Cost overruns, write-offs, a sinking stock price: When will Fluors epic failures end? After $714 million in second-quarter pretax charges, the Irving engineering company will unveil a new strategy next month -- and says all options are on the table. Fluor Corp., which is based in Irving, has begun a strategic review after taking over $700 million in charges. The company says all options are on the table. By Mitchell Schnurman Last week, Fluor took $714 million in pretax charges for its second quarter from cost overruns, project delays, client disputes and other malfunctions. That's on top of $1 billion in similar charges since 2016, and Fluor even pulled its earnings guidance for the rest of the year, a sign that problems haven't bottomed out. Since May, the company has named a new CEO, a new chairman and a new chief financial officer, and theyre now reviewing everything. The company is replacing board members, adding a committee to evaluate risk, hiring a New York strategic adviser, putting real estate on the sales block and, of course, evaluating cuts to the workforce. Much has been lost already, even beyond the billions in market value. Consider that Fluor CEO Carlos Hernandez had to close out last week's call with analysts by pledging "to restore our reputation and credibility." We ask for your patience, said Hernandez, formerly chief legal officer. Hes asking a lot. Fluors stock price has fallen over 35% since last week, after the company posted its worst quarter ever, according to Bloomberg Intelligence analyst Sonia Baldeira. The huge charges, along with withdrawing guidance, breaks our trust in Fluors future, Baldeira wrote.

Recent news also raises deep questions about the bidding and execution of projects, she said, which may demand hard decisions. That could be a sell-off of a business area and a refocus on core strengths, she wrote. Fluor has over $19 billion in annual revenue and 53,000 employees worldwide. It ranks No. 164 on the Fortune 500. It works on many major infrastructure projects, including a $14 billion liquefied natural gas facility in Canada, a new people mover at Los Angeles International Airport and a copper and silver mine in Botswana. On June 30, Fluor's backlog topped $35 billion. But the company has suffered from cost overruns and other problems, primarily with fixed-price contracts. In October 2018, then-CEO David Seaton lamented that two projects were performing miserably, which he said overshadows all the good stuff thats out there. While he said Fluor was doing "a lot of soul searching," the stock price price still fell 17%. Fast forward to May, when Fluor took $110 million in charges and Seaton stepped down, replaced by Hernandez as CEO and Alan Boeckmann as executive chairman. That time, Fluor's stock fell 24%. Then last week, it plunged 27%, the biggest one day sell-off since at least 2000. Trading volume was about seven times higher than average.NIn early October, Fluors stock traded for $60 a share. On Monday, it closed at just over $21. In less than a year, over $5 billion in market value has been wiped out. Our board absolutely recognizes the gravity of this announcement, said Boeckmann, who was Fluors chairman and CEO from 2002 to 2011. In addition to bringing back Boeckmann, the company called back Michael Steuert as chief financial officer. He had been CFO from 2001 until retiring in 2012. Steuert said the company withdrew earlier guidance because risk remains in the backlog and more charges could be coming. In addition, Fluor has launched a major strategic review, with Lazard as an adviser, and the costs of that effort could hurt results. Fluor expects to unveil the new plan in late September, and employees and investors should brace for the news.

Everything is on the table, CEO Hernandez said. We're going to be looking at capital structure, dividends, assets, portfolio, everything that you can imagine. Even board members arent safe. By next month, Fluor plans to replace two directors with people who have additional capital project and industry expertise, Boeckmann said. Fluor also created a new committee to help the board assess the risk of projects. After being blindsided by cost overruns and charges, executives are ratcheting up oversight both in project bidding and execution. In my prior life, at quarter-end, I would have one review with all the group CFOs, and go through the numbers, and make sure we're comfortable, Steuert said. This last two months, we had three rounds of reviews with all the group controllers and CFOs. It was a very intense effort, he added. Fluor will take a more skeptical view of fixed-price contracts, which shift more risk and liabilities to contractors. In June, almost half of Fluors backlog was in fixed-price contracts, up from 19% in 2014. Fluor does not have to accept these risks, and we are working with our clients to better balance these in future contracts, Boeckmann said. Fluor employees have a part to play, too. They need to have a commercial mindset and strong understanding of the contracts, he said. But the company will try to steer clear of future hazards. In recent weeks, executives declined to bid on projects they would have chased in the past, Hernandez said, and that will continue. We're not going to take projects where we are going to be bidding against a number of other competitors and we don't have a quantifiable advantage, Hernandez said. Theres one more firewall: Every risky project has to be approved by the CEO and his team. Everybody is on board with that, Hernandez said. Source: T

Question One: [25]

Fluor employees have a part to play, too. They need to have a commercial mindset and strong understanding of the contracts, he said.

Examine the article and extract above. Critically discuss five (5) methods through which Fluor management can motivate their staff.

Question Two: [20]

Since May, the company has named a new CEO, a new chairman and a new chief financial officer, and theyre now reviewing everything. The company is replacing board members, adding a committee to evaluate risk, hiring a New York strategic adviser, putting real estate on the sales block and, of course, evaluating cuts to the workforce.

In light of the statement and article above, evaluate the effectiveness of transformational and charismatic styles of leadership.

Question Three: [25]

Refer to the article above and assess the contribution of high-performance teams towards Fluor in context of the article.

Question Four [30]

As a senior project manager at Fluor, suggest and discuss the various approaches to conflict resolution.