Layoffs Possible as Arco Readies Cost-Cutting Plan
Joining much of the oil industry in bemoaning the effects of the recession, low natural gas prices and looming clean-air regulations, Atlantic Richfield Co. said Friday that it is looking for new ways to cut costs--including possibly substantial layoffs among its 20,000 U.S. employees.
Los Angeles-based Arco--already known for its lean operations--has made no decisions about “the nature of the realignment or the number of employees that may be affected,” spokesman Al Greenstein said.
Employees have known of the review for some time, though the company has not announced it internally.
“That we’re ‘concerned’ is an understatement,” said one office worker in the company’s Dallas-based Arco Oil & Gas Division, where much of the belt-tightening is expected to occur.
An employee at Arco’s downtown Los Angeles headquarters, who asked not to be identified, said a detailed plan for cuts is expected by September or October.
Greenstein declined comment on a published report Friday that as many as 10% of Arco’s U.S. workers could lose their jobs.
If Arco indeed overhauls its organization, it will be only the latest U.S. oil company to cut staff and restructure.
“Not just Arco but throughout the industry, the downstream--refining and marketing--part of the industry has really taken it on the chin over the last year,” said energy analyst Daniel Yergin, president of Cambridge Energy Research Associates. “People are working to get their houses in order.”
Some examples:
* Just last week, Unocal Corp. said it would eliminate 100 of the 680 jobs at its research center in Brea. The firm has reduced its work force by 13% since 1985.
* Earlier this month, Shell Oil Co. said it planned to lay off 10% to 15% of its 31,000 workers.
* Occidental Petroleum Corp. announced in February that it would drop 1,000 of its 26,000 non-agricultural employees.
* Last year, Chevron U.S.A., the domestic exploration and production arm of Chevron Corp., announced work force cuts of 10% to 12%, eliminating 800 to 1,000 jobs.
Three factors are driving Arco’s review, Greenstein said: lower profits and tighter margins in the company’s refining and marketing operations, lower profits from its chemicals unit and the depressed natural gas market. Most major U.S. oil companies--Arco included--reported weak second-quarter earnings this week.
Longer term, Arco and other big U.S. oil companies are gearing up for large investments in new technology to meet the tougher requirements of the new federal Clean Air Act, along with similar regulations coming down the road. Arco expects to spend up to $1 billion on new refinery equipment.
Meanwhile, crude oil demand is down about 4% for the first half of this year, noted Thomas P. Blakeslee, an energy analyst with Pegasus Econometric Group, a Hoboken, N.J., commodities consulting firm.
“It’s going to be a long time before we see the growth we saw in most of the ‘80s,” Blakeslee said. “We’re far from the end of the recession . . . and this trickles down.”
But the foundering domestic natural-gas market has been a more dramatic problem for most of the oil firms.
“It’s been a shock for every company,” Yergin said, “because particularly in the United States, exploration and production has been oriented toward natural gas as the fuel of the future. And indeed it probably is the fuel of the future. But in the meantime, the economics aren’t working.”
