IC Will Take Big Writedown, Cut 1,560 Jobs

IC Industries will take a special pretax charge of $520 million in the third quarter that will result in a net loss for the year and plans to cut 1,560 jobs at its Illinois Central Gulf railroad subsidiary, company officials have announced.

The one-time charge stemmed from costs associated with IC’s corporate restructuring program and was largely to cover expenses involved in a major reduction of its rail operations, IC Chairman William B. Johnson said Monday.

Johnson said about $410 million of the charge would be used as a reserve to cover expenses involved in the rail restructuring, including costs of employee layoffs and early retirements later this year.

Another $110 million will cover costs from the restructuring of Pneumo Abex Corp., a transportation equipment subsidiary.

Johnson said the big writedown would occur this year because of more favorable tax advantages under current law and the earlier-than-expected sale of rail segments from Illinois Central Gulf.

“It is advantageous, while our non-railroad operating companies have record earnings, for us to set up the reserves in 1986,” Johnson said. “This will be the last year in which tax benefits that we derive from this special charge will be deductible at a 46% tax rate.”

ICG’s employment will drop to fewer than 5,000 from 6,500 under the restructuring, ICG Chairman Harry Bruce said.

“We hope to get it done by the end of the year,” Bruce said of the employee reductions. But he said ICG had not negotiated the move with any of the 13 unions involved.

In 1985, IC Industries had a profit of $162.8 million on revenue of $4.41 billion. Last year’s operating income was $421.1 million.