Fluor Will Consider Shedding Crane Unit
Fluor Corp. said Monday that it will consider selling its worldwide supplier of construction cranes as part of an ongoing effort to cut costs and focus on its basic engineering and construction business.
The Irvine-based company, which revealed last week that its chairman is ailing and will retire early, said it will decide over the next four months whether to sell its American Equipment Co.
Fluor’s profits and stock price have plummeted this year. The company started a massive cost-cutting program last spring to retrench from the ambitious expansion it had launched in the early 1990s.
A major component in its retrenchment is the sale of nonessential and unprofitable operations. Though American Equipment “has proven an excellent source of income,” Fluor said, it isn’t strategically essential to Fluor’s engineering and construction work.
Analysts said the possible sale of American Equipment, as well as other changes designed to increase profits, indicate the company is stepping up restructuring efforts that were perceived as going too slowly.
“This is not business as usual,” said Robert Toomey, an industry analyst in the Seattle office of Piper Jaffrey Inc. brokerage. “The pace and the urgency have changed. That’s what they’re trying to convey to the market.”
Fluor’s stock, which had dropped 50% since February, gained $1.25 a share Monday to close at $38.25 in New York Stock Exchange trading. It hit a 12-month high of $75 a share on Feb. 18.
Fluor said it intends to use the proceeds from any sale of American Equipment to repurchase company stock, provided the price remains low. Wall Street observers are predicting the unit, with 900 employees, could fetch more than $450 million.
American Equipment technically is a subsidiary of Fluor’s main operating company, Fluor Daniel, which rents cranes and other heavy equipment for its projects. Even if a sale goes through, Fluor Daniel will continue renting from American Equipment as well as from other providers, as it does now, said Fluor spokeswoman Lisa Boyette.
Other restructuring changes announced Monday primarily involve Fluor Daniel. Senior management jobs are being realigned, reducing to five the number of executives reporting to the president, James Stein. Previously, nine executives, some with overlapping duties, reported to him.
In addition to the Fluor Daniel changes, Fluor is consolidating several of its 18 operating units to reduce overhead.
The company’s announcement Monday should reassure Wall Street that a solid, experienced team will be directing the Irvine firm after its chairman, Leslie McCraw, 63, leaves at the end of the month because of bladder cancer, analysts said.
“I think they have a very firm handle on what they’re going to do,” Mary Safrai of Carl H. Pforzheimer & Co. brokerage in New York said after Fluor executives met with analysts Monday.
The company has hired a search firm to find a successor. Among the candidates are three insiders, including Stein, 53, whom McCraw picked last March to design and carry out the restructuring.
