Voser warns of looming job cuts

Shell's new chief executive Peter Voser warned of “substantial” job cuts to come and announced a planned reduction in the supermajor’s capital spending programme, as it copes with weak demand, excess capacity and high costs.

He was speaking as Shell reported a 70% drop in net profits to $2.34 billion for the second quarter, slightly less than the average of analysts’ forecasts, and a 5% drop in production, reported the Financial Times.

Voser, who took over at the top of Shell at the beginning of the month, said in a statement: “Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery.

“Shell is adapting to this new situation, and we must do more.”

In May Voser set out a restructuring plan, including the break-up of the company’s gas and power division, intended to simplify Shell’s structure, reduce bureaucracy and complexity, and improve efficiency.

Senior executives have been made to re-apply for their jobs or new roles, and many management positions have been eliminated.

The top 600 managers in the new structure have been appointed, representing a 20% cut in management numbers.

Voser added: “Substantial further staff reductions are likely.”

He added that he planned a cut to $28 billion from the company's costs next year, a reduction of more than 10%.

He said that the restructuring plan, called “Transition 2009”, would be completed by the end of the year.

Cost-cutting, lower discretionary spending and price cuts from suppliers had saved $700 million in the first half of the year compared to the equivalent period of 2008, he said.

Voser said: “Taking new steps to reduce our costs, combined with Shell’s financing capabilities, allows us to continue with our investments for medium term shareholder value, despite today’s tough market conditions.”

The company was looking at options for new investment, he added, “but managing affordability and profitability are key priorities.”