Steel Dynamics Inc. has had a good run since its start in 1993.

It has grown from a single electric-furnace minimill in Butler to the fifth-largest steel company in the United States with more than 7,000 employees and more than $8 billion in annual revenue.

It has branched out from steel production to finishing and fabrication.

It has also taken steps to ensure a flow of feedstock with its 2007 purchase of OmniSource Corp., one of the largest U.S. scrap metal processors. Now it's building a plant in Minnesota's Iron Range to pioneer a method of producing another source of the materialfrom which steel is made.

But steel is on the cutting edge of a bad economy. As prosperity has dipped, fast-growing SDI has had to retrench by closing a fabricating plant, cutting employee hours and writing down the value of inventory. The company declared an $83 million loss for the fourth quarter of 2008.

We sat down March 24 with Chairman and CEO Keith Busse at SDI headquarters on Fort Wayne's west side.

It's a decidedly informal place. Office staffers call Busse by his first name. And when they take him a bag of McDonald's for lunch, they make sure the boss pays the $5 cost.

Busse engaged in a wide-ranging discussion of his business, the economy and his strategy. Here is an edited version of the questions and his answers:

Q. What are you doing about the downturn?

A. "Our philosophy is one of share the pain. Everybody's hours are cut back. Everybody's bonuses have changed - including management's. That's a little different than on Wall Street."

Non-union SDI employees, including executives, typically earn more than half their pay in performance-based bonuses. The compensation system, in which employees share profits instead of pensions, gives employees a strong incentive to help the company cut costs.

"The suggestion box is full of a lot of sensible ideas. We had one individual suggest that if we stopped using these manila envelopes that cost 80 cents and fold the paper once or twice, we can put it in an envelope that costs 20 cents."

Now that SDI mills are running at 50 percent capacity, many employees are working only four days a week. "But it's not as bad as getting a pink slip."

Q. Are layoffs in the works?

A. When SDI bought OmniSource, the recycler was geared for growth.

"That's probably tomorrow's business plan, but not today's. We've got an organization there that's probably not sized right. We only hope the market returns soon so we're not sized improperly, but the flow of scrap's down dramatically."

Driven in part by insatiable demand from Chinese manufacturers, scrap metal prices were skyrocketing - until about a year ago. Then as the economy tanked, so did industrial output and the demand for scrap. Prices have remained low since.

Layoffs aren't "something we're interested in talking about. We've always said we'll do everything within our power not to have to lay people off. That's the absolute thought of last resort."

"If we have the best weapons and the best tools, let's use them to gain market share. I think from a jobs perspective, we're pretty safe throughout the company."

Q. In June, you said SDI could grow even in a recession. Are you as bullish about growth now?

A. "I am. But I think the statement was that we can grow in a normal recession. A normal recession is not the calamity we're involved in. A normal recession lasts six months to a year. The dip, the fallout, isn't nearly as deep as this is."

The 11 recessions in the U.S. since World War II generally fit that pattern. But one that started in November 1973 lasted 16 months, and the "double-dip" recession of the early 1980s started with a six-month downturn in January 1980, followed by a 16-month slump starting in July 1981.

"This economy is the worst that I've seen in 40-some years of business, with perhaps no light at the end of that tunnel right now."

"I think we've reached the bottom probably. But how long you skid along that bottom remains an open question. There have been some meager signs of momentum, but we haven't seen it yet and the steel industry is one of those businesses that tend to be leading edge. When the shelves aren't stocked and the customers have no more steel and when there are fewer toys, cars, washing machines, whatever, eventually people reorder."

Q. What do you think about the Obama administration's stimulus plan?

A. "In an effort to solve the problem, we have a new administration in office that is planning to spend and put this nation in debt in a period of six months which will probably exceed anything that's been done since Grant took Richmond.

"We are putting a millstone around our children's neck that's going to drag them to the bottom of the ocean.

"I think the deficits are going to be huge. I think we may be creating a bigger problem than the one we solved."

Q. What do you think of planned stimulus spending on infrastructure such as roads and bridges?

A. "The part of the stimulus package that's being spent in infrastructure needs might not give you (the) immediate spending you want, but in the long run, it probably will give you the best spending if you can just be patient. I would argue that not near enough is being spent on hard assets and way, way too much is being spent on pork and social programs.

"I'm still one of these people who can remember a better America when we could still take care of ourselves and we didn't rely on the government for everything."

Q. Some economists have criticized the requirement in the stimulus bill that funds be spent on U.S. commodities such as steel. They fear it will touch off a wave of protectionism. Do you agree?

A. "We helped push for that. It has nothing to do with whether we're competitive. We are."

Emerging economies traditionally subsidize steel. China does so directly and through its monetary policy.

"If you're going to use my tax dollars and your tax dollars to stimulate this economy, I want my tax dollars spent creating American jobs. I thought that's what this exercise was all about.

"I don't care about creating jobs in China right now. Am I a protectionist? No. I'm a free trader in the end, but I'll worry about that some other day.

"Right now, we've got to get our economy moving. If we buy steel from China, how are we creating American jobs here?"

Q. Are you worried other countries will retaliate?

A. "I don't think other nations have all that much to offer."

Developing economies such as China often offer direct subsidies to grow their steel industries. By keeping currency artificially low relative to the dollar, that offers a bigger subsidy.

"We need 0.3 man-hours to produce a ton of flat-rolled steel, the Chinese need eight to nine hours.

We can afford to pay quite a bit more than they do and still compete - if they allowed their currency to float."

Q. How do you expect to compete in the bad economy?

A. "We are a company that developed a better game plan, a better business model than has existed in this industry."

"Where steel companies used to have an adversarial relationship with their unions, we set up a system where everybody benefits when the company does well.

"But more importantly, we are very focused on cost structure and I think we are the low-cost producer of steel in the U.S. today."

And Steel Dynamics isn't afraid to try new technology.

"We're always on the cutting edge of technology, always looking for ways to make steel more cheaply and efficiently."

mschladen@jg.net