Can BP Save Its Brand?

Philip M. Stone June 23, 2010 Follow on Twitter

Believe it or not BP still has supporters. It’s a tier 1 (biggest) sponsor for the London 2012 Summer Olympic Games and that’s worth some £40 million ($60 million) to the organizers which is why their chairman has publicly stated again that BP is a “trusted partner”. The big question, of course, is what will remain of BP by the time of those Games.

As the environmental horrors in the Gulf of Mexico continue a CNBC Europe interview some years back with Sir Stelios Haji-Ioannou, the founder of the very successful Easy Jet low-cost European airline constantly comes to mind. He was asked how a low-cost airline could afford safety costs and his simple reply, “If you think safety is expensive, try an accident.” And that is a business lesson that BP, if it didn’t already know it before its oil rig blew up, certainly knows now.

Lord Coe, the chairman of the London 2012 committee, does need to be careful with his sound bites. Speaking at a 2012 cultural event last weekend he said the oil spill “does not make a difference to us”.  Now someone reading that raw might think that he doesn’t care what’s going on when he most likely does, but rather what he was trying to say was that the huge oil spill 3,000 miles (5,000 kms) away would not affect the organizers’ BP business relationship. The unsaid words were, “We can’t afford to”. But will the London 2012 brand be tarred by the BP connection?

What’s perhaps scary is how the brand of a company as large and famous as BP can be decimated so quickly. Try as BP and the government are in preventing the media getting the full story out at sea, the live ocean-floor pictures of oil gushing out into the Gulf are enough to tell everyone here is an environmental catastrophe, and when people see the symbol (logo) of that responsible company on street corners across the nation then John and Jane Doe seem to feel that the least they can do is take their business elsewhere. Thus it is said that the BP brand itself has lost at least $1 billion in value – more than $30 million a day – since the spill began, according to General Sentiment, a sentiment analysis company.

BP has already spent more than $50 million on US TV ads (so someone is benefitting) trying to salvage its reputation but sometimes you just can’t win – instead of people listening to the message they instead ask why the company is spending that kind of money on PR instead of devoting it to the clean-up.

The images of CEO Tony Hayward grilled in front of Congress for a whole day were riveting. Sometimes his cheeks became so red you thought he might explode, but he kept his cool, he kept to the storyline that his lawyers had obviously insisted upon. His questioners became more and more frustrated as they realized no matter how the questions were phrased they weren’t going to get the answers they wanted and the TV audience was left in little doubt they were watching a classic example of stonewalling. So all the Congressional Hearing chairman could really do was to let each questioner just lambast the CEO – maybe it would help in the November elections. Hayward probably did good legally, but it didn’t help the brand.

And then there was his quick weekend home to go yachting with his son for Father’s Day. Government officials seemed to be more upset with that than people along the Gulf Coast that the BBC and Sky News interviewed who basically said they understood the guy needed a day off with his kid but all the same he was needed back in the US. Government officials went on TV to lambast Hayward for his yachting, but they didn’t really want to talk about President Obama out on the golf course!

And there were mixed messages coming from the BP hierarchy. The BP chairman said in British TV interviews that Hayward would be handing over day-to-day handling of the crisis to his American-based team and then the company reversed itself and said Hayward would stay in control. If they couldn’t get that right then that posed the question of what else they couldn’t get right.

All of this being the PR nightmare in crisis management that will serve University PR courses for years to come. No doubt BP, that says it has the brightest engineering minds in the US trying to figure out how to stop the leak, also has taken on the brightest PR minds in the US on how to fix its image once the well has been blocked. It already has hired Anne Womack-Koltan who used to serve in the Bush Administration as public affairs head for the Department of Energy and who was at one time a press spokesperson for Vice President Dick Cheney.

BP says she will only be handling media matters and will not have any responsibilities for Capitol Hill relationships – there are actually still relationships there? She’s going to have her hands full trying to convince the American media, thus the American people, that BP is not a villain. Polls say that more than 70% of Americans disapprove of the way BP is handling the oil spill and a USA Today/Gallup poll last week found also that more than 70% of Americans believe President Obama is not being hard enough on BP.  Ms. Womack-Koltan who, no doubt, accepted a huge pay packet for this job is going to have to be worth every penny!

Not that BP doesn’t have experience in the US recovering the brand from calamity. In human terms it suffered an even worse disaster five years ago from a fire at itsTexas City refinery where 15 died and more than 170 were injured. BP conducted a swift internal investigation (that’s what Hayward told Congress that BP is now doing on the Gulf leak and he doesn’t want to comment on anything until he has that report.) For Texas City, BP published the report on its web site with a news release headlined, “BP Products North America Accepts Responsibility for Texas City Explosion”

The report said its people were responsible, it explained what happened, and how it happened, it did not try and lay the blame on others, and it quickly began the compensation process. It said it had started disciplinary procedures and it appointed a new site manager whose main concentration was operational safety. 

BP also bought advertising to explain the steps it was taking to ensure such an accident would not reoccur, with many of those reforms being expensive to implement. None of that stopped media criticism but it did do away with much of the sting.

With the Gulf leak BP has said from the beginning it accepts financial responsibility but residents and the government say the claims process is far too onerous, complex and slow. Now that BP has agreed to the $20 billion compensation fund if it really wants to quickly work on saving the brand then it needs to start spreading the cash quickly so that the complaining starts to go away. No doubt, however, the lawyers will want to check every penny going out.

People have short memories (how many remember the 1990 Perrier fiasco that resulted in 160 million bottles recalled and destroyed; how many remember Michelin’s fiasco when in 2006 its tires supplied to 14 of the world’s premier Formula 1 racing teams could not be guaranteed for their race at America’s premier raceway, the Indianapolis 500 Motor Speedway, and there’s even Toyota this year). If enough money is thrown at fixing a problem then salvaging reputations is possible.

Exxon survived the Exxon Valdez 1989 Alaska oil spill but the Gulf fiasco is in a league of its own. The BP share price is now about half of what it was meaning that global pension funds, meaning retirees around the world, are also feeling the financial pain. Dividends have been stopped for at least this year hurting more people who relied on that income for daily living costs; and the company’s credit ratings have been downgraded to near junk. If all of that can happen to the BP brand then all others are susceptible.

It all brings to mind what Warren Buffet told the employees at Salomon Brothers when he became chairman in 1991, “You lose dollars for the company I will be understanding. If you lose reputation for the firm, I will be ruthless”.