A Nation the Makes and Builds Things

Can Americans still make stuff? Do we have excellent companies that operate w/o a lot of debt, stick to their business and operate with a lean staff? Can we Americans reinvent ourselves again? I think so.

C&J attended the annual shareholders’ meeting of Nucor steel. We have owed a few shares of Nucor since the early 1990s, but this is the first time we have attended a shareholders’ meeting of any kind. Despite our lowly very small shareholder status (we own 200 shares out of the 315 million shares outstanding), everybody was friendly to us. The CEO spoke to us and seemed to remember our names. The chief financial officer took a few minutes to explain the Nucor philosophy.

I bought Nucor nearly twenty years ago because I liked the philosophy of the company. I read about Nucor and its famous CEO Ken Iverson in In Search of Excellence when I was in B-school, but it took me around six years to pay off my student loans and be able to invest in anything at all besides paying off loans. After all those years, it still seems to be an excellent firm. There are more than 20,000 employees, but the firm is run with a corporate staff of around seventy-five. Top executives do not get company cars, corporate jets, executive dining rooms or even executive parking places at the headquarters. Nucor is headquartered in Charlotte, a medium sized city and its operations are generally located in small towns and rural areas, where costs are lower and American work ethics strong.

Nucor was an American pioneer of electrical arc furnaces, which let it run smaller and less expensive mills called mini-mills. While the big steel was literally rusting away, Nucor’s mini-mills were making steel in America that could compete internationally. These mills can easily process and recycle scrap and steel is the most recycled material on earth. Nucor recycles a ton of scrap every two seconds.

The Harvard Business review rated Nucor CEO Daniel DiMicco and the management team as one of the best in the world, pointing out that the list of the best CEOs overlapped very little with the list of the most admired or the most highly paid.

The economic downturn has hurt Nucor too. The firm made a profit every year from 1966 through 2008, but lost money last year, although made money again in the fourth quarter. Nucor’s cost structure is highly variable and counter cyclical, i.e. the prices of scrap metal and energy tend to decline when the economy declines. This has helped Nucor stay profitable through hard times – until this last year, of course. Companies like Nucor show that Americans can still make big, heavy industrial things profitably. This is the example I have, but I know there are many others. As I wrote above, I first learned about Nucor when I read In Search of Excellence. That was back in 1983, when America was going through hard times as we are today. There was a crisis of confidence and many people thought that our best days were behind us. They were wrong. Americans know how to reinvent themselves. We did it before – many times – and we can do it again and we will do it again.