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Exxon Mobil Job Cuts Climb to 16,000

Exxon Mobil Job Cuts Climb to 16,000

The axe fell last week on thousands more Exxon Mobil employees who will lose their jobs due to the merger that created the super major. The company said it will cut 16,000 jobs, about 15% of its workforce, by the end of 2002. Exxon and Mobil predicted job cuts of only 9,000 when they announced their merger a year ago. The $81 billion deal was approved Nov. 30.

Along with last week's announcement of deeper cuts, the company continued to tout the benefits of the merger. "When we announced plans for the merger - about a year ago - both companies recognized this was a once in a lifetime opportunity," said Chairman Lee Raymond. "Since that time, we have further refined the opportunities and benefits available to the merged company." The synergy benefits of the merger are expected to be greater and realized sooner than previously thought, Raymond said.

Much of the benefit of merging comes from the job cuts. Staffing is expected to decline by almost 16,000 people between year-end 1998 and year-end 2002. About 2,000 of that reduction occurred in 1999, before completion of the merger. Executive positions will decrease by more than 1,000, or about one-third of the two companies' pre-merger totals. Staffing numbers do not reflect required divestments or any additional productivity improvements in the base business beyond those already identified.

A year ago, the companies expected pre-tax synergy benefits to be about $2.8 billion per year by year three of the merger. "Our current view is that near-term merger synergies will be considerably higher than we originally estimated. We expect the synergies directly attributable to the merger itself to amount to $3.8 billion annually on a pre-tax basis." Raymond said the merger is forecast to improve net income by about $1 billion in 2000, with the positive impact rising to around $2.5 billion by 2003.

Sales proceeds from assets to be divested are estimated to be $4 to $5 billion. Raymond said the earnings impact from divestitures was more difficult to estimate, "but current figures indicate a net gain of around $1 billion after tax."

Joe Fisher, Houston

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