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January 1, 2006

The Working Man’s Evangelist

There is nothing fancy about Dan DiMicco

(Daniel R., if you must). The president, vice chairman and CEO of Nucor Corp. since 1999, DiMicco is variously described by the press as “no nonsense,” “hard nosed,” “evangelistic.” He is described by his peers in the metals industry as “an old style steel guy.” DiMicco, a metallurgist by training, pounds the table at speaking engagements and town hall meetings from the House Ways and Means Committee to Bourbonnais, Illinois.

His cause: American manufacturing and how unfair trade practices are eroding good paying jobs for American workers and, hence, the fabric of national society.

DiMicco does not tiptoe around any of the related issues. He understands but does not care about the complexities and niceties of multi-lateral trade negotiations. He does not mind stepping on the toes of industry advocates trying to navigate Capitol Hill or win membership dues. He told an audience at the Southern Growth Policies Board conference in June 2005 that the United States’ position on trade needs “to be precisely the opposite of their approach” and that “our trade laws need to be more easily accessible to small as well as large companies.”

Nucor would fall into the latter category. It is the largest steelmaker based in the U.S., the 10th-largest in the world and the nation’s No. 1 recycler. The company has enjoyed uninterrupted profitability since the 1960s and seems on track to break the records for revenue and profitability it set in 2004. Nucor’s net rose 24% for the first nine months of 2005 compared to the same period in 2004, to $969.3 million. Sales rose 15% to $9.49 billion.

Nucor is built on scrap and a concept that it created: the mini mill. And even with operations in 15 states, almost 11,000 employees and the largest range of products of any steelmaker in the nation, Nucor maintains the feel of a small company. Perhaps this is because there are only three management layers, or because the company is so highly decentralized and has kept decision-making literally at the front line. When DiMicco was general manager of Nucor-Yamato in Blytheville, Arkansas, in the mid-80s, the employees decided to change from eight-hour shifts five days a week to 12-hour shifts four days a week and never considered asking for his approval. Perhaps it is because employee compensation is based directly on productivity, with two-thirds of a workers’ pay typically coming from weekly bonuses. And because, in this egalitarian atmosphere, executives enjoy none of the usual perks—no company cars or jets, no executive dining rooms or parking places, no longer vacations, no better insurance plans.

But it is not good management and high performance that have won DiMicco his high profile. It is his evangelism for American manufacturing.

Q: WHAT TURNED YOU INTO THE “EVANGELIST FOR AMERICAN MANUFACTURING?”
A: Our customers did and our focus on fair/free trade. Losing our manufacturing base is not good for business or our country’s future leadership role.

Q: WHY HAS NUCOR TAKEN A LEADING ROLE IN THE LEGISLATIVE FIGHT OVER CHINA’S CURRENCY?
A: You have to either lead or get out of the way. As one of the country’s largest manufacturers that depends on a healthy manufacturing economy, we had no choice because no one else was [doing it]. The multinational companies and numerous bureaucrats had long ago stolen the discussion on free trade and gravely distorted it. These companies bought into the incentives created by foreign governments and our own government’s lack of industrial support. [They] drove industry offshore and now they have too much vested in the process to be champions for domestic manufacturing. [What we need is] energy, trade accountability, currency and the creation and maintenance of a level playing field.

Q: NUCOR’S BUSINESS IS DEPENDENT UPON A HEALTHY BASE OF DURABLE GOODS MANUFACTURING IN NORTH AMERICA. IS THAT BASE ERODING? HOW DO YOU KNOW? 
A: Yes, it is eroding.

All you have to do is look at the massive trade deficit of over $700 billion, the 3 million manufacturing jobs lost since 1999 and all the companies that have relocated operations to China and are importing goods
back into the U.S. Look at the growth in the imports of steel-intensive manufactured products, the continuing movement and pressure to move manufacturing offshore. This is not in debate; the facts are overwhelming.

Q: CAN THE U.S. BE A PROSPEROUS NATION WITHOUT MAINTAINING ITS POSITION AS A GLOBAL LEADER IN DURABLE GOODS PRODUCTION? 
A: No.

As a world leader economically, politically and militarily, we cannot lose our ability to produce for ourselves. The history of the world and mankind has taught us that in spades. If you can’t fend for yourself in this world as individuals or as a country, you get the leftovers, handouts and become dependent. And, by definition, you can’t lead if you are dependent. You have to be able to stand alone sometimes.

Q: IS U.S. DOMESTIC MANUFACTURING WELL REPRESENTED BY THE NATIONAL ASSOCIATION OF MANUFACTURERS?
A: No.

THEN WHAT SHOULD BE DONE TO CREATE AN ALTERNATIVE INFORMATION AND LOBBYING ORGANIZATION TO BALANCE THE MULTINATIONAL MESSAGE IN CONGRESS?
We should not need an alternative organization. NAM by definition should be fighting and leading our domestic manufacturing agenda, but they are only doing it in a halfhearted way. NAM is dominated by large multinationals that long ago bought into the outsourcing of America and have drunk the distorted “Free Trade” Kool-Aid. We are strongly in favor of true free trade, that is free trade based on fairness, rules, accountability and comparative advantage, not on massive government subsidies and ownership.

But, there will be [an alternative] that will take over the leadership role for domestic manufacturing if NAM persists in half measures and gamesmanship regarding U.S. manufacturing leadership and support for domestic manufacturing.

 
Photo by Brian Gomsak

Q: WHAT HAS BEEN NUCOR’S EXPERIENCE WITH THE IMPACT OF TOWN HALL MEETINGS? ARE MORE PLANNED? 
A: Very positive. We have attracted 25,000 to 30,000 people at nine meetings. The meetings have been great, enthusiastic, strong turnout and follow-up.

We are not alone. MSCI is very active with its Town Hall meetings. The grassroots effort is growing rapidly. Why? These are the people losing their standard of living, their jobs and those most negatively affected by the trade-distorting practices of some of our trading partners. Congress represents them, not large multinationals who have sold domestic manufacturing down the drain. In many cases, [the multinationals did it] because they had failed business models and poor labor relations, or were themselves victimized by our government’s lack of support for a level playing field and a strong domestic manufacturing agenda.

More meetings are planned, at least a dozen more at our locations and elsewhere. The word is spreading and it will impact elections.

The activity on manufacturing and currency issues is growing rapidly in Washington, legislation is increasing and co-sponsors are being added every day. H.R.1498 now has more than 140 co-sponsors and growing.

Q: WHY HAS H.R. 1498 BEEN SUCH A TOUGH SELL IN CONGRESS? 
A: Good question!

WHY HAS THE NORTH AMERICAN STEEL INDUSTRY BEEN SO RELUCTANT TO GLOBALIZE OPERATIONS? COMPANIES IN THE SUPPLY CHAIN FOR OTHER INDUSTRIES HAVE FOLLOWED CUSTOMERS ABROAD. WHY SO LITTLE OF THAT WITH STEEL?
There has been and still is massive global overcapacity in steel. Most of the industry here and globally has been fighting for survival over the last two to three decades. In the past, governments owned the steel industry. It is only recently, 10 to 15 years, that that has started to change in Europe, Russia, etc. but it still exists in India, some Eastern European countries and China.

Q: HOW DO YOU ASSESS THE COMPETITIVE POSITION OF STEEL VS. OTHER METALS AND MATERIALS IN AUTOMOTIVE AND OTHER DURABLE GOODS MANUFACTURING ENVIRONMENTS? 
A: Very strong. Other materials have seen their pricing increase consistently over the last 25 years while steel has not. So even today, we are still the material of choice. Steel is gaining and leading.

Q: IS CHINESE GROWTH IN STEEL PRODUCTION DANGEROUS FOR THE U.S. METALS INDUSTRY? 
A: Yes, but not just for the U.S., for the entire global industry.

Q: WHAT’S THE SOLUTION FOR THE TENSE DYNAMIC ABOUT PRICING BETWEEN METALS SUPPLIERS AND METALS USERS? IS THE NORTH AMERICAN MANUFACTURING BASE CAPABLE OF ACCEPTING HIGHER PRICE LEVELS FOR STEEL? WILL HIGHER PRICES DRIVE AWAY EVEN MORE MANUFACTURING?
A: Global steel pricing is up not just in U.S. steel. If fairly traded, [pricing] is not the issue despite the rhetoric. The problem is due to currency manipulation, 40 to 50%, and to lack of energy policy and a national manufacturing agenda, 20 to 30%.

Higher steel prices are not driving away manufacturers. That’s a complete fallacy. It is government subsidies, offshore currency manipulation, energy costs, litigation costs, healthcare costs, our government’s action and inaction on those things.

That is what the grassroots movement is all about—correcting the massive fraud being perpetrated on the American people when it comes to why manufacturing is leaving our shores. It is not labor costs, or that they are smarter or harder workers, or that we just can’t compete and this movement is the “natural order” of things. That is all part of the distortion out there.

Q: WHAT ARE THE THREE MOST IMPORTANT STEPS THAT CONGRESS AND/OR THE ADMINISTRATION CAN TAKE TO BOLSTER THE MANUFACTURING SECTOR HERE?
A: First, enforce fair/free trade legislation and hold our trading partners accountable for playing on a level playing field. Second, negotiate for our interests and not against those of domestic manufacturing in all trade negotiations. Protect our trade laws in all Doha negotiations. Third, get a serious energy plan in place and get availability of globally competitive energy to our manufacturing base.

DARLINGTON—BUT WITHOUT THE RACE CARS

Dan DiMicco had one of his biggest audiences yet. A crowd of 4,000 rallied at Darlington Raceway in Darlington, South Carolina, in support of the quest to save the increasingly fragile U.S. manufacturing sector.

The Nucor Corp. CEO, accompanied by NASCAR greats Bobby Allison and David Pearson, told the crowd on Nov. 1 that mounting job losses were due in part to the undervaluation of the yuan—but the problem was not just the Chinese.

“Tell the politicians to give us a level playing field, and we'll compete against any nation in the world,” DiMicco exhorted the crowd that included Nucor employees, their families and friends, as well as hundreds of elected officials and local media.

CNN's Lou Dobbs carried a live segment of the rally on his nightly business report and remarked admiringly that a corporation was “working in behalf of American workers.”

The Darlington rally, sponsored by Nucor, was one of a series of Town Hall meetings to help muster support for initiatives to help preserve the U.S. manufacturing base.

“Dan is a true evangelist for this problem,” said Bill Hickey, president of Lapham-Hickey Steel Corp. in Chicago, who spoke at the session on the Chinese currency issue.

DiMicco's message, in which he cited the loss of 3 million manufacturing jobs in the U.S., including 80,000 in South Carolina, played well. After the speeches, the audience swarmed the dais to shake hands with DiMicco, ask questions and offer suggestions. Darlington is home to a Nucor bar mill and a cold finish facility that employ 400 workers.

“We're trying to get political muscle,” Hickey says. The hope is that attendees will vote based on what they heard and have a grassroots impact that is heard in Washington, D.C.”

 

HOW NUCOR DOES THE JOB

A few questions about Nucor itself. What are the advantages to your flat structure, with only four layers between you and the shop floor?
Ease of communication equals effective communication equals efficiency equals success.

What are the disadvantages?
There are none.

Does making a flat structure like this work in an industrial setting necessitate a great deal of training and mentoring?
No, but it goes on everyday.

What about results? How do they get reported? In essence, how does the organization communicate without the multiple levels?
It is actually much easier and has fewer barriers to information flow. Keeping it simple works.

How do decisions get made?
As far down the organization as we can push it, sometimes by individuals and sometimes by teams.

Is the flat structure helpful in terms of employee retention? What is the average tenure of an employee?
Yes. [Most of our employees work for us] for a lifetime.

I have read about the idea of negotiating an employee’s salary every day. You compensate employees on a weekly bonus schedule that accounts for two-thirds of what they make. That employees are in control of how much they make has obvious advantages in terms of motivation and productivity but how do you manage it?
We don’t, the system does. What we do is make sure it is fair and functioning for both the employees and Nucor.

You have the broadest range of products of any U.S. steelmaker. Why?
Diversification equals flexibility; less risk equals sustainable profits.

It seems counterintuitive that you can also be the most profitable. Are all of your product lines profitable or do you use them to balance cyclicality?
Yes, and yes.

You had a record year in 2004 and seem on track to at least meet that even as prices have come down. How did you anticipate the downturn and compensate for it in order to maintain profitability levels?
We don’t specifically anticipate a particular downturn—the market will be what it is. We do put together a strategic plan to drive profitable growth throughout the business cycle.

The successful execution of our strategic plan is the key—to grow our company, to provide market leadership and diversification (within steel) and the resulting flexibility and by taking care of our customers.

You say that when you buy a company, you “change the way they operate.” How do you mean that? Technology? Management? Operations? All of the above?
All the above, but mostly we work to instill our culture, a culture that is geared to take care of our customers. Our customers are our shareholders, our employees and, yes, all those who buy and use our products.

Pay for performance, lean manufacturing, lean chain of command, teamwork, risk taking, cost controls and profitable growth.

Are you interested in making more acquisitions?
Yes, if they meet our three criteria: don’t overpay, culturally compatible and keep to what we know.

This is a famously risk-averse industry and yet you put risk at the head of the list of competitive differentiators for Nucor—risk, innovation, hard work, incentive. What makes your company ready and willing to embrace risk and use it to your advantage?
That is why we have been the anomaly in our industry—successful, growing and profitable regardless of market conditions.

It is our can-do attitude—a culture that rewards risk-taking and continual improvement.

It works! And it gives us our competitive advantage.