Originally created 01/24/98

Raytheon to eliminate 9,700 jobs

BOSTON -- Raytheon Co. said Friday it will eliminate 9,700 jobs, or 8 percent of its work force, over the next two years in an effort to cut costs and reap the rewards of a takeover spree that nearly doubled its size.

The country's third-largest defense contractor, with a work force of 120,000, said jobs would be lost through layoffs and attrition, with more than half the cuts in coming in California.

Raytheon said the consolidation will allow its defense and commercial electronics business, Raytheon Systems, to cut annual costs by up to 15 percent, or by more than $2 billion.

"There's no one else in the industry that's making these bold moves," said Kenneth Dahlberg, president and chief operating officer of Raytheon Systems. "If we got it right, we're preparing for growth and not contraction."

Savings are necessary to compete for contracts in a post-Cold War era in which the Pentagon is spending 60 percent on weapons systems than it was in 1990, the company said. In that same period, the defense industry has consolidated through massive mergers.

The announcement of cuts came a month after Raytheon completed its $9.5 billion purchase of the Hughes defense units from General Motors and less than a year after it bought Texas Instruments' defense business.

The acquisitions, along with earlier purchases of Texas-based defense electronics firm E-Systems and Chrysler Corp.'s defense businesses, just about doubled Raytheon's size. Combined revenues of Raytheon and Hughes topped $20.5 billion last year.

A total of 8,700 of the job cuts will come at Raytheon Systems; an additional 2,700 engineers there will be reassigned to other projects.

About 1,000 more jobs will be lost at Raytheon Engineers & Constructors, where business has been hurt in part by a drop-off in Asian contracts.

The company said it would close 20 of Raytheon Systems' more than 80 major manufacturing plants over the next two years and scale back six others.

Raytheon planned to consolidate many operations -- reducing its circuit board facilities from 19 to two, for example.

Raytheon executives would not say how many of the jobs would be eliminated through layoffs and how many through attrition, but it was clear the number of layoffs would be significant.

"While we've had to make some really tough decisions, decisions that will impact the lives of many people, we believe we've taken the right actions," said William H. Swanson, chairman and chief executive of Raytheon Systems.

California was hardest hit in terms of numbers, losing 5,200 jobs, many of them former Hughes employees. The company will retain 11,600 employees there after the cuts.

Massachusetts, where Raytheon is based in Lexington, was spared the brunt of the consolidation. So was Texas, where 600 of 26,000 jobs were eliminated.

Patriot and Hawk missiles will be manufactured in Andover, Mass., and Lewisville, Texas. The AMRAAM medium-range air-to-air missile system will be based in Tucson, Ariz.

Swanson said a tax break in Massachusetts that would disappear if Raytheon took many jobs elsewhere was a factor in the company's calculations, but not a decisive one.

"We looked at the best way to run this business, and the chips fell where they may," Swanson said.

The Raytheon Systems cuts also include 600 jobs in Virginia, 525 in Tennessee and 500 in Arizona.

The California plants slated for closing include ones in Los Carneros, San Diego, Irvine, Sycamore Canyon, Torrance and Westchester. Some of the operations there will be merged with other facilities in the state and elsewhere.

Analysts said cutting costs was essential if the company hopes to compete with the top two contractors, Lockheed Martin Corp. and Boeing Co.

"They're beginning on a long process here," said Byron Callan of Merrill Lynch. "It's expected. It's required."

On Wall Street, Raytheon's Class A shares fell 1.5 percent Friday, or by 75 cents to close at $49.06¬ each on the New York Stock Exchange, where its Class B stock fell 87« cents, or 1.7 percent, to $50.


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