BP PLC (NYSE ADR: BP) last week confirmed that Robert Dudley – an American and a company insider – would be replace Tony Hayward as the company's chief executive officer in a move that's intended to improve the battered BP image.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico – the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.
"I've spent the last three months, every day, on the Gulf Coast," Dudley told reporters in London. "And I'm going to focus for the next month and a half on what we're doing in the Gulf Coast, our relationships in the Gulf Coast and in Washington."
BP is hoping Dudley, who grew up 80 miles north of the Gulf Coast in Hattiesburg, Miss., can spearhead the creation of a new BP culture that pays more attention to safety and responsibility.
"Overall we see BP being reinvigorated by the new strategy in play, a new CEO and the worst news for the company concerning U.S (Gulf of Mexico) costs now being out there," Jason Kenney, an oil analyst at ING Groep NV (NYSE ADR: ING) in Edinburgh, told reporters.
BP Chairman Carl-Henric Svanberg said BP would be a "different company going forward, requiring fresh leadership."
Dudley's efforts and demeanor since the spill have drawn praise from a U.S. government that's frustrated with Hayward's missteps and his highly criticized lack of action.
"[Dudley] is cool, calm, collected," said Kenneth Feinberg, who oversees the $20 billion claims fund BP set up under U.S. government pressure. "He is proactive. He reached out to me and expressed the desire for BP to be as responsive and cooperative as possible."
But Hayward's big gaffes have caused a public distaste for BP that won't go away overnight. Hayward has angered Gulf residents and environmentalists with his poorly chosen comments that conveyed a severe lack of perspective.
In May he told reporters that "there's no one who wants this over more than I do. I would love my life back." Earlier that month he referred to the amount of oil in the Gulf as "tiny" and the impact of the spill "very, very modest."
Hayward's behavior nabbed him the title of "the most hated – and clueless – man in America" according to the New York Daily News.
And it didn't end there.
Once news of his long-rumored ouster became official last week, Hayward groused to the BBC News that he had been "demonized and vilified" as the public face of the disaster.
This prompted last week's installment of Money Morning Question of the Week: Will BP's makeover efforts salvage its damaged reputation? By swapping Dudley for Hayward, can BP regain the confidence of investors, Gulf-area businesses and the U.S. government? Will Wall Street respond favorably to BP's moves or has the company – with the oil spill and Hayward's miscues – drilled a hole from which it cannot escape? If so, what do you think will happen to BP?
Here's what readers said about BP's latest chapter in its oil-spill saga, from the first-hand account of an oil industry worker to the defensive cries of BP supporters.
Front Row Seat to BP's Negligence
I believe BP's future in the United States is kaput!
I am a retired gas turbine service engineer who spent 35 years dealing with oil company maintenance managers. I had business with the Amoco Corp. maintenance people at their Texas City refinery and with their pipelines operation in Alaska. Both of these maintenance managers told me the same story, that is, when BP bought Amoco, it imposed cost-cutting on maintenance budgets by 50% in spite of the howling by the former Amoco managers that reliability and safety would be severely compromised.
Sure enough, in the following years it had a maintenance/safety problem at both of the installations — explosion and a fire at the refinery killing a number of workers and a big spill at the Alaska pipeline. BP was found at fault in both cases, but only got its wrist slapped.
As an insider I've been aware of BP's corporate culture since British Petroleum took over Amoco and rebranded itself BP. I've avoided BP products and its stock ever since.
Now the things I've known are known by the American general public due to the Macondo well blow out.
– Esten S.
BP's Problems Will Be Short-Lived
Yes, I think BP can salvage its reputation.
First, people have short memories. For example, if this disaster hadn't happened, how many people would have even remembered the Exxon Valdez disaster?
Second, what did it really do that was wrong? It tried to meet this country's insatiable appetite for oil and at the same time make a profit. That's what businesses do: make profit. It is unfortunate that all the backup systems that were in place failed, but government (local, state and federal) must also take responsibility for not doing a better job of monitoring offshore oil platforms, making sure that the emergency systems were so redundant that this couldn't have happened. They could've been testing those systems over and over again, several times a month if necessary.
Third, all BP has to do is mention the hundreds – if not thousands – of jobs that the oil industry creates directly or indirectly.
Finally, the potential for the same disaster exists at other platforms; yet, no other platforms have shut down. Has the government even inspected those other rigs to make sure that this can't happen again?
In short, something else will come along to divert the country's attention elsewhere and BP will continue doing business as usual because no one will make it accountable.
Why Is the Spill BP's Fault?
BP disaster – or was it?
Let's just look into the disaster.
BP leased an American company's drilling rig. The American-made wellhead control failed. The American-made blowout preventer failed. The American oilrig spilled oil for weeks into the ocean. American senators wanting television airtime ostracized BP for the blowout and the oil spill for their own political position.
Can any American company cap an oil wellhead under water at the depths BP had to?
Knocking BP has informed the world just how good BP is.
– Gordon F.
Basically the Russians kicked Dudley out of Russia and the Americans kicked Hayward out of America – so now BP is just rotating these guys into each other's old positions.
– Barry J.
BP will cease to exist by 2012.
– Rodger C.
Where's the White House in All of This?
What the hell does it matter what its "image" is? It will make money in the future no matter who is at the helm. Do people not use or purchase Exxon products because of the Exxon Valdez spill in 1989? I don't love it or hate it. It is doing what any of its fellow oil thieves would have done in the same situation.
The larger problem was a lack of leadership from the White House. Do any of you really believe the stories coming from BP, or the White House? People that worry about stuff like this are playing right into their hands.
Send 'Em Packing
I believe that maybe BP made a good move in changing its command structure.
But I also believe that BP should be held responsible for the Gulf of Mexico mess. It should be held responsible for every cent spent and lost in the Gulf clean up. I think it should be held responsible for every lost penny of income for the fishermen and all who make their living in the Gulf.
Then I believe once all of this mess is cleaned up to our satisfaction, BP should be politely asked to never drill on our soil or near our water again. Let them go home, we have oilrigs all over this country. They don't need to be here taking money out of our economy.
We have sent them running home before, let's do it again!
– James J.
[Editor's Note: Thanks to all who responded to our previous installment of the Question of the Week feature regarding BP's image makeover. Be sure to answer next week's question: Are you preparing for a double-dip recession?
Send your answers to firstname.lastname@example.org — we want to hear from you!
Is there a topic you want to see covered as a Question of the Week feature? Then let us know by e-mailing Money Morning at email@example.com. Make sure to reference "question of the week suggestion" in the subject line. We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
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