Special Report : Bechtel Strives for Cost Competitiveness, Quality

Bechtel Civil and Minerals, Inc., one of the Bechtel group of companies, is a large engineering and construction firm that services the mining industry, among others. The firm's head, S. D. Bechtel Jr., comments on how his E&C company is dealing with the recessionary economy. First, he offered a historical perspective. About a half century ago-in the middle of the Great Depression-W. A. Bechtel and several business partners drew up a fixed price bid to build the Hoover Dam. At that moment in history, the W. A. Bechtel Co. was a modest success, but the times were troubled and uncertain. Money was scarce and a lot of contractors across the country were one project ahead of bankruptcy. The bid for Hoover was a make-or-break proposition for Bechtel, and it turned out successfully. The Hoover Dam was a no-frills operation in an isolated and harsh environment. There was plenty of hard work, long hours, and not many amenities. Controlling costs was critical. Everyone knew what had to be done, and why and what the consequences were. Today's Challenge Bechtel is now a bigger, more complex organization whose management views the current economic recession as a challenge to be met in much the same way W. A. Bechtel met the challenge of the Hoover Dam: by pulling together with a sense of purpose and direction. In many respects, Bechtel's situation today has a number of parallels to that which faced my grandfather. The company is eminently successful, but times are tough and there are plenty of signs that they could get tougher. My grandfather bet on the Hoover Dam to insure the future health of his company and I think we can work together again in that same tradition, make some tough decisions together, and the company's future can be just as promising. The first and most important requirement is to make certain that everyone understands the situation. The Bechtel group of companies are in an excellent financial position now. Its workload hit an alltime high in 1982 and it is well positioned in its principal markets. But the next two years may be critical for the company. Traditionally, Bechtel's work load lags behind general developments in the economy. Although many of its clients continue to suffer serious business difficulties, Bechtel is only beginning to feel the impact. The worldwide market for basic metals remains soft; relatively low prices and abundant supplies of oil and gas have flattened the petroleum market and made once promising synfuels projects economically unattractive; utility clients are still caught in the vise between overregulation and escalating costs. And persistently high, long-term interest rates have made capital investments expensive and difficult to justify. The company maintained a healthy workload through 1982. In some areas it has had little new work and consequently has been forced to lay off some staff as projects have been canceled or concluded. In other areas new work has tided the company over and more people have been hired. But new work bookings have fallen off, creating some uncertainty for the near future. 1983 requirements are clear, although seemingly contradictory. Belt tightening and cost reduction are necessary for Bechtel to remain healthy and competitive, enabling it to handle a possible further downturn with a minimum of turmoil and dislocation. At the same time, we need to allocate resources and funds in areas that will keep us positioned for the turn-around marketplace.