David S. Tappan, who led Irvine-based Fluor Corp.'s return to profitability, will step down as chief executive of the giant engineering and construction firm at the end of the year, the company said Wednesday.
As expected, Fluor President Leslie G. McCraw, 54, will succeed Tappan, 67, as chief executive of Orange County's largest publicly held company. McCraw, who has played a key role in Fluor's aggressive diversification, will also become vice chairman next year and will succeed Tappan as chairman at the end of 1990.
Vincent L. Kontny, 52, will replace McCraw as president of Fluor Corp. while also retaining his current position as president and chief executive of Fluor Daniel, the parent company's principal subsidiary.
Tappan took over as chairman and chief executive in 1984 and had planned to retire in 1987. At the request of the board of directors, Tappan postponed retirement to oversee an overhaul of the firm and help it recover from a painful slump. Tappan said Wednesday that he feels he has accomplished that mission.
"I have had a quite a list of 'must dos' and now it is down to zero," Tappan said Wednesday.
Under Tappan's leadership, Fluor achieved a major turnaround. In fiscal 1988, Fluor posted $56.4 million in earnings, a big rebound from the $633.3-million loss it reported in 1985. And for the first nine months of fiscal 1989, Fluor posted net income of $79.4 million, up from $32.8 million during the same period a year earlier.
Caught in Recession
When Tappan became chairman and chief executive upon the death of J. Robert Fluor, the company's founder, he took over a company whose chief business, building refineries and petrochemical plants, was caught in a worldwide recession. Moreover, the company had invested heavily in coal and metals just as prices for those commodities were at their apex and about to dive.
"He was faced with an incredibly difficult situation, having the company's two major businesses, metals and engineering, crashing at the same time," said Deborah Thielsch, an analyst at First Boston.
Work Force Slashed
Tappan focused on Fluor's main business of engineering and construction and sold off or revamped the money-losing natural resources operations. He managed to sell Fluor's gold and zinc businesses at what analysts considered premium prices and the remaining investments in coal and lead have become profitable.
He also slashed the company's worldwide work force in half, sold its 137-acre corporate headquarters in Irvine and temporarily suspended quarterly cash dividends to its shareholders.
Tappan acknowledged in an interview that his five-year tenure as head of Fluor was difficult, especially the work-force cutbacks. "I wouldn't want to go through it again," he said.
Tappan restructured Fluor to enable it to diversify its engineering and construction activities beyond refineries, petrochemical manufacturing plants and oil and gas pipelines. The company is now also involved in projects ranging from food, pulp and paper manufacturing plants to prisons and hotels.
In its new diversified form, Fluor has been able to take full advantage of a global surge in capital spending. For the past two years, Fluor Daniel has been named the largest engineering and construction company in the United States by ENR, the leading publication in the engineering and construction industry, based on having the highest value of new contracts.
Unpaid Iranian Bills
Tappan said one of the last "must-dos" on his list was to reach a settlement with the National Iranian Oil Co. for unpaid bills on a refinery construction job that was interrupted in 1979 by the revolution in Iran. Two months ago, Fluor received a $43-million payment from Iran, opening the way for Fluor to re-establish business in that country.
McCraw joined Fluor in 1977 when Fluor bought Daniel International, a general construction firm in Greenville, S.C. At the time of the acquisition, McCraw was a senior vice president at Daniel. He rose to become the company's chief executive in 1986 when Daniel was merged with Fluor's engineering and construction operations as part of Fluor's restructuring.
"We created a new company, Fluor Daniel, that was designed to respond to the decade of the '90s," McCraw said Wednesday. "We took the best from the old Fluor engineering and construction and from the old Daniel engineering and construction. The response on the part of the marketplace has been very gratifying over the last two years."
FLUOR CORP. NAMES NEW CHIEF EXECUTIVE
LESLIE G. McCRAW
CURRENT POSITION: President of Fluor Corp. from 1984 to present. Joined Fluor in 1977.
FAMILY: Married to Mary Earle McCraw, with three sons, ages 24 to 29.
EDUCATION: Bachelor's degree in civil engineering, Clemson University, 1956, and Cornell University Business School, 1979.
David S. Tappan
Chairman and chief executive will retire at the end of the year. He joined Fluor in 1952.
Vincent L. Kontny
Will succeed McCraw as president of Fluor Corp. while retaining his position as president and CEO of Fluor Daniel.
FLUOR RESULTS 1984-PRESENT Figures in Thousands
Revenues from Fiscal Continuing Net Year Operations Income 1984 $4,401,130 $1,008 1985 3,776,442 (633,324) 1986 4,341,700 (60,443) 1987 3,924,480 26,592 1988 5,132,457 56,395
Source: Fluor Corp. annual reports