A Calculated Contraction

A leaner and refocused Valero Energy has shed its retail operation to concentrate on growth and the refinement of more western crude oil

Ross R. Bayus
Ross R. Bayus

Last year, Valero Energy Inc. had 3,500 employees in Canada. Today, 750 remain. The dramatic reduction is due to Valero’s recently completed spin-off of its retail assets—a vast multibillion-dollar transaction that discharged 1,800 store locations in the United States and Canada. Canadian president Ross R. Bayus managed the transition here, and he sees it as a bold move that will allow Valero to focus solely on its lucrative refining and wholesale operations.

As part of Valero Energy Corporation (which comes in ninth on the Fortune 500 list), Valero Energy Inc. contributes to an output of 3 million barrels of oil per day and $140 billion per year in profits. In 2001, the Canadian arm of the subsidiary was part of a bigger purchase by Valero, and after that, the company invested $3 billion in the Canadian arm’s refinery at Lévis (near Québec City) and in retail and logistics operations. The investments paid off, and the retail assets actually increased in value. “We realized that our retail assets had a huge value that we could unlock for our shareholders by putting the assets in the marketplace,” Bayus says.

That’s just what the company did, but the sale proved a challenge to manage because Valero Energy Inc.’s employees faced uncertain futures. The spin-off forced Bayus to divide and restructure the administrative, accounting, finance, HR, and IT teams, but approaching it all with honesty, transparency, and communication helped him through. “It was quite the test to hold everything together, but we focused on really talking to people in groups and individually,” he says. “We wanted to keep people informed so they could be comfortable and concentrate on their jobs. Our employees were solid.”

How I Advanced My Career

“I went through different jobs, and I took on the challenges that were given to me. Some of those challenges included packing up my family and moving, which we did a few times. Being open to doing different things gave me the coverage I need to deal with a wide group of employees today. I deal with executives, professionals, labour unions, truck drivers, etc. You learn where people are and what it takes to motivate them. Doing different jobs through a career gives you great judgment in the decision-making process.”

Ross R. Bayus, President

The company’s assets might amount to no more than numbers and lists on paper, so Bayus was glad to focus on his employees as individuals during the difficult period. “We realize these are real people with families that count on them,” he says. “Things change, and this was a big one, but it provided some exciting opportunities.” The way Bayus sees it, the employees who went to the new company have a future full of potential, and those who remained are part of a strong company with great growth aspirations.

Senior executives took an additional step to help employees navigate the change by formally adopting a new name. Although the subsidiary had been part of Valero since 2001, it had operated as Ultramar Ltd. With the spin-off complete, though, management took on the Valero name—with more than a little recognition from the remaining staff. “We celebrated the new Valero image and name with events at each location across the country,” says Bayus, adding that the move helped everyone put Ultramar aside and press forward with Valero. Accepting the international brand name of a major company was a logical and important step, and the employees are proud of Valero’s success.

Based in Montréal, Valero Energy Inc. is now a top distributor of petroleum products in Eastern Canada. The company is working to handle all its assets in smart ways by integrating international operations where possible. Valero operates one refinery in Canada, one in Europe, and 16 overall, so sharing resources, information, technology, and employees is crucial to achieving efficiency and international leverage. The corporation trades in Canada, Europe, Asia, the United States, and South America, with once-scattered trading teams now united in San Antonio, Texas, and its integrated approach helps it maintain a consistent presence in the marketplace. “Leaders have to be willing to give up full control of something small to the common good of the bigger business,” Bayus says.

Moving forward, Valero Energy Inc. is poised to expand deeper into Eastern Canada, including Ontario. As other companies close refineries, Bayus and his teams continue to invest in theirs. And with the success of the spin-off, Valero can carry out its future plans unencumbered.