A Bonanza For Bechtel? Well...Maria Shao
Given the scale of destruction in Kuwait, the casual observer might think that U. S. companies hired to rebuild the war-torn country had hit the jackpot. The biggest winner appeared to be Bechtel Group Inc., the San Francisco engineering and construction giant that has snagged the contract to restore Kuwait's oil production.
Not so fast. Riley P. Bechtel, 39, president and CEO of the closely held company, says the deal probably means "hundreds of millions, not billions" of dollars in revenues over the next 12 to 36 months. "The scope of our work is widely misunderstood. People think we're running all the work in all of Kuwait."
WELL-APPOINTED. Riley isn't the only big player in the industry eager to correct that impression. Says William Stitt, chairman of ICF Kaiser Engineers in Oakland, Calif.: "Everybody would like to get their name on the marquee. But there will be a difference between signing up and making money at it." Bechtel's contract with Kuwait Petroleum Corp., as Riley Bechtel points out, is limited to restoring "upstream" oil and gas installations--wells, mostly. So far, the company hasn't been hired to rebuild oil refineries or infrastructure such as roads and bridges. And for now, most of Bechtel's work involves fighting oil fires. Riley says the Kuwait project is one of some two dozen "megaprojects" the company is involved in. "It will be a major assignment for us, but it won't be the largest."
For that matter, the gulf war wasn't altogether good for Bechtel's book of business. The company said on Apr. 23 that revenues for projects completed last year had risen a healthy 10%, to $5.6 billion. But the war put a lid on new contracts. Even though bookings were ahead of plan during the first half of 1990, Iraq's invasion of Kuwait on Aug. 2 stymied many new projects. The upshot: Bechtel's bookings dropped 12% last year, to $4.8 billion.
Bechtel says he won't drain the company's other projects to service Kuwait--a fear expressed by certain Bechtel clients. Only 120 of the company's 32,500 employees have been dispatched to Kuwait so far. Its work force in the country could eventually grow to 4,300 people, but no more than 200 are expected to be Bechtel employees. The rest are likely to work for various subcontractors.
Still, the 1990s are almost sure to be kinder to Bechtel than the previous decade was. The company's revenues slumped--along with oil prices and nuclear plant construction--forcing Riley's father and predecessor, Steven D. Bechtel Jr., to slash the work force. Now, the company has logged its second straight year of revenue gains, and Riley Bechtel expects 1991 sales to rise further.
He's focusing much of his attention overseas. In Asia, the company recently snared major airport projects in Japan, South Korea, and Hong Kong. He also sees big opportunities in Eastern Europe. So whether Kuwait is mega or middling, Bechtel will stay busy.