Tapped Out

San Francisco slips one more notch as a global business player

It's not the widest crack in San Francisco's crumbling stature as a world financial and industrial hub. Only 250 or so people will lose their jobs. And according to a corporate spokesman, they'll be well taken care of.

But the recent announcement that Broken Hill Proprietary Company Limited will close its San Francisco headquarters by December certainly hearkens back to the days when mundane decisions made near Market Street created tremors around the globe. Australia-based BHP's San Francisco office was, until recently, global headquarters for the $22.6 billion company's copper and world mineral operations, which were worth about $5 billion.

As part of a worldwide mining retrenchment, BHP will also close a Zimbabwean platinum mine, cutting the amount by which economists predict that country's economy will grow this year by around half. BHP will decide by the end of this month whether to close or sell an Arizona copper mine that is the world's largest underground mine, potentially devastating the rural economy of that state while endangering 3,400 jobs. It may close another mine in Nevada. Mining interests in Chile may also go on the block.

"We're looking at options for the disposition of those assets," is the way BHP spokesman Jay Rhodes describes the moves.

Analysts, though, say the retreat is the result of a losing gamble BHP's executives made during 1996, when it seemed that, by fashioning itself into the Rupert Murdoch of copper mining, BHP could continue a Western Hemisphere expansion begun during the 1980s. While copper may be known as an Old World commodity to most (remember the Bronze Age?), the fact is that modern, wired-age houses have more copper strands wound through them yearly. Copper water pipes have also replaced iron ones, bringing the total amount of copper in a typical modern house to more than 400 pounds.

In December 1996, BHP paid $3.2 billion to buy the Southwest copper miner and smelter Magma, making BHP the world's second-largest copper producer, after the Chilean government. With the smelting capacity Magma offered, BHP thought it would be able to weather fluctuations in world ore markets.

But BHP paid way too much for its Arizona investments, analysts now say. In 1996, copper supplies began increasing faster than consumption, and the world copper market tanked months after the Magma purchase. BHP began bleeding cash. Problems were exacerbated by an old-fashioned, inefficient BHP management style, according to one analyst.

"BHP is an old-line natural resources company. It's slow moving, and decisions didn't filter up from the shop floor," says Victor Lazarovici, managing director of Nesbitt Burns Securities in New York. "The management change, when BHP took control over Magma, resulted in a situation where the efficiencies that were the hallmark of the Magma management regime did not stay in force."

Adds a self-described former BHP manager contributing to a mining-stock chat room: "The good old (Aussie) boy (white, male, private school chums) network is unsuitable for management of a global multi-industry company."

So, as tends to happen in cases such as these, BHP stockholders demanded a corporate shake-up. Last December, the company hired a new managing director and CEO in the person of Paul Anderson, who moved from the North Carolina conglomerate Duke Energy Corp. Anderson announced he would rid the company of assets unrelated to its core steel and petroleum businesses. Last month, BHP said it would close its San Francisco offices by December. What's left of the old S.F. operations will be shifted to a small office in Houston, the company says.

While the BHP move doesn't represent nearly the blow of something like, say, the sale of a Transamerica Corp., a BankAmerica, or a Wells Fargo & Co., the office's closure does point to the passing of the golden age of San Francisco's stature as a global commercial center.

BHP's San Francisco office was made up of the remains of the old S.F.-based coal and copper producer Utah Construction and Mining Co., which was bought out by GE in 1976. BHP bought the GE division in 1983. And by the end of the year, the old company will have disappeared.

 
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