DANCE : Taking Another Crack at It : Can American Ballet Theatre’s new ‘Nutcracker’ rescue the company from harsh fiscal realities of the ‘90s and capture the imagination of children into the 21st Century?

It looks like it’s been in a war, this Nutcracker doll the dancers of American Ballet Theatre are passing around in rehearsal. It’s got a battered torso, an arm that plops off at inopportune moments and an assertive nose--the only feature on its face. Like ABT, it’s a little beat-up, but it’s still here.

A year ago, the company was $5.9 million in debt, but company officials recently announced that $2 million has been paid off, the board has been reorganized and, with the agreement of the dancers union, the size of the company has been reduced, along with the number of guaranteed weeks of work for the dancers.

On a recent rainy Saturday, dozens of dancers gathered in a big studio at the company’s home, working to bring to life artistic director Kevin McKenzie’s new $3-million production of “The Nutcracker” (for which the funds already have been raised). Hanging in the overheated air was the unspoken hope that the company, too, would be resuscitated.

With a libretto by playwright Wendy Wasserstein, sets by Paul Kelly and costumes by Theoni Aldredge, “The Nutcracker” premieres Friday at the Orange County Performing Arts Center in Costa Mesa, going on to the Dorothy Chandler Pavilion on Dec. 21.

For restoring company coffers, there’s nothing quite like a “Nutcracker,” a perennial sentimental favorite set to Tchaikovsky’s last ballet score. Or is there? For these days, almost every ballet troupe has a “Nutcracker,” taking its cue from George Balanchine’s blockbuster at the New York City Ballet, which is performed each December at Lincoln Center. In fact, this holiday season, the New York City Ballet’s “Nutcracker” has become a Macaulay Culkin movie. All this leaves open the question of whether a tourable version of the “Nutcracker” for ABT will help extract the company from its financial woes.

ABT hasn’t had a “Nutcracker” since Mikhail Baryshnikov quit as artistic director in 1989, taking with him the rights to perform his own version. “I spoke with him about doing it again,” McKenzie said, “but he said the sets were dry-rotted and it would cost the same to do a new production. We agreed that I had strong ideas, and that it would be a very good bonding experience for me to choreograph for the company.” Like the previous ABT “Nutcracker,” this one uses no child dancers, only the company members.

McKenzie had been kind of a dancers’ danseur; in his 12 years dancing with ABT he was inevitably overshadowed by Baryshnikov. In the years since leaving the company, he’s choreographed short ballets. But this is his first full-length work.

McKenzie’s version includes part of the story of the Hard Nut, a tale within the E.T.A. Hoffman fairy tale. Often considered too scary for children, it was omitted from the Nutcracker that premiered in 1892 at the Maryinsky Theatre in St. Petersburg, Russia, the production that inspired the much-emulated George Balanchine “Nutcracker” for the New York City Ballet.

In McKenzie’s Hard Nut scene, Drosselmeyer tells Clara the story of Princess Pirlipat. The princess was under the spell of the Rat King, who made her ugly. But the Nutcracker Prince loved her anyway, which made her beautiful. So the Rat King, in revenge, made the Nutcracker Prince ugly and Princess Pirlipat, whose heart was not as lovely as her new face, now spurned the ugly Nutcracker.

Clara tells Drosselmeyer that she’ll remember the story and try to be compassionate. And, wouldn’t you know it, her compassion transforms her Nutcracker doll into a handsome prince, and off they go on a series of wonderful adventures. (Choreographer Mark Morris also used the Hard Nut story in his “Hard Nut,” which had its U.S. premiere last year and is playing at the Brooklyn Academy of Music in December.)

The moral of McKenzie’s “Nutcracker,” he says, is that “imagination is a wonderful thing. Clara believed in her imagination. She acted on her imagination and saved a little boy.”

This “Nutcracker” also is the work of Wasserstein, who was invited to participate by designer William Ivey Long, a friend of hers. (Since then, he got too busy with Neil Simon’s new “Laughter on the 23rd Floor” and turned the designing over to Paul Kelly.)

“Darling, you’re a dancer!” Long told Wasserstein, probably remembering what she’d said about her childhood experiences studying at the June Taylor (as in “Jackie Gleason Show”) School of Dance.

Wasserstein claims that since this is the first ballet most kids see, it’s too bad that in most productions Clara is “a drip--kind of a good girl with a headband. I tried to ‘up’ the character of the little girl into someone with an imagination--an outsider and an artist who plays with her dolls” and is better with her imagination than with people like her Cousin Greta, a headband girl “who makes her feel like a complete jerk.”

In the second act, Clara learns to deal with people instead of dolls, “so when the boy (the Nutcracker Prince) arrives,” said Wasserstein, “it’s like a coming of age.” Even though in this version the dancers move from snow into a land of flowers rather than sweets, Wasserstein finds the new ballet quite traditional. But by emphasizing Clara’s passage from childhood to young womanhood, she said, “it will hopefully have something for the girls to hang on to.”

Asked about the difference between working in ballet and in the theater, Wasserstein joked, “dancers are much thinner, and they wear things with holes all over them! Where do they find all those things with holes?”

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Actually, Stephen Hyde, who just joined ABT from the Royal Winnepeg ballet, was wearing a tidy shirt at a recent rehearsal. Although he was brought in as a corps dancer because of ABT’s budget, he’s one of the dancers who will perform the principal role of the Nutcracker Prince. (The cast changes with each performance.) He’s under a spell, and can only be released from being a Nutcracker doll by someone loving him. Hyde said he relishes the chance to pair drama with ballet technique and envisions the Nutcracker as a young man who is “experiencing the world for the first time, and how exciting that would be.”

In this, his guru is Clara. “Kevin really wants her to be the driving force,” said Amanda McKerrow. “She’s saying, ‘Let’s go here,’ or ‘Let’s try this.’ ” The production, she said, “is traditional enough to please the people who want to see another ‘Nutcracker’ and different enough to keep the dancers interested.” His choreography, she said, imparts a sense of “movement and freedom.”

Victor Barbee, among the company’s leading interpreters of character roles, will play Drosselmeyer, the sorcerer who sets the magic in motion. He’s done him in other versions, including Baryshnikov’s, but this time he has “a little more depth, and the story is that ‘maybe dreams are not dreams, that things you strongly believe in come true, and that you have to be willing to love what your dreams are.”

Famed designer Theoni Aldredge has made Drosselmeyer a cloak of deep aubergine, she said, and the rest of the costumes, designed to reflect the Edwardian era, will include many shades of purple, which she loves. The rats, who come to life in Clara’s parlor, “all have a touch of nasty yellow and nasty gold.” But not too nasty, she said: “They can be kind of hateful, but you shouldn’t be afraid of them.” This is, after all, aimed at children.

And children--especially today’s children--pose a challenge. Designer Kelly said he had worried, “What are we going to do that’s really going to capture the imagination of children and ballet-goers, too? Kids are so sophisticated now, with film and video and TV.”

So he chose things, he said, that could only be appreciated live, on a stage. “Our tree actually flies. It sort of blasts off like a rocket, which we hope will get their attention. And the room sort of explodes.” And in the land of the flowers, “the set literally blossoms, with buds that flower,” to parallel Clara’s blossoming into a woman.

This is Kelly’s first big ballet, and there are challenges. “The production has to be around in the year 2005. What’s going to be magic seven years from now? What’s our idea of entertainment going to be like?”

And then there’s the money. “I’ve restrained myself a little bit, because you have to watch the budget. So you don’t use as fancy a trim or as expensive a fabric,” Kelly said. Still, he said, magic is magic, and “as long as that tree lifts off, I think we’ll be OK.”