Insofar as yesterday's meeting between BP and President Barack Obama was a negotiation, there's no question who came out on top: as well as issuing another public apology (so that's what chairman Svanberg looks like), BP has decided to cancel all dividends for this year - including the one already announced, which was due to be paid out next week - and promised to put a whopping $20bn (£13.5bn) into a compensation pot to speed up payouts those affected by the Gulf spill. But with BP chief Tony Hayward due appear before a Congressional committee this afternoon, who'll be baying for his blood, the full sackcloth and ashes routine is about BP's only option…
With the President under pressure to be tougher on BP, he's managed to drive a very hard bargain. Despite its previous protestations that it has deep enough pockets to cover fallout costs and dividends, BP has decided discretion is the better part of valour and has suspended the dividend it had been recently considering. Not only that, it's also cancelled the first quarter divi that it had already announced, and it won't pay out any more for the rest of the year. That will leave pension funds and other investors some $5bn poorer.
It's also pledged to put $20bn into an independently-run compensation pot over the next three years (including $5bn this year). That's a big concession, since as far as we can see this number has been rather randomly plucked out of the air, and the chances of it getting any of it back once it's gone must surely be slim. We can't see the US-appointed administrator giving half of it back, put it that way.
So all in all Hayward is likely to cut a pretty desperate figure when he appears at Congress later today. According to a pre-released statement from BP revealing snippets of the CEO’s prepared speech, he will tell the committee that he is ‘personally devastated’ by the spill.
But it won’t be an entirely tail-between-the-legs routine for the BP boss. He will also use this speech to try to deflect some of the blame for the spill by explaining that ‘this is a complex accident, caused by an unprecedented combination of failures’. And he may have a point, but it’s a risky strategy nonetheless.
Regardless of the speech Hayward trots out today, BP is likely to continue to incur the wrath of the US president (and shareholders are unlikely to be happy either if the share price continues to plummet). BP’s bargaining position is so weak that it doesn’t have much choice but to roll over, beg forgiveness and hope for some sympathy…
In today's bulletin:
Osborne takes a chance with FSA regulatory shake-up
BP cancels divi and pledges $20bn ahead of Hayward's US grilling
Boardroom bonuses bounce back
Ethnic minorities still shut out of top professions?
Taking a hard line with latter-day Robin Hoods