Kellogg Brown and Root, the engineering and construction subsidiary of energy giant Halliburton, may be up for sale. Halliburton announced Sept. 23 it was considering selling the KBR unit due to financial losses from asbestos claims and criticism over its involvement in Iraq and Nigeria.
The subsidiary has been plagued with problems in recent years, most notably a $4.2 billion asbestos claim the company took on when it purchased Dresser Industries in 1999. KBR has also had to deal with claims the company overcharged the Pentagon on several military supply contracts and is involved in employee corruption in Nigeria. The majority of the company’s criticism, however, comes from its relationship with Vice President Dick Cheney – former chief executive of Halliburton — and the fact that the subsidiary won the first large contracts in Iraq through a no-bid process.
According to The New York Times, KBR experienced an operating loss of $277 million in the second quarter of this year, and had an operating loss of $148 million in 2003.
“There’s a negative perception politically of KBR, whether it’s deserved or not,” Gary Russell, a financial analyst with Stifel Nicolaus, told The New York Times.
According to Halliburton, KBR could be separated through a sale, spinoff or initial public offering. The company would like to retain some control over the unit, with an eventual separation if the subsidiary continued to perform badly in the stock market. Halliburton plans to consolidate KBR’s five units into two divisions, one that will cover energy and chemicals, the other for government and infrastructure projects. The consolidation will save Halliburton approximately $100 million a year.
Halliburton has not announced if the sale of KBR or the changes made within the company could affect the jobs of employees in Iraq and elsewhere. Since the United States invaded Iraq in 2003 at least 45 Halliburton subcontractors and employees have died there.
