Atlantic Richfield Co. was once a model corporate citizen and a major presence in downtown Los Angeles. It wasn't just that its corporate headquarters employed hundreds of people and leased huge blocks of office space the company was also generous on the philanthropy front.
With Arco's acquisition by BP Amoco, which was finalized in April, that presence is vastly diminished. But BP hasn't walked away from Los Angeles.
Its Western U.S. regional headquarters is being established at Arco Center in downtown L.A., and the new face of the company is Bob Malone, who was appointed in June as regional president. He is an oil-industry veteran who joined BP America in 1986 and has held a series of positions with the company.
While the downtown corporate offices will eventually drop to fewer than 100 employees, Malone will oversee a regional BP workforce of some 15,000 employees.
Question: Having just arrived in town a few weeks ago, how do you like L.A. so far?
Answer: We were in Alaska for seven years, and we have a lot of good friends and we're sad to leave. But we're excited about California. The people have been tremendous, very welcoming in the business community and political arena. We have a home in Pasadena and think we're going to enjoy it.
Q: Kind of big shoes to fill, though. Arco was very active in Los Angeles civic affairs. How do you plan to be involved here?
A: I've always been very, very active both politically and in the community. I give a lot of my time to organizations, donate a lot of my time. When I was in Alaska, I was appointed to the board of regents for the university system and to what's called the Children's Trust, which is a foundation that funds programs that help stem child abuse and neglect. I was on the board of directors, and still am, of the Nature Conservancy of Alaska. I was also involved with several soup kitchens. I'm very interested in youth, education and the environment. A lot of my time and my wife's goes to helping the less fortunate.
Q: How about here and now? Are you still figuring out how you want to get involved in Los Angeles?
A: There are a number of organizations that have approached me to be involved. My staff is saying, "Hang on, get settled in first and think about where you can best apply your efforts." I'm doing that right now, getting settled first before I make any significant commitment. I plan to be involved in the community. I'm still figuring out where my skills can best be utilized by Los Angeles.
Q: Will BP's involvement here be much less than Arco's pre-existing level?
A: There's no question that, just by the sheer numbers that we have here, it will be less than Arco. This was the corporate headquarters for a global company. We are a regional office for a global company. The employee base in the regional office will be much smaller than Arco's corporate office. But we made a commitment to the state of California to give $10 million a year for 10 years in the state and we are exceeding that this year. That number was arrived at by looking at Arco's average annual giving. From that standpoint, we are going to have significant involvement philanthropically, as well as through (BP employees') time. I will be involved as well because that's what I like to do.
Q: State Attorney General Bill Lockyer earlier this year raised questions about whether oil companies, including Arco, were colluding, or gouging customers. What's your response to that?
A: We're fully cooperating with the attorney general. I'm confident the investigation will show, as all previous investigations have, that there is nothing improper occurring. You have to look regionally at demand. What is the refining capacity, what is the cost of raw product?
Right now, in the Western United States, we're running at full tilt. When your raw material supply is selling for $30 a barrel, that drives your margins up. It's as simple as supply and demand. Right now, the demand is huge and the capacity to produce gasoline is tight. We're very proud of the environmental progress that we've made on gasoline. And all that comes with an impact on our refinery as we adjust and produce a more environmentally sound product. We have increased demand and higher product costs because of the reformulation.
Q: But now the main ingredient in that reformulation, MTBE, is being phased out because it's polluting the groundwater. Reformulating again and modifying refineries will be costly, won't it?
A: We do not have an estimate of the cost to meet the MTBE requirement. We're in that process now. We're looking at technology and formulation that will give us that (lower-emission) result without MTBE, but we will meet commitments.
Q: Let's get back to your new job here. What's your area of responsibility?
A: I have Wyoming, Montana, Colorado, New Mexico westward. That includes Alaska and Hawaii. BP has become the largest gas marketer in the United States, the largest gas producer in the United States and the largest producer of oil in the United States. Just slightly less than half the assets of BP and about half the employees are in the United States. So the United States is significant to BP now.
Q: What role will you play as Western regional president?
A: Because of the importance of the United States, the sheer size of the market, it was determined we needed to have a different management model here. We are still absolutely committed to the business-unit model. But when you look at a global corporation like BP, people want to know whom they need to talk to. In the Western United States for BP, on issues that are non-business-unit issues, it's Bob Malone.
On the East Coast, there will be another regional president named. We will be the representatives for BP in the United States. We both work with the deputy chief executive, who is based in London and the United States.
Q: But what's your operational role?
A: I don't have the day-to-day operating role. My job is to, first of all, complete the integration of Arco into BP. My job is also to be the representative of BP in the Western U.S. the public face, public involvement.
We have issues that cross our business streams. We have a production unit producing the oil in Alaska. They load that onto tankers that are BP Marine, and they unload at a refinery, and then it goes to retail marketing. So if we have an issue on either end of that, maybe what the refinery can receive vs. what the production company is producing, my job is to get everyone together to come up with a decision that's the strongest for the group.
Q: What about layoffs?
A: There were about 750 people in the corporate office of Arco and we had already announced that about 740 people were going to be let go. The regional office will be less than 100 people. Right now, there's about 300 still working here. For some of those, it'll actually be another two years from now before all the transition is complete. But the number reduces significantly this year and the first part of next year.
Q: Why such dramatic cuts?
A: There's a difference in philosophy. BP's corporate office is very small. Our philosophy is a business-driven company through our operating units and because of that, large regional or corporate offices are not part of our culture. What I want to remind everyone of is the size of our employee base there are 5,300 to 5,500 BP employees in Southern California. The corporate office is the one that has decreased in size. California is a significant piece of business for us.
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