Nucor

Chapter 1

The Nature of Management Control Systems

19

Case 1-1

Nucor Corporation (A)

Basically when you are at the peak of the We are a cyclical business. cycle—times are good, interest rates are low, people are building—our margins increase. When we go to the trough. of course. the margins are squeezed. But over the last 25 years Nucor has never had a losing quarter. Not only a losing quarter, we have never had a losing month or a losing week.’ John D. Correnti, President and CEO, Nucor

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In 1998 Nucor was a Fortune 500 company with 6,900 employees and sales of $4.3 billion in steel and steel-related products. Its chairman, F. Kenneth Iverson, had headed the company for more than 30 years. During his tenure, the steel industry faced a number of problems, including foreign competition, strained labor relations, and slowed demand for steel (related in part to the substitution of alternative materials). Despite these industry challenges, Nucor’s sales during Iverson’s tenure grew at an annual compound rate of about 17 percent per annum. Selected comparative financial data are shown in Exhibit 1. In different years, both Iverson and Nucor CEO John Correnti were named Steelmaker of the Year by New Steel magazine.

EXHIBIT 1

Selected Financial Data 1993-1997 Sales 1997 (S in billions) Return on Equity (5-year average) % 1993—1997

18%

Debt! Capital % 1997

7%

5-Year Sales Growth % 1993—1997

23%

Profit Margin % 1997

8%

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Nucor Texas lndustries* (parent of Chaparral Steel) National Steelt USX-US Steelt Bethlehem Steelt LTV Northwestern Steel* Industry Median

Mini-mill.

$4.1

1 .0 3.1 6.8 4.7 4.3 0.6 $1.9

12 7 10 Deficit 11 2 10%

22 27 21 28 18 71 30%

12 6 7 3 3 7 8%

8 7 6 Deficit 1 Deficit 3%

lntegrated steel producer. Source: Forbes. ,Januar 12, 1995. pp. 196—97.

This case was prepared by Vijay Govindarajan. The cooperation and help provided by F. Kenneth Iverson, chairman, Nucor Corporation, in preparing...