From Carnegie forward, American steel companies had designed each of their plants to function as a single operation; from ore refinement to blast furnace to casting, steel manufacturing was one integrated operation. As such, Big Steel in its heyday made big profits. Until those big profits became a big draw for every looter who could somehow get his hands into the till of the American steel companies—and until the U.S. government sanctioned that looting, putting itself first in what would become a long line of thieves.
Lots of rust.
By the time Ken Iverson came along, using that method meant hundreds of millions of dollars—perhaps billions to be truly competitive—in capitalization, not only to get the plants up and running, but to jump through the legal hoops required by government agencies; to pay for the cost of government regulations; to avoid anti-trust lawsuits; to bank roll the unions—to, in short, pay off the thieves.
Though Iverson insisted that Big Steel could be made profitable if America’s steel companies would simply think in terms of manning efficiency—eliminating the featherbedding both on the line and in the office—the hard facts were that even using this approach would still require an abundance of start-up capital from any newcomer in the field. In 1968, Vulcraft and Nuclear just didn’t have that sort of investment capital.
So Ken took a different approach. He decided not to make steel from refined ore but from scrap metal in what is called a mini-mill. This was how the Europeans were able to make such inexpensive steel. Ken Iverson took their idea and pioneered it in America. In so doing, Ken took integrated steel making to the next level, in a mini-mill process that even the Europeans had not tried.
Iverson’s approach required using two relatively new kinds of technologies, the Electric Arc Furnace) (EAF) and a process called continuous casting. An EAF is essentially a huge dish or bowl shaped hearth. A kind of removable lid equipped with electrodes underneath sits atop this furnace dish. The dish is filled with scrap metal, the lid lowered and the electrodes are powered up. The result is that the scrap metal is melted by heat produced from electricity, rather than from a fuel and coked fired blast furnace.
Continuous casting fits into this procedure by taking the molten steel and casting it right out of the EAF furnace dish—without first cooling it!
Many snickered at Ken’s plan, including Big Steel—until he started to build new mini-mill steel plants as fast as others were closing their large steel plants.
Iverson’s company, now renamed Nucor, opened its first mini-mill in Darlington, South Caroline in June, 1969. Nucor’s mission—recall—was to produce good, inexpensive steel for use in making Vulcraft joists and steel grates. But because of Iverson’s business plan—lean and mean at every level, non-union workers, performance bonuses and high tech cost efficient production methods—Nucor suddenly found its low-cost, quality steel in great demand. Ken decided that Nucor could—and would—meet that demand.
Throughout the 1970’s and 80’s, Ken opened joist and steel grate plants in Bay City, Indiana (1972) and in Brigham City, Utah (1982). Nucor mini-mills soon popped in Grapeland, Texas (1975); in Norfolk, Nebraska (1977); and in Plymouth, Utah (1982). Over the next 16 years, Nucor’s earnings grew at 20%, with an average return on investment (ROI) of 18%.
How did Nucor’s wealth production, though, stack up against the big boys of Big Steel? Here’s one telling example. In the early 1980s, Nucor Corporation had grown into the most profitable carbon-steel operation in the world. In 1984, it produced 1.5 million tons of steel, with sales of $660 million and profits of $44.5 million” (American National Business Hall of Fame) This at a time when Big Steel was slowly dying from massive revenue losses in a sputtering American economy.
What about Big Steel’s hot shot union workers? Another telling example: The average hourly worker’s annual pay at Nucor in 1985, as reported at the time in Reader’s Digest, was $40,000! This was comparable to the Nucor worker’s Big Steel union counterpart—if that union leashed worker could get a job at a Big Steel company in 1985, which more than likely he could not even though the economy as whole was in recovery.
One final example: The average income for a Nucor hourly employee was double that of the average factory worker in the rural locations where Nucor built its plants. Nucor was creating wealth in places like Utah that would become, in the 1990’s and beyond thanks in part to Nucor, hot spots of progress and growth.
Ken Iverson had relit the sacred fires gone out in the East, and from those fires in his Nucor mini-mills, he ignited the nation. What followed was a record of industrial success unparalleled in steel making in the latter part of the 20th Century.
Ken, however, wasn’t through. Indeed, he was just getting started.
During the 1980’s, not content to just keep expanding the reach of his joist operations and his mini-mills, Ken Iverson decided to pioneer a new technology in steel making: continuous, thin-slab steel casting. Experimental, developed by a German, the process had never been attempted. Not by the Europeans. Not by the Japanese. Not by Big Steel. It was a huge gamble, and Ken bet his beloved Nucor—all that he had built thus far—that his gamble would succeed.
The rest of the story is told in detail in Richard Preston’s American Steel. Preston’s account about Iverson and Nucor’s exploits is reminiscent of the great 18th and 19th Century American business titans whom we have all read about in our history school books, an American honor roll of merit that includes Astor, Vanderbilt, Hill, Carnegie, Dow, Rockefeller, Morgan, Ford, Durant.
This chapter in Iverson’s story begins in Crawfordsville, Indiana, where a new kind of never-before-seen steel plant is to be built. Nucor planners, engineers, contractors and workers gather. A monumental struggle begins. Seemingly insurmountable obstacles arise, followed by spectacular failures—mounds of capital are expended at an alarming rate—a growing doubt spreads among Nucor investors—naysayers are popping off in the press left and right—and, silently, America’s industrial tycoons for which steel is their companies’ life blood wait in agonizing suspense.
Then: heroic perseverance—brilliantly ingenious solutions—increasing successes—a muted but steadfast and growing determination—and, in the end, glorious, magnificent triumph! And above it all the while, leading the way—tough, certain, unflappable, his eyes ever focused on the goal—stands Kenneth Iverson.
The Man of Steel.