Jim (cont'd):
In the last 12
months,
McCormick our
worst of times
stock… is down
7.3%… while
Nucor is down
19.4%… but at
what point Nucor
was down 60%…
right here…
Now, if you had
only owned
Nucor (NUE)…
not as part of
diversified
portfolio… just
as a play on the
economy to get
better soon… I
think that it
would have been
simple human
nature for you
to panic…. and
sell right here…
and then miss
the great big
rally up… that
is part of the
reason we
created a
notoriously
B.I.G.
accidental high
yield strategy…
where you buy
more of
accidental high
yielders like
Nucor… on a
scale base… on
the dividend
yields… because
as the share
price goes lower
the yield goes
higher… at its
lowest Nucor
actually yielded
at a might 8.5%…
now Nucor no
longer has that
accidentally
high yield that
we like so much…
and I think that
you can buy it
at a much better
price frankly…
remember we do
not condone
chasing stocks
on this show…
that said
though… doesn’t
matter…. $30...
$50... it is
still… by far…
our absolute
favorite in the
steel business…
and that is why
I want to talk…
this guy is one
of my… this guy
is really one of
my favorites… we
are going to
Nucor’s
fantastic CEO,
Dan DiMicco,
about his
companies
future.
▼ ▼
▼ ▼
▼
Start of
CEO
Interview
with
Daniel
DiMicco,
CEO of Nucor
Steel...
Jim:
Mr. DiMicco...
Dan... welcome
back to Mad
Money. How have
you been?...
Dan:
I have been
good, I could be
better. But I am
glad to be back
on the show
again.
Jim:
Okay, Dan, let’s
cut right to it.
The stimulus
package,
obviously one of
the key
hallmarks of the
stimulus package
is buy American.
That unless
there is just
absolutely some
total necessity
to buy away, we
should be buying
American steel.
When I read thru
your conference
call, I think
you totally
agree with that
don’t you?
Dan:
Absolutely.
Jim:
Well, what do we
do about guys
like the good
CEO at
Caterpillar?
Owens, who was
on with the
wonderful
fabulous Erin
Burnett
yesterday, and
he said that
this would be a
disaster for
America?
Dan:
Well, he is
an alarmist. And
it is
unfortunate,
Caterpillar is a
great company.
Everybody is
being negatively
impacted from
this economic
crisis, that we
are in today, it
is the
Granddaddy that
I have seen in
my lifetime. And
we have all got
to do things to
help our
employees, and
to help our
shareholders
thru this tough
time. And the
thing that we
are focusing on
here, Jim, is
hey listen, the
American
taxpayer is
going to be
footing this
trillion dollar
bill plus as we
go into next
year and the
year after. And
the stimulus
package is
designed to do,
by definition,
by the Obama
administration
and the
Congress’ own
words, is to
create jobs.
Jobs here in
America. Not
jobs in China.
Not jobs over in
Europe. Jobs
here in America.
And the issue
here is that
China is going
to be doing it’s
thing to get
it’s economy
going., and
focus on getting
it’s people back
to work. So is
Europe. So is
Russia. So is
Brazil. So is
India. We all
need to get our
own houses in
order, and when
we do that, when
we get back on
track with our
economy here in
the United
States, the
whole world gets
its house back
in order. Then
the whole world
is going to come
up. But unless
we take care of
our own
situation here
at home, we are
kidding
ourselves. If we
don’t reinvest
that money in
such a way that
it creates
American jobs,
and recycles
thru our
economy, we are
never going to
pull ourselves
out of this
mess. And we
will end up in
something much
worse than a
sever recession.
Jim:
Well, is that an
every country
for itself
strategy? Is
that not
somewhat like
what we saw in
the Depression?
Where we put
tariffs up?
Dan:
Absolutely
not. That is the
scare tactics of
the scare
mongers, someone
who got us into
this mess.
Jim:
Obviously I am
not considered a
scare monger,
but you know I
have to do my
job. I am
concerned… I
read your….look,
I saw the
Supreme Court
decision which
is anti-dun… I
completely agree
with you… but I
do want to give
the people their
due who are
saying well we
can’t erect
barriers.
Dan:
Here is the
situation. We
are not erecting
barriers. All we
are saying is
the same thing
that we have
been saying for
the last ten
years. At Nucor,
and in
Washington, and
as an industry,
and as an
American
manufacturers.
As you know I
sit on the
council, the
manufacturing
council of the
Department of
Commerce, and
what we have
been saying is
don’t erect
barriers.
Enforce the laws
that are on the
books, and
enforce the
trade agreements
that China and
the rest of the
world signed
onto to get
access to our
market. That is
not
protectionism,
protectionism is
what is going on
in China today,
when they erect
barriers to keep
our steel out,
and other banks
out, and other
manufacturers
out. Okay, I
don’t begrudge
Caterpillar
being over in
Russia, or in
China, or
anywhere else.
But they should
not be there at
the expense of
American jobs.
Jim:
Agreed...Now
there is a part
of your
conference call
that concerned
me greatly… you
talk about the
infrastructure
package… you say
that $60B of
infrastructure…
spend $825B
spending package
is completely
insufficient to
deal with the
issues… all day
today I heard
people say they
are throwing
money at it…
they are
throwing too
much money at
it… you are not
taking that
tack, are you?
Dan:
Where here
is the
situation,
alright, we have
got to create
jobs here. We
have got to
create jobs that
will actually
turn out to be
investments in
America. Not
jobs that
disappear after
you have
insulated the
White House, or
you have
insulated the
federal
building, or
whatever else.
And the only way
to do that is
invest in
America, to
invest in our
infrastructure,
is one way to do
it. And it is an
area that we are
woefully lacking
in investment,
our bridges, our
roads, our water
systems. Here in
Charlotte they
have got
problems with
the sewer
systems not
keeping up. We
have got a lot
of reinvestment
to do in
America. Here is
an opportunity
to put people
back to work
doing that.
Doing something
that is going to
have a lasting
value here in
the United
States. And as
we get our act
together, there
is no such thing
as decoupling
Jim, and you
know that. This
has proved it,
this crisis has
proved it. We
have got to get
our act together
here. Get people
back to work
here. Get our
economy going.
It will pick up
the rest of the
world.
Jim:
Okay, Dan, when
I was a hedge
fund manager, I
used to short
Bethlehem Steel
all the time…
and I did was
because as soon
as their
production went
down, they would
go from say
making $10 bucks
to losing $20
bucks. Your
production was
virtually cut in
half… but you
made a fortune
anyway…. How
could a steel
company, with
big fixed costs,
actually make a
lot of money
when production
is cut in half?
Dan:
Well, the
key here for
Nucor is we
don’t have big
fix costs. Most
of our costs is
variable in
nature. Our
largest
component of
cost is scrap,
and that moves
up with supply
and demand. When
demand is good,
and we are
getting good
prices for our
steel, scrap
prices are up
too, but our
margins grow.
When demand is
down, scrap
prices fall and
our margins
still hold
together. We
have variable
cost miles to
respect to our
pay for
performance
system, both for
the CEO of the
corporation and
the front line
workers out in
our plants. We
are all on pay
for performance,
we don’t lay our
workers off, we
have a no layoff
practice. But we
do reduce the
work week. And
we do reduce the
pay that the CEO
and the upper
management get,
and all
management get
based upon the
profitability of
the company. So
as we go thru
tough times, a
lot of those
“fixed” costs
that a lot of
those other
companies have,
aren’t there for
us.
Jim:
One last
question Dan,
when you were on
last you talked
about taking
advantage of the
decline in other
steel companies
to buy. You
totally
cancelled your
$2B acquisition
plan. Is that
wise given how
you have always
taken advantage
of downturns?
Dan:
Jim, what we
did is put those
on hold. There
is a big
difference
between
cancelling and
putting on hold.
As I mentioned
on our
conference call
yesterday, we
stay in contact
with the people
that we were
talking with
before. We also
see this as we
always see every
downturn for the
silver lining
that is going to
out there. As an
opportunity to
build our
earnings
platform for the
future, thru
wise
acquisitions for
building new
Greenfield
plants at the
lower cost
thesis in this
kind of
environment. We
have a great
balance sheet,
that is part of
our culture,
that is part of
our history. We
used that strong
balance sheet in
01, 02, and 03
to more than
double the size
of our company,
to increase our
earnings from
peak to peak,
and we will do
it again in this
downturn.
Jim:
Dan, you are
just the king of
steel, and I
really
appreciate… I
know what you
have done in the
company in the
time that you
have been there…
I knew your
predecessor… and
I have just got
to tell you I am
honored to have
you on the show.
Thank you very
much Dan
DiMicco...
Dan:
Thank you,
Jim
▼ ▼
▼ ▼
▼
