Goodyear chipper after BHP Billiton

IT'S not hard to get a laugh out of Chip Goodyear these days. Even the prospect of a China crisis interrupting the stronger-for-longer minerals boom has the charmingly taciturn boss of BHP Billiton chuckling over the virtuous cycle that has embraced the Global Australian. Goodyear maintains that BHP is poised to play a role in the next phase of consolidation in the global resources sector. And, happily, its capacity to take advantage of that process would be increased should a shock suspend the boom. "It would be great," Goodyear enthuses surprisingly. "People would look at that and say, 'You gotta be kidding - lower prices are OK?' "But if you think about our business, the way we do things - that it is in decades, not in days - then it would be a wonderful opportunity. "A period when prices are higher than maybe they should be actually incentivises inefficient production and new companies to come in. "You get a (prices) hiccup along the way, then you will see an opportunity to pick up great resources at low prices." This is the new BHP Billiton. It is a world of opportunity where people talk in billions and quote operational mantras and behavioural charters, and where traditional managerial pieties have been abandoned in the race to first survive and then prosper in this remarkable new era in minerals and energy. BHP was just BHP when it made first contact with Chip Goodyear 1998. Back then it was a business suddenly on its financial knees, having burnt $12 billion in shareholders' funds and lost a chief executive and a chairman along the way. The company Goodyear leaves in three weeks - BHP Billiton - is easily the world's biggest resources house and has a management that operates more like Macquarie Bank than the battered and bleeding team driving Australia's heritage mining house a decade ago. That BHP has evolved into some sort of resources investment bank is a contention Goodyear accepts cheerfully. It was always the point. "That is a good observation," he says. "That is something that, when I came here, I saw that quite quickly, because BHP is different businesses around the world. "And coming from a bank, I am more comfortable with the idea that we have the charter, we have our guide to business practice and operation standards, we empower our people, we have our discussions about what is important and the financial objectives, and then we assess the impact of that over the half year and full year. "But we don't micro-manage. It is too big a place to micro-manage. If we actually tried to do that we would probably slow ourselves down. "Instead we use what we call the portfolio model. And I would expect that many of our investors would feel very comfortable with the way we talk about the portfolio, because it is what they are used to, it is how institutional managers manage their investments, on the basis of a risk-return trade off." The key to successfully managing that portfolio is an acute understanding of BHP's skill set and the requirements of the assets it manages. BHP's core skill is moving materials in very high volumes and at industry-low production costs. And those skills are best bought to bear on large, low-cost, long-life assets that cover a range of products, commodities and markets. When Goodyear talks about this stuff, it just rolls off the tongue. But delivering on the promise of BHP has been a long, disciplined haul. It is five years since Goodyear became the fourth BHP boss in just five years. Since then the Global Australian has achieved organic production growth of 9 per cent annually. Over that time it has increased capital investment from $US1 billion ($1.22 billion) at the time of the WMC acquisition in 2005 to $US7 billions in 2007. And for the foreseeable future, it plans to spend at least $US8 billion a year on capital projects. The BHP that Goodyear hands to new boss Marius Kloppers on October 1 has $US20 billion of projects under way or in the final stages of feasibility and a "options" pipeline of a further $US50 billion of projects. BHP is, quite simply, the most powerful company ever to emerge from Australia, outstripping even the masterful Rupert Murdoch's News Corporation in its capacity to generate cash and to attract and use capital. Which is an amazing turn of events, when you consider that Goodyear nearly never made it to BHP. He was approached to join the defeated Australian by a headhunter in August 1998. "I said, 'Well, I know the company, but you need a CEO before you get a CFO, so when you do, give me a call'." By November, a peripatetic citizen of Houston, Paul Anderson, had been appointed chief executive and suddenly Goodyear got interested. "I thought, 'Gee, isn't that interesting'," Goodyear recalls. "I had met Paul before but I didn't really know him. But we had a lot of mutual friends. "And then the headhunter called back, and I met with Paul in December." In January Goodyear headed to Melbourne from Manhattan. He spent a week talking to everyone including the new chairman Don Argus. But by the Friday morning he was still uncertain. He wandered into Anderson's office and said: 'Hey listen, now this is going to be really tough!" Left unstated, but made utterly clear, is that Goodyear really didn't want the job. "But then, that afternoon, I talked to Don again and I asked him why did he take the chairmanship role. "He said, 'Well, it is a great company, it has great people, it just needs a redirection on the key drivers to success. So you guys take care of the company and I'll take care of the board'. "I had been involved in oil and gas and minerals for a long time. And Paul hadn't spent much time in minerals. "But what was very clear is that the assets were great. If some of the things that had happened didn't sink the company, then it was going to be pretty difficult to sink this company." Goodyear doesn't enjoy the personality-profile side of business. But, with departure imminent, he is content to reflect on the wildly different personalities of the three men he reckons have shaped his approach to working life. He talks of his father Charles, an obsessively industrious Exxon marketeer who would rise early, go to work early and spend evenings at his desk until "falling asleep on a floor somewhere". He recalls too the now 105-year-old Al Gordon, who rescued Peabody Kidder after the 1929 Wall Street crash, and who only recently stopped heading into the office three times a week. It was Gordon who employed Goodyear at Peabody. "He is a guy who just loves what he does," Goodyear says. And then there is the Elvis impersonator who runs a Fortune 500 company and who built the world's loftiest and probably most controversial copper and gold mine, Grasberg. Table-thumping Texan Jim-Bob Moffett runs copper miner and former Rio Tinto associate Freeport McMoRan. He is a self-made billionaire who loves work and Elvis Presley. "He is a very passionate guy, he enjoys what he does, he loves the organisation. "That is the sort of person I would like to think about (as an influence): the people who find something they love to do and then go do it. "Jim-Bob is a lot of fun. "I would say it would be unusual to find your Fortune 500 CEO do his Elvis impression," he says, laughing hard. "I remember going on a boat trip - they were a client of the bank, that is how I came to work for them - and we had done a bond financing and we invited them on a boat trip around Manhattan. Now, we had a band and Jim-Bob got up and sang with the band. "Jim-Bob is there singing I Ain't Nothing But a Hound Dog, and I said to this friend I was with, 'You just can't buy a ticket to this show'." So where does Goodyear go now? Well, that is a tough one. Son Charlie has decided to go to boarding school in England while daughter Adelaide has opted for the international school in Beijing. The next generation of Goodyears, you see, are passionate about Mandarin studies. Which leaves Goodyear and wife Elizabeth facing a continuation of the nomadic executive lifestyle they have lived for the past four years. That said, Goodyear is contemplating his career options. There have been rumours of private equity and investment banking. But he would, he says, take on another chief executive job, as long as it provided the opportunity to drive the sort of intellectual and cultural change that has been delivered at BHP Billiton. "That is the fun bit," he concludes.