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	PRESS COPY OF OPENING REMARKS CLEVELAND MERCER DEBATE MAY 3, 1988 10 MINUTES

I appreciate the opportunity to discuss the effects of corporate restructuring. The subject cries for public debate. I appreciate Mr. Mercer coming out.

There are two schools of thought surrounding public corporations. . .I’m from the free market side. I started Mesa in 1956 with $2,500 and have built it into the largest independent producer of domestic oil and gas in the United States.

When I took Mesa public in 1964, it was clear to me that I had one mission. . .to create value for my new partners, the shareholders. That’s the only reason they bought Mesa stock.

Mesa has grown from that $2,500 start into a $2 billion company. We went from having 421 stockholders to 150,000. But my mission remains the same. . .maximize returns for shareholders.

My mission hasn’t changed, but the means of accomplishing it has changed dramatically. Mesa has continuously restructured its operations. We underwent major restructurings in ’70, ’73, ’79, ’82 and ’85. Nobody had to pressure us to restructure. We simply changed with the times. It was tough. We downsized, and we had to cut employees. But the result is a strong company in a weak industry.

All these changes were made with owners’ interests in mind. As the Free Market school has proven time and again, the system collapses if you put anyone’s interests before owners’.

Making money for owners is consistent with responsibilities to employees, communities, customers and suppliers. To succeed, your employees must be challenged and properly rewarded, customers must get the best product for the best price. Then communities and suppliers thrive on the company’s success.

The other school says business is more complex than that. They believe public companies exist to serve society instead of to focus on profits for their owners. As Goodyear’s Mr. Mercer told the L.A. Times on December 18, 1987: “Our No. 1 constituency is not the shareholder — it’s the customer. You handle the customer first, then comes the shareholder. But equally with the shareholder comes our employees and the communities where we operate and the suppliers — the whole litany of interests.”

This is the exact business philosophy that led to most of Europe’s economic downfall. And it’s been leading American business into decline.

Today’s corporate restructuring reflects a return to the basic principles of capitalism, reverting back to the blueprint laid out by Adam Smith, with the new focus on creating value for owners, not empires for management.

Corporate America is now well into the process of change. Some saw it coming and helped bring it about. Others were nimble enough to adjust or were fortunate enough to have it forced on them. . .like Goodyear. Another group, the iron-headed crowd, is being run over by change.

The data has been analyzed, the results are in and the restructuring philosophy has been almost universally adopted. . .it’s even moving through Europe. But just like every period of change, there’s a group that has to be dragged kicking and screaming into it. They’re oblivious to the transformation going on around them.

They move only when they’re pushed out of the freight train’s path, then they gripe because someone pushed them. If you look at Goodyear’s performance since Jimmy Goldsmith forced its restructuring, only a fool could claim it wasn’t the right move.

Yet Mr. Mercer blindly claims Goodyear’s results would have been better if left alone. Look at the facts. Before Goldsmith came along, Goodyear’s stock price dropped 13.5% over a 4-year period when the Dow went up 80%. Since Goldsmith, the stock price is up 100%, while the Dow is up only 7%. This is after the October 19 market crash! And Goodyear just announced its best first quarter results ever.

Congratulations, Mr. Mercer. But why are you so defensive about your success? Mr. Mercer told Investor’s Daily in December 1987 that the new Goodyear is not as good as the old. He said, “I don’t see the Goodyear of today as a plus. What’s the upside? People have said our restructuring is just what Goldsmith would have done. But that’s not the case. We cut off an arm and a leg. He would have cut off both arms and both legs.”

Goodyear didn’t cut off an arm and a leg, it cut off 150 pounds of fat!

The fact is, Goodyear did almost exactly what Goldsmith said he would have done. . .and the restructuring has been a tremendous success.

Has Mercer learned anything from it? Apparently not. He wrote in Goodyear’s February 1987 employee publication that as soon as he gets Goodyear’s debt paid off, he’s going to diversify again.

It seems he may be trying to fulfill his own prophecy. He said in a speech in January 1987 (Reported by Reuters 1-17-87) that he expected Goodyear stock to reach $50 in the following 18 months. That means he has until June to get the price back down $14 points.

I’d like to point out that I use Goodyear only as an example. The problems it’s had and the success it witnessed from its restructuring are not different from what’s happened in the rest of Corporate America. The companies whose managements continue to resist change are simply going to perish. And their loss will be a blow to the shareholders and the entire American economy.

Thank you.