Former Reagan cabinet officer William Clark resigned on Monday as acting chairman of the financially troubled Morrison Knudsen Corp. as the onetime construction giant said its 1994 losses will be even worse than anticipated.
The company said losses are now expected to total $310 million, $135 million more than the estimate it made earlier this winter. Fourth quarter losses alone are expected to hit $275 million.
Morrison Knudsen stock dropped 20 percent Monday in response to the news, closing at $6.50 on the New York Stock Exchange.
These new developments come as the corporate board and its cadre of executives tries to rebuild following the ouster of former chairman and chief executive William Agee.
Clark, who took control of the Boise-based company when Agee was forced out last month, said he resigned as acting chairman to return to family and professional commitments. The company said it would name a new chairman by year’s end.
Morrison Knudsen veteran executive Bob Tinstman was named chief executive officer several weeks ago to handle day-to-day corporate operations.
The larger pool of red ink was the result of higher than expected losses in the company’s transit group, where rising costs and delivery delays must be covered. The company specifically cited problems with contracts for design, engineering and manufacture of 113 intercity and commuter cars for Caltrans and 50 sleeper cars for Amtrak.
Increased loss reserves and write-downs in the company’s 65 percent-owned subsidiary, MK Rail Corp., its Infrastructure Group and its Clevelandbased Engineering, Construction and Environmental Group also increased the estimated loss.
Corporate officials said they expect to announce final financial results by the end of March.
They also said negotiations are continuing with creditors but have not resolved the corporate debt crisis with 26 lenders.
Still, Tinstman said the banks probably will not foreclose on the $235 million in defaulted loans.
Since lenders have not come forward with $125 million in new loans that Clark had hoped for, it now appears that the company will have to negotiate several short-term loan extensions until a two-year business plan under development is accepted by the lenders.
“We don’t have any signed deals yet,” Tinstman said. “You have to have financial flexibility and integrity. … People are looking for a signal that, yes, we will have financial stability.”