Exxon Valdez Case Summary, fall 2011, by Kurt Beyers

At the beginning of 1989, ExxonMobil Corp. reported total revenue for 1988 of more than $477.3 billion and a net profit of more than $45.2 billion. It is, in 2011, the largest U.S. oil company. In 2008, it was the most profitable corporation in the world, according to a New York Times profile. It was replaced in 2009 by PetroChina as the world’s largest publicly traded company, but it is still one of the largest, richest and most profitable companies ever.
It was also one of the largest, richest corporations on the planet in 1989, when one of its tankers, the Exxon Valdez, ran aground in Prince William Sound in Alaska and spilled at least 11 millions gallons of oil into the waterway, devastating wildlife and the sound’s fishing industry.
The problem for ExxonMobil, of course, was that they were looking at having to pay out a lot of money. There would undoubtedly be damages to the local economy, and they also faced costs for cleaning up Prince William Sound. Public opinion is another cost they faced. Even in pre-Internet days, the company faced a potential public backlash if they appeared carless, callous or unprepared.
The company’s strength was based in the fact that it was an economic powerhouse, and its economic strength was, and is, based primarily in a commodity essential to all areas of American life: oil. It figures into the economy and culture in almost every way. It not only powers the nation’s cars, trucks, trains and planes, but is a key component of many of the materials that go into the manufacture of those means of conveyance but in the most mundane everyday articles – plastics, adhesives, chemicals for processing almost every item of everyday life.
ExxonMobil was almost certainly never facing utter destruction as a result of the oil spill, but it was looking at financial damage and bad public opinion. They may have had an opportunity to come out of it looking like a good, responsible corporate citizen doing the best they could in the face of a tragic accident, but that opportunity was gone by Friday night. The textbook says the Valdez grounded just after midnight Friday, March 24, but according to the Coast Guard timeline published on the Thinkquest website, the call from the Valdez came into the Coast Guard at 0030 hours on Friday, March 24. By Friday night, any opportunity for Exxon was gone. After that, all that was left was damage control.
The damage control continues today. The textbook cites the successful PR efforts to prevent damage to Alaska’s tourist industry; the cleanup of land and water; wildlife rescue efforts; damages paid to fishermen and people in other industries on the sound. But one beach on Knight Island, for example, is still called the Death Marsh because a shovel stuck in the sand there will still reveal crude oil just beneath the surface. Other beaches are the same. This according to a 20th anniversary story in Time. Exxon Valdez, 20-plus years later, is obviously still in crisis stage 4, and will be for some time to come.
As of Feb. 28 this year, according to the Alaska Dispatch, Exxon had paid $2.3 billion in immediate cleanup costs, $300 million in damages and, in 1991, another $1 billion for more environmental remediation and other costs. A University of Alaska professor went to court this spring to try to force Exxon to pay another $100 million, but has so far been unsuccessful. These figures do not count legal costs, which were no doubt extensive.
In the court of public opinion, some people still have a negative view of ExxonMobil, but probably no more than any other big oil company. Customers, apparently, did not stay away in droves. Exxon is, as previously mentioned, the No. 1 oil company in the United States.
Exxon, from the available accounts, did not really take the crisis seriously at first. For one thing, they didn’t seem to have regarded a massive spill as very likely, or else they couldn’t imagine a monster spill. And although a few people in the lower executive ranks recognized the threat immediately and took what steps they could to mitigate the damage, those people were primarily in the communications arena. Equipment, materiel and manpower to deal with the actual oil spill itself were severely lacking. The attitude of the CEO, Mr. Rawl, wasn’t mere incompetence, or stupidity or even ignorance, I think. It simply did not register with him until very late that that this was a real problem instead of a minor inconvenience.
Despite all this, ExxonMobil escaped with something close to the minimum cost they could have hoped for. In terms of cash payouts, the $3.6 billion tabulated by the Alaska Dispatch amounts to less than 10 percent of its 1988 profits. With legal costs added, direct costs might amount to something a little more than 10 percent of 1988 profits. That’s a sting, not a wound. It seems to me that, without the diligence and professionalism of the communications personnel, most notably Don Cornet and George Mason, the company would have ended up paying a lot more. Those two likely kept public opinion from going a lot more negative, to more people, than it did. If it had, I think Exxon would have fared even worse in the courts, and could even have suffered significantly from boycotts and other consumer action.

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4 Responses to Exxon Valdez Case Summary, fall 2011, by Kurt Beyers

  1. dijiang313 says:

    “The textbook cites the successful PR efforts to prevent damage to Alaska’s tourist industry; the cleanup of land and water; wildlife rescue efforts; damages paid to fishermen and people in other industries on the sound.” I think crisis communication is the dialog between the company and its public during the whole crisis period, and the essential role of news media is to change and affect public opinion. Also the competitive enterprise used this crisis to built their own enterprise image on the aspects of risk prevention and environmental protection

  2. krmorel2 says:

    “It seems to me that, without the diligence and professionalism of the communications personnel, most notably Don Cornet and George Mason, the company would have ended up paying a lot more.” I completely agree – George Mason played such a crucial role in the Exxon crisis. If he hadn’t been involved, the media would have slaughtered the Exxon company.

  3. lilly1989 says:

    “The company’s strength was based in the fact that it was an economic powerhouse, and its economic strength was, and is, based primarily in a commodity essential to all areas of American life: oil.”–This one I also write in my paper. I just feel that the company become to better than before, but it begins to pay less to restore the damages they took. This one lets me feel that they do not completely and sincerely apology for the society.

  4. trrichmeier says:

    “The company’s strength was based in the fact that it was an economic powerhouse, and its economic strength was, and is, based primarily in a commodity essential to all areas of American life: oil.” I do not believe Exxon handled this crisis very well and I only think they survived because oil is something everyone in the world relies on, and is something no one is willing to give up. I think this need for oil has been show cased especially over the past few years as oil and gas prices continue to climb but you don’t see the masses, especially in Kansas giving up their vehicles or switching to public transportation.

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