CRISIS IN THE PERSIAN GULF : Arco’s Super Salesman Even Squeezes Amity Out of Oil : Marketing: George Babikian devised a strategy that won his company money and love, or at least good will.
Friends say George H. Babikian, president of Atlantic Richfield Co.’s refining and marketing unit, is a salesman’s salesman.
“He would have been a success selling retail clothing or widgets or whatever else,” said Scott Jones, president of AUS Consultants in West Conshohocken, Pa., and a former director of energy studies at Arco. “He’s a retailer at heart.”
These days, Babikian is doing a lot of selling. Since the Iraqi invasion of Kuwait on Aug. 2, Babikian has appeared on every Los Angeles television station, every major network, in every major newspaper and even before the California Legislature to sell the public on an explanation for recent gasoline price increases.
At the same time, he has been selling Arco. Babikian, 62, is the mastermind behind Arco’s decision to freeze gasoline prices while other oil companies hiked theirs--a decision that Jones called “a stroke of genius.”
* It allowed Los Angeles-based Arco, already the No. 1 gasoline seller in its five-state Western market, to reassert its image as the low-price leader at a time when other marketers had begun encroaching on Arco territory.
* It allowed Arco to win a lot of good will by appearing to be a good corporate citizen responding to President Bush’s calls for price restraint. That good will should persist, even now that Arco is “reluctantly” raising prices, as announced Thursday.
* It enabled Arco to boost market share and sales volume--to the point where its stations were running short of gasoline.
* And it set the stage for Babikian’s next move: the introduction this fall of new lower-emissions gasolines to complement Arco’s successful EC-1 less polluting gasoline.
Because those gasolines cost more to make, they might cost more at the pump. “It’s difficult to appeal to people’s sense of the environment at $1.30 a gallon, where it would have been easy at $1.05,” Jones said. “But if anyone can do it, (Arco) can, given the good will they’ve generated.”
Babikian himself dismisses any competitive motivations for the price freeze, which was made possible by Arco’s large Alaskan crude reserves. “We did this to respond to President Bush’s request to hold the line on prices,” he said. “To the extent that good will results, then certainly we’re pleased with that.”
Babikian’s performance during the current crisis is only the latest example of an oil marketing career that draws rave reviews from analysts and industry observers.
Babikian (pronounced BAB-i-ken) has worked for Arco or its predecessor companies since leaving the graduate business school at Syracuse University in 1954. He has played a key role in all of Arco’s major marketing coups the last two decades.
He started as a sales trainee with the old Atlantic Refining Co., working his way up the corporate chain. Atlantic merged with California’s old Richfield Oil Corp. to form Arco, and Babikian was put in charge of marketing gasoline in the early 1970s for the old Sinclair oil company, which Arco had purchased.
With James A. Morrison, who is now Arco’s executive vice president, Babikian made Sinclair’s service stations profitable by introducing self-service gasoline and cash-only business.
Those ideas worked so well that Babikian and Morrison used them again to transform Arco’s main marketing system. In 1982, they eliminated Arco’s credit card, converted its stations to self-serve and staked out the low-price end of the market as Arco’s own.
As a result, Arco jumped to the No. 1 retailing spot in its West Coast market, and other oil companies have rushed to copy most of Arco’s innovations.
Later, when Babikian was put in charge of Arco marketing, his staff devised the am/pm minimarket concept that placed convenience stores in the former service bays of Arco stations. The concept enabled dealers to boost profits--and allowed Arco to charge higher rents.
In 1985, Babikian was named president of Arco Products Co., the refining and marketing subsidiary. Last year, Babikian was Arco’s front man when the company unveiled EC-1, the first of a slew of lower-emissions gasolines.
EC-1 won Arco and Babikian accolades from state legislators and air-quality officials, and helped place gasoline on the national clean-air agenda as a possible alternative to methanol, ethanol or compressed natural gas. It also won Arco new customers and good will.
In all of the changes, Babikian has played the “great communicator” for his company, a role he took on most effectively during the gasoline price shocks of the 1970s.
“Part of differentiating Arco from many other oil companies was getting leaders like Babikian to speak very openly with the press . . . at a time when the oil companies were of course not speaking very much,” said Anthony Hatch, a former Arco media relations executive and now a spokesman for Quotron Systems Inc., a Los Angeles-based financial information company.
Babikian denies any love of the limelight. “I don’t like it, very honestly,” he said in an interview Thursday. “It’s not my occupation, it’s not my business. I’m in the oil business . . . and that’s where I’d like to spend my time and energies and efforts.”
Still, he said, “one of the problems that the industry suffered during the shortages that existed in the (1970s) . . . was the fact that you couldn’t get any comment out of anyone in the oil industry as to why things were happening. . . . I think it’s incumbent on us in the industry . . . to try to explain it.”
This time around, Babikian said, “It’s more defensive. . . . The industry is being tarred and feathered, and I think it’s grossly unfair.”
A resident of Palos Verdes Estates, where he lives with his wife of 36 years, Babikian car-pools to the office by 6:15 a.m. He leaves by 4 p.m. and finds time for an occasional game of golf.
Hatch recalls a more driven man. He accompanied Babikian on a national barnstorming press tour after Arco dropped its credit card in the early 1980s but before the company sold its Eastern retailing operations.
“I remember flying into Buffalo, N.Y., for a morning briefing; into Syracuse for a noontime briefing; into Albany and Schenectady and Troy in the afternoon, and arriving in Boston to do the same thing in the evening,” he said.
“And in the middle of it, as if the day wasn’t crowded enough, he would arrange to be picked up at the airport by his regional manager and insist on driving past Arco stations to see how they looked. . . . If he saw something he didn’t like, the area manager would know it right on the spot.”
