COMPANIES TO WATCH FLUSH TIMES FOR FLUOR Profits and orders are up at this drastically redesigned construction giant. The stock also rises.
By Nancy J. Perry

(FORTUNE Magazine) – WHAT'S the essential quality a leader needs to turn a bloated, near-bankrupt company into a lean, mean, wealth-creating machine? ''Confidence,'' says David Tappan, 67, chairman and chief executive of Fluor Corp. ''You have to exude confidence. Even though you may not be 100% sure what you're doing is right, you have to act 100% confident and tell the world: 'By God, we're going to do it.' '' Happily, Tappan and his troops have done it. Fluor, headquartered in Irvine, California, is now the biggest engineering and construction company in the U.S. For two years running, revenues and new orders have outpaced those of its chief rival, Bechtel Group of San Francisco. Most important, Fluor, which lost , a horrific $633 million in 1985, is once again making solid profits. For the first nine months of fiscal 1989, which ends October 31, earnings topped $79 million on revenues of $4.6 billion. Fluor hasn't ridden so high since the early 1980s. Back then, almost all its profits gushed from a single source: building $1-billion-plus oil refineries and petrochemical facilities for free-spending Saudi Arabians and other Middle Easterners. When the megaproject market sank into the sand along with oil prices, Fluor found itself in a deep dry hole. By 1984 its new-construction backlog had shriveled from $16 billion to $4 billion. At that point Bob Fluor, the popular grandson of the founder, died of cancer, and Tappan, his longtime No. 2, took charge. Tappan's first priority was repairing Fluor's severely damaged balance sheet. In three years he cut the payroll from 32,000 to 14,000, partly through layoffs and partly by selling off $750 million in assets. With the cash from the asset sales, Tappan paid down nearly $1 billion in debt. His tough tactics earned him the nickname ''Ice Man'' -- a handle he disliked at the time and now laughs off. But Tappan's restructuring produced a solid financial foundation that Morgan Stanley analyst Candice Eggerss declares ''just beautiful.'' Aided by President Les McCraw, 54, who succeeds him as chief executive in January, Tappan then began redesigning the company to make it less vulnerable to the oil patch's ups and downs. Though petroleum-related projects account for 25% of backlog and are again growing fast, Fluor now designs, constructs, and maintains buildings and equipment in more than 30 industries. These range from prisons to paper mills to power plants. As a self-styled ''diversified technical services'' company rather than a mere builder, Fluor also makes money selecting sites, arranging financing, and even lending directly to some blue-chip clients. Another new departure: Fluor actively seeks long-term partnerships with customers. In these deals a client, such as Du Pont, promises to use Fluor for a significant chunk of its engineering and construction work rather than open up every project to competitive bidding. In return, Fluor pledges to keep a fixed number of employees on call for Du Pont. The customer can operate with fewer engineers on its staff, while for Fluor's folk, familiarity breeds greater efficiency. Says Robert Miller, director of project engineering for Du Pont: ''Now we have to go up the learning curve with our contractor only , once.'' In recent years Fluor has forged almost 30 alliances. One of the latest is a joint venture with North Carolina's Duke Power to build, operate, and maintain coal-fired electric power plants. That deal leaves Fluor well-positioned to cash in should a crunch in America's megawatt capacity emerge in the 1990s, as some forecasters predict. Says Tappan with a smile: ''We are ready to serve our country in a crisis.'' SINCE JANUARY 1988 Fluor's stock has risen 180% to around $34 a share. With profit margins and new orders still growing -- the current backlog of $8.2 billion is the highest since 1982 -- some analysts think the share price could climb to $46 over the next 12 months. Says Deborah Thielsch, an engineering construction analyst with First Boston: ''The scariest thing about Fluor is that there doesn't seem to be anything negative lurking.'' Does the chairman agree? Says Tappan: ''There is no reason we can't grow exponentially -- except for our own stupidity.'' Somehow, you don't get the feeling this confident character is worrying too much about that.