Marketing Wing Still Key at Arco, Analysts Say
Lodwrick M. Cook, the next president and chief executive of Atlantic Richfield, began his career with the the nation’s sixth-largest oil company laying pipeline in the small town of Mayville, La. He hadn’t been on the job long, Cook recalled Monday, when the foreman noticed his pale and pasty looks and told him to “go sit under a tree in the shade for a while.”
If Cook, 57, hasn’t learned how to tolerate heat after 28 years of climbing Arco’s corporate ladder, he will now. News of his impending promotion to the No. 2 job comes as Arco is undergoing the largest restructuring ever undertaken by an oil company, involving a $4-billion stock repurchase, withdrawal from refining and marketing operations in the East, a $1.2-billion write-down and the elimination of about 5,000 jobs, 12% of Arco’s work force.
Cook was the surprise choice of Arco’s board on Sunday to succeed William F. Kieschnick, who plans to retire Oct. 15 after a controversial four years as chief executive. During a press conference Monday at Arco’s Los Angeles headquarters, Kieschnick said that Cook was picked for his management ability and his belief that Arco must become more innovative--an oft-repeated Kieschnick theme.
It has been clear for some time that Cook and two other Arco executives, Ralph E. Cox and Robert E. Wycoff, were competing for the top spot, oil industry observers said. That became even more apparent a year ago when Kieschnick restructured the company and gave each of the three equal posts. Cook and Cox shared the responsibilities of chief operating officer, and Wycoff became chief corporate officer, a new position.
Observers said the choice of Cook over Cox and Wycoff suggests that the refining and marketing side of the company, which Cook headed, will continue to dominate--despite Arco’s announcement two months ago that it will sell or close 2,000 East Coast gas stations as part of its restructuring. The company said last week that 400 of the stations had been sold to Shell Oil.
But observers said that Cook probably won’t have the freedom that Kieschnick enjoyed and that power would most likely be shared among Cook, Cox and Wycoff. “I’d say it will be more like a triumvirate,” one analyst said.
There had been speculation for the last six weeks that Kieschnick had planned to retire because of differences with Robert O. Anderson, Arco’s chairman and a major shareholder. Industry observers said Anderson was particularly unhappy with the lackluster results of Arco’s refining and marketing operations.
Three years ago, in an effort to shore up profits, the company adopted a new gasoline marketing strategy, emphasizing low prices and high volume. Arco shocked the industry when it eliminated credit cards to cut costs and keep prices low. It was among the first major oil companies to team convenience stores with gas stations, a strategy used with success by independent gasoline retailers for years.
As a result of these efforts, Arco rapidly gained market share and for the first time overtook Chevron last year in California, the world’s biggest gasoline market. Despite these gains, profits declined and Anderson’s disappointment increased, observers said. “They weren’t able to deliver,” one observer said.
Some observers speculated that, despite Cook’s appointment for now, Cox, who is in charge of oil and gas production, eventually would succeed Kieschnick. Wycoff, a strong financial executive, was viewed as Wall Street’s choice.
“Cook is either a dark horse or an interim president--I’m not sure which,” said Rosario Ilacqua, an oil industry analyst with L. F. Rothschild, Unterberg, Towbin in New York.
Analysts speculated that the choice of Cook indicates that any change of emphasis at Arco, from marketing to production, will come about slowly. “Cox would have put the money in the ground and would have changed things rapidly,” one analyst said.
At Monday’s press conference, Anderson did his best to dispel speculation about a rift with Kieschnick. “It would be a real error to imagine that there were differences between the two of us,” he said, adding that he “was just as much a prime mover and supporter” of the company’s recent restructuring as Kieschnick.
Anderson said the job that Kieschnick did at Arco was “outstanding.” He said that, although he “always knew that Bill (Kieschnick) wanted to stay active after retirement, the timing was Bill’s.” Kieschnick said he had always planned to retire before he turned 65, to turn his attention to other activities. He said his plans were indefinite but could involve “business, technological ventures or some academic ventures.”
Kieschnick couldn’t pinpoint when he decided to resign, but he and Anderson said that it was within the last several weeks that they discussed Kieschnick’s retirement and jointly endorsed Cook as his successor. Kieschnick said the choice was difficult, but he and Anderson decided that Cook “was the first among equals.” Kieschnick said it was the right time for him to retire, since the major part of Arco’s reorganization was under way.
“We all felt good about the direction of the company,” he said.
Cook said that, although he was charged with overseeing the refining and marketing operations, he has experience in transportation, chemicals and was involved in the construction of the trans-Alaska pipeline as chairman of the owners’ committee.
“That experience taught me a lot about the North Slope,” Cook said. The North Slope of Alaska, with its rich oil reserves, is the heart of Arco’s reserve base.
Learned From Bottom Up
“You can’t be in senior management here without dealing with the North Slope,” said Kieschnick, who said Cook had demonstrated his management skills in his handling of the pipeline construction.
Cook, a petroleum engineer, joined Arco shortly after he was graduated from Louisiana State University in 1955. He learned the job from the bottom up since, in those days, engineers were trained in the fields, where they worked with pipeline crews such as the crew in Mayville, La.
A native of Louisiana, he lives in Los Angeles and is the father of five grown children.