Passing the torch at big steel.

When what was then the Nuclear Corp. of America moved into steelmaking in the late 1960s, success was hardly a cinch. In pouring the first batch of steel into a mold at a plant in Darlington, SC, a defect in the process caused molten metal to spill on the floor of the plant. The "breakout" prompted dozens of panicked workers to flee the building.

"We had only 20 people who'd ever been in a steel mill before," says F. Kenneth Iverson, then-president and CEO of the troubled conglomerate. "The rest were butchers, bakers, and sharecroppers." In the wake of the mishap, he adds, "we were left asking ourselves, 'Are we ever going to have a steel mill?'"

In retrospect, the twinge of doubt seems amusing. In the generation since, the Charlotte, NC, company has chalked up a solid track record, changing its name to Nucor, focusing on steel, and near-singlehandedly breathing life into a moribund U.S. industry over the past few years. Its key to success: so-called minimills producing steel via scrap and electric furnaces, rather than conventional blast furnaces. The payoff is faster steel at a lower cost than that of larger competitors such as USX, Bethlehem Steel, and LTV Corp. Under Iverson, Nucor more than doubled sales and tripled pre-tax earnings between 1990 and 1994, compiling impressive stock-market gains.

Last year, however, steel prices softened, margins thinned, and competitors launched their own minimills, nipping at Nucor's heels much as the company once bedeviled its elders. With 70-year-old Iverson stepping down as CEO on January 1, while retaining the chairman's position, the job of acclimating the company to the harsher environment has fallen on the shoulders of John D. Correnti, 48, formerly the company's president and chief operating officer.

In assuming the Nucor mantle, Correnti says, his most immediate challenges include maintaining the pace of technological innovation; expanding into related, steel-product businesses; and getting into higher-margin steels. Perhaps most important, he has set for himself the difficult task of maintaining a small-company culture in what may be the nation's largest steelmaker by the year 2000, keeping $3.3 billion Nucor fast, flexible, and, he hopes, a step ahead of the competition.

"Nucor acts, smells, and feels like a $300 million company," says Correnti, a 10-year engineering veteran of U.S. Steel who was recruited by Iverson in 1980. "That's an important part of our success equation." Senior executives are particularly proud of a decentralized management scheme that cedes near-total autonomy to 19 divisions and is administered by a whippet-thin headquarters staff of 22 people. Working in tandem, Correnti and Iverson play a direct role in everything from health and safety compliance to employee-management dispute resolution.

To be sure, culture is king at Nucor. Asked why Correnti is the right man to succeed him as CEO, Iverson passes over a host of technical criteria and snaps, "We both answer our own phones."

"Each of our 6,200 employees has our home phone number," says Correnti, a Republican and, ironically, a fast friend of Bill Clinton; Correnti meets occasionally with the nation's chief executive to talk politics and steel at the White House or on the rubber-chicken circuit. "I field 15 to 30 calls a year. Both Ken and I have an open door; that's one of the reasons Nucor has remained nonunion. Employees have an avenue of appeal." In fact, Iverson and Correnti recently convinced a plant manager to reinstate a young, gung-ho employee who was dismissed for fudging his bonus calculation for ego. "You have to look at things on a case-by-case basis," Correnti says. "I'd be very surprised if he isn't one of our best employees for the rest of his career."

Despite the increased competition in the steel industry, analysts hand Nucor and its management team above-average marks. "Nucor has demonstrated its ability to grow in an industry that had been declining for several decades," says Jordan Estra, who tracks the steel business in New York for Merrill Lynch. "Its growth has been based on an aggressive management style, reliance upon revolutionary technologies, and a keen understanding of the commodity-like nature of the steel market."

Indeed, technology drives success at Nucor. The company was the first to use thin-slab casting, which cast molten steel in 2-inch-deep blocks instead of 8-to-10-inch blocks, using less manpower, equipment, and energy. The technique slashed production costs from 4 to 5 man-hours per ton to less than six-tenths of a man-hour per ton. On the horizon is thin-strip casting: Relying on similar principles, Correnti says, the process is expected to knock another couple of tenths off man-hour costs.

Thin-strip improvements illustrate the law of diminishing technology returns in the steel business. The next quantum reductions in steelmaking costs remain in the offing. A Nucor start-up in Trinidad is experimenting with a process to reduce iron ore to iron carbide, a cheaper scrap-steel substitute. The company also formed a joint venture with industry leader USX to convert iron carbide directly into steel without costly blast and oxygen-driven furnaces. Some industry experts maintain the process may cut production costs by one-third.

Correnti targets annual growth of 15 percent to 18 percent a year. In a mature business expected to grow at a snail's pace, "that means taking market share away from larger, integrated manufacturers," he says.

But if the new CEO is looking ahead, he's also peeking over his shoulder, where a spate of Nucor wanna-bes is launching a run for the money in flat-rolled, or sheet, steel. Contenders already up and running include Steel Dynamics, a company created by former Nucor managers; and Gallatin Steel, a joint venture between Canadian companies Co-Steel and Dofasco. Still in the construction phase are Trico, a joint venture between LTV of the U.S., Sumitomo of Japan, and British Steel PLC; and Delta Steel, a joint venture between Australia's Broken Hill Proprietary and North Star Steel of the U.S. Nucor has two flat-rolled plants and is building another in South Carolina.

Partly because of these Nucor "look-alikes," says Vice Chairman and CFO Sam Siegel, the company's stock has traded down to about $59 from last year's high of $72. "The stock was up 75 percent in 1992 and another 35 percent in 1993," Siegel says. "It needs some time to rest." Flat-rolled steel comprised 43 percent of Nucor's tonnage in 1994, with bar and structural steel accounting for the remainder, Siegel says. The company's products are used by auto and appliance maker's; nearly one-quarter of its raw output also goes to its own divisions, which turn out finished products such as steel joists, parallel beams used to hold up the planks of a floor or the laths of a ceiling.

Eventually, Correnti would like-to push Nucor - the nation's fourth-largest steel company - more significantly into global markets. Currently, the company exports only about 10 percent of the 7 million tons of steel it produces.

Iverson acknowledges that he tapped Correnti to lead Nucor because of the younger executive's depth of engineering expertise. "It's just a business-as-usual transition from one generation to the next," he says. "Sam Walton did it with David Glass when he turned 70, and that worked out pretty well for Wal-Mart." For his part, Correnti salutes his predecessor and vows to keep the faith: "Anyone who thinks he can fill Ken's shoes doesn't know the business. I just want to keep the train rolling down the track. If it ain't broke, don't fix it."

That's made somewhat easier by the fact that "we're both real similar," says Correnti of Iverson. "We're both engineers, not accountants, and we have the same type of people skills."

The chairman returns the compliment, claiming that the biggest difference between the two executives is just your typical generation gap. "John is a little more flamboyant," says the genial Iverson, who was raised during the Depression. "And he likes to wear loud ties."

"My wife buys them to offset my conservative shirts," parries baby-boomer Correnti. "Besides, Ken's 70 years old. His definition is in the eye of the beholder."

RELATED ARTICLE: PROFILE

JOHN D. CORRENTI President and Chief Executive NUCOR

Born: Mount Morris, NY.

Age: 48

Education: Bachelor's degree, civil engineering, Clarkson University.

Family: Wife, Dawn J.; son, Nicholas, 13

Boards: Harnischfeger, Navistar International, CEM 

Industry affiliations: The Steel Service Center Institute and The Steel Manufacturer's Association.

Interests: Skiing; reading Dick Francis mysteries; movie buff; Pittsburgh Steelers fan.

Last book read: "My American Journey," retired Gen. Colin Powell's autobiography.

Car: 1990 Lincoln Town Car.

Circle of friends: U.S. President Bill Clinton.

Mentors: Nucor Chairman F. Kenneth Iverson (business); father, Nicholas; maternal uncle, Sandy Annalora; maternal grandfather, Salvatore Annalora.

Best decision: Joining Nucor.

Biggest mistake: "Too numerous to name."

RELATED ARTICLE: PROFILE

F. KENNETH IVERSON Chairman NUCOR

Born: Downers Grove, IL.

Age: 70

Education: Bachelor's degree, aeronautical engineering, Cornell University; master's degree, mechanical engineering, Purdue University.

Family: Married with two children.

Boards: Wachovia, Wal-Mart, Tultex, Wikoff Color Corp.

Industry affiliations: National Academy of Engineering.

Achievements: Awarded National Medal of Technology by former President George Bush; named 1995 Best Chief Executive in the Steel Industry by the Wall Street Transcript.

Interests: Tennis; raising water fowl, including black swans, Chinese geese, Mandarin ducks.

Last book read: "Vision of the Anointed" by Thomas Sowell.

Car: 1994 Mercedes 380 Sedan.

Mentor: Father, Norris.

Quote: "Much good work is lost for the lack of a little more."