Honeywell Sees Huge Loss, to Cut 1,200 Jobs

Honeywell Inc. unexpectedly announced Tuesday that it could lose more than $400 million in 1988, largely because of abnormal tax expenses, and that it planned to eliminate 1,200 jobs.

The defense contractor and building controls maker, which employs 79,000 worldwide, also announced that James J. Renier, president and chief executive, would replace retiring Chairman Edson W. Spencer.

Honeywell had earnings of $86.1 million, or $1.99 a share, in the fourth quarter of 1987. Net income in 1987 was $254 million on sales of $6.7 billion.

For the first nine months of this year, Honeywell had a profit of $67.1 million, or $1.58 a share.

“There had been no indication earlier there would be a loss for the year,” said Susan Eich, a Honeywell spokeswoman.

The company made its announcement after the stock market closed Tuesday. In composite New York Stock Exchange trading, Honeywell stock fell 62 1/2 cents to $59.62 1/2 a share.

Honeywell said in a news release that tax expenses will account for about $300 million in fourth-quarter losses. Other charges are related to a restructuring of its Solid State Electronics division, a loss of some defense contracts and early retirement and severance costs related to the 1,200-person work force cut.

“We have a core of profitable businesses whose positive results from operations have been exceeded by a series of unusual charges this year,” Renier said.

“Achieving our long-term financial goals would have been unacceptably delayed without these aggressive actions to improve operations,” he said.

Honeywell also said projections for the $400-million annual net loss were unaudited and could change.

The principal tax expense results from Honeywell’s inability to assume tax benefits this year for operational writeoffs where actual expenses will occur in the future, the company said. For example, Honeywell won’t be able to realize a tax benefit for a fourth-quarter restructuring of its integrated computer circuits business.

The restructuring, which included the November sale of its Colorado Springs, Colo., merchant semiconductor operation, reflects Honeywell’s retreat from computer manufacturing. That strategy includes an anticipated reduction of Honeywell’s interest in Honeywell Bull Inc., the information systems company it formed with Japan’s NEC Corp. and France’s Bull group, Renier said.

Eich said the job cuts were part of a program to reduce costs and enhance competitiveness. About 60% of the reduction will be made through early retirements and severance agreements that will add to fourth-quarter costs, she said.