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McDermott International Inc. Message Board

  • spectracide spectracide Mar 4, 2013 11:45 AM Flag

    Here's a big part of why the analysts don't believe in the management team.

    Steve, if you could just elaborate -- the projects that you had issues within the Atlantic region, and you're talking about labor issues that a lot of your peers are. I mean in your estimate, do you -- I know you mentioned productivity issues, but do you also assume in your forecast that labor costs are going up, because that's an issue that other people are having? So I guess my concern would be that we didn't factor enough cushion in there. And just how you'll manage through the labor issue longer term. And then my second question just relates to your margins. Sitting here again in the 7% to 10% margin range, which is below your targeted range of 10% to 12%, you cited a number of issues. But is there any reason structurally, as we look out to 2014, why margins can't get back within the 10% to 12% targeted range? Is there anything structural going on? Or are the new types of projects you're going after, when we think of deeper water and subsea, they won't allow you to achieve those type of margins? Because I'm just wondering at what point, or ever, if we get back there.
    Stephen M. Johnson - Chairman, Chief Executive Officer and President

    Jamie, we'll try to answer both of them as crisply as we can. With respect to the labor issues in Morgan City and the U.S. Gulf Coast, rightly you observed that wage rates are an issue as well. I would say you put the basket of the following things and they have put pressure on our projects. Labor availability has negatively affected us. Labor productivity, in terms of lack of the skilled labor workforce that we have had in the past, has negatively affected us. The fact that there aren't a number -- the numbers of skilled laborers that we need has caused us to work through a subcontracting labor approach, where we're not direct hire and can't control the labor as well as we have when we had a higher percentage of direct hire. And wage rates, the competition for the skilled labor naturally creates wage rate pressure. Now specifically you said, did we include all of those in our estimates? Factually, no. We did not predict the extent of the issue in that yard and in that area, specifically on the rates, and that was part of what has caught us in the position that we're in. At the end of the day, I will tell you, our customers are working with us. They see these issues. And as you know, under our rules, we take these charges as we see them and estimate them. There's recovery potential in 2, if not 3, of those jobs, that we've mentioned in the prepared comments, in the Atlantic region. So there's a future quarter potential recovery subject to negotiations with our customers. Now let's go to the second question. Perry?

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    • The management team continually incurs loses on many of their contract...if you read above...they note that they did take labor issues into account in the new contract bids (see second paragraph)...in short, their margins will most likely come in below what they bid.

      I am very long this stock...and now I have to hope they get bought out by someone smart...because this management team is a bunch of idiots....they effectively admitted on the call that they don't know how to bid. Obviously, the Board doesn't seem to care for they haven't done anything to force change or improvement.

 
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