Just a few years ago, Quaker State Corp. saw itself on a slippery slope.
The motor oil company had surrendered its lead in the industry, dividends were more than the company could afford and U.S. drivers were changing their oil less frequently.
So Quaker State decided it needed its own oil business change.
With a new chief executive, new headquarters and new products, the company is now heating up the industry.
The company halted the downward spiral from the No. 1 spot in the country in 1986 to No. 3 in 1993 when the board brought in Herbert Baum from outside the ranks of Quaker State.
The former Campbell Soup Co. executive brought with him a mandate for change to fight an array of formidable competitors including the No. 1 motor oil company, Pennzoil, which runs Jiffy Lube, Ashland, which operates Valvoline Instant Oil Change Centers, Texaco and Castrol.
“Probably 30 days after I arrived, it occurred to me that Quaker State was making $600 million sales and making 1 percent after tax,” Baum said. “If I had known how bad it was, I would have stayed at Campbell Soup.”
Baum replaced his management team with people familiar with branded products; he reduced staff at corporate headquarters by 6 percent and at the lubricant division, now named Q Lube, by 25 percent. He fired the firm’s advertising agency and he cut dividends in half.
“Some of the people buying for dividends were angry, but Wall Street has been very kind,” Baum said.
Then Baum made a move that garnered him bad press in the company’s hometown. He decided in 1995 to move Quaker State from Oil City, Pa., to the Dallas area. The company, founded in the Quaker State in 1913 as a small marketing company selling crude oil, had simply outgrown the rural community.
Now comfortably settled, Baum can narrow his focus to the company’s holdings.
At first there were divestitures. Heritage Insurance Group was sold for $86 million to General Electric and the company’s exploration and production facilities went for $56 million to Belden & Blake Corp. Also sold was Quaker State’s petroleum refinery in West Virginia, a site that had experienced some environmental problems, to Ergon West Virginia Inc.
New products have also been a priority. Quaker State introduced 4x4 motor oil specifically for drivers of sport utility vehicles and light trucks.
Analysts estimate that 4x4 motor oil contributes between 10 percent and 20 percent of sales at many Q Lube centers.
Then there were the acquisitions. Quaker State bought Specialty Oil in 1994, doubling the size of its lubricants business. And in 1996, Quaker State bought Slick 50, a Houston maker of automotive engine treatments; Cleveland-based Blue Coral, which makes car wax and cleaners; and Medo, of Tarrytown, N.Y., which makes air fresheners for cars.
“What we’ve done is gain the reputation as being the consolidator in the business,” Baum said.
Baum said other acquisitions are in the company’s future, preferably consumer products. He also plans to grow the Q Lube segment of oil change stores from 400 company-owned sites and 100 franchises.
“We’re hoping to move to 1,000 by 1999,” Baum said.
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