Minimills, Maxiprofits: Nucor and Chaparral

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Making money in the steel business these days is about as easy as rolling an I beam uphill. Nonetheless, at least two firms are still forging profits: Nucor Corp. of Charlotte, N.C., and Chaparral Steel Co. in Midlothian, Texas. In the first nine months of 1982, Nucor earned $13.4 million on sales of $379 million. Chaparral cleared $11 million last year on sales of $160 million.

Nucor and Chaparral are leaders in a new class of companies that make steel in what are called minimills: small, low-cost plants that utilize state-of-the-art technology and, in most cases, nonunion labor. These factories contain none of the costly blast furnaces used to transform raw materials into steel. Instead, they take scrap steel, melt it down and reshape it into new forms. The minimills fashion small, specialized steel products rather than huge beams and sheets. Nucor's steel can be found, for example, in reinforcing rods for concrete walls, traffic barricades and lawnmowers.

Since it entered the minimill business only 14 years ago, Nucor has built seven plants in South Carolina, Texas, Nebraska and Utah. President Kenneth Iverson links his company's success to its modern equipment and employee-incentive program.

Depending on how much steel the workers produce, they are paid bonuses as large as 200% of their base salaries. Says Iverson: "People think that because we're in the South and are nonunion, our workers make less, but we reward high productivity." He contends that in 1981 the average blue-collar worker at Nucor made $30,000, in contrast to $28,500 at the large steel companies. But that Nucor worker, Iverson maintains, churned out about 850 tons of steel during the year, while employees at the big firms averaged only 350 tons.

The emphasis on cost cutting extends from the plant floors to the executive offices in Charlotte. "We have no company cars, no jet, no hunting lodges," says Iverson, "and everybody, including me, travels economy class." The "executive dining room" is a delicatessen in a nearby shopping center.

Chaparral built its single minimill seven years ago. Says Chairman Robert Rogers: "Our biggest advantage is probably that we didn't know anything about the industry when we started. We scoured the world for the best technology." After the plant was built, Chaparral continued to send out employees in search of new production techniques. Last year the company exchanged a ten-man steel-melting crew for a similar group from a Japanese firm. For five weeks the Chaparral team studied the fine points of Japanese steelmaking. Says Gordon Forward, the company's president: "We want to beat them at their own productivity game."