Arco to Trim 4,000 to 5,000 Jobs in Next Year
Atlantic Richfield Co. expects to eliminate 4,000 to 5,000 jobs, or up to 13% of its work force, over the next year or so as part of its massive restructuring plan, company officials said Tuesday.
At a press conference after the company’s annual meeting of shareholders in Los Angeles, Arco President William F. Kieschnick said he doesn’t yet know how many employees will be laid off. He added, however, that he expects a large number to take advantage of an early retirement package. Employees have until the end of June to participate, Kieschnick said, and Arco will look at possible layoffs then.
Last week, Arco announced that it intends to sell or shut down 2,000 gasoline stations east of the Mississippi, its Eastern refining operations and its copper and molybdenum mining operations as part of a restructuring plan that also includes the repurchase of up to $4 billion worth of its stock.
At the time of its announcement, Arco did not say how many jobs would be affected. On Tuesday, it indicated that about 2,000 of the jobs it intends to eliminate are in its Eastern refining and marketing operations, including 550 at a refinery in Philadelphia that Arco plans to shut down or sell. Officials said Tuesday that the company is negotiating with several potential buyers of the Philadelphia refinery and the gas stations, but they declined to identify them.
It couldn’t be learned Tuesday how many are employed in Arco’s mining operations, which are concentrated in Rocky Mountains states and are for sale.
The Los Angeles-based oil company currently employs 38,000 people, including 9,300 in California and 4,000 in the Dallas area.
Arco’s restructuring also calls for a 25% cut in capital spending this year to $2.8 billion and a 30% to 35% decrease to $900 million in spending for oil and gas exploration. Arco Chairman Robert O. Anderson said at the press conference that the aim of the restructuring was to lop off marginal or money-losing businesses and increase the value of Arco’s shares.
Anderson and Kieschnick insisted that the plan was not enacted out of fear of Mesa Petroleum Chairman T. Boone Pickens Jr. and other corporate raiders who have been attempting to take over big oil firms because their stock prices are perceived as being low compared to their asset value. Pickens is currently trying to acquire Unocal, the Los Angeles-based parent of Union Oil of California.
Kieschnick said, instead, that Pickens and “the new Arco” are both “symptoms” of a vastly changed oil market in which oil company shares, thanks to the current oil glut, tend to be undervalued. He said that, since its announcement, Arco has purchased 10 million of its shares on the open market.
Before last week’s announcement, Arco’s shares were trading at $53. They rose $5.25 immediately and closed Tuesday on the New York Stock Exchange at $63.25, up 25 cents from Monday.
Kieschnick said he wasn’t surprised by the number of investors willing to sell Arco shares. “I think what we saw was how many institutions were willing to take a profit at, say, $62 or $63,” he said.
Anderson said the Eastern refining and marketing operation has been “marginally profitable” for eight to 10 years. “It’s no secret, to them or anybody,” he said, referring to the people employed in those operations.
Kieschnick said it was logical to discontinue that business “because it’s the only part . . . that’s geographically separate from everything else.”
The restructuring effort, which is expected to last through 1986, will reshape Arco into a company with emphasis on exploration and mining, Anderson said, rather than on the retail sale of gasoline. He said that Arco will borrow to repurchase the stock, but he doesn’t anticipate problems paying off that debt.
Meanwhile, he predicted that the company’s per-share earnings from operations would exceed its 1982 record of $6.93, but he declined to give a specific forecast. The company previously said its per-share operating earnings would be between $8.80 and $9.70, assuming the $4-billion stock repurchase is completed this year.
Anderson said Monday that the buy-back will not be completed by year-end but could be completed within 12 months.
Anderson said that, despite a one-time, $1.3-billion write-off, mostly for its Eastern refining and marketing operations, Arco will report a net profit for all of 1985.
At the annual meeting, shareholders approved several anti-takeover measures proposed by management, including a change in the company’s state of incorporation from Pennsylvania to Delaware.
Specifically, the measure calls for the formation of a new company, Atlantic Richfield of Delaware, which the current Arco will be merged into. With incorporation in Delaware, cumulative voting will be eliminated.
Delaware incorporation also eliminates a shareholder’s right to call a special meeting and propose amendments to the certificate of incorporation. Also, a two-thirds vote will be needed to remove a director, as opposed to the simple majority required under Pennsylvania law.
Shareholders also approved an anti-greenmail provision, which forbids Arco management from buying back shares at above-market prices from someone who has owned more than 3% of its stock for less than two years, without two-thirds approval of shareholders.
