Sunoco to shrink workforce by 20%; plans to reduce US$300 mln cost by year end

14-Mar-09

Sunoco, Inc. has announced to reduce its salaried workforce by approximately 750 positions in 2009, which represents about 20% of the workforce included in the first phase of the company's Business Improvement Initiative. This phase of the review included all business and operations support functions, as well as operations at the Philadelphia and Marcus Hook refineries. The company plans to offer hourly employees in certain identified areas the opportunity to resign and receive severance. The company expects to reduce costs by more than US$300 mln on an annualized basis by year-end 2009. In addition to this workforce reduction, significant savings are also expected in energy costs, and the use of materials, equipment and contractor services. In connection with the first phase of the initiative, the company expects to establish a pretax accrual ranging from US$60-US$70 mln ($35-$40 mln after tax) in the first quarter of 2009. Of this amount, approximately US$45-US$50 mln ($25-$30 mln after tax) pertains to employee severance and related cash costs, which are expected to be paid out over approximately one year, with the balance attributable to a noncash provision for pension and postretirement curtailment losses. The amounts identified above do not include any costs related to hourly employees. As a result of the workforce reduction, the company may also incur noncash settlement losses in its defined benefit pension plans during 2009. However, the amount and timing of any such losses cannot be estimated at this time.