Mobil Corp., long a proponent of doing business in South Africa, said Friday that it is leaving the racially divided nation after 90 years of business there and will take a net loss of $140 million on the move.
The withdrawal of Mobil, the largest American company doing business in South Africa, leaves 135 other American companies still operating there, according to the Washington-based Investor Responsibility Research Center, a not-for-profit association funded by institutional investors.
The oil giant said it is selling operations once valued at more than $400 million to General Mining Union Corp. for more than $155 million in cash plus $10 million that was expected to be the operation's 1989 profit.
Price Exceeds Estimated Value
After adjustments for taxes and accounting, the company will record a net book loss of $140 million on the sale.
"The rand (South Africa's unit of currency) has fallen a great deal over the last few years and that has reduced the dollar value of the company in South Africa," said Mobil spokesman John Lord. The loss will be included in the company's second-quarter earnings report, Lord said.
In a prepared statement earlier in the day, New York-based Mobil had said the price exceeded Mobil's estimated present value of the South African operation's future earnings.
Mobil Chairman Allen E. Murray blamed U.S. foreign policies, including a 1987 law that eliminated certain tax credits for U.S. companies doing business in South Africa, for ultimately forcing the pullout.
Several Operations Sold
"The law was ill conceived . . . and had a serious economic impact on us," Murray said.
The sale, expected to be concluded by June 30, includes a refinery and retail and commercial petroleum marketing networks. Twelve Mobil affiliates are involved in the sale, doing business in South Africa, Namibia, Botswana, Swaziland and Lesotho, Mobil said.
In New York Stock Exchange Trading, Mobil stock closed down 50 cents at $50.75 a share.
"This was a difficult decision because we continue to believe that our presence and our actions have contributed greatly to economic and social progress for non-whites in South Africa," Murray said.
"But we had to weigh business considerations, including the impact of recently enacted and proposed U.S. legislation and regulations which have made it more and more difficult for us to be fully competitive there."
Congress in late 1987 passed a bill by Rep. Charles B. Rangel (D-N.Y.) eliminating a tax credit that allowed U.S. companies to deduct taxes paid to South Africa against taxes owed to the U.S. government.
Murray said that, as a result of the change, earnings in South Africa were taxed twice and the effective tax rate on South African earnings by U.S. corporations was 72%.
Mobil's 1988 profit was $2.1 billion on revenue of $54.9 billion. Its foreign petroleum earnings totaled $1.2 billion, up 5% from 1987.
Mobil had insisted since 1986, when Exxon Corp., the biggest U.S. oil company, left South Africa, that it would not bow to pressure to disinvest.
U.S. FIRMS IN SOUTH AFRICA Here are the 10 largest U.S. companies currently in South Africa, ranked by number of employees during peak operations.
Company Employees Mobil 2,793 Goodyear Tire & Rubber 2,419 International Paper 2,242 RJR Nabisco 2,196 Caltex Petroleum 2,046 Johnson & Johnson 1,342 United Technologies 939 Joy Technologies 856 Baker Hughes 855 Minnesota Mining & Mfg. 832
Source: Investor Responsibility Research Center via Associated Press