Unocal Chief Fights Takeover Bid : Fred Hartley--Going Into Battle for His Life, Love

Another man who saw himself in the lyrics of “My Way” might wait and hope for the band to play it in tribute at his retirement dinner. Not Fred L. Hartley.

When the mood strikes Hartley, he goes to the piano and plays the song himself and perhaps even sings it. Hartley thinks so much of the sentiment, in fact, that he named his 51-foot cabin cruiser My Way.

Doing things his way--and noticeably--is Hartley’s best-known trait. And in the 21 years that he has been running things, his way has paid off for Los Angeles-based Unocal, parent company of Union Oil.

These days, though, the 68-year-old chairman is being forced to change his ways to defend against corporate raider T. Boone Pickens Jr.’s threatened takeover and restructuring of Unocal.

Today, the two face off at Unocal’s annual meeting at which a vote on adjourning the session has shaped up as a test of who has the most support among the shareholders. Postponement of the meeting would give Pickens more time to line up backers for his takeover plan.

The battle is being watched closely because control of the nation’s 12th-largest oil company is at stake and, some analysts say, it could mark a turning point in the current takeover spree. It also is shaping up as a test of wills and resources of the two strong-willed men: Hartley, one of the longest-tenured and most powerful men in the industry, and Pickens, labeled by many as an upstart maverick.

As part of his defense, Hartley has agreed to anti-takeover proposals that would nearly quadruple the company’s debt and reduce this year’s capital investment by about 12%--a tactic, Hartley said, that “goes against my common sense.”

That Hartley is willing to make changes at Unocal that go against his long-held policies may be a surprise. That he is loudly expressing his displeasure at doing so is not.

“He pulls no punches,” said Franklin D. Murphy, former UCLA chancellor who has known Hartley through various business and civic circles for many years. “People expect Fred to speak up. In fact, if he’s part of a group, the other people are surprised if he doesn’t speak up,” added Murphy, who also is former chairman of the board and chairman of the executive committee at Times Mirror Co., which owns The Times.

Termed Outspoken

Barry C. Good, an oil industry analyst with Morgan Stanley & Co. Inc. in New York, said: “I don’t think anybody in the world would dispute the use of ‘outspoken’ when used about Fred Hartley.”

Hartley has sparred with politicians and environmentalists, stockholders and the media. These days, financiers are high on his list, and he overlooks few opportunities to inveigh against them.

Unlike bankers, he has said, oilmen “have to work for a living.” Also, he said, financiers have been “ruthless” in helping to restructure the oil industry while making “absolutely zero contribution to the betterment of our society and our standard of living.”

As for the nation’s lawmakers, he accuses them of standing idly by while major oil companies are “murdered.” Corporate America’s fight against the takeover epidemic, he said, is ripe to be “brought under control by the forces of good, instead of being allowed to operate by the forces of evil.”

Hartley’s bluntest shots are for Pickens, though. Pickens is able to “run around like a playboy and say anything he wants, anywhere, anytime, anyplace, and he usually does.” Pickens and his investment group “have no manners, no morals, no etiquette, no integrity and don’t care about the future or strength of our country to be competitive in world markets,” he said in a recent interview.

Branded as Arrogant

Pickens, on the other hand, has said Hartley is “arrogant” and has a “hostile” attitude. “I see Unocal as really a one-man band, which is Mr. Hartley. I would say that he epitomizes the arrogance that I see in some (oil company) managements.”

Hartley’s feistiness on Unocal’s behalf reflects his 46-year commitment to the company. Three years ago he told Financial World magazine: “Union Oil has been my life and my love, and it is still my chief source of satisfaction.”

Hartley is guarded about his private life; the company’s biography of Hartley doesn’t include personal information, and company officials and colleagues are reluctant to elaborate on the bare facts: Hartley and his his wife of almost 45 years, Peggy, have two grown children and live in Palos Verdes Estates.

When Hartley socializes, colleagues say, it is usually business-related. Lee McFarland, chairman of McFarland Energy Inc. of Santa Fe Springs and president of the California Independent Producers Assn., said he occasionally sees Hartley at social affairs. But Hartley “always has his mind on business, at least a little bit.”

Said a former Union Oil employee: “Fred thinks every day is 48 hours long. He’s a dynamo. He doesn’t seem to wind down. I don’t know what drives him. But he is a driven man.”

After open-heart surgery in 1969 convinced him that it was time to take life easier, Hartley said, he bought My Way. But, he admitted, the crush of work keeps him from taking the boat out as often as he would like to.

When it comes to energy and drive, Hartley often is compared to Armand Hammer, the indomitable chairman of Occidental Petroleum. Hartley winces at the thought: “For Christ’s sake, don’t compare me to him. He’s 19 years older than me.”

Many people describe Hartley as a workaholic. But he denies it, saying simply that he keeps busy and “a busy man can get a lot done in a day.”

Hartley was born Jan. 16, 1917, in Vancouver, British Columbia. He graduated from the University of British Columbia in 1939 with a bachelor’s degree in applied science and moved to the United States the same year. He joined Union Oil in May, 1939, as an engineering trainee. By 1950, the year he became a naturalized U.S. citizen, he was general superintendent of Union’s Los Angeles refinery; three years later he moved to the research department, where he successively was made general manager, vice president and senior vice president. In April, 1962, Hartley was put in charge of the newly created division for refining and marketing.

Three months later, Reese H. Taylor, Unocal chief executive and president, died. A. C. (Cy) Rubel, who had been president from 1956 to 1960, was called out of retirement to fill in. In the meantime, Hartley was going through the finishing school of top-level management and in late 1963, he rose yet another notch to executive vice president.

Hartley became president of the company in August, 1964, and four months later added the title of chief executive officer. Within months, Hartley oversaw what was then the biggest corporate merger in history: Union acquired Pure Oil in a friendly $900,000 deal that expanded Union from a regional company into the major leagues.

Nearly a decade later, the board named Hartley chairman, a position that had been vacant for several years.

Through the years, Hartley has collected odds and ends from his travels for Unocal. The mementos from his travels line display cases on the wall opposite his desk and spill over onto nearby tables, creating a personal corner in the otherwise bland executive suite atop the Union Oil Center in downtown Los Angeles.

The spare board room, dominated by a directors’ table that Hartley designed, is connected to Hartley’s office by a lanai area--now closed in--affording a view of downtown Los Angeles from across the Harbor Freeway.

From his perch, Hartley has had a chance to watch the city grow up past the old 13-story height limit (the Unocal building, erected in 1956, was the last to be built before the earthquake safety regulations were changed). He also has seen the oil industry mature, sobered by energy crises, and has seen the Middle East oil nations’ rise in economic power and conflicts between the public’s seemingly insatiable thirst for energy and its increasing concerns for the environment.

Hartley’s lack of reserve contrasts with an industry that has “made an enormous effort to downplay its role in the world,” Good said. “Fred has been more outspoken than most.”

Robert O. Anderson, chairman of Atlantic Richfield, said, “He frequently finds himself at cross-purposes with his friends. But he’s so open about what he thinks that nobody is offended.”

Santa Barbara Spill

Hartley’s reputation for being “overblown” or sometimes “downright impolitic” dates at least to 1969, one associate said, when the company was involved in the massive oil spill off the Santa Barbara coast.

Hartley became at least a temporary villain when remarks, made to a Senate subcommittee about the related deaths of sea birds, were misquoted. Union Oil later ran newspaper advertisements to dispute the quote, “I’m amazed at the publicity for the loss of a few birds.” The actual statement, included in context in the ad, was: “I am always tremendously impressed at the publicity that the death of birds receives versus the loss of people in our country in this day and age.”

Hartley’s stamp is all over Unocal. As analyst Good of Morgan Stanley said, “It’s hard not to tell when somebody has been chief executive for more than 20 years.”

During those two decades, Hartley has achieved respect on Wall Street and within his industry for the company’s accomplishments. By pumping profits back into the company, Unocal has managed steady growth and has typically earned a higher than average return to investors throughout the oil industry. Hartley puts it at an average annual rate of 15% over a 25-year period.

Although its cost of finding oil and gas reserves has been higher than the industry average in recent years, Unocal’s record of replacing reserves that are used up also has been above average, according to John S. Herold Inc., a Greenwich, Conn.-based petroleum research firm.

Hartley is credited with keeping Unocal’s long-term debt burden low, but he is blamed for rejecting repeated advice to boost the value of the company’s stock by repurchasing shares and raising dividends more often.

Ultimately, low debt, low dividends and no stock repurchase made the company attractive to Pickens and his investment group. “It was a sitting duck,” one analyst said.

Retirement Plans

If Hartley does prevail in his fight against Pickens, he may consider retiring shortly after, many analysts believe. But questions about the prospects for retirement are answered with one of his short blasts of temper. “That’s none of your damn business,” he said.

Hartley is like many longtime executives who are “strongly convinced that--A, they were indispensable and, B, that they would live forever,” said analyst Herbert Hart of S. G. Warburg, Rowe & Pitman, Akroyd Inc. in San Francisco.

But many familiar with the company’s management structure say the mantel probably will be passed to Claude Brinegar, another graduate of the Union Oil research department who is Unocal’s senior vice president-administration.

Brinegar is one of five men who join Hartley on Unocal’s executive committee that meets at least twice a week. Said a former executive: “Those six (on the executive committee) know what’s happening in the company. But Fred’s still the boss. He may have a number of people disagree, but he can usually prevail.” That’s not to say, however, that Hartley always has his way. “He has been out-argued,” the former executive said.

The defensive proposals to buy back stock and increase the company’s debt may be examples of the board’s winning out, analysts speculated.

For every description of Hartley as outspoken and gruff, there’s another that calls him charming, witty and even “very delightful.”

One such person is Dr. Laurence Peter, author of the “Peter Principle” and a fellow native of Vancouver. Peter and Hartley are among the 400 or so members of the Palos Verdes Breakfast Club, an all-male group that meets a couple of Saturdays a month, mostly for camaraderie. Peter said he is most impressed with Hartley’s ability to laugh at himself.

“Many people with that kind of power,” Peter said, “take themselves very seriously. He takes his position seriously . . . but not himself.”

Community Work

Hartley and Unocal have been good citizens, community officials say. Hartley is a trustee of several colleges and educational groups and has served on the boards of many industry and cultural associations. In 1984, Unocal made contributions of about $3 million to charitable groups in the state, with about half that amount going to Los Angeles County organizations. Unocal supports the county art museum and music complex, hospitals and universities.

Paul Conrad, the Times editorial cartoonist whose derisive depictions of Hartley elicited a libel suit (filed in 1974 and dismissed in 1978) and recently drew a good-natured request for the original, said that Hartley agreed years ago to have Unocal sponsor a couple of children’s softball teams. “He was the only sponsor who showed up opening day to meet the teams,” Conrad recalled.

Whether Hartley’s wrath against Pickens will subside once the fight is over may depend on whether Pickens continues his forays against other oil companies.

The Unocal takeover effort may be “a watershed deal” for Pickens and other corporate raiders, said analyst John Curti of the San Francisco brokerage of Birr, Wilson & Co. “If Pickens is able to be stopped to some degree,” he said, “it could possibly put a damper” on the takeover epidemic because companies will have learned from Unocal’s experience and “will be better prepared. Pickens will not be able to come in so quickly.”

Whipping Up Frenzy

“But if he succeeds (at Unocal), it might even whip up the takeover frenzy even more” because it would give the momentum to the raiders, he said.

Hartley and Pickens are well matched, many observers say. “In some respects, they’re just alike,” said Arco chief Anderson. “They’re both determined, have strong goals . . . and both men are workaholics.

“I don’t underestimate either’s abilities, but I certainly wouldn’t underestimate Fred. . . . Mr. Hartley could win this one.”

If he does, Hartley can be expected to continue the company’s 30-year tradition of commemorating its most important event each year on tastefully designed ties that the chairman gives away to select friends and associates. Hartley is confident that he will be deciding what goes on the 1985 tie, and he already is certain that it won’t be the Pickens battle.

“Oh, I’m sure there will be plenty of things more important this year,” he said.