Santa Monica Daily Press
Friday, July 23, 2004 ❑ Page 7
Early ‘90s near demise prompted course to brighter future BY BOB FICK Associated Press Writer
BOISE, Idaho — It’s one of the nation’s most storied companies, with achievements around the world. It helped build Hoover Dam and the San Francisco Bay Bridge. But in 1995, Morrison Knudsen Corp. stood on the brink of ruin after a misguided effort to diversify beyond construction and engineering. Now, nine years later and bearing the new name of Washington Group International, the company is bigger, more diverse — but within the business it knows best — and regaining its reputation. “In the ‘80s and ‘90s, people had the feeling they could buy anything,” Philadelphia-based business consultant John Reddish said. “A lot of companies lost their way.” “When you get back to your knitting, you can focus on your core business and spread out from there,” Reddish said. “They’re coming back. It’s a testimony to paying attention to the trade skills they needed to pay attention to.” Sweeping dams, long power transmission lines and huge industrial plants are still part of the company’s portfolio, but it also now includes destroying weapons of mass destruction, cleaning up and managing radioactive waste and even analyzing isotopes protecting and powering the Mars rovers. It’s a long way from what many say were the misguided efforts of ex-chief executive William Agee to diversify Morrison Knudsen Corp. beyond the construction and engineering prowess that had earned it international acclaim. Agee’s friend, Chief Financial Officer Stephen Hanks, recommended Agee’s dismissal. “It was the hardest thing I ever had to do. I don’t want to have to do that again,” Hanks said. “But it was the right thing for the company at the time.” Now, Hanks holds the reins.
In an effort to diversify beyond heavy construction with its up and down cycles, Morrison Knudsen moved into real estate and shipbuilding in the 1980s only to see both go sour in a matter of years. Then Agee, the former Bendix chairman, was hired and moved Morrison into the uncharted waters of manufacturing rail cars — a business neither he nor other Morrison executives knew very well. That move foundered, too, combining with Agee’s personal extravagance to hasten his ouster. “Were the problems of the early 1990s a wake-up call? Absolutely,” Hanks said. “Did they refocus us on what we’re good at? Absolutely. I can tell you that because I lived through it.” Montana construction magnate Dennis Washington was critical to the recovery, first bailing the company out of bankruptcy and then seeing a broader, brighter future. “We wanted to build a foundation of talented people as good as any other company in our industry,” Washington said in a statement. “We also wanted to diversify into markets that tend to offset each other in their normal economic cycles.” He capitalized on the experience of the people responsible for Morrison Knudsen’s reputation and built on it with the purchase in 1999 of Westinghouse Government Services Group and the decision a year later to buy out Raytheon’s engineering and construction division. All three units gave Washington Group 27,000 employees worldwide. Jettisoned were shipbuilding, railroad and transit car manufacturing and real estate development and the focus was returned to engineering, construction and management services. But beyond the heavy construction and mining projects Morrison Knudsen was known for, the evolving company’s portfolio was expanding into power, government and industrial processing fueled by the technological expertise the new acquisitions provided.
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It offered the cyclical balance Washington was looking for — government work to pick up the slack in times when heavy construction is down and energy contracts in times when sluggish economies rein in industrial projects. Resolution of the bankruptcy gave the company a debt-free balance sheet and protection from federal taxes on their first $80 million of annual operating profits for the next decade, setting the stage for what analysts say is the company’s final shot as a publicly traded company. “They’ve gone under twice. That’s a fact,” said Sanjay Shrestha, an analyst with First Albany Corp. “But this is a company that has a pretty darn good resume. ... Does the company have enough to take it to the next level? What I’ve seen out of bankruptcy, they are kicking on all cylinders.” It is a culture with roots that go back 92 years to Harry Morrison and Morris Knudsen. Their regional construction company gained the national stage when Morrison organized the joint venture and oversaw construction of Hoover Dam. The San Francisco Bay Bridge followed as did the Grand Coolee Dam, the largest private enterprise hydroelectric project for the Aluminum Co. of Canada and the Trans-Alaska Pipeline. The projects were big and made a difference in the way people lived. In 1954, Time Magazine called Harry Morrison the one builder in history who had done the most to change the face of the earth. “The name Morrison really carried a
lot of weight,” said 27-year-veteran Keith Prince, a former executive vice president fired by Agee as the company began its slide in 1991. The company also had a reputation of backing government in times of war — a reputation that was dramatically enhanced in 1941 when its 1,150 workers building airstrips on Wake Island joined Marines to try holding off a Japanese attack. They failed and most were sent to prison camps in China. But 98, who were kept behind to finish the runways, were killed by the Japanese after digging their own mass grave nearly two years later. The company was also a major civilian presence during the Vietnam War, lost 13 employees from its New York office in the 2001 World Trade Center attacks and now has more than 100 people in Iraq overseeing hundreds of millions of dollars in reconstruction work. Morrison was also drawn to Iraq by oil and natural gas. Hanks expects more than $100 billion to be spent over the next decade to convert natural gas from the region into a liquid that can be shipped elsewhere. “If the coalition is successful, then Western companies, and it’s not just U.S. companies, but European companies, even companies from Korea and Japan, will have a long-term future in providing services in that part of the world,” Hanks said. “And we want to be a part of it. In fact, we have to be a part of it. If this company is going to continue to grow, we’ve got to go where the world’s markets are.”
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