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The Wall Street Journal: CEO Hayward to Streamline

BP, Cut Headquarters Jobs
By GUY CHAZAN
October 11, 2007 1:31 p.m.

LONDON – BP PLC is set for a “step-by-step” recovery after years of underperformance, said the oil major’s new chief executive Tony Hayward as he launched a broad restructuring that will include big job losses at company’s London headquarters.

In an interview, Mr. Hayward said BP’s revenues, which have lagged behind those of its rivals, should surge in the fourth quarter as big production projects come on-stream and BP’s two big U.S. refineries return to full capacity.

But Mr. Hayward admitted the company was unlikely to see a sudden change in its fortunes. “The road to recovery will be incremental, step-by-step,” he said. “We’re not suddenly going to be back to where we were four or five years ago. That’s unrealistic.”

 The restructuring plan Mr. Hayward unveiled Thursday is designed to turn around a company that has suffered a string of mishaps and operational problems in recent years. BP’s reputation was badly tarnished after the explosion and fire at a Texas refinery in 2005 that killed 15 people and an oil spill in Alaska the same year.

More recently, the company has been hit by holdups in commissioning prestige projects such as Atlantis and Thunder Horse in the Gulf of Mexico, and by shutdowns at its two biggest refineries, Texas City, in Texas, and Whiting, in Indiana.

In a statement, Mr. Hayward said the management shake-up was designed to reduce BP’s “unacceptably high overhead costs.” He said the company would reduce the number of its business segments from three to two and slash layers of management that had built up above its operating businesses.

There would be big job losses at company headquarters, though BP would also hire lots more engineers to work in the field.

In parts of the company, up to four layers of management would be shed, the statement said, while procedures – for safety, finance, IT and other departments – would be standardized across the company.

“We’ll continue to build up the organizational capability on the front-line at the same time as we get rid of some office roles,” said Mr. Hayward in the interview.

Analysts have been critical of the build-up of bureaucracy at BP in recent years. The company has 60,000 staff, excluding those working at its retail sites – and 10,000 of those work in its finance department as accountants, planners and performance analysts. One of Mr. Hayward’s first announcements as CEO was that dozens of planners would be redeployed from BP’s London offices to engineering jobs in the field.

While avoiding any direct criticism of his predecessor as CEO Lord John Browne, Mr. Hayward said BP’s organizational shortcomings had developed when Lord Browne headed the company. Lord Browne, who resigned in May after lying to a judge about details of his private life, had been widely praised for engineering a string of daring acquisitions that transformed BP from a small player to an energy giant.

But Mr. Hayward said the companies BP acquired had not been wholly consolidated. “The original core was very small and quite diversified, so there’s never been a foundation to consolidate onto,” he said. “With the benefit of hindsight we didn’t do enough early on.”

Write to Guy Chazan at [email protected]

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