First Annual Meeting as Chairman : Tappan Puts Positive Face on Fluor Woes

At his first annual shareholders meeting since assuming the chairmanship of Fluor Corp., David S. Tappan Jr. put a positive face on two years of retrenchment at the engineering company, saying that, in its “streamlined and refocused” form, it will weather a lengthy international slump in the heavy construction industry.

The annual meeting, the first since the death of Chairman J. Robert Fluor last September, drew questions about Fluor’s $32.6-million first-quarter loss and protests from the United Mine Workers of America over Fluor’s doing business in South Africa.

Tappan told the audience of about 900 shareholders that 1984 had been a “watershed” year for the Irvine company and detailed the company’s continuing strategy of shedding its assests and focusing on project management.

Fluor has sold $715.5 million of its assets since 1982, leaving the company with its two major divisions, natural resources and engineering and construction. As of last Oct. 31, Fluor’s assets totaled about ‘$3.8 billion. Tappan said the slimming-down process had been orderly and not a “fire sale.”

Although Fluor booked about $2 billion in new engineering and construction orders in the first quarter of fiscal 1985 ended Jan. 31, Tappan said the company’s bottom line will not reflect the resulted for several months. Fluor’s backlog stands at $5.2 billion.

In recent months, Fluor has consolidated several divisions to reduce overhead. But to reach new customers, it also has opened about 12 satellite engineering offices around the country. The company currently employs about 3,000 in Irvine and 32,000 worldwide.

“We don’t have clients standing outside the door in a queue” but, in the first quarter of 1985, the “trend in new orders has been strong,” Tappan said.

Before the meeting began, about 30 protesters from the United Mine Workers and other labor unions greeted shareholders with placards protesting Fluor’s South African interests.

Dave Michel, special assistant to UMW President Richard Trumka, said the union plans to ask U.S. municipal utilities to stop burning coal mined by A.T. Massey Coal Co., a subsidiary of Fluor’s St. Joe Minerals. Michel said the UMW also wants U.S. cities to cut off public funds for Fluor contracts.

Michel, who attended the meeting on the strength of the union’s 10 shares of Fluor stock, said Fluor plays a “direct and critical role” in South Africa’s apartheid system of racial segregation. He criticized Fluor for building and operating giant refineries that turn coal into oil, because these refineries help South Africa remain free from the pressures of any international oil boycott.

“Fluor is about to become the lightning rod for the anti-apartheid movement, and that could cost the shareholders money,” Michel warned Tappan during the meeting.

Tappan defended the company’s South African projects and, at a later press conference, discounted the union’s threatened campaign. He said Fluor, which has worked in South Africa for about 25 years, has no capital investment there. He said less than 1% of Fluor’s total revenue is derived from its South African operations. (In fiscal 1984, Fluor earned $1 million on revenue of $4.4 billion.)

According to the proxy statement, Fluor provided engineering and construction management services for a crude oil pipeline in South Africa last year.

“Out continued involvement is in the best interest of all South Africans,” Tappan said. he said Fluor has trained about 20,000 non-white South African workers and, in doing so, has improved their standard of living.

“Fluor’s presence is making a positive contribution to the welfare of the black working man in South Africa,” Tappan said.

Closer to home, Tappan said the company is moving forward with its plans to develop its 162-acre corporate headquarters site under a joint venture with Trammell crow Co. of Dallas. In October, 1984, Fluor announced that it was selling its property to Trammel Crow, the nation’s leading commercial real estate developer, for $340 million.

The deal, scheduled to close April 29, calls for Fluor to lease back most of its corporate headquarters and have an undisclosed interest in development of the land, which is adjacent to the San Diego Freeway.

However, Irvine city officials have publicly questioned--under a 1982 city zoning ordinance--whether Fluor has the right to build a speculative commercial development on its headquarters property. And two major Orange County developers, Irvine Co. and Koll Co., have expressed the same concerns about the development.

“This property is going to be developed,” Tappan said, adding that “Fluor Corp. has never promoted anything that is not in the best interest of the City of Irvine.”

To encourage its shareholders to comment on the plan, Fluor provided them with stamped envelopes addressed to the Irvine City Council.

The first phase of the development calls for construction of two hotels, six office buildings, a retail complex, day-care center and a variety of recreational facilities. Trammel Crow is working with Boston-based First Winthrop Corp. to raise about $350 million.

Meanwhile, Fluor’s belt-tightening measures have affected all levels, including top executives. Tappan’s annual salary was reduced about 50% to $406,135, according to the proxy statement.

The annual meeting, in fact, originally had been scheduled for Houston but was held at the Irvine headquarters to save money. The two-hour session was held in an empty wing of Fluor’s engineering building.

Tappan said he would have preferred to see the wing filled again with engineers planning a billion-dollar mega-project, rather than with “a mega-meeting.”

In addition to the pending sale of the headquarters site to Trammell, Fluor--in the past three years--has sold four companies in its distribution group for $157.1 million, Coquina Oil Corp., a unit of Fluor’s St. Joe Minerals Corp., for $212 million, and miscellaneous assets worth $145 million. Additionally, the sale of properties have added another $121.5 million to Fluor’s coffers.

Following the meeting, Fluor’s board of directors declared a quarterly cash dividend of 10 cents a share on the company’s common stock, payable April 15 to holders of record March 27.