Workers at Arco Speculate on Who Will Stay, Who Will Go

Atlantic Richfield employees are making new discoveries about some of their co-workers: how old people are, how long they’ve been with the company and who’s ready to go job hunting.

Such particulars, one employee said, were the “topic of endless speculation and constant conversation” last week throughout the Arco Tower at 5th and Flower in downtown Los Angeles, as workers tried to measure the personal impact of Arco’s plan to buy back $4 billion worth of its stock, close down its Eastern operations and make commensurate cuts from among its almost 35,000 employees. To help winnow out the excess staff, Arco is offering an early retirement package to its non-union employees.

A “wait-and-see” attitude appeared common among employees following the company’s Monday announcement as they sought more information about how many people in which departments would be affected. In random interviews, many Arco employees expressed confidence that the impact on West Coast operations would not be severe. Most spoke only on the condition that their names not be used.

Center of Conversation

Arco has not yet said how far its payroll will have to be trimmed back, and company officials said they first will see how many employees take advantage of the early retirement program before determining how many pink slips go out.

“All everyone is talking about,” said one woman in Arco’s legal department, “is who is going to retire.”

Although many employees contacted said there was worry throughout the departments as to which jobs would be cut, few said they feared for their own jobs. Many said they believed that the program would make Arco an even better place to work and expressed optimism about their future opportunities.

“I love it,” said a telecommunications consultant in Arco corporate offices. “The company’s going to be trimmer, thinner, more streamlined. We’ll get rid of the excess fat. . . . It will give our shareholders more value.” He added, almost as an afterthought: “Oh, and nobody’s going in our department.”

Arco said its restructuring, which will include the sale or closure of its Philadelphia refinery and sale of 1,350 gas stations east of the Mississippi River, is designed to make the company lean enough to cope with a drop in crude oil prices to as low as $18 a barrel from its current $29 price. Adding the $4 billion in debt to buy back its shares also is seen as a dramatic measure to fend off any potential hostile takeover.

Will Benefit Both

Employees said the benefits to them are less direct than to major shareholders, who also see increased dividends. Although many employees are also shareholders through the employee stock ownership participation program, most say their stock ownership is secondary to their concerns for their jobs. However, the early retirement and severance pay packages being offered were called “very fair” by several employees.

Indeed, said one outside employee relations consultant, the kind of early retirement and severance package that Arco is offering its employees can make it a “win-win” situation in which the outcome is beneficial to both the company and the remaining employees.

The company said it will increase eligibility for the early retirement program by adding five years onto the age and service record of any employee who wishes to take advantage of the program. For example, previously, Arco’s retirement plan required an employee to have worked for the company for 10 years before becoming vested in the pension plan; an employee was eligible to retire at age 55 providing he or she had 15 years’ service, or at age 60 with 10 years of service to the company.

Under the early retirement offering, a 50-year-old employee with 10 years of service would be eligible to receive pension benefits immediately, and a five-year employee of any age can take early retirement but wouldn’t receive pension benefits until age 50.

On top of those pension benefits, each employee voluntarily accepting early retirement will be paid a lump sum equal to about 1 1/2 weeks’ pay for every year of service, up to a maximum of 36 weeks’ pay.

There is a “window” for the plan; employees must accept the plan by June 30, with a retirement date of not later than August 1. Those who are terminated will receive severance pay equal to three weeks for every year of service, with a minimum of six weeks’ pay.

The early retirement offering “sounds like a fairly attractive, liberal package that I would anticipate would be awfully enticing. A lot of people would have to look seriously at this,” said Dale Gifford, partner and actuary at the Houston office of Hewitt Associates, a Chicago-based employee relations consultant.

Gifford said early retirement packages are becoming fairly common tools among employers--especially in energy-dominated economies such as Houston’s--who have to cut back on staffs and have the financial resources to make it attractive to the employees to leave.

Such programs are risky in that some desirable, productive employees may leave and some less-desirable, less-productive ones may stay, he said. However, it does not embitter remaining employees the way a less-gentle round of firings or layoffs would.

Several Arco employees praised the company for the generosity of the packages. A woman who has worked in Arco’s medical department for 15 years said she believed that the plan would be good for the company and praised the company for the way it was handling the situation.

“A lot of people,” said another employee, “are going to find this retirement package too good to pass up.”

Some employees, however, were skeptical of the company’s motivation; one manager in a division facing an estimated 50% cutback said the company “overreacted” to any perceived takeover threat.

But others, especially those in mid-level management positions, said they would breathe more easily because the program was being implemented on such a wide scale. “In a sense,” said one manager in the corporate division, “there’s a lot of relief in areas where they’ve been cutting a little bit at a time for three years. Now, this is going to be it for a long time. And, it will be good for the people who are staying.”

Hewitt Associates’ Gifford agreed, saying that the early retirement program helps open up promotion opportunities for the younger remaining employees.

“All in all,” said an enthusiastic 26-year-old member of the legal department staff, “after the reorganization, this place will be a great place to work. I just want to stick around for it.”