The Times: Thousands of jobs to go at BP as chief executive Tony Hayward acts to cut overheads

October 12, 2007
Steve Hawkes

Thousands of jobs are expected to go at BP over the next two years after Tony Hayward, the chief executive, yesterday announced plans for a “fundamental shift” in the way the oil giant operates around the world.

Mr Hayward stamped his authority on the business, saying that BP had to bring its overhead costs down from “unacceptably high” levels and focus on generating more revenue.

Four layers of management will go in parts of the BP empire, with more resources deployed instead on the front line. Under the plans, BP’s Gas, Power & Renewables division will also be disbanded and integrated into the two remaining core divisions, Exploration & Production and Refining & Marketing.

Vivienne Cox, the current chief executive of Gas, Power & Renewables, will lead a new Alternative Energy unit centred on solar power, wind energy and carbon capture technology.

Mr Hayward said that overlaps in certain roles remained from the mega-mergers masterminded by his predecessor, Lord Browne of Madingley, and had to be removed to reduce complexity. He admitted that redundancies were inevitable during the next couple of years. However, he insisted that the restructuring was not about job cuts but improving performance and putting BP back on track.

He said that more jobs would be created in key operating areas. “Net, I’m still not certain where we will be on headcount,” he told The Times. “This is not about cuts, it’s about productivity.” BP employs nearly 100,000 staff worldwide.

The plans are the result of a wide- ranging, five-month review by Mr Hayward and his closest advisers.

In a damning verdict on the last years under Lord Browne, Mr Hayward said that staff had to be able to get on with the job without “unnecessary interference” from managers. “Our problem is not about the strategy itself but about our execution of it,” he said.

“BP’s performance has materially lagged our peer group in the last three years. It has been poor because we are not consistent and our organisation has grown too complex. At the root of all this is a need to change our behaviours. What we are doing represents a fundamental shift in how BP works.”

BP has suffered a dramatic fall from grace ever since the fatal Texas City refinery blast in March 2005. The group is still contending with the fallout from the explosion as well as problems caused by pipeline leaks in Alaska and speculation over the future of Peter Sutherland, its chairman. BP’s third quarter results on October 23 are expected to show that underlying profits fell to less than $4 billion (£2 billion) in the three months to the end of September, 19 per cent below a year ago.

Mr Hayward took over as chief executive after Lord Browne’s resignation in May, when he was found to have lied in the High Court over his relationship with a former boyfriend.

Asked why Lord Browne had not instigated a similar restructuring, Mr Hayward said: “I suppose the right answer is to ask John but you always learn and we have learnt a lot.

“We have focused a lot on what has happened, on the experience of the last three to four years and it’s not been a happy period for BP.”

Shares in the group rose 2 per cent, up 13½p to 593½p, as analysts gave a cautious welcome to the proposals. Neil Morton, at MF Global, said: “It’s a step in the right direction and will help put BP on the front foot again.”

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2641404.ece

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