ROLL DICE, NOT STEEL.

Nucor bets big, doubling down with strip casting. Its new CEO could show he's a winner - or crap out.

Daniel R. DiMicco crows about the future. President and CEO of Nucor Corp. for a year now, he boasts about a project he thinks can revolutionize not only his company but the entire steel industry. "I have no idea how big it can get," he says in the rat-a-tat-tat cadence of his native New York. "I just know that it will be very profitable, that it will have worldwide application."

It is a technology for making sheet steel -- raw material for everything from car fenders to refrigerator doors -- called strip casting. Henry Bessemer envisioned it when he invented the methods for modem steel making in the 19th century. Trouble is, nobody has been able to make it work commercially. If Nucor can, DiMicco, who's also vice chairman, will have quickly made his mark on a company famous for taking big risks and -- sometimes -- reaping big rewards.

Naysayers are legion. But they don't have the job once held by Ken Iverson, one of the industry's giants, a man who was literally a legend in his own time. Nor are they the handpicked successor to the man who toppled Iverson in a boardroom coup three years ago. Though strip casting is only a third of DiMicco's three-part plan to plump the Charlotte-based steel maker's waning profits -- the 51-year-old also wants to buy other companies and squeeze even more efficiency out of Nucor's streamlined mills -- strip casting, whether it flies or flops, likely will be a key part of his legacy. "If it doesn't work, it will be another situation where Nucor took a risk on something," he says. "It is not going to make or break the company. It won't make or break my career.

That's his spin. But if the experiment fails, so will DiMicco in his first high-profile test as CEO. Analysts and investors won't recall that strip casting was former CEO Dave Aycock's baby. Sure, Nucor is big enough, with $4.6 billion in 2000 sales and 8,000 employees, to absorb even the sizable bet the company is laying on strip casting. It is spending an estimated $105 million on a prototype plant in Crawfordsville, Ind., which should open in the first quarter of next year, and is prepared to spend $50 million more on ramping up.

And, yes, the company does have a culture of taking gutsy risks. Gambling on new technology helped make Nucor the nation's largest steel maker. Iverson bet big on minimills, one half the size of -- and much cheaper than -- traditional steel mills.

Under Iverson, Nucor went from near bankruptcy to being hailed as the savior of America's $45 billion steel industry. Minimills, which Nucor pioneered in 1969, weren't his only innovation. In 1989, Nucor built the world's first thin-slab caster. With the risk came reward: profits that one for-Mer Nucor executive described as obscene.

The company became a blueprint for the remodeling of corporate America: a lean, if not mean, operation with decentralized management. Iverson kept the unions out of his mills, which were built in rural areas, with bonuses and incentives. Nucor had some of the industry's highest-paid workers -- and lowest labor costs -- because its people were so productive.

Iverson liked to boast that roughly half the company's investments in new technology and ideas didn't pan out. But as he grew older, his critics claimed he became set in his ways and wouldn't let the company evolve. In 1998, Aycock, who had been Nucor's president and chief operating officer from 1984 to 1992, led the board revolt against his old boss, who stepped down as chairman at the end of the year. At the time, Iverson was 73; Aycock, 68.

The board named Aycock chairman. He quickly moved to shut down a $60 million experimental plant in Trinidad making iron carbide, an ingredient in steel. Iverson wasn't willing to close the plant even though it had operated six years without making a profit. The following June, Aycock asked for the resignation of CEO and President John Correnti, Iverson's handpicked heir, and took those titles, too. It was only temporary, he said, just until he found the right man for the job. That was Dan DiMicco.

"He's a forward thinker," says Aycock, who stepped down as chairman in September of last year. "The directors felt he'd never become dated or obsolete." The compliment seems a subtle jab at Iverson. Aycock continues, "He doesn't try to copy anybody else. You can't lead using somebody else's personality." This compliment, too, seems a jab, this time at Correnti.

The Mount Kisco, N.Y., native earned a bachelor's degree in metallurgy from Brown University in 1972 and his master's in the same field from the University of Pennsylvania in 1975. He went to work for Republic Steel in Cleveland right out of school and in 1982 joined Nucor as quality-control manager and plant metallurgist in Plymouth, Utah. In 1991, he became vice president in charge of the Blytheville, Ark., mill. When Aycock took over, DiMicco became one of the five executive vice presidents he would pick his successor from. With the job came both risk and reward: DiMicco got $1 million last year in cash and stock.

It's too soon to predict whether strip casting will be a heavenly reprise of slab casting or a hellish repeat of the Trinidad experiment. When Nucor was considering whether to invest in the technology, executives spent three days at a demonstration mill in Port Kembla, Australia. On two of the three days, the mill couldn't make steel.

But the company retains enough of Iverson's confidence that it bought in anyway, believing in its ability to beat the odds. "If successful -- and we think the odds are 50% -- it'll change the way flat-rolled steel is made for the next 30 years, and we'll have a big jump in cost and perhaps quality," Aycock says.

Unlike much of the U.S. steel industry -- 12 companies have sought bankruptcy protection since 1997-- Nucor can afford such confidence. It has been consistently profitable. Net earnings hit a record $310.9 million in 2000, up from $244 million the previous year. But competition from cheap imports is squeezing Nucor, just as it has the other domestic steel makers. Nucor's fourth-quarter earnings last year were $79.8 million, down from $97.6 million in the same quarter a year earlier. In the first quarter of 2001, they fell 40% from the prior year to $32.7 million. And in the second, earnings rose to $33.3 million, but they were still down substantially from the prior year's $81.8 million.

Yet the risks of strip-casting may explain why DiMicco and others at Nucor seem to contradict themselves when they talk about the technology. Even Richard Wechsler, president of Charlotte-based Castrip LLP, the joint venture created to manage the project, equivocates. "I am very optimistic," he says, "but we are also brutally realistic. Until it is operating and we improve the quality and cost, no bets can be made on its financial success."

When pressed, DiMicco will point out that strip casting is but one of several new technology ventures under consideration -- and that new technology is just one third of his growth strategy. "You have to look at the big picture," he says. He takes pains to point out that, once it's up and running, he'll know within six months whether it's close to turning a profit. If not, he'll kill it. The unspoken message: I won't repeat Iverson's mistakes.

But in the gray, gritty world of steel making, flashy R&D projects grab attention. Alan Cramb, co-director of the Center for Iron and Steel Making at Carnegie Mellon University in Pittsburgh, Pa., says Nucor's strip-casting project could be the greatest breakthrough in steel making in three decades -- if it works.

Others doubt it will. Among them is John Tumazos, a steel analyst at Sanford C. Bernstein & Co. He questions the quality produced by strip casting. All steel has bumps, craters and other imperfections when it's cast. They're literally ironed out in the rolling process because even small flaws mean waste and ballooning costs. Strip casting eliminates almost all rolling, leaving little margin for error. The motive behind strip casting is increased efficiency, but the possibility of defects leaves Tumazos wondering how efficient the process really is.

He also questions why the Australian company that developed strip casting -- Melbourne-based Broken Hill Proprietary Corp. -- isn't putting it into production. Nucor and BHP each have a 47.5% stake in Castrip. Tokyo-based Ishikawajima-Harima Heavy Industries Co. Ltd., which supplies the machinery, has 5%. If strip casting has so much promise, Tumazos says, "BHP would have kept 100% of the process."

Keith Busse was the executive in charge of building Nucor's first thin-slab mill in Crawfordsville. He left Nucor after Iverson picked Correnti as president when Aycock retired -- the first time -- in 1992. Now president and CEO of Steel Dynamics Inc. in Fort Wayne, Ind., he eyed strip casting when BHP shopped for investors. He came away unimpressed. "When we looked at it from our perspective, it didn't fly. For some reason, Nucor sees a benefit."

What Nucor sees is the chance to produce sheet steel more cheaply than its competitors. Mills must now produce a slab of steel, then flatten it with long lines of powerful rollers. Eliminate rolling and you can cut the size of a modern steel plant by more than three-fourths. That means dramatically lower construction costs. Strip casting should also use less energy (early estimates say as much as 80% less) and fewer workers, which translates to even lower operating costs.

Those sorts of predictions have been around a long time, but so far no one has been able to harness the potential of strip casting. The technique traces its lineage back to Bessemer, the father of modern steel. In his method, iron ore is mixed with carbon and melted in four-story-high blast furnaces. Molten steel is then cast -- poured into molds to produce ingots. Bessemer also conceived a method for casting steel in thin sheets, but putting his theory into practice proved impossible until recently.

Sheet steel arrived in America in the early 20th century when producers started to roll ingots into sheets. The process is like taking a roiling pin to a ball of dough -- only the dough happens to be blazing steel. A breakthrough came in the 1970s with the invention of slab casting. It allowed molten metal to be cast into 10-inch-thick slabs, a shape more easily pressed into sheets. In slab casting, molten steel pours into a funnel and is extruded as slabs and cooled by water. Rollers squash the slabs into a continuous sheet typically 0.06 inches thick. Slab-casting mills, stretching as long as a half-mile, can cost $1 billion to build. Only the biggest steel makers can afford them.

Iverson broke the big companies' hold on sheet-steel production in 1989 by introducing thin-slab casting. That process had been developed in Germany. The key was a new type of funnel that provided enough control over molten steel to cast much thinner slabs -- two inches thick instead of 10. Thinner slabs meant less rolling. A mill using thick-slab casting stretches 1,500 to 2,500 feet. A thin-slab mill is about 1,000 to 1,300 feet, and its construction costs about a third as much as the thick-slab mill. Once production begins, the smaller mills need fewer workers. With these advantages, a smaller company such as Nucor could compete with behemoths.

Nucor is building its experimental strip-casting plant next to the site of its first thin-slab plant in Crawfordsville. The location should ensure that DiMicco never forgets an opportunity the company missed when it introduced thin-slab casting. Make no mistake: Thin-slab mills made Nucor what it is today. In 1987, Nucor made $50 million in profit on $850 million in sales; in 1994, $226 million on $3 billion in sales. But its competitive edge didn't last. The company didn't get exclusive rights to the process. Within a few years, other steel makers had dozens of thin-slab mills in operation.

As those plants multiplied, engineers were already puzzling over the next step, trying to realize Bessemer's dream of casting steel directly into thin sheets. They imagined plants that would again shrink in size and cost, from as much as 1,500 feet long and $300 million for a thin-slab mill to 200 feet and $100 million for a strip-casting mill.

Strip casting requires super-cooled rollers and a nozzle that allows the steel to be extruded at a high speed. The pouring, cooling and shaping of the hot metal happen within seconds. To go from 3,000-degree molten steel to a thin strip of metal means cooling it 150 times faster than the methods previously used. "That is not easy," Wechsler says. "That just puts an enormous strain on materials. It requires new materials, new methods of extracting heat."

Among those seeking solutions to the problems was a secret joint venture of BHP and Ishikawajima-Harima. Called Project M, it began in 1989 and, after six years of research, led to hundreds of patents and, starting in 1995, the operation of a full-size demonstration plant in Port Kembla. By 1998, the plant was producing small lots of sheet steel of marketable quality but not quantity. The mill couldn't cover its $25 million-a-year cost and was prone to breakdowns. The radical temperature extremes quickly wore through parts, increasing downtime and maintenance costs. Nearly 10 years had passed. No end was in sight.

Paul Anderson had been president and CEO of Houston-based PanEnergy Corp. prior to its merger with Charlotte-based Duke Power Co. Duke's Rick Priory became CEO of Duke Energy Corp., and Anderson stuck around two years before heading Down Under. Besides making steel, BHP mines and drills for oil. The new boss demanded higher returns in every line of business. To the managers of Project M, Anderson issued an ultimatum: Commercialize strip casting or close the plant.

In 1999, Project M executives began hunting for a partner. They wrote to five companies -- including Nucor and Busse's Steel Dynamics -- inviting them to consider buying in. Many in the steel industry had heard about the project, but BHP's secrecy prevented them from knowing how far along it was.

Nucor sent a team to Australia led by Executive Vice President Dan Rutkowski. It included two managers who, like Busse, had been part of the Crawfordsville start-up. On their first day at pilot mill, the Nucor team watched as the machine refused to cooperate. BHP tried again the next day. The machinery balked again. "The third day, we said, 'We'll show up, but you better do something or we don't bid.' "Rutkowski recalls. "They tested successfully."

He returned to Charlotte with his recommendation: Buy the technology. Rutkowski saw an unreliable system but one that, when it worked, was capable of casting a thin strip of steel. "If it lives up to its possibilities, it is an amazing technology for the future of steel making."

Yet even Rutkowski admits the outcome is far from certain. Is Nucor poor-mouthing its technology so it can roll over competitors once the mill is running? Or is it trying to lower expectations in case it fails? Even a Nucor veteran such as Busse doesn't know. He says that, no matter how his engineers and accountants pored over the data on the strip-casting technology, they could not see enough of an advantage to make it worthwhile. "There's got to be an economic reason," he says. "Otherwise, why would we want to do it? We couldn't answer that question. Maybe Nucor found an answer."

Nucor struck its deal with BHP in January 2000 and created Castrip, based in Charlotte. Its board is made up of three Nucor executives, two from BHP and one from the Japanese company. Nucor gets exclusive rights to the process in the U.S. and Brazil, the world's eighth-largest steel-producing nation. Nucor has right of first refusal for any project to use the technology in the rest of the Americas. BHP gets exclusive rights in Southeast Asia, Australia and New Zealand. The three partners share in royalties from licensing in Europe, Asia and the rest of the world.

Nucor bears the cost of building the first mill. In March, it broke ground. Building the plant and perfecting the system could take up to two years. "If there's failure, we learn from that and go on," DiMicco says. "It's not the end of the world." Though Aycock gave him his job and this project, he cites Iverson as a model. "Ken often said our managers are going to make mistakes. He encouraged making mistakes, because that meant you were making decisions. You were doing something as a leader and not playing it safe."

Then he recalls an Iverson adage. "He always used to joke around: 'Just don't make real expensive mistakes.'"

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