Fluor Corp. Announces Reorganization, Staff Cuts at Fluor-Daniel

Staff reductions totaling 5,000 workers, a $160-million charge, and a reorganization into more-focused business groups are in store for Fluor Corp. (Irvine, CA) this year. While the company grossed $13.5 billion in 1998, it has been beset by low profitability in the competitive engineering-construction world.

While much of the current business in chemicals, refining and other process industries will remain, Fluor says that it will seek to reduce its base of clients to around 200 global organizations. Activity in the paper industry and environmental projects (except for DOE cleanup work performed by its Government Services group) will fall. Nearly all of the staff reductions are occurring in the Fluor-Daniel division, which will close 15 offices. The specifics of the Fluor-Daniel plan:

Narrow target market and increase focus on fewer customers:

• Focus primarily on 15 industry segments, while honoring customer relationships, alliances and current contracts.
• Serve fewer customers, (approximately 200 key global clients). -- Increase segmentation and selectivity process to re-focus resources on highest-value projects.
• New emphasis on marketing and global project development, focusing on relationship-oriented, rather than project-oriented, client alliances and joint ventures.
• Build specific differentiated value-based services.

Streamline engineering, procurement and construction (EPC) organizational structure from 17 operating companies to five industry groups:

• Oil, Gas & Power
• Chemicals & Process
• Infrastructure
• Mining
• Manufacturing

Contract in low margin business areas, except for unique clients and projects, for example:

• Environmental
• Commercial buildings
• Pipelines in Western Europe and United States
• Forest products
• Exceptions may be made based on evaluations of opportunistic developments where the company has a performance advantage.

In addition, it will reorganize its global procurement practices to reduce costs; it sees a major opportunity in the $4 billion it spends with 52,000 suppliers annually.

Other changes are the creation of a Global Business Development, Sales & Marketing Group, and a Shared Services Group, an in-house administrative service organization. A.T. Masse, the coal company Fluor owns, will continue the belt-tightening that has been going on for several years. Global Services, which includes various types of outsourced work, will receive a $90-million investment over the next three years to upgrade its enterprise-resource management software and systems.

Speaking at the company's annual meeting, Chairman and CEO Philip Carroll Jr. told shareholders the company is initiating actions designed to increase return on operating assets from 9% in 1998 to above 13%, with a sustainable revenue growth rate of 10% within five years. "We are implementing actions intended to deal with both deteriorating business environments in our two principal business segments and strategically position the company for profitability, growth and the creation of shareholder value longer term. The transformation we are initiating will help create a Fluor Corporation that is considerably stronger and more diversified than it is today."