Exxon Restructures; Oil Price Dive Cited
The collapse of oil prices has caused Exxon to order the centralization of some far-flung operations and the elimination of some departments and jobs in what the company called its first major restructuring since the early 1960s.
The action, announced Tuesday, comes on top of a series of consolidations beginning in 1981 that have already carved 36,000 jobs out of Exxon, leaving a work force of 145,000 worldwide.
Exxon said there will be layoffs, demotions and transfers of employees under the restructuring, which is to be completed by fall.
Hiring and merit pay raises have also been frozen, company spokesmen said. But the New York-based company would not say how many jobs would be eliminated.
“The recent sharp drop in crude oil prices has intensified the need for the re-examination of all aspects of the company’s operations,” Chairman Clifton C. Garvin said in a written statement.
Exxon, the world’s largest oil company, is also regarded as the strongest in the face of the 60% decline in oil prices since late November. However, its earnings are expected to drop sharply this year, and it recently announced a 26% cut in its capital spending budget.
The decision to restructure much of the company and to review other operations suggests that the company expects a prolonged period of weak prices, though Garvin has recently remarked on the futility of forecasting oil prices.
A single new international organization will take the place of five current ones: Esso Europe, Esso Eastern, Esso Middle East, Esso Inter-America and Esso Exploration. The five units have about 1,600 employees, some of whom will perform overlapping duties under the new structure.
New Division
That will put all oil and gas operations under three umbrellas: the new, unnamed international unit to be based in New Jersey, Exxon USA in Houston and the company’s Canadian company, Imperial Oil.
A new Houston-based coal and mineral division will be formed to manage all worldwide coal and mineral operations, while four departments will be eliminated at Exxon’s 790-employee headquarters in New York.
Analysts said the actions represent a step back from Exxon’s establishment of separate overseas units for political and other reasons in the early 1960s. One result of the restructuring appears to be a shorter leash from headquarters.
“In a time when oil prices are uncertain, they want stricter administrative control over their operating arms,” said oil analyst M. Craig Schwerdt of Morgan, Olmstead, Kennedy & Gardner in Los Angeles. “It isn’t going to be as extreme in terms of the head count as some of the other oil companies.” He was referring mainly to Chevron’s recent announcement that it is making plans to eliminate up to 9,100 jobs.
Exxon officials portrayed the restructuring as “a major change in the way we operate,” but analyst Bruce Lazier, of Prescott, Ball & Turbin in New York, said: “It’s just more consolidation, which Exxon’s been doing for the last few years. I don’t think it’s that earth-shattering.”
At a price of $15 per barrel for crude oil, Sanford C. Bernstein & Co. has estimated that Exxon would earn $2.1 billion this year, off 60% from its 1985 results. Crude oil prices in recent days have ranged from $12 to $15 a barrel.
