Arco-civic/LK1st/mark2nd

By DANIEL TAUB

Staff Reporter

As other large L.A. companies have merged or moved, Atlantic Richfield Co. has remained solid as a rock one of the city’s great corporate citizens, and one of the strongest supporters of downtown Los Angeles.

But now, that rock may be crumbling.

Battered by the lowest crude oil prices in a decade and continued speculation about it being a takeover target, Arco is on a cost-cutting mission, laying off employees and shaking up its management structure.

And the shake-up is not limited to Arco’s employee base and executive suites. The company’s civic and charitable work also is gearing up to take a major hit as it tries to become more cost-efficient.

“Arco will continue, even after this downsizing, to be active in this community,” Mike Bowlin, the oil giant’s chairman and chief executive, said in an interview last week. “Having said that, I’ve got to clearly emphasize that we’ve got to live within our means. With the current environment that we’re in today and could continue on for a number of years we’ve got to reduce our resources in community affairs.”

That, Bowlin said, means scaling back the budgets of programs that have supported projects and organizations in downtown L.A. and other areas for years.

Even a partial withdrawal from the philanthropic community could leave a large void especially in downtown L.A., said Maxene Johnston, former president of the Weingart Center Foundation and now a management consultant.

In 1986, for example, when the Los Angeles Central Library burned down, Arco spearheaded reconstruction efforts, helping to raise some $10 million. Now Johnston wonders: Would Arco be so eager to leap into the fray today?

“It’s not clear what would happen if there were another library fire, God forbid, because Arco took the lead on that effort,” she said. “It’s not clear that they will be able to play that same role, should we face another one of those one-time events that create an opportunity for civic leadership.

“The question is: Who would step in, if not Arco?”

With a charity budget of nearly $15 million in 1997, Arco is one of the most giving of L.A. corporations. By comparison, Times Mirror Co. had a 1997 philanthropic budget of $13.3 million, Rosemead-based Edison International $10.5 million and El Segundo-based Mattel Inc. $5.5 million.

Arco’s civic and charitable work is separated into two areas: the Arco Foundation, which provides grants and other financial support to organizations and programs, both in L.A. and in other cities where Arco has operations; and Arco’s community-affairs section, which focuses heavily on downtown L.A.

The budgets of both programs are expected to drop in the coming year, because both depend on the health of the company. And in recent months, Arco has been ailing.

For the second quarter ended June 30, Arco reported net income of $154 million, down nearly 70 percent from the $508 million for the like period a year ago. The company’s first-quarter net income also was down 54.4 percent from the like period in 1997.

The Arco Foundation’s budget is based on the domestic earnings of the company before federal taxes are deducted. This year, the foundation’s budget is about $14 million, roughly same as last year and up from the $10 million received in 1995 and 1996. But in the mid-’80s, it was budgeted at more than $30 million.

“We’re anticipating (cuts), although we don’t know what the figure will be, because we don’t have this year’s figures yet,” said Russell Sakaguchi, executive director of the Arco Foundation.

Bowlin said the company might reduce the percentage of its domestic, pretax earnings currently at 1.25 percent that it gives to the foundation.

“We haven’t made that decision yet,” Bowlin said. “We don’t know if the percentage will change or not. We’ll look at that, but we have not made those decisions at the current time.”

As for the community-affairs section of Atlantic Richfield, which focuses more heavily on downtown L.A. programs and institutions, a budget cut is all but certain.

“We haven’t had any specific discussions with numbers added in,” said Betsy Bartscherer, manager of community affairs for Arco. “But it is time for us to take a serious look at the kinds of commitments we have, and make sure they reflect our core values and are things where we can make a difference.

“This is the time for us to be cautious and not make long-term commitments,” she said.

This year’s budget for community affairs is about $700,000, Bartscherer said, with about $200,000 of that going toward dues for Arco executives’ membership in such organizations as the Los Angeles Area Chamber of Commerce and Los Angeles Business Advisors. The balance goes to such programs as the Joint Education Program, a partnership with the Los Angeles Unified School District, United Way of Greater Los Angeles, and the Library Foundation of Los Angeles, a charitable organization which supports L.A.’s library system.

The funding for community affairs, like that for the Arco Foundation, is about the same as it was last year, but still lower than its mid-’80s peak of about $1 million.

The Joint Education Program is one of the crown jewels of Arco’s community involvement. Arco employees visit five LAUSD schools in the downtown area to give courses and one-on-one tutoring.

Under that program, Arco employees are allowed an hour and a half of paid time off each week to volunteer. But participation has shrunk over the last several years, not only because Arco has fewer employees, but because those who remain have less time for non-business activities, according to Bartscherer.

“We still do it, we encourage it, but fewer people are able to take care of it because of bigger workloads,” she said.

Over the last 20 years, more than 2,600 Arco employees have participated in the Joint Education Program an average of 130 participants in a given year. But as of last week, less than half that number 55 employees were participating.

“It has fallen off substantially,” Bartscherer said.

Aside from the Joint Education Program, few downtown programs and organizations have felt a major impact from Arco’s cuts so far. But some downtown leaders say they are beginning to see the company become more conservative in its giving and are concerned about what the future may hold.

Consider the Library Foundation of Los Angeles, of which Arco has been a strong supporter. At the foundation’s annual awards dinner, Arco traditionally has purchased the highest-priced table, a $25,000 donation.

But at last April’s gala, Arco contributed just $10,000, said Evelyn Hoffman, the foundation’s executive director.

Ruth Schwartz, executive director of Shelter Partnership Inc., a downtown organization that raises money for homeless programs, said that the amount Arco gave this year, $5,000, was actually twice the amount it gave last year. But, she noted, the donation still is not as great as the $10,000 it gave in 1985, or the $7,500 it contributed in 1987.

“We’re rethinking a lot of our relationships right now because of cutbacks and because of the changing business environment,” said Schwartz. “While $5,000 may not seem like a lot of money, $5,000 is a building block and you count on contributions from corporations to help you fulfill your mission.”

Arco’s cutbacks, she added, “may mean some reduction in services for the most needy.”

Although Schwartz and others expressed concern over the impact Arco’s problems will have on charitable and civic giving, others said the situation is far from dire.

“Whenever an industry or country or region is in some sort of recession, if you want to call it that, they’ve got to pay a little more attention to their business than ever before,” said Eli Broad, chairman and chief executive of SunAmerica Inc., and a major contributor to such downtown projects as Disney Concert Hall and the Museum of Contemporary Art.

“But Arco will do its part,” he said. “I’m not concerned about that. Frankly, I wish all companies in our region would do as much as Arco has done and will do.”

Bowlin said that even though his company’s charitable and civic participation will drop next year, he hopes the public will not forget the contributions Arco has made to Disney Concert Hall, LAUSD schools and other downtown projects and programs.

“I would hope the community and community leaders will look and remember the things we have done, and realize that in very difficult times you have to make cuts whether it is the federal government, the city government or private enterprise,” he said.