Oil Spill Likely Poisonous to BP’s Rebranding Efforts
April 30, 2010 Uncategorized
As the Gulf oil spill inches closer to landfall, the New York Times considers the impact on BP (BP). The company’s initial estimates suggest the incident could cost several hundred million dollars, which might even be conservative. Between cleanup costs, settlements, fees, and other costs, Exxon Mobil paid more than $4.3 billion dollars for the 1982 Exxon Valdez spill. But industry analysts suggest the biggest impact will be the damage to BP’s reputation. So far, they’ve been unable to stop the leak, and the worsening incident threatens to undo aggressive marketing efforts to rebrand the company as “beyond petroleum.” The company seemed to have cleaned up its act in recent years, says an oil analyst at Oppenheimer & Co., but now “it looks like a house of cards that has totally collapsed.”
The Post adds that the spill has prompted attacks on Obama’s plan for expanded offshore oil drilling and will likely supercharge calls for greater regulation on the oil and natural gas industry. Florida Sen. Bill Nelson has already announced plans to block Obama’s offshore drilling legislation. One of his top aides, Dan McLaughlin, wondered why regulators hadn’t been tougher on oil companies to institute emergency shut-offs. “Somebody is going to have to ask the question as to why the regulators didn’t put this question to the industry before?”
With the auto industry slowly stabilizing, local economies across the Midwest are returning to life, the Wall Street Journal says. Once GM and Chrysler emerged from bankruptcy, their orders for car parts skyrocketed, bringing jobs back to many small towns. Two factories in Flora, Ill.—population 4,772—were able to rehire 400 of the 550 people they’d laid off, a big boost for the small town. Shops are once again selling patio furniture and new Little League gear. Debate continues over the effectiveness of the bailouts, and many of the 400,000 jobs lost are never returning. But the government’s efforts “allowed GM to remain viable, and the fact that it got back up and running quickly really helped the supply chain,” as Lear (LEA) CFO Matthew Simoncini argues.
The feds aren’t done with Goldman Sachs (GS), the Wall Street Journal reports. Sources say prosecutors are conducting a criminal investigation into possible securities fraud at the firm, in connection with mortgage trading. It’s too soon to tell whether they’ll bring any charges, and it’s unclear which deals are at issue. To move forward, prosecutors would need evidence of intent to break the law, something proving the firm or its employees knew they were committing fraud. The potential fallout is significant: No U.S. financial firm has ever survived criminal convictions. The Washington Post suggests charges are unlikely, as standards of evidence are high and indictments in similar cases rare.
According to the Times, the Department of Labor will begin requiring companies to create plans for compliance with labor laws regarding wages, safety, and equal employment. Deputy labor secretary Seth Harris hopes to curb companies who view the benefits of ignoring the regulations as outweighing the risk of getting caught and the costs of compliance. “They are playing a dangerous game of catch me if you can, and they are putting workers’ rights, even their lives, at risk,” he said at a recent public appearance. But business groups say the new requirement would just be another burden on employers, without evidence it would increase compliance.
Business travelers are slowing getting back on the road, the Wall Street Journal reports. Many road warriors went missing from the nation’s airports and hotels last year, as the recession took its toll on corporate travel budgets. It’s good news for airlines like US Airways (LCC), which saw a 7.9 percent uptick in first-quarter revenue, thanks largely to business travelers. It will take time to recover the 12.2 percent drop in corporate travel spending, and most companies are maintaining cost-saving measures. But the paper points out the numbers are a good sign for the broader recovery.
Next Congress will begin hearings on proposals to strengthen federal auto regulators, the Times says. In addition to boosting enforcement powers, the Motor Vehicle Safety Act would require installation of several safety features, many discussed in recent Toyota (TM) hearings. The bill would also charge automakers a fee for certification costs.
Business – BP – Oil well – Oil spill – ExxonMobil