- The Washington Times - Tuesday, March 18, 2003

The red and black star of Texaco is about to be replaced by the clam logo of Shell at about 170 gas stations in the Washington area. Texaco credit-card holders have begun receiving new Shell cards, which work at both stations nationwide. The switch, set to start in several weeks, is a result of Chevron Corp.'s $39 billion purchase of Houston oil company Texaco Inc. in 2001 to become Chevron Texaco.
Chevron Texaco officials say they will bring back the Texaco star when the company regains the rights to the brand June 30, 2004. But some industry analysts question whether the brand will be strong enough to survive in an increasingly competitive industry.
The Federal Trade Commission required Chevron Texaco to sell all of its Texaco franchised gasoline stations that were shared through a venture with Shell Oil Co., owned by Royal Dutch/Shell Group, and a partnership with Saudi Refining Co.
Shell bought a large share of the Texaco stations and became a gasoline supplier to 22,000 stations. It now plans to supply only 15,000, spokesman Rick Wirth said.
Shell sold some of its stations and offered contracts to thousands of Texaco station owners to change their brand, Mr. Wirth said. The company has not determined how many Texaco stations nationwide it will change to Shell.
The $250 million convergence process includes store restructuring and transfer of Shell electronic systems.
Mr. Wirth would not say how many of the roughly 170 Texaco stations in the Washington area will be added to the 200 Shell stations, noting that Shell is still in contract talks with station owners.
Shell has changed hundreds of Texaco stations to Shell in Oklahoma City; Nashville, Tenn.; Seattle; and Portland, Ore.
Many independent station owners who sell Texaco gasoline face the tough choice of sticking with the Texas icon or choosing another brand to stay afloat, said Harry Storm, counsel for the Service Station Dealers of America and Allied Trades, a Lanham-based trade organization.
"The majority will likely opt for another brand to stay relevant in the market and because customer loyalty is based more on price than name," Mr. Storm said.
The station owners have the option of signing contracts with Chevron Texaco, but would not be able to sell Texaco-brand gasoline until 2004.
Chevron Texaco plans to remarket the brand at Chevron stations, primarily in the Southeast, and start offering supplier contracts to Texaco stations later this year, said spokeswoman Nicole Hodgson.
Ms. Hodgson said several Texaco station owners have sought renewal contracts with Chevron Texaco.
The company will regain exclusive rights to the Texaco name in 2006.
But Mr. Storm said the brand will be weakened in the gasoline industry, which has seen fewer brand names after mergers of large oil companies.
"Right now, Chevron Texaco and Shell are unclear on how they plan to deal with the change of stations when Chevron Texaco gets the Texaco name again," said Tom West, president of the National Association of Texaco and Shell Marketers, a Springfield-based trade organization.
Some analysts said it is too soon to determine the strength of the Texaco brand after the large shift to Shell.
"There are concerns about how the brand will hold, but people forget the loyalty and history associated with the Texaco star," said George Gaspar, managing director for petroleum research at Robert W. Baird & Co.
Texaco was started by Joseph "Buckskin Joe" Cullinan and Arnold Shclaet in 1901 in Beaumont, Texas. The company's customer base grew while it ran its prime-time vaudeville-style television show, hosted by Milton Berle, from 1948 to 1953.
With the Texaco stations, Shell controls about 14.3 percent of the U.S. gasoline market, according to a survey by the Lundberg Letter, a national industry publication.

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