NPRA '08: Run public companies as private - Gower

31 March 2008 00:15  [Source: ICIS news]

By Joe Chang

SAN ANTONIO, Texas (ICIS news)--One of the keys to creating value in a public company is to run it as if you just took it private, said Robert Gower, former CEO of Lyondell Petrochemical, on Sunday.

When Arco Chemical formed Lyondell Petrochemical in 1985, Gower took the helm as president of the money-losing division and was given the opportunity to run the business as he saw fit. He retired from the company in 1997.

"We operated Lyondell as if we just did an LBO [leveraged buyout]. It was the equivalent of an LBO inside a large company," said Gower at the Chemical Heritage Foundation/Founders Club/NPRA Symposium on Entrepreneurship and Innovation in the Chemical Industry.

"We put together a maverick operation in the framework of a larger company," he added.

Lyondell, now part of LyondellBasell, brought in new leadership, eliminated layers of management, changed the way it bought crude oil into its refinery and boosted employee communication and involvement, said Gower.

At the time, the Lyondell petrochemical and refining businesses had been losing money for many years.

"In the words of a Merle Haggard song, we wondered: Are we rolling downhill like a snowball headed for hell?" said Gower.

Management and employees were accustomed to losing money and explaining failures on market and external conditions beyond their control.

"The biggest challenge was to change the mindset of the Lyondell people, who were accustomed to losing money," said Gower.

At a refinery meeting, Gower found that the business made good margins when running on heavy Maya crude oil from Mexico, but had poor margins on WTI crude.

"So I asked the operating manager: Why not run more Maya crude?" said Gower. "The manager believed management didn't want it that way, but I said let's just start increasing the Maya rate."

The refinery boosted its use of Maya crude from 20,000 bbl/day to 70,000 bbl/day and vastly improved profitability, said Gower.

Employee communication is critical to a successful operation, said Gower.

"It is probably the most important thing," he said. "Employees need to feel valued, be informed, understand the company's strategy and understand what they need to do."

Gower instituted employee meetings at every location each month. The result was better morale, earnings performance and safety, he said.

Lyondell eventually went public in 1989 as a highly profitable company, but the company kept most of its LBO culture, said Gower.

The symposium was held at the 33rd National Petrochemical & Refiners Association meeting that runs from Sunday to Tuesday.

By: Joseph Chang
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