Fluor Sues G.E. Over Costs to Build Plant

Breaking more than a year of silence on the issue, Fluor Corp. said Tuesday that it has sued General Electric Corp. for more than $160 million in a dispute over cost overruns at a giant power plant in Saudi Arabia.

The overruns were part of a double blow that caused Fluor, an Irvine-based construction and engineering giant, to take a charge last year of more than $120 million in losses on two contracts--the G.E. pact in Rabigh, Saudi Arabia, and one for a power plant in the United States with a contractor that the company has not yet identified.

The write-downs, along with Fluor’s admission that pursuit of an aggressive expansion policy had caused its top management to lessen oversight of essential operations such as contract negotiating, sent Fluor’s stock into a tailspin for much of 1997. The shares were trading at $75 prior to the company’s announcement of the write-off in late February that year and by mid-November had hit a low of $33.94.

Fluor’s stock, which is sensitive to troubles in the Asian and Pacific Rim economies, fell $1.38 on Tuesday, to $34.88, while G.E. shares gained $2.06, to $76.13. Both stocks trade on the New York Stock Exchange.

In its suit, filed Tuesday in U.S. District Court in New York, Fluor claims that General Electric misled it about the scope of the Rabigh project. Fluor contends that G.E. intentionally failed to disclose the degree of complexity that would be involved in building the 380-megawatt power plant.

Fluor was unable to complete the project on time because it kept running into unanticipated problems, according to the suit, and was hit with numerous nonperformance penalties.

General Electric, the world’s top supplier of power-generation equipment and services, also failed to notify the plant’s owner of changes that Fluor needed to make, leaving Fluor to cope with an “intractable” owner without G.E.’s assistance, according to the suit.

G.E. officials dispute Fluor’s version of events.

“Fluor’s claim that G.E. misrepresented the contract, which Fluor itself reviewed and signed, is a transparent attempt to avoid terms it doesn’t like,” said G.E. spokesman Bruce Bunch.

Fluor, which is seeking more than $160 million in actual damages as well as unspecified punitive damages from G.E., said Tuesday that the contract work was performed by its Fluor Daniel subsidiary. The company claims that “extraordinary efforts” by Fluor Daniel have enabled it to “essentially complete” the project.

The Rabigh power plant is operating and producing more power than the capacity spelled out in the contract, Fluor said.

A Fluor spokeswoman declined to comment Tuesday on the company’s activities regarding the domestic power plant project that it cited last year as one of its trouble spots. The location and owner of the plant have not been disclosed and Fluor would not say whether it is contemplating similar legal action.