THE WRECK OF MORRISON KNUDSEN

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IN ITS GLORY DAYS, THE MORRISON Knudsen company helped create the very fabric of America by building such megastructures as the Hoover Dam, the San Francisco-Oakland Bay Bridge and the Trans-Alaska pipeline. By last week, however, the 83-year-old construction firm, based in Boise, Idaho, was struggling to survive a devastating corporate crackup. Just six weeks after directors ousted the charismatic William Agee as chairman and chief executive officer, the company was frantically seeking $125 million in new bank loans needed by the end of this week to avert a bankruptcy filing. And with losses mounting, shareholders suing and directors resigning, the stock of Morrison Knudsen, which traded for about $30-a-share a year ago, closed at $5.75 on Friday.

The most daunting news was that the company would report a loss of $310 million for 1994, stemming in large part from its troubled railcar business. That was nearly twice the deficit that Morrison Knudsen acknowledged as recently as February. To make matters worse, the firm remained in technical default on $225 million in loans from Bank of America, J.P. Morgan and other lenders. "We are beginning to seriously doubt the company's viability," says analyst Tobias Levkovich, who follows the firm for Smith Barney.

The turmoil grew worse when former California Supreme Court Judge William Clark, the leader of the boardroom putsch that removed Agee six weeks ago, resigned last week as acting chairman to return to his consulting business and his horse ranch in California. Clark, who once served as Ronald Reagan's National Security Adviser, said he had achieved his goals of exposing the company's financial woes and putting in place a new management team. Also departing was Zbigniew Brzezinski, Jimmy Carter's National Security Adviser, who, like Clark, became a director just last year. Remaining members of the company's beleaguered board were left with acting chief operating officer Robert Tintsman as president and CEO while they continued to search for a new chairman.

The bleak financial results only sharpened the bitter charges and countercharges over who was responsible for the collapse of the $2.7 billion firm, which earned $35.7 million in 1993 and had seemed primed for increased profits in 1994. Disaffected directors blamed Agee for withholding from them the true state of the company. Partisans of the deposed chairman blamed Clark and a coterie of anonymous Agee detractors for precipitating a panic among lenders and stockholders, who, along with present and former MK employees, have brought 19 suits against Agee and the board.