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The Man Who Guided Fluor Through Tough Times Stepping Down : Engineering: Five years ago, many thought the overextended Irvine company would go under. Then Chairman David Tappan launched a restructuring that led it back to profitability.

December 16, 1990|LESLIE BERKMAN | TIMES STAFF WRITER

In his wood-paneled office, David S. Tappan Jr. keeps a small gold Buddha, a gift from the deputy minister of Thailand. He has placed it on a special altar because Thai custom requires, out of respect, that Buddha be viewed at or above eye level.

Attending to such detail in order not to offend a foreign customer and dignitary is a mark of the silver-haired chairman of Irvine-based Fluor Corp. Tappan's adaptability, shrewdness and hard work are credited for his 38-year rise through the ranks at Fluor.

Those same traits also are responsible for his crowning achievement: Rescuing the troubled international engineering and construction giant with a gut-wrenching restructuring and returning it to profitability and leadership in its industry.

"There is no doubt in my mind that he (Tappan) is going out a winner," said Mark Altman, an analyst with Paine Webber.

Indeed, Tappan will retire from Fluor at the end of this month as a hero in the eyes of many employees and stockholders. That mantle did not come easy. He endured a lengthy period of difficulty and criticism that he admits he would not want to relive.

"I'm ready to retire," he said in a recent interview. "There is no question about that. I don't want to repeat the last 10 years. We came through the Valley of the Shadow of Death here."

Tappan is confident that he is leaving the now-robust company in good hands. He said the team of executives--headed by Chief Executive Officer Leslie G. McGraw--that saw the company through its harshest trial is battle-hardened and prepared for anything.

"They know it is not all beer and skittles, and not all sunshine and sweetness and light," he said. "It is tough and unpredictable."

That was the case in September, 1984. J. Robert Fluor, who had headed the company founded by his grandfather for 22 years, died of lung cancer. Tappan was handed the helm as Fluor's chairman and chief executive officer.

But he was given a sick company. The problems stemmed from management's decision in 1981 to go on a natural resources buying binge. The company, renowned as a builder and designer of oil refineries and petrochemical plants worldwide, decided that the time was right to invest in minerals--lead, coal, gold and others.

Wrong. Just as the company was making its move, the economy went into a recession. The hydrocarbon and minerals industries went into a tailspin. And Fluor, which had survived many boom and bust cycles in the oil business, was hobbled for the first time with a large long-term debt--a result of its $2.2-billion acquisition of St. Joe Minerals Corp., a big gold and base metals producer.

Fluor earned $159 million in 1981. But earnings deteriorated during the next three years and disappeared in 1985, when the company lost $633 million. In 1986, it lost another $60 million.

Tappan said he recognized the seriousness of the situation. "When you have more than $1 billion of long-term debt hanging around your neck and the business stops, that's bad," he said. "That is the stuff of which companies don't recover from."

Competitors were predicting Fluor's demise to their customers and even among themselves. "I had feedback that they were (saying) Fluor was not to be considered any longer in planning, that we were gone," Tappan said.

But he never lost faith. McCraw, who will become chairman on Jan. 1, said Tappan "saw the light when probably many people in the company saw only darkness. He was the steadying force. He had the vision of what we could achieve."

Tappan, who jokingly says optimism is in his genes, said that at first he thought Fluor could simply retrench as it had in past down cycles, surviving by making layoffs and waiting 18 to 24 months for a rebound. Soon it became clear that fancier footwork was required.

"You learn that the old things do change and the same old repetitive instinctive reactions could be wrong," he said. "You have to be innovative."

So after many late-night and weekend brainstorming sessions with his staff, Tappan used his skills as a consummate salesman and charted a new course. Fluor restructured by selling off its minerals, oil and gas operations and refocusing on its core engineering and construction business. It also merged Fluor Engineers, its traditional hydrocarbon engineering unit, with Daniel International, a non-union contracting subsidiary based in Greenville, S.C., that Fluor had acquired in 1977.

"He inherited the biggest mess anyone could have got hold of," said Bill McKay, who retired as a group vice president of Fluor in 1985. "He was very cool about it and analyzed the situation. He pulled the company back from the brink of disaster and made an even better company out of the wreckage."

Unlike Fluor Engineers, which was accustomed to designing large hydrocarbon mega-projects overseas, Daniel had domestic construction experience in a wide variety of industries. That helped Fluor in a major push into new markets.

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