USA: Halliburton May Shed KBR and Iraq Business
Houston-based Halliburton Co. plans a cost-cutting program at its KBR subsidiary and could sell the engineering and construction business if the company's stock performance does not improve.
Company officials said today the reorganization will result in some job losses, although they could not say how many layoffs might occur. Most of the cuts will come from the management ranks, Halliburton spokeswoman Wendy Hall said.
The plan calls for KBR to be recast from the current five product lines to two divisions: an energy and chemicals unit and a government and infrastructure operation. The latter division would include the company's operations in Iraq, which have come under intense public scrutiny.
The restructuring is expected to cost about $30 million but save the company $80 million to $100 million annually.
KBR, formerly known as Kellogg Brown & Root, has been saddled with a huge asbestos liability. Those claims forced KBR to seek Chapter 11 bankruptcy court protection to pay all those with health problems or potential problems due to asbestos exposure. That prolonged process has helped drag down Halliburton's stock price at a time when high oil and gas prices are aiding competitors in the oilwell service sector.
If Halliburton shares do not begin trading at a level comparable with the company's peers after the asbestos issues have been dealt with, company executives will consider launching an initial public offering, selling KBR outright or conducting a spinoff of the operation, company Chief Executive Officer Dave Lesar told analysts this morning at a conference dubbed "Looking Beyond."
Company officials did not announce a timetable for when such a decision might be made.
Many investors have long called on Halliburton to sell off KBR. But in late morning trading today, Halliburton shares were down 14 cents to $31.92 on the New York Stock Exchange.