Texaco’s Star May Soon Fade

What’s going to happen to the “man who wears the star”?

Texaco Inc., the oil giant whose 1960s advertising campaign made that slogan a household phrase a generation ago, is about to be bought by rival Chevron Corp. And the name of the new company would be ChevronTexaco Corp.

But ChevronTexaco won’t own the 12,800 Texaco gasoline stations in the United States, including the 725 in California. Texaco plans to sell its interest in those stations to an as-yet-unknown buyer to get antitrust clearance from federal regulators for the $30-billion merger.

And it’s unclear whether or how long the buyer of those stations will keep the Texaco name, which has been around for nearly a century and ranks among the best-known product brands in the country.

Some industry observers say the name could survive, for a few years at least, if the new owner provides licensing rights to Texaco dealers. But others believe that the name’s days are numbered.

“We suspect that the Texaco brand is dead,” said Will Woods, executive director of the Automotive Trade Organizations of California, a Tustin-based association of gasoline dealers.

“Everybody’s in the dark about what’s going to happen with this merger,” Woods said, but “we think the company that takes over those stations will re-brand them over a period of time to their brand.”

Here’s the situation: Both the Texaco and Shell refining and retail operations in the U.S., along with the brands, are actually owned by two joint ventures. One is Equilon Enterprises, which controls Texaco and Shell in the West and Midwest, and the other is Motiva Enterprises, which does so in the East. Equilon is owned by Texaco and Royal Dutch/Shell Group, and Motiva by those two companies and Saudi Refining Co. (Most of the individual Texaco and Shell stations are owned or operated by independent dealers.)

To win government approval of the merger, Texaco and Chevron said this month that they had reached a tentative pact with the Federal Trade Commission’s staff whereby Texaco would sell its stakes in Equilon and Motiva.

The divestiture--intended to assuage concerns that Chevron and Texaco would curb competition by controlling too many gasoline stations--still needs approval from the FTC itself.

But who would buy Texaco’s interest in the ventures? The odds-on favorite is its partner Shell--which has 9,200 U.S. stations--and the companies say they are in talks about the sale. Texaco says it is also discussing the matter with the FTC.

It’s also likely that if Shell does buy Texaco’s stake and re-brands Texaco’s stations to Shell, the FTC might need to look at the antitrust implications of having one fewer brand available for motorists.

But for now, everyone involved is saying little about the future of the Texaco name.

“It’s inappropriate for us to comment on that matter until such time as the FTC has issued its consent order” approving the merger with Chevron, said Texaco spokesman Paul Weeditz. He noted, however, that ChevronTexaco would continue to own and market the Texaco brand in foreign markets. Chevron referred inquiries to Texaco, and Shell had no immediate comment.

What are Texaco dealers hearing?

“Nothing, zero,” said Andre van der Valk, who owns three Texaco and three Shell stations in Los Angeles and Ventura counties.

“There’s still great value in the Texaco brand, and those [stations] I have remaining are doing fine,” he said. “It’s business as usual, and that’s all we can do in the absence of any guidance” from the companies.

But the Texaco red star could be facing a supernova, and it might not be the last.

Woods, of the California dealers group, said, “We really don’t think the Arco brand is going to last two or three more years either.” There is widespread speculation that Arco’s parent, BP, eventually will supplant the Arco name with its own, though BP says it has no immediate plans to do so.

There’s already some confusion in California about which stations and brands belong to which company.

For instance, Valero Energy Corp. supplies fuel to about 260 Exxon stations in Northern California as part of an asset purchase it made from Exxon Mobil Corp. Tosco Corp. bought the 76 gasoline business from longtime owner Unocal Corp., based in El Segundo, a few years ago. And now Tosco is about to be bought by Phillips Petroleum Co., prompting guesswork about whether the 76 brand might be replaced by Phillips 66.

If the Texaco brand does vanish in the U.S., it would mark the end of a venerable name in product merchandising. Indeed, when Universal Studios Florida built a 1940s gasoline station on its site as its symbol of motor travel, it placed a Texaco sign on the building.

Texaco traces its roots to 1902 with the founding of the Texas Fuel Co., and as the company grew it used memorable advertising to build brand loyalty. (The company changed its name to Texaco Inc. in 1959; it already had marketed many of its products under the Texaco label for years.)

Its early television ads showed dealers singing, “Oh, we’re the men of Texaco; we work from Maine to Mexico,” and they were regulars on “Texaco Star Theater,” a TV show hosted by comedian Milton Berle that had millions of weekly viewers.

Then came the ad campaign, launched in 1962, that urged motorists to “trust your car to the man who wears the star,” a reference to the company’s logo back in the days when service stations provided, well, service.

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Texaco’s Tally

As it prepares to merge with Chevron, Texaco plans to shed its interest in the two joint ventures that control Texaco and Shell gasoline stations in the U.S.: Equilon in the West, Motiva in the East. But that could mean the end of the venerable Texaco brand name. Here’s how Equilon stacks up in the Southern California gasoline market, in terms of gallons sold:

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% of total gasoline Company sold in Southern California BP (Arco) 28.9% Chevron 18.6 Equilon (Texaco/Shell) 15.2 Exxon Mobil 15.0 Tosco (76 brand) 14.5 Others 7.8

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Source: Burnett & Associates