SAN FRANCISCO — ChevonTexaco Corp. Monday said it will lay off about 500 more workers than management anticipated as part of the newly merged oil giant’s effort to save an additional $600 million annually in its combined operations.
Under the more aggressive cost-cutting program, the San Francisco-based company will eliminate 4,500 jobs, or about 8 percent of its work force, instead of the 4,000 layoffs envisioned in October 2000 when Chevron announced its plans to buy Texaco for $39 billion.
The company reiterated its plans to eliminate 4,000 jobs in a quarterly report to the Securities and Exchange Commission last week.
The extra job cuts are being made as ChevronTexaco raises its estimated cost savings from the merger to $1.8 billion from management’s original estimate of $1.2 billion annually. The company expects to trim $1.2 billion in expenses by July of next year and realize an additional $600 million in savings by March 2003.
The 500 additional layoffs and other belt-tightening measures will account for $80 million of the extra savings, according to a presentation for industry analysts in New York.
More than half — $320 million — of the additional savings will be generated in the company’s “downstream” business, the segment devoted to selling refined products to consumers and businesses. ChevronTexaco plans to reduce its selection of lubricant products as part of a “more focused” marketing efforts, company Chairman David O’Reilly told analysts during Monday’s 90-minute meeting.
The company runs more than 25,000 gasoline stations worldwide, including 8,100 North American locations.
ChevronTexaco expects to save an additional $200 million on the production side of its business.
Overall, the company says it has identified about 700 specific areas where money can be saved and is holding weekly meetings to make sure the expense cuts are proceeding on schedule. “I’m confident these (savings) are real and they are deliverable,” O’Reilly said.
The higher savings estimates didn’t come as a surprise. Analysts had widely expected ChevronTeaxco to raise its savings target to at least $1.5 billion annually, based on the pattern in other recently completed oil industry combinations.
ChevronTexaco’s shares fell 54 cents to close at $82.91 Monday on the New York Stock Exchange. With oil prices sliding, the company’s stock has declined by 9 percent since the Oct. 9 consummation of the marriage.
To pay for severance checks, employee relocations and office closures, ChevronTexaco will incur about $1.5 billion in merger expenses. The company had spent $230 million on merger expenses through Oct. 31, according to SEC documents.
With its efforts focused on the merger savings, ChevronTexaco expects to increase its oil and gas production by just 1 percent in 2002, O’Reilly said. The company’s production should rise by an annual average of 2.5 percent to 3 percent during the next five years.
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