Beast of the Month - January 1999
Lee Raymond, Exxon Chairman and Chief Executive
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
Ad Slogan for Godzilla
While the collective death wish of Bill Klinton and the GOP seemed to make all the headlines, 1998 could just as well be remembered as the year of the korporate merger. Of the ten biggest U.S. mergers in history, all ten occurred in 1998, the earliest on May 11. These facts seem to fly in the face of popular mythology: the notion that the Reagan years of the go-go eighties were the high point of unmatched greed and speculation, a time of massive mergers and massive layoffs, which somehow ended with a realization that letting big business run amuck was a bad idea, followed by our present times in a kinder, gentler decade.
Indeed, much of the attack leveled upon Bill Klinton by his political opponents (at least within the Rush Limbaugh crowd) has been on the accusation that he is a socialist (or, even worse, a liberal) bent upon destroying our capitalistic economic system by attacking big business. The facts seem to suggest differently: that Reagan's voodoo economics have continued unstopped, with Klinton a chief practitioner, and that the nineties have been just as greed-at-all-costs driven as the previous decade. There is no greater example of this rarely stated truth than the merger of Exxon and Mobil.
On December 1, 1998, Exxon, the biggest oil company in the nation, announced the acquisition of Mobil, the second biggest, to become the largest oil company in the world. The deal, with a value at approximately $80 billion, would be the largest merger in U.S. history. It would also become the biggest company on the Fortune 500, with combined 1997 revenues of over $200 billion, and nationally 13 percent of the oil market. The acquisition, along with British Petroleum's purchase of Amoco for $58.5 billion August (as well as the joint alliance of Shell-Texaco), leaves just three major international players in the oil industry.
However, as Lee Raymond, Exxon's chairman and chief executive (and The Konformist Beast of the Month ), was quick to point out at the news conference announcing the deal, "I have no interest in being the largest company in the Fortune 500. Revenues mean nothing to me. What counts is profit."
And how does Raymond plan to get much of this new profit? Unsurprisingly, by layoffs. Raymond said the merger would eliminate about $2.8 billion in costs over three years, largely through job cuts and asset divestitures. According to Raymond, initial estimates suggest 9,000 of the 123,000 workers both companies have likely will be cut. Other analysts have said the figure could go as high as 20,000. That comes out to one in six employees receiving a pink slip. About 40 percent of the total work force is in the US, and while Raymond insists the layoffs will be spread equally, it is likely that Americans will receive the axe before lower paid employees in the third world. Even John Lichtblau, chairman of the Petroleum Industry Research Foundation in New York (basically a mouthpiece for the oil giants), admitted of the merger, "The principal losers will be employees. They will definitely cut their staff by several thousand. That's going to be the biggest single cost savings." Among areas likely to be hit is Fairfax, Virginia, where Mobil has its headquarters. Thanks for the support.
Of course, some believe the merger will harm the environment even more than workers, with consequences even graver than layoffs. Michael Crosby, coordinator for Campaign Exxon (a group of church-based Exxon shareholders and environmental organizations concerned about the oil company's approach to global warming) states, "Economically, they may think this marriage is made in heaven. Ecologically, we think this marriage is bad for the heavens as well as the Earth. These two have done much to undermine national and international efforts to lessen global warming. To have them come together is only going to make matters worse." John Passacantando, executive director of Ozone Action, declares more concisely, "Putting Exxon and Mobil together creates the Death Star of global warming."
Indeed, this is not mere hyperbole: Exxon and Mobil have long been the largest financiers of pseudo-research "science" institutes that have proclaimed concerns of environmental effects from fuels to be unfounded, including such Orwellian-named organs such as the National Consumer Coalition, the National Center for Public Policy Research and the Competitive Enterprise Institute. Mobil Oil regularly has advertisements posing as unbiased editorials in Time Magazine and The New York Times, among other korporate propaganda organs, declaring as the best energy policies to be the one's which, coincidentally, happen to be the policies that hurt them the least. On both oil behemoth's sites, there are "op-ed" pieces which argue that global warming is either:
b) a naturally occurring process; or
c) actually quite beneficial to society.
It is apparent that all three arguments can't all be true, proving that their argument is a mere attempt to throw anything in the way of the substantial scientific evidence to the contrary.
While the joint power of the two companies will likely not change things too drastically, it certainly will not be beneficial to honest debate on environmental issues. Case in point: when the Exxon Valdez disaster happened, the end result punishment that Exxon received for its negligence amounted to a wrist slap. With the combined power of the two oil giants together, even a wrist slap may be out of the question in the future. Further, beyond the effects of their crude oil, Exxon-Mobil would be the world's No. 1 producer of several industrial chemicals, including polyethylene, polypropylene and paraxylene. It appears the "Death Star" analogy is quite deserving.
Of course, the greatest significance of the Mobil-Exxon venture may not be to workers, or to the environment, or even in oil prices, but in symbolism. At the start of the 20th century, the biggest threat to liberty and democracy was the high concentration of power held by industrial lords, and the most notorious of robber barons was John D. Rockefeller and his Standard Oil Trust. After years of court battle, in 1911, Standard Oil was busted up, the two biggest chunks being Exxon and Mobil. While the breakup certainly didn't spell the end for Rockefeller domination on society (to this day, many consider David Rockefeller the most powerful man alive, thanks to his influence through Chase Manhattan, the Standard Oil satellites and other institutions) it at least indicated there was some - even if mainly illusionary - counterbalancing forces to at least try and limit the family juggernaut. The reuniting of the two crown jewels of Rockefeller empire as we approach the millennium is perhaps as significant as the tearing down of the Berlin Wall: a century has passed, and apparently the Gilded Age that Mark Twain warned about is ready to flourish again. Certainly if a "liberal" like Bill Klinton has no problem with it, one wonders if there is any politician that will roar against the industrial komplex like Teddy Roosevelt did (who was, for his time, an economic conservative.)
So what can we expect from this? More political power wielded by the oil companies, for one. Already their influence is nefarious: many suspect the current bombing of Iraq had less to do with Slick Willie's Peckergate fiasco and more to do with limp and sagging oil prices. And perhaps this is what this deal is really about: concentrating social power in fewer and fewer hands at the expense of others. If that was the goal of Lee Raymond in arranging this deal, he hardly could have come up with a better blueprint.
In any case, we salute you, Lee Raymond, as Beast of the Month. Congratulations, and keep up the great work, Lee!!!
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