Bootstrapping for Billions

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At Nucor work is done in small, tightly knit groups guided by a supervisor. "Manufacturing work can be humdrum," says Roos, "but we give our people the chance to shape their own work." That, he reasons, takes the edge off the drudgery. Production workers are on four days, and then off four -- but each shift runs 12 hours. Seniority saves no one. All workers must alternate between working day and night shifts.

Out in the cold mill a coil of steel spins through a whining mass of machinery the size of a small two-story house. That is a reversing mill. Based loosely on the concept of the wringer on an old-fashioned washing machine, the mill rolls steel to reduce its thickness. The group running it numbers just four. Crew chief John Lewis works the computerized controls as Randy Penick, the utility person, and Al Woodall, the entry operator, watch the progress of the coil through the mill. Paul Cohee, the fourth member of the crew, operates the crane that guides the next coil into place for processing. The noise is deafening, and a greasy film hangs in the air as lubricating oil gets spun off the steel whirring through the mill. By shift's end the crew members' blue uniforms will have turned a coppery brown.

The reversing mill was deemed dated technology when Nucor bought it -- used -- thrown in for $5 million as an afterthought by the German supplier that installed the main casting line in the plant. The supplier rated the mill's output at 325,000 tons per year. Crews changed the way the coil was fed into the mill, upping the speed it could pass through from 960 feet per minute to 1,960 feet. They reduced the time it took to thread the coil on the rollers from five minutes to 20 seconds. They found a better grade of lubricating oil and installed a bigger motor on the payoff reel.

Those changes, coupled with hard work, resulted in the reversing mill's rolling 650,000 tons of steel last year -- twice as much as its manufacturer believed it could.

This year it should do 700,000 tons.

Assets: Forever betting on the undervalued
Every good bootstrapper knows how to buy assets like that reversing mill for a dime or two on the dollar -- and then get more production out of them. Both Nucor and Computer Associates are aggressive acquirers of nominally different things. Computer Associates buys software companies and the talent therein. Nucor buys equipment. Ultimately, though, both companies are buying the same thing -- undervalued technology they believe the business can leverage.

Nucor's Crawfordsville plant is built around a single and substantial technological bet, the ability to achieve continuous casting of a thin slab of sheet steel. When Nucor built the plant, in 1988, at a cost of $250 million, the technology for the process had never been proved on a production scale. Metallurgists believed steel could not be continuously cast in a slab less than eight inches thick. In casting sheet steel, there is a big advantage in making it as thin as possible, since rolling steel to reduce its thickness is costly.

Nucor's bet paid off, with Crawfordsville being the first production-scale caster to produce a continuous slab just two inches thick. Competitors are now scrambling to follow Nucor's lead, but the company recently installed a second caster at Crawfordsville. The first caster gave Nucor its cost advantage by stripping out about $50 per ton in conversion cost. The second will give it leverage. It will cost $45 million and require adding 30 people to the workforce. But it will increase the plant's annual output from 1.1 million to 1.8 million tons.

While Nucor embraces breakthrough technologies like continuous casting, it also prides itself on taking a shop-floor approach to making them work.

Vince Schiavoni, manager of the hot mill, says Nucor deliberately gives equipment vendors rough parameters on the theory that engineering specifications that are too tightly drawn "can trample good-quality suppliers." Schiavoni tells vendors he wants equipment 85% done upon installation for two reasons. First, he wants the asset in place because management pay tilts heavily toward hitting return-on-assets targets. Better to have a machine running half-speed than not at all, he reasons. Second, steel-mill conditions never approximate those of the laboratory. "We want to be able to tinker with equipment, because only the workers know what's really going on under production conditions," he says.

Three years ago Nucor decided to install a galvanizing line that coats finished steel to enhance its durability. Engineers from $17.8-billion USX Corp. (formerly U.S. Steel) visited the plant in July 1992 before the foundation for the line had even been poured, and Nucor engineers told them they'd have the line running by year's end. As Glenn Pushis, a Nucor engineer, recalls, the USX visitors laughed; they, after all, had started building a similar line a year earlier, and it still wasn't up. The day after Christmas, USX ran its first coil through its new galvanizing line. Twelve hours later Nucor ran its first coil. Nucor spent $25 million to build its galvanizing line. No one else has done it for less than $48 million, according to Pushis.

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