From Spindletop to Saudi Arabia

In the 1950s, at the peak of its financial might, Texaco was the most profitable oil company in the U.S. and one of the best known. Millions of Americans watched the Texaco Star Theater television show, featuring Milton Berle, and a decade later any child could sing the jingle "You can trust your car to the man who wears the star." With exploration, refining and retail operations from Abilene to Aberdeen, the company has generated huge wealth and no small amount of controversy in its 86-year history.

Texaco grew from one great gusher. In 1901 Joseph Cullinan, a former Standard Oil employee, found black gold on Spindletop Hill, near Beaumont, Texas. The next year he formed the Texas Co., and by 1928 it was operating in all 48 states. Texaco ventured overseas in 1936, when it teamed up with Standard Oil of California to market Middle Eastern oil. It also bought an interest in California Arabian Standard Oil, which held a major concession in Saudi Arabia. That company later became Aramco, a consortium that joined Saudi Arabia and American producers.

In 1940 Texaco's reputation was tarnished when its chairman was forced to resign after a company representative in Germany was found to be a Nazi spy who had obtained a valuable report on the U.S. aircraft industry prepared by Texaco economists. That same year Texaco sponsored a German lawyer who, while on a purported business mission to the U.S., was actually cultivating goodwill toward the Nazis.

Over the next two decades Texaco steadily developed its vast petroleum reserves and sold more gasoline than any of its rivals. But the world changed for the company when the Organization of Petroleum Exporting Countries jacked up the price of oil in the 1970s. In 1979 Texaco and other U.S. producers were accused of overcharging for their crude. Throughout the decade, many of Texaco's vast but maturing oil reserves began to dwindle. At the same time, consumption of gasoline leveled off and Texaco's network of filling stations became something of a burden. Many were eventually folded. As a result, Texaco's industry lead faded. By 1977 it had dropped to its current No. 3 spot, behind Exxon and Mobil. In recent years Texaco has struggled to boost profits in the face of depressed energy prices.

Texaco is today seen as arrogant in its dealings with competitors, suppliers and its own station operators, some of whom have secretly enjoyed its discomfort in the Pennzoil crisis. The company's chairmen have been known for making their own decisions. James Kinnear, who has been chief executive for less than four months, may adopt a more democratic management style. But Texaco could have already paid a steep price for its autocratic tradition. It was one man -- John McKinley, Kinnear's predecessor -- who decided in 1984 to buy Getty Oil. At best, he had a good idea that was poorly executed. In any case his decision set in motion the chain of events that would drive Texaco to bankruptcy court.