Restructuring in the U.S. oil industry is far from over.
Mobil Corp. last week unveiled its latest program, (36108 bytes) designed to slash 4,700 jobs from its world workforce of 51,000 and save more than $1 billion/year.
The reduction in number of employees is to be substantially complete by the end of first quarter 1996. Savings are expected to begin in first quarter 1996, building to the target level by yearend 1996.
A little earlier, Quaker State Corp., essentially a native of Pennsylvania, disclosed a restructuring plan that involves, among other things, a move of its headquarters and motor oil division from Oil City, Pa., to the Dallas area. An administrative unit at Shreveport, La., also will move to the Dallas area, but some operations will remain at Shreveport.
Pennsylvania roots of today's Quaker State organization date to June 23, 1931.
That's when predecessor Quaker State Oil Refining Corp. was incorporated, melding 19 companies from the Midwest and Appalachia into the new concern. Most of the companies were engaged in refining, lubricants blending, and petroleum products marketing, Quaker State's strong points to this day. Some of the 19 companies traced their roots to the 1850s.
MOBIL PROGRAM
Most of Mobil's planned personnel cuts will occur in the company's worldwide staff support services, Chairman Lucio A. Noto disclosed in a May 1 announcement.
Work processes will be streamlined to create efficiencies that will lead to a reduction of about 4,000 persons from Mobil's current 14,500 staff support employees. Those changes, along with other improvements, when fully implemented will lead to targeted pretax savings of $750 million/year compared with the 1994 level.
In addition to reductions among staff groups, Mobil will eliminate 700 jobs in U.S. downstream operations. Cost reductions from those and associated actions are estimated at another $300 million/year pretax.
"We envision even more savings as the changes take effect and employees identify additional opportunities for efficiencies," Noto said.
In anticipation of this round of restructuring, Mobil will take an after tax charge of about $300 million to earnings in the second quarter of this year.
In the staff services restructuring, a small corporate center will support the board of directors and executive committee at headquarters in Fairfax, Va.
To support operations, most worldwide staff employees will be organized into shared services located to reflect the geography of Mobil's businesses and take advantage of economies of scale. Other staff employees will remain in the operating businesses.
Few transfers of employees are expected.
Noto said this round of restructuring marks completion of the first phase of the staff redesign program begun last October and start of a second phase.
Fifty employees worked full time, along with many part time team members, to revamp staff services in the first phase. Now, more than 200 employees, with hundreds of others in part time support, will complete work on detailed design, roles, responsibilities, and final implementation of the program.
Many details of the organizational redesign and individual job assignments are not worked out.
However it is certain that Mobil's research center in Princeton, N.J., will be phased out and consolidated with other research sites in Paulsboro, N.J., and Dallas. Total workforce reduction among 2,400 employees at the three sites is expected to be about 20%.
QUAKER STATE
In addition to moving its headquarters and motor oil division to the Dallas area, Quaker State will restructure its organization to integrate recent acquisitions. It also will consolidate management and administrative functions.
It plans to identify its new Texas facility and complete the real estate arrangements within the next 60 days, then wrap up the move by first quarter 1996.
Pretax costs of restructuring and office moves will be about $25 million, including a $7.5 million noncash charge.
Certain of the costs will be recognized in the second quarter of this year and the rest when they are incurred.
Herbert M. Baum, Quaker State chairman, president, and chief executive officer, said the goal of restructuring is to create a "leaner, more cohesive" organization that will maximize performance.
Baum, who joined Quaker State in 1993, said, "As a result of acquiring Specialty Oil Cos., we have duplicate positions and activities spread across multiple sites.
This situation is costly, inefficient, and difficult to manage."
Quaker State acquired Specialty in September 1994 for $79 million and 4 million shares of common stock. Acquisition of the lubricants company gave Quaker State facilities at 24 sites across the U.S. South and Southwest and boosted its sales to nearly $1 billion/year, a gain of about $300 million/year.
Baum said, 'Moving to the Dallas area will enhance our consolidation." He characterized Dallas as a "diverse and dynamic business environment, well established as a headquarters location for many companies in our industry."
Meantime, Quaker State plans a $25-million development project for the Red River port in Shreveport, which will become the company's manufacturing and technical headquarters.
Quaker State will sell its existing Shreveport property for $9 million to the local port commission or development board.
The company will use the proceeds from this sale, along with an additional $16-million investment, to pay for improvements and expansion at a new port site along the Red River.
Quaker State will lease back its existing property while improvements are made at the port, after which it will continue to rent the port site with an option to buy it after 20 years.
Port development will include a 425,000 sq ft blending, packaging, and warehousing facility at Shreveport, along with a 20,000 sq ft laboratory and a tank farm near the river.
The company will improve and upgrade existing plant facilities and build additional storage tanks and bulk handling facilities near the Red River.
Although plans are not complete, some additional research and development positions could be located at this site.
Quaker State Oil Refining Corp. became Quaker State Corp. July 1, 1987, the new name chosen to reflect diversification and growth.
Copyright 1995 Oil & Gas Journal. All Rights Reserved.
