Business: Gulf Oil's Painful Surgery

Rumors have been swirling for months through business circles from Wall Street to Houston: Gulf Oil Corp., the nation's eighth largest industrial concern (sales last year: $17.8 billion), is in trouble. Though there is no question about the company's survival, it is in the midst of a painful struggle to overcome years of bad luck and fumbling management.

Squeezed for cash because of overinvestment and declining earnings, Gulfs chiefs have been wielding a heavy ax to cut costs, jettison losing properties and clear a path out of past mistakes. The company's fleet of planes has been reduced from six to three, and the executive dining room has been closed. More important than these symbolic moves, this year's capital budget, originally set for $2.5 billion, is being cut drastically. At headquarters in Pittsburgh, and in branch offices from Houston to Tokyo, cutbacks in staff are reaching into the hundreds. Public affairs has been pruned severely; its chief, Senior Vice President Jayne Baker Spain, a former vice chairman of the U.S. Civil Service Commission, is the highest Gulf officer to go so far; at least two more vice presidents also are out. The Gulf Transportation and Trading Co., which directs the firm's fleet of 76 tankers, has also been caught in a shower of pink slips. Says Gulf Chairman Jerry McAfee: "I will be surprised if we don't find more than 1,000 employees who are not essential."

To take some of the sting out of the firings, Gulf has hired a Manhattan firm, Thine., which specializes in helping axed employees find jobs. Still, morale among many of the remaining 59,000 employees is scraping bottom, and quite a few are nervously looking for other jobs.

Gulfs crunch came in 1975. Kuwait, where Gulf had poured the bulk of its foreign investment money, took over the company's share of Kuwait Oil Co., with its wells, refineries and other facilities, cutting off Gulfs biggest and most profitable source of crude. Venezuela also took over Gulfs holdings. General Atomic, a joint Gulf-Royal Dutch/Shell venture, pulled out of the production of high-temperature nuclear gas reactors after heavy losses. Meantime, Gulf had missed out on most of the big U.S.oil strikes—the Rocky Mountains, west Texas, east Texas and Alaska.

Bob R. Dorsey, McAfee's suave and articulate predecessor, responded to the end of the era of cheap oil with an ill-conceived diversification program. Gulf bought heavily into real estate, including the "new town" of Reston, Va., and a chain of recreational vehicle parks, Venture Out in America Inc. About $100 million was invested in high-technology companies, with dreary results; none came up with anything promising. When in 1974-75 reports came out that Gulf had made huge illegal payments to U.S. and foreign politicians, Dorsey was forced to resign, and McAfee, a big, bluff, humorous technician, was brought in from the company's Canadian subsidiary.