Fluor Chief Ailing but Says Company’s in ‘Excellent Shape’
A day after revealing that cancer is forcing him to retire in the middle of a major restructuring effort, Fluor Corp. Chairman Leslie McCraw says he is leaving a company in “excellent financial shape, with an excellent management team and a positive strategy.”
McCraw, who will step down Jan. 1 to devote his energies to battling bladder cancer, said in an interview Thursday that the global engineering and construction services firm “will continue to move forward” with the reorganization that he began earlier this year.
The 63-year-old executive’s early retirement will end a year in which Fluor’s profits and stock price plummeted and a massive cost-cutting program was initiated after the chairman acknowledged that an ambitious expansion drive he launched in the early 1990s was to blame for the company’s woes.
In March, McCraw said the Irvine-based company would fix itself by slashing $100 million from operating costs, mostly in its Fluor Daniel operating unit, and by dropping unprofitable business pursuits--particularly in government contracting--to concentrate on energy, mining and chemical facility projects.
Fluor’s stock rose 94 cents a share Thursday to $36.06, but McCraw shrugged off suggestions that the gain was tied to his resignation announcement. He said he’s happy to see the stock go up “because I’m a major shareholder.” The stock is still more than 50% below its February high of $75.
McCraw also said Thursday that Fluor’s directors have hired a search firm to look outside the company for chairman-chief executive candidates. He noted, however, that the search is merely an effort “to see if there are any outside candidates as good as the people inside.”
McCraw said he believes a replacement will be named by summer.
Company observers say the leading contender is James Stein, 53, head of the company’s core operating subsidiary, Fluor Daniel. McCraw picked Stein in March to design and carry out the restructuring.
In fact, Stein spent Thursday visiting several Fluor Daniel offices near the subsidiary’s headquarters in Greenville, S.C., to tell employees of a series of operational changes he plans to make as part of the ongoing cost-cutting drive. McCraw said Stein will announce the changes publicly next week.
Industry analyst Robert Toomey of the Piper Jaffray brokerage said McCraw is leaving the company in good financial shape. “But his work in repositioning the company for long-term performance is unfinished,” he said. “That will be a challenge for his successor.”
McCraw said he decided to retire after doctors advised him to undergo a regimen that includes immunotherapy--a drug-based treatment that can produce toxic side effects.
“I reflected carefully on what I needed to do to get well, and what the company needed in terms of leadership,” he said. “After those reflections, I wrote the board a letter and shared my thoughts and requested early retirement.”
McCraw, his Southern accent soft but his voice firm and steady, said he is particularly proud of the achievements of the Fluor Daniel unit, which he helped create when he became president of Fluor in 1987.
In the past 10 years, Fluor Daniel has been named the best-performing engineering and construction services firm in the world nine times by various industry journals.
“That says a lot about what we have accomplished,” he said.
“And we also have created what many would argue is the best coal company in the United States,” he said, referring to Fluor’s highly profitable A.T. Massey coal mining subsidiary.
Until a successor is selected, the company will be run by a team of four executives: Fluor Daniel chief Stein, A.T. Massey Chairman Donald Blankenship, Fluor Director Peter Fluor and Chief Administrative Officer James Rollans.
“Each brings his own strengths to the office and each has a clearly defined role,” McCraw said. “I’m confident that the team will go forward and not repeat the disappointments” of the past year.
Still, McCraw says, it will be hard to walk away.
“I had fully intended to stay at Fluor until I was 65,” McCraw said. “and I would have if it had not been for the cancer.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Profile: Leslie G. McCraw Jr.
Age: 63
Firm: Fluor Corp.
Position: Chairman/CEO
Education: Bachelor’s in civil engineering, Clemson University, 1956
Family: Married, three sons
Career Highlights:
* 1956 Begins career as design engineer at Gulf Oil Corp.
* 1959 Enters U.S. Air Force, attaining rank of captain
* 1960 Joins E.I. DuPont Co.; various management positions in engineering and construction divisions
* 1975 Joins Daniel International as division manager
* 1977 Daniel purchased by Fluor Corp.
* 1981 Becomes president of Daniel.
* 1984 Named president/CEO of Daniel, becomes a director on Fluor Corp. board
* 1986 Named president/CEO of newly formed Fluor Daniel Corp.
* 1988 Becomes president of Fluor Corp., Fluor Daniel parent company
* 1990 Named vice chairman/CEO of Fluor Corp.
* 1991 Becomes chairman/CEO of Fluor Corp.
* 1997 Seeks early retirement
ON MCCRAW’S WATCH
1991
* Record net earnings of $161 million surpasses previous high, $151 million, in 1981.
1992
* Doe Run Co., an unprofitable lead refining concern, sold.
1993
* Fluor earns $167 million on revenue of nearly $8 billion.
* Reacting to shrinking markets in Middle East and Europe, company opens offices in Mexico and strengthens position in China, Thailand and Indonesia and expands into Philippines, Vietnam and Peru.
1994
* Major corporate restructuring eliminates two levels of senior management.
* Net earnings increase 15% to $192 million.
1995
* Net earnings increase 20% to $232 million.
* Long-term debt reduced to $3 million.
* A.T. Massey, a coal operation, delivers record profits of $111 million, up 17%.
1996
* Fluor lands $1.6-billion contract to construct and manage major gold/copper mine in Indonesia.
* Wins $4.8-billion contract to manage development of high-speed rail system in Florida.
* Its $7.5 billion in contracting revenue ranks Fluor Daniel unit as nation’s largest contractor for third consecutive year by an engineering trade journal.
* Revenues of $11 billion net $268.1 million.
1997
* Competition and financial turmoil in East Asia cause profits to dip even though revenue increases.
* Losses on several major projects result in second-quarter write-off of $140 million.
* Share price falls from $75 in February to below $37 in November.
* Reorganization cuts 600 jobs.
Source: Fluor Corp.
