- Demoted managers fret job loss as company focuses on cost cuts
- Brazilian state oil producer seeks to save $440 million a year
Inside the new Petrobras -- less ambitious, more focused on cutting costs -- life for many remaining employees has slowed. Alarmingly so in some cases.
Take the engineer who was recently stripped of his title as a manager and forced to take a 40 percent pay cut. He’s spending much of his time nowadays reading newspapers in a semi-deserted office space. With two kids and a big mortgage, he’s hoping the Brazilian state-run oil giant will offer a new dismissal package.
Another manager frets about her future at the company. Her pay was cut too -- by almost half -- and all of the projects she was working on were scrapped. She passes the time browsing Facebook and other websites.
The two workers, who asked not to be named because they feared for their jobs, are among several interviewed who described similar situations. While the descriptions probably don’t apply to the majority of workers, the cutbacks are clearly spurring a sense of angst among those targeted. Two years ago, Petroleo Brasileiro SA had an aggressive five-year growth plan that carried a $237-billion price tag, and work for everyone. This month, it cut that figure by more than half, and Thursday said it would combine units and cut the number of managers, allowing them to be paid less. The goal: 1.8 billion reais ($440 million) a year in savings.
As the price of crude hovers at its lowest level in a dozen years, few believe the cost cutting -- which began in 2015 -- will end any time soon. That’s opening new questions about the culture of Brazil’s biggest company, and its effect on an economy that relies on the state-run producer for roughly 10 percent of investment.
“The impact of investment cuts by Petrobras is huge for Brazil’s economy and the job market in general,” said Jose Francisco Goncalves, the chief economist at Banco Fator SA, in a telephone interview. “Its suppliers spread from manufacturing to services, from construction to catering.”
The combination of collapsing crude prices, the largest debt load in the industry and a pay-to-play scandal that has seen some of Petrobras’s former executives go to jail and suppliers go bankrupt, has made the Rio de Janeiro-based producer the worst performing major oil stock in the past year, with a 49 percent plunge. Shares were up 2.4 percent at 4.71 reais as of 12 p.m. New York time Friday.
At the same time, managers facing uncertain times are growing increasingly concerned as they face a changing employment landscape. Some offices, once bustling, have been stripped down, and rumors race through the hallways as to which unit may find itself on the sale block, the former managers say.
The woman who wants to salvage her career said that nine coordinators in her area alone have been demoted as the projects they worked on were ended.
Petrobras now has about 80,000 workers, or almost four times the number at Norway’s Statoil ASA, which produces just 30 percent less oil and gas, according to data compiled by Bloomberg. The company also employed 128,000 contractors as late as June 2015, according to the latest data available. In 2015, in its first round of cost-cutting, the Rio de Janeiro-based company fired more than 6,000 employees and 60,000 contractors, and demoted hundreds of managers.
On Thursday, it said it would reduce its 5,300 management posts in non-operational areas by about 30 percent and combine the refining and natural gas units. The changes will be presented to shareholders for approval, and the first phase of dismissals should be completed in about a month, the company said.
“It’s a scenario of total stress,” Chief Executive Officer Aldemir Bendine told reporters after the announcement. “The company has to adapt.”
Chief Financial Officer Ivan Monteiro said earlier this month that more layoffs would be needed. Petrobras’s job reductions are happening in all areas of the company due to the investment cuts, the company said in an e-mailed response to questions.
Bendine said the company is pursuing asset sales at “full speed” to raise cash for investments.
Petrobras is preparing for oil prices as low as $20 a barrel and its main deep-water projects are still very competitive despite the price plunge, Bendine said. Projects in the so-called pre-salt region that holds Brazil’s largest crude discoveries will remain a priority under the new business model, he said.
“We’ve worked with lower Brent prices in the past,” Bendine said. “It’s not the end of the world.”