Domestic steel producers must develop processes that reduce the labor content of manufacturing if they are to beat foreign competitors, a nationally recognized steel executive said.
"About 20 percent of manufacturing goes to labor costs. We need to get that down to 10 percent; then we can offset the shipping costs for foreign steel," said F. Kenneth Iverson, chairman and chief executive officer of Nucor Corp.Iverson's comments came at the 15th annual conference of the Utah chapter of the Association of Steel Engineers. Nucor, which operates a plant in Plymouth, Utah, is recognized internationally for its innovative and profitable "mini mill" operations around the country.
Iverson explained that by cutting labor costs, American producers could make importing foreign steel too expensive.
In many cases it is less costly to import steel manufactured in Korea than it is to produce the same product domestically. Inexpensive Korean steel was a main factor in USX's decision to shut down its former plant in Utah County in 1986.
"We have the skills and ingenuity to compete with any manufacturer in the world. We need dedication to new management styles," Iverson said.
He said managers must be willing to make mistakes, take the feedback that comes from those mistakes and be willing to accept technological advancements.
At Nucor, Iverson said, management consists of corporate, general managers, department heads and foremen. He explained that Nucor's four layers of management allow decisions to be made quickly and for feedback from employees to reach management.
"About 40 percent of our decisions were bad and we (orporate management) received 50 to 60 calls from employees reacting to our bad decisions," he said.
Nucor's sales have grown from $22.3 million in 1965 to $800 million last year. Iverson said the firm has never experienced a quarterly loss.
Besides its management structure and bonus incentive pay, Iverson said Nucor uses the latest technology in its manufacturing and tries to stay on the leading edge. "If you fall behind in technology you can't afford the cost of catching up."
He described the technological innovations at Nucor's newest proposed plant to be built in Crawfordsville, Ind., which will reduce the cost of producing thin-slab steel by 18 percent, enabling mini-mills to produce thin-slab steel economically for the first time.
"This will have a significant impact for small producers all over the world."