Halliburton in for the long haul in Iraq

With 33 staff dead and razor-thin profit margins to be had, the company seems less concerned than many might expect
By Simon Romero

Street-performance group Mourning Mothers stands in front of Bechtel Corporate Headquarters during the ``Stop the Corporate Invasion of Iraq'' protest on Feb. 24 in San Francisco, California. The activists were seeking to bring attention to what they see as profiteering in Iraq by Bechtel and Halliburton, companies with close ties to the Bush administration.

Is Iraq the right destination for a 48-year-old with eight grandchildren?

Cynthia Johnson, the grandmother in question, laughed at the query as she tried on a yellow jumpsuit that might protect her from a chemical-weapons attack.

Johnson and hundreds of others hired by Halliburton Co packed into what used to be a J.C. Penney store at the Greenspoint Mall here this week to prepare to go to Iraq. She said her job there, serving food to US troops, was more promising than her previous occupation, cooking on an offshore oil platform in the Gulf of Mexico.

"The money's better and there's the feeling I'm doing something useful," said Johnson, a native of Deridder, Louisiana. "My daughters and grandchildren worry for me, but a job like this doesn't come up every day."

Other contractors, including General Electric and Siemens, have suspended their work in Iraq after an escalation of violence in the last month that singles out civilians. Halliburton, meanwhile, the most prominent company there with government contracts valued at US$8 billion, appears to be anticipating a long slog ahead.

Its frenzied efforts to prepare a new round of US workers to go to Iraq and the increasingly grim assessment of the risks there stand in contrast to the view that the contracts initially awarded to Halliburton last year, some without competitive bidding, would be a boon for the company.

Still, David Lesar, the company's chief executive, said Halliburton had no intention of slowing down in Iraq or leaving.

"We're absolutely not going to pull out of there," Lesar said.

To be sure, Halliburton is the company US Vice President Dick Cheney once ran, lifting it to prominence from its once obscure status -- known mostly for oilfield services. The company fought hard to secure the contracts that were once viewed as plum rewards but have evolved into headaches and, at times, a public relations nightmare. An early exit would seem untenable in light of the controversy surrounding Cheney's ties to the company, questions over how the company won some contracts and its overbilling for some services in Iraq.

None of this seems to slow the hundreds of people who stream into Houston each week to vie for blue-collar jobs in Iraq. Most are lured by tax-free salaries of about US$80,000 and sometimes more for overtime and unusually hazardous duty.

Many of those going through the two-week screening were hesitant to give their names until passing background checks. Some had not notified their bosses in other jobs or even their spouses that they might go to Iraq, fearful of doing so until absolutely sure of going.

"I guess I'm lucky not to have those issues since I'm unmarried, unemployed and ready for some steady work," said Michael Curry, 40, of Houston. Curry said he lost his job maintaining aircraft systems after air travel plummeted following the terrorist attacks in September 2001, so he was eager to be offered a position repairing air-conditioning units in Iraq by Halliburton.

"This'll be my first time overseas, but I just want a job," he said.

A grim acknowledgement that opportunities could outweigh risks pervades Halliburton's executive suite as well these days.

Lesar's description of the mood at the company's headquarters here is "solemn and serious." He returned last week from Kuwait, where he tried to calm nerves among the company's truck drivers after three drivers were killed and one kidnapped in an ambush of their fuel convoy in Iraq.

Since the start of the war, Halliburton has lost 33 employees and contractors in attacks or accidents in that country, more than the military casualties of any coalition member except the US and Britain. Scrutinized by critics claiming it is profiteering from war, Halliburton has reluctantly admitted to overcharging the Pentagon for services like food preparation and gasoline delivery.

Adding to the pressure on the company, investors are groaning about measly profit margins the company has reported on its contracts in Iraq. With other contractors suspending their Iraqi operations, some are questioning why Halliburton does not limit its exposure to Iraq or at least consider selling the subsidiary, Kellogg Brown and Root, handling its work there.

"From a business-mix standpoint, the Iraq work has little or no fit with the rest of the organization," said Gary Russell, an analyst in Denver with Stifel Nicolaus, a brokerage firm, who looks favorably on the company's other operations. Russell noted the "razor thin" profit margins of the Iraq contracts, which range from a base level of 1 percent to 2 percent and slightly higher, depending on the company's performance. Margins climb to 10 percent for other jobs like building liquefied natural gas terminals.

Could Halliburton be ruing the day it entered Iraq? Not quite, as executives prepare to discuss the company's financial results with investors on Wednesday. Part of the appeal of the Iraq contracts lies in serving the US government, that pays its bills on time. "I think our shareholders understand why we're in this business," Lesar said, citing the company's work for US military operations around the world since World War II.

From: http://www.taipeitimes.com/News/bizfocus/archives/2004/04/25/2003138055