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PHILADELPHIA -- Sunoco Inc. will reduce its salaried workforce by approximately 750 positions -- or about 20 percent of the company’s salaried workforce -- in a move expected to save more than $300 million by this year’s end.
The action will involve all operations, including those at its Philadelphia and Marcus Hook refineries, according to a report by the Philadelphia Inquirer.
The company said it plans to offer buyouts to some hourly employees.
In addition to the workforce reduction, significant savings are also expected in energy costs and the use of materials, equipment and contractor services, the report stated.
Sunoco said it expects a pretax savings of $60 million to $70 million, or $35 million to $40 million after taxes, in the first quarter of 2009. Of this amount, $45 million to $50 million pertains to employee severance and related cash costs, which are expected to be paid out over roughly one year, with the rest attributable to a non-cash provision for pension and post-retirement curtailment losses.
Friday’s announcement -- labeled the first phase of a business improvement initiative --ended years of relative stability at Sunoco, which employs 4,900 in the Philadelphia region, including 700 at convenience stores, the Inquirer reported.
Sunoco had about 13,600 employees overall, including 1,200 at Sunoco Logistics, a spin-off that is still closely tied to the company.
"It is never easy to take steps that impact the lives of employees and their families," Lynn Elsenhans, Sunoco's chairman and chief executive officer, said in a statement. "While the company has enjoyed several years of strong financial performance, we are now facing a different -- and more difficult -- economic reality. Like many other companies across a variety of industries, Sunoco is taking steps to remain competitive."
From the mid 1980s to mid 1990s, Sunoco went through several restructurings as it transformed itself from a 1960s-style industrial conglomerate centered on a large oil producer and refiner, into a firm dependent on refining for most of its profits.
Like other oil refiners, Sunoco flourished from 2003 through 2006. Profits soared, propelled by strong demand for gasoline, diesel and other fuels coupled with little excess capacity at the nation's oil refineries, according to the Inquirer report.
After losing $47 million in 2002, Sunoco saw its value shoot to a peak of nearly $1 billion in 2005 and 2006. Its stock price rocketed from less the $20 per share in early 2003 to its peak of $96.21 three years later. Since then, annual profits fell for two straight years and the stock price bounced between $20 and $50 per share.
Elsenhans, who succeeded John G. Drosdick in August, said in December the company was instituting a cost-cutting push that was "not in response to the downturn," but rather an effort to get the company's costs out of the average range into the top quartile.
"This is not cut and cope," Elsenhans said, citing the potential for savings in corporate overhead and in the operation and maintenance of refineries and chemical plants.