Amoco Corporation Announces Mass Layoffs Amidst Reorganization

Strategic Insights -

Amoco Corporation, the nation's fifth-largest oil company, has announced a drastic reorganization plan that includes the layoff of approximately 3,800 employees, or 8.3 percent of its workforce, over the next year. The move is aimed at bringing the company's staff and structure, which grew significantly during the high-demand and high-oil-price era of the 1980s, in line with the lower prices of recent years. According to H. Laurance Fuller, the company's chairman and chief executive, the reorganization will eliminate a layer of management, reducing the corporate staff from 4,200 to 400.

Key Takeaways:

  • The layoffs are part of a broader restructuring effort aimed at improving efficiency and competitiveness in the face of lower oil prices.
  • Approximately 3,800 employees, or 8.3 percent of Amoco's workforce, will be let go over the next year.
  • The middle layer of management that ran the production and exploration unit, the refining and transportation arm, and the chemical business unit will be eliminated, and the three business units will be split into 17 separate units.
  • A shared services group will be established, consisting of 7,000 employees, including legal, accounting, and human-services staff, who will provide services to the new business units.
  • Amoco expects to save approximately $600 million before taxes by 1996 as a result of the restructuring.
  • The company will take a charge on earnings of $256 million after taxes in the second quarter due to the layoffs and restructuring.
  • Amoco's stock fell by $1.50 yesterday, to $59.625 a share, on the New York Stock Exchange.

Statistics:

  • 3,800: The number of employees Amoco plans to lay off over the next year, accounting for 8.3% of its workforce.
  • 4,200: The current number of employees in Amoco's corporate staff, which will shrink to 400 under the reorganization plan.
  • 17: The number of business units Amoco will establish as a result of the reorganization, down from three previous business units.
  • $600 million: The estimated savings Amoco expects to achieve by 1996 as a result of the restructuring.
  • $256 million: The charge Amoco will take on earnings in the second quarter as a result of the layoffs and restructuring.

Sources:

  • "Amoco Plans Layoffs, Major Reorganization," The New York Times, [no date provided].
  • "Amoco's H. Laurance Fuller Predicts Industry Changes," The New York Times, [no date provided].
  • "Oil Companies' Cutbacks May Be Reaching a Point of No Return," The New York Times, [no date provided].