Sunoco Begins Layoffs

Job cuts include members of company's retail marketing business unit
PHILADELPHIA -- While not prepared to offer details, a spokesperson for Sunoco Inc. said the company's workforce reduction initiative, as reported Friday in a CSP Daily News Flash, does include members of its retail marketing business unit. "Those people may have been affected," said Thomas Golembeski. "A dealer who operates a Sunoco station may be dealing with a new representative from Sunoco."

Sunoco announced the workforce reduction Friday. The Philadelphia-based company will reduce its salaried workforce by approximately 750 positions in 2009, which represents [image-nocss] about 20% of the workforce included in a first phase of the company's Business Improvement Initiative. This phase of the review included all business and operations support functions, as well as operations at the Philadelphia and Marcus Hook refineries. The company plans to offer hourly employees in certain identified areas the opportunity to resign and receive severance.

"It is never easy to take steps that impact the lives of employees and their families," said Lynn Elsenhans, Sunoco's chairman and CEO, in a statement. "While the company has enjoyed several years of strong financial performance, we are now facing a different and more difficult economic reality. Like many other companies across a variety of industries, Sunoco is taking steps to remain competitive."

The company expects to reduce costs by more than $300 million on an annualized basis by yearend 2009. In addition to this workforce reduction, significant savings are also expected in energy costs, and the use of materials, equipment and contractor services.

Golebeski said layoff notifications began early last week and will continue. A second phase of the initiative is also to come. It is expected to include Sunoco's other two refineries, its chemical manufacturing facilities and its coke manufacturing facilities.

In connection with the first phase of the initiative, the company expects to establish a pretax accrual ranging from $60 million-$70 million ($35 million-$40 million after tax) in the first quarter of 2009. Of this amount, approximately $45 million-$50 million ($25 million-$30 million after tax) pertains to employee severance and related cash costs, which are expected to be paid out over approximately one year, with the balance attributable to a noncash provision for pension and postretirement curtailment losses.

The amounts identified above do not include any costs related to hourly employees. As a result of the workforce reduction, the company may also incur noncash settlement losses in its defined benefit pension plans during 2009. However, the amount and timing of any such losses cannot be estimated at this time.

Sunoco Inc. is a manufacturer and marketer of petroleum and petrochemical products. With 910,000 barrels per day of refining capacity, approximately 4,700 retail sites selling gasoline and convenience items, approximately 6,000 miles of crude oil and refined product owned and operated pipelines and 43 product terminals, Sunoco is one of the largest independent refiner-marketers in the United States.

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