20% of salaried Sunoco workers to lose jobs

Sunoco Inc. announced today that it will eliminate 20 percent of its salaried workforce as part of a broad effort to remain competitive during a downturn in its oil refining and chemical manufacturing businesses.

Most of the 750 job losses will occur in the Philadelphia region, where the company has its headquarters and three refineries, Sunoco's chairman and chief executive officer, Lynn Elsenhans, said in an interview this morning.

"We are in a down part of the cycle in refining that would have occurred even without the economic downturn," Elsenhans said. "The economic downturn has just made the situation more dire."

Layoffs are difficult because of the impact they have on employees and their families, Elsenhans said, but the goal is to ensure the long-term health of the company by making it lean enough to at least break even in the worst of times for refiners.

In addition to the reduction in salaried workforce, Sunoco is also searching for ways to reduce what it spends on supplies, utilities and services. Altogether, Sunoco said, it expected to reduce costs this year by $300 million on an annualized basis.

The company said it expected to set aside $60 million to $70 million, before taxes, in the first quarter to pay for the layoffs, some of which were voluntary.

Separately, Sunoco plans to offer buyouts to hourly refinery workers, Elsenhans said. She declined to speculate on how many could leave the company by that route.

Hourly workers at Sunoco's Marcus Hook refinery who are represented by the United Steelworkers Local 10-901 yesterday approved a new three-year contract that provided 3 percent annual raises and preserved current benefit levels.

Members of USW Local 10-1 at Sunoco's Philadelphia refinery were voting today on a similar deal, union president Jim Savage said.

Savage said the layoff of 750 salaried workers was severe, given the company's profitability. He called it "unconscionable" that "they are going to throw 750 families out into this economy."

Chi Chow, director of institutional research at Tristone Capital, an energy advisory firm based in Calgary, said that 750 seemed to be a big number, and that "it's probably what they need to do to stay competitive in this environment."

Sunoco had about 13,600 employees overall, including 1,200 at Sunoco Logistics, a spin-off that is still closely tied to the company. Most of Sunoco's 3,700 salaried employees are in the Philadelphia area.

The company declined to say how many worked at headquarters in the Mellon Bank Center in Center City. It also declined to say how many of the employees targeted for layoff worked there and how many voluntary layoffs there were.

Many who volunteered to leave the company had their last day today. Others were given the bad news starting Monday and will depart over the next month, Elsenhans said.

Today's announcement ended years of relative stability at Sunoco, which employs 4,900 in the Philadelphia region, including 700 at convenience stores.

From the mid-1980s to the mid-1990s, Sunoco went through several restructurings as it transformed itself from a 1960s-style industrial conglomerate centered on a large integrated energy company into a firm dependent on refining for most of its profits.

Like other 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.

Since then, annual profits have fallen for two straight years and the stock price has bounced around between $20 and $50 per share. At midafternoon, Sunoco's shares were down 4.40 percent, or $1.28, to $27.83 on the New York Stock Exchange.

Though the company is still anticipating a difficult year, Elsenhans said the refining business is not doing quite as badly so far this year as expected. One reason is that the rate of decline in gasoline demand has slowed.

"I don't want to venture to say that it has stopped or is at the bottom, but it would appear to be leveling out a bit," Elsenhans said.