Allied-Signal Unveils Massive Restructuring : Workplace: About 5,000 people are expected to lose their jobs as the firm’s new chief executive moves to bolster profits.

Allied-Signal Inc. announced a massive restructuring Wednesday that will result in layoffs of thousands of employees, an $880-million charge against third-quarter earnings and a net loss for the quarter and full year.

The swift move by the company’s new chief executive, Lawrence A. Bossidy, to cut costs and reverse a serious cash drain received enthusiastic approval on Wall Street. Trading in its stock was delayed until after the announcement, and its share price then shot up $4.375 to close at $40.50, a 12.1% gain. The sharp run-up came even though the company said it expects to slash the quarterly dividend paid on its common stock to 25 cents per share from 45 cents.

But the good news for the company’s long-term financial outlook was bad news for many employees. In a meeting with securities analysts in New York, Bossidy said the company will lay off about 5,000 salaried employees, or 14% of its salaried work force worldwide, as well as an undisclosed but smaller number of workers paid on an hourly basis. The company’s total work force is about 110,000.

The New Jersey-based conglomerate is one of the nation’s 20 largest industrial concerns. It has extensive operations in Southern California that employ about 10,000, including a concentration of aerospace plants in Torrance. The company declined to say how many Southern California workers will be affected. But Bossidy said after the analysts’ meeting that layoffs will be distributed more or less evenly throughout operations in the United States.

Allied said it will seek to sell eight relatively small subsidiaries. Of the four it identified, two are in Southern California: Endevco, based in San Juan Capistrano, which makes vibration sensors for jet engines, and Torrance-based Airsupply, which makes other aerospace hardware. These two units together employ about 800 workers. The company also said it will close about 10 plants, mainly involved in automotive parts manufacturing.

The dividend cut is expected to have an impact on Allied-Signal’s employees, who own about 19% of the company’s stock, mainly through savings and stock ownership plans.

Bossidy, a former vice chairman of the General Electric Co., became chief executive of Allied-Signal on July 1. He had promised to move fast to bolster the firm’s sagging profits, streamline operations and cut costs that were causing the company to spend far more cash than it was taking in. The company was saddled with heavy spending on new plants and projects, the cost of environmental cleanup from its chemicals operations and the unusually generous dividend.

For the first half of 1991, the company reported a profit of $152 million, or $1.12 per share, including an extraordinary credit, compared to profit of $250 million, or $1.78 a share, in the same period in 1990. Earnings figures for the 1991 third quarter are expected later this month.

Bossidy said the restructuring is also necessary because of expected further cuts in the U.S. defense budget, which will have an effect on the company’s aerospace operations, and because of continuing weakness in the economy.

Bossidy predicted strong growth in the company’s profits in 1992 and 1993.

The company, formerly mainly a chemicals concern, grew through large acquisitions in the 1980s, including the purchase of Bendix Corp. in 1983 and Signal Corp. in 1985. In addition to aerospace and chemical products, the company has extensive interests in automotive products, including breaks, and engineered materials.

The growth through acquisition left Allied with many corporate functions duplicated at each subsidiary, such as payroll departments, data processing and telecommunications. Bossidy said that under the plan these functions will be consolidated, with divisions that are strong in one area taking over the function for the whole company.

The restructuring plan is to be carried out over 18 months. Bossidy estimated that it will cause savings of $350 million annually by 1994, with about $225 million of that coming in the first year of the program.

Securities analyst Michael Lauer of Kidder, Peabody & Co. said the projected cost savings seemed realistic and noted that the program involves only relatively minor sales of assets.

In addition to the layoffs, asset sales and plant closings, Allied-Signal will cut by $225 million its planned capital spending on new plants and other projects.

The $880-million charge includes the costs associated with laying off employees, closing plants and marking down the value of certain assets on the company’s balance sheet. It also includes an additional $200-million reserve to cover possible future costs of environmental cleanup from its chemical operations.

Times staff writer Dean Takahashi in Orange County contributed to this story.