Unocal, Amoco Plan Additional Job Cuts of 9,600 : Energy: The move is part of an ongoing, deep retrenchment in the oil industry. At least 250 of the eliminated positions will be in Southern California.
Continuing the deep retrenchment of the oil industry over the last decade, Unocal Corp. and Amoco Corp. on Wednesday announced yet more cuts, including the elimination of thousands of jobs.
Los Angeles-based Unocal, still burdened by debts it incurred to fight off hostile takeover attempts by T. Boone Pickens in the 1980s, unveiled a $1.5-billion cost-cutting program that will do away with 1,100 jobs. At least 250 of those are in Southern California.
Chicago-based Amoco, the nation’s fifth-largest oil company, said it will cut 8,500 jobs--about 16% of its work force--over the next 18 months to make it more competitive. Most of the cuts will come in the Chicago area.
The announcements from Unocal and Amoco were the latest in a recent series of similar moves by oil companies. On Tuesday, Mobil Corp. said it would cut 2,000 jobs this year, and last month, British Petroleum said it would cut 600 to 700 jobs in the United States. In May, Exxon Corp., the nation’s biggest oil company, said it would cut 1,000 American jobs.
“It’s an industry trend toward consolidation in the United States,†said William Randol, an oil industry analyst at Salomon Bros. in New York. “Everyone is doing it as a reaction of a drop in crude oil prices, unattractive natural gas prices and poor profits for refined products.â€
Over the last decade, employment in the American petroleum industry has declined 22%, which means more than 429,000 jobs were lost. According to the American Petroleum Institute, oil industry employment peaked at 1,912,000 workers in February, 1982. It stood at just 1,482,000 last May.
Analysts say the industry, especially in the United States, is likely to continue contracting as oil companies move exploration and production operations to more fertile fields abroad.
“Low-cost oil and gas is likely to be found anywhere but the United States. We have drilled ourselves dry here,†said Philip Verlerger Jr. of the Institute for International Economics in Washington. “Our oil industry has been on the defensive for the last 10 years, and it will continue for at least the next five years.â€
Unocal’s latest announcement fills in details of the $1.5-billion debt reduction plan it unveiled in April. Under the plan, the company will pare itself down to just two main units.
The Energy Resources division, which combines the company’s international and North American exploration and production operations, was described Wednesday. In April, the company announced plans to form the Petroleum Products and Chemicals division from its refining and marketing groups.
The company said the new structure and the 1,100 job cuts are expected to boost after-tax cash flow by $200 million beginning next year.
“All these companies are moving aggressively to be competitive,†said Eugene L. Nowak, the head of Dean Witter Reynolds’ energy analysis group. “It’s difficult for the people who are losing their jobs, but you’re almost compelled to do it because you’re operating in an environment which is depressed and with an outlook which is difficult.â€
Investors apparently approve. When Unocal Chairman Richard J. Stegemeier announced the cuts at the annual meeting in April, the company’s shares were trading in the low $20s. On the New York Stock Exchange on Wednesday, the stock closed at $26.125, down 37 1/2 cents. Amoco closed at $48.75, up 87 1/2 cents.
Amoco said its latest cuts will require it to take a one-time charge of $800 million in the second quarter to cover the cost of restructuring and employee severance packages. However, the company said ultimately the move will save $600 million per year.
“This strategic reassessment is a key step undertaken to position Amoco to succeed in a very competitive marketplace,†Amoco Chairman Laurance Fuller said. “The human impact of our decisions is very real and very painful. However, our actions also are very necessary.â€
The elimination of those 8,500 jobs follows Amoco’s cuts of nearly 1,800 jobs in 1990 and 1991.
The latest announcements underscore the continuing weakness in the nation’s job market and heighten concerns that the sputtering, see-saw economy is precariously close to falling further into recession. Last week, major corporations announced more than 17,000 job cuts, citing the need to pare expenses in a time of lean profits.
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