Shell axes 3,000 jobs and warns it may quit the forecourts
Wednesday 01 October 1997
The Anglo-Dutch oil giant gave itself two year's to restructure its network of 13,000 European filling stations. But the company warned yesterday that it could be forced to leave some markets altogether, including Britain, if its chains failed to perform.
The programme means the loss of around 15 per cent of the 19,000 strong workforce in the refining and marketing businesses, of which about 2,500 are based in the UK. Many of the jobs would be those of managers as Shell "delayered" its organisation.
Shell insisted the British job cuts were difficult to quantify, because only 850 of its 1,700 UK sites were owned by the company. Most forecourt staff, even in company-owned stations, are employed directly by the manager.
The company admitted openly for the first time yesterday that its UK chain of petrol stations was unprofitable. Garages that failed to break even after two years would be closed and sold, though the sites would not be offered to competitors.
"We are making losses...You should be constantly asking yourself whether we should be in a market," said Phil Turberville, head of European Oil Products.
The plan would slash Shell's retailing cost base in Britain by 43 per cent. Its UK operations are more expensive to run than those on the Continent, with 4.4p of each litre of petrol going on overheads, compared with 4.1p on the continent. The target is to reduce this to 2.5p a litre.
Though some stations would close, the programme aimed to increase Shell's share in all its European markets to 20 per cent, with the company taking the first or second place in each country.
The recent deal to buy 450 Gulf filling stations, which has yet to be formally signed, raised Shell's UK market share from just under 15 per cent to almost 17 per cent. But it remains in third place behind the market leader, Esso, with 18 per cent and BP-Mobil, which merged their petrol chains last year, with just over 17 per cent.
"We urgently need to get the organisation fit the the purpose. Every single piece of real estate has to perform," said Mr Turberville. The plan is doubly ambitious, because Shell's position is weakest in its biggest markets, such as France and Italy.
To achieve this growth, Shell raised the prospect of another petrol price war as the company pledged to cut its fuel prices to a figure closer to those of its main competitors. Mr Turberville explained: "Price is one dimension. Where that involves cutting then of course they'll be cut."
Shell's UK market share declined after Esso launched its Price Watch campaign in 1995, which promissed to match the supermarkets on price. Esso lost some pounds 200m on the strategy, which also forced its competitors into the red. Shell yesterday predicted that the market would rationalise into just two or three oil giants battling with the supermarket chains, which account for 22 per cent of British petrol sales.
Further UK takeovers or mergers, to be unveiled "in months rather than years," were the other main plank of the strategy. "It could be through mergers, it could be swaps and it could be acquisitions. Nothing has been ruled out," said Mr Turberville.
Speculation mounted that another middle-ranking player would be bought up. Gulf, owned by Chevron of the US, succumbed to Shell after the collapse of three way merger talks with Elf of France and Murco, which trades in the UK under the Murphy brand.
Elf last night ruled itself out of a deal with Shell, insisting it had made a long term commitment to the UK. "We looked at the possibility of a sale or merger, but it just wasn't on the cards. Since then we've taken a conscious decision to build on our UK position," said a spokesman.
Oil analysts welcomed the announcement yesterday as a further step in Shell's global drive to boost its profitability. In the space of a month it has spend pounds 1.2bn taking control of a chemicals joint venture and announced the pounds 1.5bn acquisition of a Texas gas pipeline.
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