Mobil Corp.’s New President Continues Predecessor’s Belt Tightening
Mobil Corp. has made its share of headlines by taking over non-oil businesses and engaging in sometimes acrimonious bidding contests for other oil companies, but it also has been quietly dismantling substantial parts of its business at the same time.
For Allen Murray, the new president of the nation’s second-largest oil company, that belt-tightening is a crucial responsibility inherited from his predecessor, William Tavoulareas.
Murray, 55, is a native New Yorker with the accent to prove it, like Tavoulareas, 65, who retired as president but remains with Mobil as a special consultant. There also are other similarities.
Completed Education
Both completed their education at night while working in Mobil’s accounting department, both have had ties to Mobil’s Middle Eastern oil operations and both have supported Mobil’s outspoken position on controversial issues through advertisements in major newspapers. Both also have been involved in battles with the news media.
Tavoulareas sued the Washington Post for libel following a 1979 report that he had “set up” his son in the shipping business that then obtained many contracts from Mobil. A jury ruled Tavoulareas was entitled to $2 million, but a federal judge later threw out the award, a decision Tavoulareas is appealing.
Murray is supporting a boycott that Mobil launched against the Wall Street Journal following its publication of a story in November describing how the company planned to build a Chicago office tower in conjunction with a real estate firm that employs the son-in-law of Mobil’s chairman, Rawleigh Warner Jr. Mobil refuses to advertise in the Journal or provide information or grant interviews to the paper’s reporters.
But it is the restructuring of the company that Murray says is his biggest worry, after oil prices--something he has little control over these days.
He says each segment of Mobil’s empire, from its Montgomery Ward department stores to its oil refineries, is being measured against the top competition in its field with a view to either giving the business the money it needs or getting rid of it.
“Only the top, the most efficient, are going to survive,” he says.
When it comes to having a reputation as a street-smart fighter, Mobil is a name that stands out, and analysts say Murray fits that corporate mold.
“Mobil has more of a New York street mentality than a lot of companies,” said Bruce Lazier, a former Mobil employee who now follows the company for the investment firm Prescott, Ball & Turben.
As for Murray, Lazier said: “He’s got a big job ahead of him. He may look like a hero five years from now, but in the short term, there’s a lot of slugging.”
The first steps already were taken before Murray moved up from president of Mobil’s oil operations.
“In the last four or five years, very quietly, we have sold over $1 billion worth of our assets. We’ve closed a lot more than that . . . because these were things we felt didn’t stand us in good stead in the long term and we were better off with the cash,” Murray said in an interview.
In addition to selling $1.1 billion worth of assets between 1980 and 1984, Mobil has closed five refineries since 1981. Last year it reduced earnings by $110 million to reflect the expenses of closing an 8-year-old refinery in Wilhemshaven, West Germany.
The remaining refineries have a capacity of processing 2.1 million barrels of petroleum daily, but because of declining demand for oil products are operating at about 72% of capacity.
The cutbacks have also led to job cuts. Mobil’s work force, not counting Montgomery Ward or its recently acquired Superior Oil Co., has fallen 14.3% from the 110,486 people on its payrolls as of the end of 1981.
More cuts are likely.
But, Murray said, even if Mobil executives and outside financial advisers decide to sell a marginal business, the decision may not be carried out until a later date, when markets are more receptive to such a sale.
“I think you are going to see a continued shakedown in the oil industry, a continued consolidation, a continued closing of refineries, a continued closing of marginal service stations, withdrawals from certain areas,” he said.
“When this shakeout ends, the efficient companies are going to come out very nicely because there’s not going to be a tremendous increase in total world demand (for oil), but there’s going to be more demand available for those who are around. So the key, of course, is for the companies to be around and be efficient.”
Few doubt the ability of Murray, a father of five who began his career in the oil industry as a 75-cent-an-hour mail room clerk at Gulf Oil in 1949. He joined Mobil when he was turned down for a special training program at Gulf.
Last year, he earned $830,000 in salary and short-term performance incentives and also received $220,000 in long-term incentive awards earned in earlier years.
Corporate Brawler
Murray also is described as “down to earth.”
He still rides a commuter train and subway to work in Manhattan from his home in the Long Island suburb of Syosset. A fan of the New York Islanders, his free time is sometimes spent watching the hockey team compete.
And although the image of a corporate brawler is not one that Mobil cultivates--the company is an active supporter of the arts--Murray is not apologetic.
“We’re not exactly a company that has a reputation for not fighting,” he said with a chuckle.
Mobil’s aggressiveness came up in a discussion of Mobil’s plans to seek shareholder approval Feb. 22 of a defense against a hostile takeover. Murray said he was not aware of any such bid but that adopting the defense measures appeared to be “a prudent thing to do.”
He dismissed the suggestion that Mobil was trying to send a warning to any potential suitor. “Do you really think anybody ever thought there would not be a fight with Mobil?” he asked.
Another area of concern for Mobil is the supply of oil.
Despite its idle refineries, Mobil is a partner with Saudi Arabia in a new refining and petrochemical venture, in a continuation of what has proved to be a costly strategy of securing ties to the oil-rich kingdom.
When prices were rising through the 1970s, long-term supply contracts with Saudi Arabia were highly profitable. Now, Saudi Arabia’s oil is more costly than oil available on the open market.
But Mobil still counts on Saudi Arabia for as much as a quarter of its crude oil, and Murray views the tie as vital to his company.
“Saudi Arabia is where the (oil) reserves are,” Murray said. “Some day--and I don’t know whether it’s five years or 10 or 15 years, it depends upon what happens to the price--Saudi Arabia is again going to be the swing source in the world. And I know if we’re going to be in this business, we want our share of it.”
