share of the metal – a situation that prevailed for so long that Inco became an “absent-minded monopoly,” in the words of one metals analyst. As self-appointed guardian of the official price of nickel, it benignly turned a blind eye when upstart competitors wrote contracts to sell nickel at Inco’s price “minus X%.” As the self-appointed guardian of supply, it single-handedly tried to control the cyclicality of the market by stockpiling both its own and competitors’ nickel, for which is sometimes acted as selling agent.

“The company seemed to consider it its God-given duty to produce all the nickel it could at any price,” remarks the analyst. (Not until the cost-cutting regime of CEO Ed Grubb, from 1972 to 1974, did the company change its policy by announcing that only profitable nickel would be produced.)

During the monopoly period of the company’s adolescence, it developed a high-handed confidence that its customers would always be there. Once its missionary work had converted those customers to thinking nickel, it felt its job was over. Its salesmen were not in the habit of making calls. In times of shortages the company had t decide who would get the limited nickel, and naturally a few feelings were ruffled when some customers were put on allocation, During one allocation period in the late 1960s, an American observer complained to the Wall Street Journal, “If you didn’t play ball with Inco, you didn’t get nickel.” And if you didn’t like the way they were dong things you could always go elsewhere – or try to. For its first 60 years the company had more of the market than all its competitors combined. Inco was nickel. Take it or leave it.

Over the seven decades of its life, no one can claim to know the character of the company as intimately as the community that’s wedded to it, Sudbury. For Sudbury, the company has been an irreconcilable mixture of benign patron, arrogant absentee landlord and necessary evil. To Sudbury, the company has revealed the same aggressive, Yankee-boosterish, high-handed personality it has revealed to its customers but more openly.

Soldiers returning to Sudbury after World War One remarked that Hometown looked like the Western Front after a gas attack. But that was okay. The company’s presence meant jobs to go to and a future for Hometown. The local townsfolk didn’t object too loudly about the deadly sulphur dioxide smoke that continued to pour off the open-air roasting heaps until smelters were built in 1928, or about the absence of a sewage plant until the company installed one in 1929.

By then a small new competitor, Falconbridge Nickel mines Limited, had appeared on the scene to add its smoke to the unhealthy atmosphere. Well, Falconbridge and its jobs were welcome too. By 1930 the population of Sudbury had topped 20,000 and the town became a city.

Inco was its major benefactor, the focus of its life. In the Depression the only way you got a job was if you could complement one of the mines’ hockey or soccer teams; exhibition games, practically the only source of local entertainment, were frequent and were attended by the whole community. Inco ran picnics, regattas, ski meets (it still does). The company brought in a retirement plan in 1914 and group insurance in 1928.

But if Sudbury was a company town, it was disowned by its parents. Inco didn’t pay a penny in municipal taxes before the coming of regional government in 1972. The company headquartered its smelting operations at Coniston and Copper Cliff, and built smaller settlements for its employees out at the mine sites – Creighton, Levack, Murray Mine. Few of these outlying communities felt the benefit of the company’s largesse.  As late as 1968, several towns within 15 miles of Sudbury had no sidewalks, sewage or water mains.

It was Copper Cliff, four miles west of Sudbury, down a barren stretch of Highway 17, that became the showcase company town. Ringed by hills (some of which on closer inspection turn out to be slag and tailings heaps), with smelter stacks standing in the middle like birthday candles, Copper Cliff nevertheless has the snug pretty feel of a Vermont village. Large white New England-style houses with clapboard and Dutch roods flank the flower-filled Nickel Park, where the company used to stage concerts on warm summer afternoons. Copper Cliff got its company-run hospital in 1900, and a community centre with northern Ontario’s first indoor swimming pool in 1915; even the extracurricular activities at its elementary and high schools used to be company-sponsored. The mayors of Copper Cliff were “acclaimed” into office. Even its police were on Inco’s payroll. Their patrols took them from the large executive homes to the other side of the slag range, where thing were a little more lively in Little Italy and other immigrant workers’ enclaves.

The executives were Scots-Canadian and American; the workers were French, Italian, Finnish, Ukrainian, Polish and poor WASP. Most of the population of the Sudbury district was recently immigrant, and it was not to the company’s advantage to patch the rifts between these groups. One reason union organizing made little headway in the area was because the Red Finns were forever charging that the White Finns were slacking on the job, and the Slavs continually fought the Italians in the local beer halls. Ethnic apartheid kept labour solidarity at bay – and besides, people were just damn glad to get work.

The attitudes of the employees to the company have changed since then. The character of the company is what change them.

Frank Southern, 67, a retired miner, recalls hanging around the hiring office gate in the late 1930s, hoping to be taken on for work. “I’d go down each day a 5:30 a.m. to see what I could get, and there’d be 10 men there already. By shift time, there’d be 500.” In 1940, Southern was hired, at 63 cents an hour, seven days a week with every second Sunday off. He was sent down 3,400 feet into the Frood Mine. Six men had been killed in Frood the year before, five in 1938 and five in 1937. The company never mentioned this to the new men; Southern stumbled on a chart in an office one day by accident. “The air was good underground,” he recalls, “but the sulphide ore oxidized and created heat, sometimes fire. The temperature would go to 80 degrees and above, with saturation humidity. We’d peel to our socks and our underwear. They have fans down there now, but it can still get pretty hot.”

Frank Southern is upright, hale and healthy. His hearing is good, though he worked alongside rock drillers without protection until the company issued ear plugs in the 1950s, earmuffs in the 1960s. When Southern retired he was allowed to keep his earmuffs and miner’s helmet, which is emblazoned with a safety award and the name FRANK. The helmet is Southern’s gold watch for 37 years of service so loyal that his fellow miners called Southern a “company dupe” to his face.

Southern was an executive of Inco’s own union. The company spent $68,000 trying to organize that union in 1942 to counteract the incoming threat of the Union of Mine, Mill Workers. Men like Frank Southern, who joined Inco’s union, believed that the best way to bargain was to cooperate fully with their employers; accordingly, after each meeting the Inco-sanctioned union’s executives dutifully handed over the minutes to the company bosses for perusal.

Frank Southern and a handful of other believers were alone in their faith. The majority of miners scornfully labelled the company union “the nickel rash” and shunned it like a social disease. The majority had no faith in the possibility of cooperation, but they did have strong memories of pink slips for men who’d tried to organize labour in the past. In some cases, they even had bruises from goons who’d replaced the pink slips when union organizing stepped up. Mine Mill won certification in 1943, after a Mine Mill recruiting office was trashed and its inhabitants beaten – “by a supervisor from the Frood, I believe,” remembers Southern with equanimity.

Frank Southern regretfully joined the Mine Mill. But he continued to campaign from within against what he regarded as its dangerous Red tendencies – such as sending money to the Rosenbergs’ defence fund, hosting a Paul Robeson concert for the miners, “stirring class hatreds,” as Southern puts it, “and calling useless strikes.”

The strike of 1958 collapsed after Sudbury Mayor Joe Fabbro called a prayer meeting rally and told the wives of the picketing miners to urge their men back to work. Frank Southern’s fellow miners were deeply embittered, but not he – he’d been for a settlement anyway. Meanwhile Southern personally wrote a carefully reasoned treatise on “The Psychology of Supervision” – a blueprint for management to improve blue-collar good will and productivity which he had printed at his own expense. When the politically centralist United Steelworkers of America began to raid the Mine Mill union in the early 1960s, Southern worked with the raiders against his “Red” brethren, and after the Steelworkers won over the Inco work force Southern continued to mine until retirement, almost without accident, a model worker, ever-cognizant of the company’s role in his life. “I never did become a supervisor,” he says with gentle regret. “I guess I never made the grade,”

Southern is not bitter that the company found it more useful to keep him as an ally underground, or that it absorbed his loyalty and his work life without recognition. There used to be a lot of Southerns in the Inco rank-and-file; hard-working, grateful men who believed in the capitalist order of things. But after three generations of secretive, clumsy and occasionally violent relations with its workers, the company now confronts a different breed.

“About a year before I retired,” Southern recalls, “a boy name Dave Patterson come to work at our level. We got used to seeing him in the Refuge Station every lunch hour, filing grievances. One time a foreman helped me hook up a fallen cable. I think he even bruised his foot in the process. When Patterson got wind of it, he put in a grievance that a salaried man was dong an hourly-rated man’s work. I thought that was pretty damn childish.”

Dave Patterson is now the thirty-year-old leader of the 11,700 Steelworkers striking the company. Patterson, who joined the company in 1969, had formed an attitude very different from Frank Southern’s and expressed it in print. “They’re bastards,” he wrote. “Inco is a four-letter word.” Some of the older men in the rank-and-file regard Patterson as a dangerous radical; but to the majority, Patterson’s intense, low-keyed anger represents a “realistic” appraisal of his employer.

Most of the workers didn’t turn out for Mine Mill meetings in the 1940s and 1950s; they feared the union’s rumoured communism, and they had an almost superstitious belief in the company’s power. Elmer Sopha, a former Liberal MPP for the district, remembers that on the first day of the strike in 1958, when the Copper Cliff smelters stopped smoking along the skyline, “it was as if Big Ben had gone still.” But after the trauma of the first defiant strike, the floodgates were open. Throughout the 1960s Inco was struck regularly.

The strike in 1969 was particularly hard on the company. Caught short of stockpiles, it lost a big chunk of market share. So as a result it began to make a concerted effort to improve its labour relations. Between 1970 and 1975 company executives began meeting informally with Steelworker leaders on the union’s own turf. Steelworkers, who used to cross the street if they saw Inco staffers coming were now confronted by the sight of company executives sitting around the union hall, chatting away with eager friendliness. The company abolished time clocks, installed noise and pollution meters, and did away with the practice of handing the men their paycheques each week as they shuffled forward in long queues; henceforth, cheques were deposited into the bank.

In 1975 the company was struck briefly, for the 10 days it took to ratify a new contract. Though the mood was friendly, the company was so chastened, says Toronto metals analyst Patrick Mars, of Alfred Bunting & Company Limited, that “they bent over backwards to be nice. The union got a 30% raise over three years, and personally I think the size of that settlement helped trigger the formations of the Anti-Inflation Board.”

The company felt its reforms to be substantial; the union’s appetite was whetted for more. Says senior vice-president Ian McDougall, “One reason we continued to build up inventory from 1975 through 1977, in spite of the soft nickel market, was because we wanted to maintain good labour relations.”

But the net result of keeping the men producing was ultimately more harmful to labour relations than it would have been had the company stood a longer strike and slowed production back in 1975. All the groundwork of the early 1970s vanished when the inventory-saddled company announced in the fall of 1977 that it would be laying off about one-fifth of its work force at Sudbury and Port Colborne. The Financial Times reported, “Had Inco not recently announced ‘cash conservation moves’ including the dramatic decision to lay off 2,800 workers, ‘someone else would have blown the whistle on us,’ says a senior Inco officer.”

Sudbury stricken with worry about the effect of the layoffs, was feverish with rumours. Rumour said there would be more layoffs because it would be easier for the company to cut payroll than to cut its debt repayments on its various overseas projects. Rumour had it that the company’s creditors, the banks, had “blown the whistle” and insisted on the layoffs, and had further hinted that the company should be uncooperative in new contract negotiations. Rumour said the old miners would be retired early, on 1975-based pensions of little more than $400 a month. Driven by rumours and by the company’s refusal to confirm or deny, 11,700 workers struck on September 15, 1978.

David Patterson is not what you’d call conciliatory. “When I took my oath of office in 1976 it was like a marriage vow. I don’t lave anything but my job.” He’d like to see Inco nationalized. “I think somebody should tell them to get the hell out. We know we can run the company more profitably than the multinational.” He blames the company’s priorities – production over safety – for the deaths of men smothered in sandfalls underground, and can tell of digging in the rock with his bare hands to recover a trapped mate.

“The mood of this strike is different from 1975,” says Patterson. “We were well behaved and then the company retaliated after the strike and sued us for half a million bucks. Plus they gave 45 stewards and activists notice that they were one step from being fired.”  Since Patterson was elected he’s kept his hard hat on his union president’s desk. “I never want to forget where I came from.” At the time of writing new union elections were imminent. Whether Patterson retains the presidency of Local 6500 of the United Steelworkers of America is irrelevant. Whoever wins will inherit the mood of confrontation. The men have been living on weekly strike pay of $25 (single), $30 (married) and $3 for each child, and they are bitter.

The company insists that it went to a lot of effort and expense in the early 1970s to improve its labour relations. All that has been lost in the strike of 1978-79. As far as the working men are concerned, the company has never lost its arrogant and distant image.

Bitter miners like Dave Patterson are perhaps an inevitable product of the company’s history and character. The change in their attitude to the company through the years was as inevitable as the other events that turned the cyclical fortunes of Inco and nickel.

For part 3, click here: http://www.republicofmining.com/2010/06/30/the-arrogance-of-inco-%E2%80%93-by-val-ross-originally-published-in-may-1979-%E2%80%93-part-3-of-4/

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