Raytheon planning cutbacks 'At least' 7 plants to close, CEO says

February 28, 1997|By BLOOMBERG NEWS

LEXINGTON, Mass. -- Raytheon Co. will shutter as many as a dozen defense plants and close more than 30 marketing offices in an effort to save money as it prepares to spend $12.5 billion on pending defense acquisitions, analysts said yesterday.

The company also may consider selling a portion of its engineering unit to "unlock" its value, they said.

Raytheon Chairman and Chief Executive Officer Dennis J. Picard told analysts and investors that the defense electronics giant would be closing "at least" seven of its 41 major defense facilities.

The Lexington, Mass.-based maker of Patriot missiles also plans to slash the number of worldwide marketing offices to 70 from 105, and the number of profit centers to 12 from 50, said Cowen & Co. analyst Cai von Rumohr.

" 'At least seven' tells me it will be more than that," said von Rumohr, who hosted Picard at the meeting with investors last week. "Ten to 12 would be a pretty reasonable guess."

At some future date, Raytheon also may consider selling a portion of the engineering unit to the public, von Rumohr said.

A Raytheon spokesman, Robert McWade, declined to comment on any specific measures that the company was considering.

He did say that the cuts wouldn't begin until later this year.

Raytheon said last month that it would buy the defense electronics units of General Motors Corp.'s Hughes Electronics unit and Texas Instruments Inc.

Raytheon will pay about $9.5 billion in stock and assumed debt for the Hughes business, and $2.95 billion in cash for the TI unit.

"Undoubtedly they are going to be quite aggressive in cost savings," said Paul Nisbet, an analyst with JSA Research Inc. Raytheon has said it has a 2 1/2 -year goal of reducing costs in the combined defense operations by 10 percent. That doesn't mean, McWade said, that Raytheon will cut 10 percent of the 83,000 defense workers in the combined companies.

Instead, the goal refers to the amount of money the company wants to save through job cuts, plant closings and savings on procurement, research and development and other expenses.

As part of its makeover, Raytheon said Sunday, the company is considering the sale of its Amana appliance operations, which, analysts said, could fetch about $1 billion.

Pub Date: 2/28/97

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