Fluor Corporation

3333 Michelson Drive
Irvine, California 92730
U.S.A.
(714) 975-2000
Fax: (714) 975-5981

Public Company
Incorporated: 1924 as Fluor Construction Company
Employees: 43,605
Sales: $6.60 billion
Stock Exchanges: New York Chicago Pacific Amsterdam London Swiss
SICs: 1629 Heavy Construction Nec; 1542 Nonresidential Construction Nec; 1541 Industrial Buildings & Warehouses; 8711 Engineering Services; 1799 Special Trade Contractors Nec; 1521 Single-Family Housing Construction

Fluor Corporation is one of the world’s largest engineering, construction, maintenance, and related technical service companies. Fluor Daniel, the company’s largest unit, provides engineering and construction services ranging from site selection and design to construction and plant maintenance for a broad range of industries. The company also has considerable investments in the coal industry, producing steam coal for the electric generating industry and metallurgical coal for the steel industry.

Fluor’s story begins with a Swiss emigré who, upon arriving in the United States knew only one English word—“hello.” Born in 1867, John Simon Fluor was a carpenter who had gained engineering experience while serving in the Swiss army. Fluor emigrated in 1888 at the age of 21, joining his two older brothers who had settled in Oshkosh, Wisconsin. The three pooled their money in 1890 to start a saw and paper mill called Rudolph Fluor & Brother. J. Simon Fluor’s contribution was $100; he served as manager at the mill.

In 1903 the company name changed to Fluor Brothers Construction Company, with J. Simon Fluor as president. Nine years later he traveled on his own to California and started a general construction business under his own name. With innovative methods and precise work, Fluor built his venture’s reputation quickly. The Southern California Gas Company asked him to build an office and numerous meter shops in 1915, and afterward Fluor received a contract for a compressor station from Industrial Fuel Supply Company. Fluor recognized that the emerging California petroleum industry held enormous potential, so in 1921 he began to tailor his engineering and construction work to meet the demands of the field.

Fluor received a contract to erect a cooling tower in 1921. Believing that those in use at the time were inefficient and wasteful, he designed the “Buddha tower,” a radical advancement which not only cooled water more efficiently but reduced water loss. The name came from the tower’s resemblance to Buddhist shrines. Fluor soon began manufacturing the towers. The oil and gas companies quickly recognized the Buddha towers’ merit, and used them at many installations.

Fluor incorporated his business as Fluor Construction Company in 1924 with a capital investment of $100,000. He began manufacturing large engine mufflers, expanding the company from strictly engineering to engineering and construction. After outgrowing two different facilities, Fluor built new quarters in Los Angeles and consolidated all general offices in one building in 1927.

In the mid-1920s, Fluor started involving his sons in the family business. He retained the presidency until 1943, although his sons ran the company. Fluor’s eldest son, Peter Earl, became executive vice president and general manager. Peter Fluor seemed to be a born salesman, and associates called him “the company engine.” He led Fluor’s development through the Depression and World War II.

Fluor’s business continued increasing until the stock market crashed in October 1929. Between 1924 and 1929 annual sales grew from $100,000 to $1.5 million. In need of additional capital in 1929, the company reincorporated and changed its name to Fluor Corporation, Ltd. to reflect its involvement in fields outside construction. At the time of the reincorporation, Peter Fluor and his brother J. Simon Fluor, Jr. encouraged company employees to take advantage of the company’s success by offering them Fluor stock at one dollar per month per share. The brothers initiated many employee benefit programs and were considered enlightened employers.

Until 1930 Fluor operated primarily within California. That year, Peter Fluor pushed for expansion, contrary to his father’s wishes, and sold Fluor’s services to the Panhandle Eastern Pipeline Company. The contract was for construction of compressor stations on an oil pipeline from Texas to Indiana. The company also opened a Kansas City office. Fluor’s expansion got another boost later that year when the Shell Oil Company hired the firm to build a $100,000 refining unit in Illinois. It was the company’s largest refining contract to date and helped establish Fluor as a major competitor in the refining construction field.

Fluor’s business decreased sharply during the Depression years, but the company’s leadership wanted to keep its skilled personnel on the payroll. Thus many Fluor employees with sophisticated expertise worked as laborers until business improved. Also during the Depression, Fluor registered patents on two of the company founder’s inventions. They were the Fluor aerator tower, patented in 1932; and the Fluor air-cooler muffler, patented in 1938.

The pressures and energy needs of World War II led Fluor into more new work areas. Early in the war years, Fluor had only a few months to develop facilities and personnel capable of producing high-octane gasoline and synthetic rubber. Later, Sinclair Oil Company selected Fluor to design and build a sulfuric alkylation plant at its California refinery. Between 1940 and 1943, Fluor facilities produced more than a third of all 100 percent octane gasoline in the United States, and the Fluor staff developed three patented procedures to improve oil and gas processing.

In 1944 J. Simon Fluor died. Peter Fluor succeeded him as president, and J. Simon Fluor, Jr. became executive vice president. Peter Fluor died unexpectedly in 1947 at age 52. An interim officer followed him in the presidency, and in 1949 the permanent successor, Donald Darnell, took over. After a few years of declines in business, Fluor turned to the U.S. government for contracts in the early 1950s, and thus entered another new area of work. The company participated in construction of a large materials testing reactor for the Atomic Energy Commission in Arco, Idaho. Many more assignments in the nuclear field followed.

The immediate postwar years were a time of significant international expansion for the company; the firm secured contracts for refineries and natural gas plants in Canada and Venezuela. In 1946 a contract for a grassroots refinery in Montana solidified Fluor’s reputation as a refinery engineering firm and helped lead to an assignment to expand the Aramco facilities in Saudi Arabia. The company formed its Gas-Gasoline Division in Houston in 1948.

By the time the Korean War created massive petroleum product needs in 1950, Fluor’s reputation was so widespread that it was a natural choice for many energy-producing projects. In the first half of the decade, Fluor actively diversified its operations, contracting work for the U.S. Air Force at Dhahran Air Base and for refineries in Puerto Rico. In the early 1950s Fluor introduced a new technique that has since become standard in the industry: using scale models in the design of process facilities. The models helped Fluor staff become specialists in lifting large vessels at job sites. More projects followed, including designing and building plants for the petrochemical industry in Canada, Scotland, Australia and South Africa. A London office opened in 1957. In the late 1950s Fluor’s expertise in building helium plants gained the company contracts with Britain’s Bureau of Mines and Office of Saline Water.

During this period of rapid expansion and large international contracts, Darnell became chairman of the company, J. Simon Fluor, Jr. became president and chief executive officer, and J. Robert Fluor, grandson of the founder, became executive vice president.

As the company grew, Fluor’s leadership recognized the critical value of recruiting a staff trained in the most current, sophisticated construction methods. Because the marketplace during the 1950s was short of workers with the skills Fluor demanded, the company established in-house training and college tuition reimbursement programs, both of which are still in use.

In 1962 J. Robert Fluor, an engineer and former U.S. Air Force pilot who bred thoroughbred horses, became president and chief executive officer of the company. His tenure was significant for Fluor Corporation in four major ways: internationalization, computerization, acquisitions in the offshore oil drilling industry, and mining acquisitions. In the first case, Fluor built refineries in Korea and Iran, extending its operations into two more nations. In the computerization area, the company began using computers throughout its offices for both engineering projects and management needs during the 1960s.

Fluor’s extensive diversification into offshore drilling began in 1967 with the merger of five companies into Fluor under the divisional name Coral Drilling. Around the same time Fluor established a new subsidiary called Deep Oil Technology for deep-ocean recovery of oil. In 1968 the company created Fluor Ocean Services, an umbrella management company headquartered in Houston. Ocean Services quickly became a worldwide company. Fluor’s largest offshore drilling acquisition occurred in 1969, when the company took over the Pike Corporation of America. Pike’s operations had been consolidated under three separate companies—Western Offshore Drilling and Exploration Company, Republic Supply Company of California, an equipment distributor, and the specialty tubing and pipe distributor Kilsby Tubesupply.

Fluor’s involvement with the mining and metals industry also began in 1969. The company purchased Utah Construction and Mining Company, forming the subsidiary Fluor Mining & Metals, Inc. Fluor Australia, another mining interest, was set up soon afterward. In later years mining would become a significant interest for Fluor.

The company’s activities in the 1970s focused heavily on the international natural resources industries: oil, gas and nuclear power. Fluor also set up subsidiaries and management organizations in Europe, Indonesia, South Africa, Alaska and Saudi Arabia, the last being a $5 billion gas program. In 1973 Fluor consolidated its oil and gas activities to form Fluor Oil and Gas Corporation. It completed the world’s largest offshore facility for natural gas in Java in 1976.

The financial figures for three consecutive years demonstrate the rate of the company’s expansion: 1973, $1.3 billion; 1974, $4.4 billion; 1975, $9 billion. New corporate offices opened in Houston and Irvine to accommodate the company’s rapidly growing staff. Fluor executives attributed a large part of the company’s success to its task force management concept, under which every Fluor project received all the tools, personnel and resources to get the job done, and the project director had full authority and responsibility for the entire project.

In the late 1970s the Saudi Arabian minister of industry asked company president J. Robert Fluor to help improve Saudi Arabia’s poor image in the United States. At that time Fluor chaired the board of trustees at the University of Southern California. He asked executives of 40 major companies that dealt with the Saudis to fund a $22 million Middle East Studies Center at the university. The center was to be run by a former oil company employee and controlled by the donors. The university faculty and the Los Angeles Jewish community blocked the project because of the irregularity of its intended relationship with its fund sources. Fluor Corporation’s public relations department claimed the affair had been distorted by the “Jewish Press.”

Along with Fluor’s extensive and sometimes controversial international involvement, the company also made a significant domestic expansion by acquiring the Daniel International Corporation in 1977. Daniel was an industrial contractor with revenues over $1 billion a year that in many ways complemented the Fluor portfolio. Daniel’s operations were primarily based in the U.S., whereas Fluor worked largely overseas. The two had different client lists and were involved in different kinds of projects. Most Fluor employees were members of labor unions, but most of Daniel’s employees were not. Despite, and in some cases because of, their differences, the two companies integrated efficiently.

This was not the case, however, with the purchase of St. Joe Minerals in 1981. The acquisition happened at a time when Fluor had a healthy cash flow from its growing engineering and construction sectors. Management knew about the mining industry from its experience building facilities for mines. Fluor executives determined that metals prices ran counter-cyclically to the market variations in the construction industry, making mining the perfect complement to building. Thus the company successfully bid $2.2 billion for St. Joe.

In the next several years Fluor posted significant losses. The company was not prepared for the crash in metals prices of the early 1980s. The fall was compounded by a deep recession, a reduced inflation rate, and a collapse in petrochemical plant building because of the oversupply of oil. From a high of $71 in 1981, Fluor stock fell to lower than $20 by 1985, and the company accumulated $724 million in debt.

After J. Robert Fluor’s death in 1984, David S. Tappan, Jr. moved up from the Fluor presidency to become chief executive officer. Tappan brought a great deal of international experience to the position and looked for ways to ease the company’s dependence on oil contracts. As the company continued to lose money from 1983 through 1986, it earnestly sought a return to profitability, finally deciding it must divest some of its holdings and restructure the entire enterprise. Fluor sold all the oil properties and some of the gold affiliated with its St. Joe Minerals operation, all its offshore drilling facilities, and some of the corporate offices it had built during the 1970s.

The company also divested its South African operations in 1986. Fluor’s stated political position on the issue was that the company “still believes sanctions and withdrawal of U.S. firms from South Africa are counterproductive to achieving a peaceful solution to the problems of racial inequality. But as uncertainties of continued operation in South Africa escalate, we felt that an orderly transfer of ownership at this time would be in the best interests of all concerned.” Fluor retained a repurchase option on the divested South African assets.

Concurrent with Fluor’s divestiture of its South African operations in 1986, the company underwent extensive restructuring. The dramatic losses incurred throughout the early 1980s had convinced Tappan that Fluor’s survival would not be assured if the company remained almost entirely dependent upon the cyclical oil industry for its business. The collapse of oil prices in the beginning of the decade marked the end of Fluor’s $1 billion-plus contracts to construct oil refineries and petrochemical facilities, and the company began to suffer disastrous losses, recording its largest at $633 million in 1985. In order to lessen its dependence on the oil market and to develop a more diversified clientele, Tappan decided in 1986 to merge Daniel International with Fluor to create Fluor Daniel Inc. Operating as the major subsidiary of Fluor Corp., the creation of Fluor Daniel enabled the company to capitalize on the industrial business that had been Daniel’s strength. Instead of almost exclusively constructing facilities for the petroleum industry, Fluor now began to contract for plant modernizations, chemical plant constructions, factory retro-fits, and high-tech plant construction. To further strengthen its move toward diversification, Tappan reorganized Fluor into five market sectors: process, power, industrial, hydrocarbon, and government.

The transformation proved successful. After losing $60 million in 1986, Fluor posted a profit the following year of $26 million and by the end of the decade had bolstered its earnings to $147 million, on over $7 billion in sales. Although Fluor continued to construct petroleum refineries for $1 billion and upwards—most notably in Saudi Arabia—the company’s recovery was due to the diversity of its clientele. Fluor now designed, constructed, and maintained buildings and equipment in more than 30 industries.

This diverse customer base served Fluor well in the early 1990s when a recession crippled many construction companies. The company increased its operating profit throughout the downturn, benefiting from a $5 billion contract to manage and construct the production facilities of Saudi Aramco and other work in the Middle East resulting from the destruction of petroleum facilities during the war in the Persian Gulf.

In 1992, under the stewardship of Leslie G. McCraw, a former vice-president of Fluor who replaced Tappan a year earlier, Fluor continued to increase its profits in the engineering and construction business and augment its investment in the coal industry. For the fifth consecutive year Fluor Daniel recorded an operating profit, increasing 15 percent from 1991 to $191 million. Revenues for the year were buoyed by a $2.2 billion Department of Energy contract to manage the clean-up and dismantling of a plutonium plant in Ferndale, Ohio. The company’s coal mining concern, A.T. Massey Coal Company, increased its reserves of high-quality, low-sulfur coal to nearly one billion tons, ranking it among the five largest U.S. coal companies. While Fluor’s coal business thrived, generating an operating profit of $80 million, the company’s lead concern, The Doe Run Company, suffered from a considerable drop in the price of lead. By the end of the year, McCraw decided to end Fluor’s presence in the lead industry, discontinuing the Doe Run operation.

Clearly, the decision to diversify in 1986 was instrumental in Fluor’s recovery from the drastic decline in petroleum-related construction during the early 1980s. The company’s performance since diversifying bodes well for its future prospects, especially considering its consistent increase in earnings throughout the recession in the early 1990s. As the need for environmental waste management begins to build, Fluor appears poised to reap the rewards. If Fluor continues to expand its customer base and develop new niches of business, the company should experience a rate of growth comparable to the steady rise it has enjoyed since 1987.

Principal Subsidiaries

Fluor Constructors International Inc.; Fluor Daniel Inc; A.T. Massey Coal Company

Further Reading

Byrne, Harlan S., “Fluor Corp.,” Barren’s, October 21, 1991, pp. 51–52.

“Doe Run: How To Clean Up On The Cheap,” Fortune, December 16, 1991, p. 102.

Fluor, J. Robert, Fluor Corporation: A 65-Year History, New York: Newcomen Society, 1978.

McCraw, Leslie G., “Developing Global Strategies at Fluor Corp.,” Site Selection, April 1990, pp. 391–392.

Perry, Nancy J., “Flush Times For Fluor,” Fortune, November 6, 1989, p. 113.

Poole, Claire, “Construction,” Forbes, January 7, 1991, pp. 126–128.

Wrubel, Robert, “Transforming Fluor,” Financial World, May 30, 1989, pp. 28–29.

—updated by Jeffrey L. Covell