Fluor Looks Like Winner of $300-Million Mercedes Bid : Construction: The engineering giant will apparently get the nod to build a facility in Alabama.
Fluor Corp. has apparently won the coveted contract to build a $300-million auto plant for Mercedes-Benz near Tuscaloosa, Ala.
The Irvine-based engineering giant refused Tuesday to confirm its victory, and Mercedes said it will not make an official announcement until next week. But the German auto maker conceded that it has narrowed the competition to a couple of candidates, and one of those--Rust International Corp. of Birmingham, Ala.--said Mercedes has informed it that it is no longer in the running.
“We received a letter on Dec. 21 notifying us that they would not be continuing discussions with us,” Rust spokeswoman Jann Blitz said. “Of course, we are very disappointed.”
For Fluor, the plant would be a showcase project--a chance to show off its expertise on a prestigious job for a renowned auto company, said Mark Altman, an analyst with the brokerage Paine Webber Inc. in New York.
The actual size of the contract, however, is not that large. “It’s a decent-sized contract,” Altman said, “but certainly not a mega-contract--especially when compared to the kind of contracts Fluor has been getting in the foreign market.”
Among its more lucrative deals in the past year, Fluor won a $1.5-billion contract to build an oil refinery in Belgium and a $1.3-billion contract to construct a refinery in Thailand. The company, which has rebounded in recent years after a severe downturn in the early to mid-1980s, earned a record $167 million in 1993 on revenue of nearly $8 billion.
Mercedes spokeswoman Linda Paulmeno said Tuesday that negotiations with Fluor are still under way and that “anything can happen.” However, she noted that Fluor is in a strong position because it has already worked with Mercedes in scouting out a site for the plant.
“We have a very good relationship with Fluor, so obviously that can help,” Paulmeno said.
Mercedes chose Alabama in October from half a dozen states that courted the auto company with generous incentives. North Carolina proposed building a $35-million employee training center at the plant. Alabama matched the offer, though, and also agreed to pay workers’ salaries while in training.
Scheduled for completion late next year, the plant will be Mercedes’ first U.S. factory to produce passenger vehicles. A Mercedes subsidiary, Freightliner Corp. in Portland, Ore., makes trucks for commercial use.
Mercedes will build a new sport utility vehicle at its Alabama plant, which is expected to employ 1,500 people. The car--designed to compete with Ford Motor Co.’s popular Explorer and Chrysler Corp.’s Jeep Grand Cherokee--will sell for between $20,000 and $30,000, making it the least expensive vehicle in the Mercedes lineup.
More than half of Fluor’s new work orders last year came from outside the United States, spokeswoman Deborah Land said. However, U.S. contracts still represent 60% of the company’s $14.7-billion backlog of projects.
“The strongest markets for new construction, particularly of energy-related facilities, have been in the Far East,” analyst Altman said. “Domestically, market conditions are tough.”
Fluor Daniel, the core engineering and construction unit of Fluor Corp., has been involved in the construction of more than 60 automobile plants. Among those was a $660-million Nissan factory in Smyrna, Tenn., which Fluor built 13 years ago, followed by a $450-million expansion of it in 1992.
By U.S. auto factory standards, the Mercedes plant will be relatively small, assembling about 60,000 vehicles a year. “Typically, plants in the U.S. produce 200,000 vehicles,” said Michael Luckey, an automotive industry consultant in Woodcliff Lake, N.J.
“Production costs here are lower than in Germany, where unions are very strong,” Luckey said. “This is a case study for Mercedes to see if it makes sense for the company to build more plants in the U.S.”
News of Fluor’s selection first appeared in a Birmingham newspaper Tuesday. In trading on the New York Stock Exchange, Fluor’s stock closed at $41 a share, up 50 cents.
Accelerating Into 1994
Fluor-Daniel appears to have won the contract to build Mercedes-Benz’s first U.S. assembly plant. Details on the upcoming deal:
* What: Automobile assembly plant * Where: Alabama, between Tuscaloosa and Birmingham * Projected cost: $300 million * Top contenders: Fluor-Daniel and Rust International Corp. of Birmingham, Ala. * Groundbreaking: Set for late February * Expected completion: Late 1995 * Production start: Early 1997
Source: Associated Press; Researched by JANICE L. JONES / Los Angeles Times
