Better in their words…

Nucor, one of the world’s most profitable steel companies, hasn’t laid off an employee in 42 years in the business. What’s its secret?
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CHARLES R. MORRIS
March 3, 2015 7:02 p.m. ET

Nucor is one of the world’s most profitable steel companies and the only North American steel company to have an investment-grade bond rating. Dan DiMicco was its chief executive from 2000 through 2013; during that time he tripled the firm’s revenue, increased profits sixfold and earned shareholders 720% on their investment. In Nucor’s 42 years in the steel business, it has always paid a dividend, and it has never laid off an employee, even during the recent crash.

With “American Made,” Mr. DiMicco delivers a broadside against the fashionable “secular stagnation” theorists dominating the political discourse—who cite, variously, an aging population, globalization or the lack of technology breakthroughs as insuperable obstacles to restoring healthy growth. Since he is a metallurgist and a star manufacturer, his advice is heavily weighted on the side of increasing the country’s manufacturing footprint, eschewing low-growth service jobs for the work of making things.

Mr. DiMicco estimates that, on top of the normal growth of the workforce, we need to create 30 million jobs in the next 10 years to curb the current underemployment—the part-timers and the labor-force dropouts who aren’t counted officially as unemployed. We can’t do that, he says, if “millions of college graduates are slinging hash or selling Chinese-made tennis shoes” or, even worse, working in Wall Street’s “malicious trading-room capitalism.”

The $787 billion federal stimulus program in 2009 was big enough to do the job, he says, but it was wasted. Only $60 billion was allocated to programs that created real jobs, like infrastructure repair, mostly because the states didn’t have the required matching money. “Trendy green subsidies” didn’t help either, since they emphasized technology development rather than current jobs. But most important, the stimulus was overwhelmingly targeted to income enhancement, like tax relief and rehiring laid-off state and local workers. That emphasis seemed to make sense at the time, but 80% of such income enhancement went overseas for imports.

Mr. DiMicco is no fan of the Obama administration, deploring a 2009 meeting at the White House with business executives that focused on climate change and health-care reform rather than job creation. But he also criticizes Republicans for being, after the 2008 recession, “so obsessed with the national debt” that they were “blind . . . to the larger crisis.” Both parties, he says, “tried to redefine the economic crisis to fit the policies they really want, rather than address the crisis for what it really is.”

A core problem, Mr. DiMicco believes, is America’s Pollyannaish view of free trade. The Marshall Plan and other splendid initiatives to assist in the postwar reconstruction of Germany and Japan accustomed us to the role of the benevolent rich uncle, ignoring how rapidly our wards were transforming into competitive powerhouses. It took the Plaza Accord of 1985 to stop egregious German and Japanese currency manipulation—both countries purposely cheapening their currencies against the dollar to fuel their conquest of American markets.

The Chinese attack on American markets since the early 2000s has been even more predatory. Nucor is one of the most efficient steel manufacturers in the world. It takes only 0.4 man-hours to produce a ton of sheet steel, and Nucor makes it out of scrap, which is cheaper than ore. So the total cost is about $8 to $10 a ton. China must import its iron ore, and it costs $40 a ton to ship steel from China to the U.S. Yet China is still underselling Nucor. In short, China is dumping product at any price to keep its mills working. Complaints to the World Trade Organization or other tribunals are rarely acted upon.
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Mr. DiMicco is scathing on big companies like Boeing—he could have also cited GE and Caterpillar—that are transferring their crown-jewels technology to Chinese partners in the hope of gaining permanent footholds in the huge Chinese market. More likely, he expects, they will soon awake to find all their contracts going to newly empowered Chinese champions. China is pursuing a national industrial strategy, he argues, and has no commitment to free markets. History offers many analogues. Germany dumped steel as part of its industrializing strategy in the run-up to World War I. The British economics establishment was virtually unanimous against retaliation, claiming that the market would exact its own penalties. They were wrong, and the British steel industry was decimated.

Despite the threats to American pre-eminence, Mr. DiMicco is an optimist. He proposes a massive 10-year infrastructure upgrade program. (Nearly all international comparisons show that the U.S. has badly neglected its roads, airports, water systems, electrical grids and industrial canals—all essential contributors to an industrial revival.) He thinks that the “skills gap” is a myth. Nucor sponsors cooperative training programs with public institutions at nearly all its locations and, he says, has no trouble finding workers. While he supports environmental regulation, he pleads for streamlined, coordinated reviews. A new Nucor plant in Louisiana was held up for five years as it bounced between multiple agencies and courts. A simpler and more uniform corporate tax, he says, could produce the same revenue at lower rates and improve our competitiveness.

Few of Mr. DiMicco’s recommendations are original, and few people will agree with everything he says. But the book is a cri de coeur from one of our best executives from one of our most successful companies. Attention should be paid.

Mr. Morris, a fellow at the Century Foundation, is working on a book on the crash of 1929-33

http://www.wsj.com/articles/book-review-american-made-by-dan-dimicco-1425427374