Oxy’s Post-Hammer Era : Layoffs, Cost-Cutting and Bad Publicity Tarnish the Late Chairman’s Legend
The doctor would not be pleased.
Occidental Petroleum Corp. Chairman Ray R. Irani, who succeeded the legendary Dr. Armand Hammer two years ago, announced plans Thursday to cut costs by $300 million in 1993 by job cuts, a freeze on hiring and salaries, and slashes in capital spending.
Such cuts, part of a major restructuring begun in 1991, would likely have been anathema to Hammer, the tireless, sometimes bombastic entrepreneur who built Occidental from a three-employee firm into the nation’s 16th-largest industrial company.
But they are only the latest in a series of moves by Occidental management to leave behind the Hammer legacy and transform the once-quixotic company into a more traditional enterprise.
“Different times require different solutions,” Irani said Thursday.
While Irani asserted that “if Dr. Hammer were alive, we would have come to a similar position,” others familiar with Oxy’s history said Hammer would have moved mountains to avoid such cuts.
“He may have done the same, but only if his back were to the wall,” said Albert J. Anton Jr., a partner at Carl Pforzheimer & Co. in New York.
Since Hammer’s death in December of 1990 at age 92, change has come rapidly at Occidental and at the charities and other pet projects that Hammer left behind.
Just a month after Hammer was laid to rest in a Westwood mausoleum, Irani unceremoniously announced that certain far-flung businesses Hammer had collected would be sold in a drastic restructuring: the Chinese coal mine, the film production unit, the hybrid-seed research unit, the cattle- and horse-breeding operations.
Occidental has now shed those investments and more, slimming to a company half its former size. And the name Armand Hammer--which the company founder hoped would be revered forever--has been virtually purged from Oxy’s corporate identity.
Irani denied any deliberate effort to ignore Hammer’s role. “You can’t keep looking back to be a historian,” he explained. “That’s not our business.”
But one executive outside the company who knew both men for years said that Irani grew resentful during the last five years of Hammer’s life. Hammer placed more daily management burdens on Irani, the former executive said, but gave him little authority to restructure a company Irani thought was headed for trouble and distracted by Hammer’s eclectic projects.
“Hammer took credit for a lot of the things that were good in the company and ignored some that were not so good,” Anton recalled. “So it wouldn’t surprise me. Irani must have been chafing at the bit to get some of these things done.”
Robert Abboud, who was Occidental president from 1980 through 1984, praised Irani’s efforts to “institutionalize” the company, which he said was “always considered rather unique and non-Establishment and entrepreneurial.” He noted that conservatively managed companies have an easier time attracting financing and gaining support from Wall Street.
Irani’s main goal has been to return Oxy to its traditional strategy: hunting for new oil and gas sources, often taking its profit from the sale of drilling rights. “We’ve been very successful,” Irani said, “converting those (oil and gas) finds to cash, either through early sale or early production.”
Irani predicted Thursday that Occidental’s international oil and gas production would increase by 50% during the next two years as oil production begins at wells in Ecuador, Yemen and Russia. Oxy has exploratory operations in 16 countries.
Meantime, Hammer’s personal legacy has suffered in the last two years. “Hammer has gotten nothing but bad publicity since he died,” analyst Anton said.
His art collection has been sneered at by critics, and a relative is suing the Hammer estate for half the paintings as well as half of Hammer’s more than $18 million in Occidental stock. His museum and cultural center in Westwood remains unfinished, with concrete caverns where Hammer had planned a library and theater. UCLA’s art department will take over the center in January.
Other Hammer interests have felt the loss of their benefactor. Ted Lockwood, president of the Armand Hammer World College of the American West, in Montezuma, N.M., is searching for funds to augment the trust Hammer established for the small two-year institution, which emphasizes global peace studies.
“We had hoped, like the other charities, that Dr. Hammer would leave us some funds, some stock, whatever,” Lockwood said.
But perhaps the unkindest cut came this month in an unflattering and lurid look at Hammer’s personal life by a former Occidental publicist.
The book, “The Dark Side of Power: The Real Armand Hammer,” by Carl Blumay with Henry Edwards, purports to reveal details of Hammer’s personal and professional life. The author describes Hammer as a high-handed manager who was callous toward his family.
The book quotes Hammer on business: “Money happens to be my first, last and only love.” And on his quest for fame: “If I fund the cure for cancer, I’ll be a hero for all time.”
Most of the unflattering charges are made in extended quotes--many more than a half-page long--attributed to Hammer and his brother, Victor. Blumay, who worked for Hammer from 1955 to 1980, said he transcribed them from old verbatim notes, paraphrased notes or from memory.
Arthur Groman, a lawyer and Oxy board member since 1957, called the book “the most venomous hatchet job by a discharged employee that I ever saw.”
For their part, Oxy officials decline to discuss the book.
Revolution at Occidental
Dec. 10, 1990: Armand Hammer, 92, dies at home in Los Angeles after 33 years turning Occidental Petroleum Corp. from a three-employee operation into the seventh-largest U.S. oil company.
Jan. 15, 1991: Hammer’s successor, Ray R. Irani, announces that the “new Oxy” will cut $3 billion of assets and will spare “no sacred cows.” On the block will be unprofitable ventures that Hammer created or acquired, including an oil-shale research project, Arabian horse-breeding program, cattle ranch, film production unit, a Soviet petrochemical project and a Chinese coal mine.
Jan. 16, 1991: The niece of Hammer’s late wife sues for half ownership of Hammer’s art collection, alleging that the industrialist had an affair with Occidental’s onetime art curator.
Jan. 28, 1991: Occidental sells its small share in the manufacturer of Arm & Hammer baking soda, which Hammer once considered buying because so many people asked if he were the “baking soda king.”
Late January, 1991: Officials at the Armand Hammer World College of the American West, in Montezuma, N.M., and Hammer’s other charities learn he bequeathed them no money in his will.
Feb. 13, 1991: Oxy announces first layoffs since Hammer’s death, including 25% of headquarters staff.
March 28, 1991: In Oxy’s first post-Hammer annual report, his sole mention is “In Memoriam, Dr. Armand Hammer, 1898-1990.”
Sept. 4, 1991: Oxy’s interest in IBP Inc., the largest U.S. producer of beef and pork products, is sold.
Nov. 7, 1991: Michael A. Hammer, 36, ends his grandfather’s dream to place a family heir in charge of Occidental by resigning as corporate secretary and vice president. He agrees to leave Oxy’s board in 1994, but remains as chief executive of the Armand Hammer Foundation, created to oversee Hammer’s charitable ventures.
Jan. 1, 1992: Oxy work force has shrunk by half, from 55,400 to 24,700. Assets sales and other restructuring has cut debt by $2.8 billion, or 37%.
April 29, 1992: At the 90-minute annual shareholders’ meeting, there is no mention of Hammer at all.
July 17, 1992: Agreement is announced to turn over the unfinished Armand Hammer Museum and Cultural Center to UCLA in 1993.
