CHEVRON stock soared more than 12 points on the news. The reduction decision, announced today, came after a year-long internal review of cost-cutting procedures, said CHEVRON CEO David J. O'Reilly. The initial report concluded the company would save $1.2 billion by eliminating 20 percent of its 36,000 employees. "From there", said O'Reilly, "it didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save $2.4 billion, and if we cut 100 percent of our workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another 20 percent and save $7.2 billion. "We believe in increasing shareholder value, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added. CHEVRON plans to achieve the 100 percent internal reduction through layoffs, attrition and early retirement packages. To achieve the 20 percent in external reductions, the company plans to involuntarily downsize 7,200 non-CHEVRON employees who presently work for other companies.

"We pretty much picked them out of a hat," said O'Reilly. Among firms CHEVRON has picked as "External Reduction Targets," or ERTs, are Electronic Data Systems Corporation (EDS), AMR Corporation, parent of American Airlines, and Charles Schwab & Co. CHEVRON's plan presents a "win-win" for the company and ERTs, said O'Reilly, as any savings by ERTs would be passed on to CHEVRON, while the ERTs themselves would benefit by the increase in stock price that usually accompanies personnel cutback announcements. "We're also hoping that since, over the years, we've been really helpful to a lot of companies, they'll do this for us kind of as a favor," said O'Reilly.

Legally, pink slips sent out by CHEVRON would have no standing at ERTs unless those companies agreed. While executives at ERTs declined to comment, employees at those companies said they were not inclined to cooperate.

"This is ridiculous. I don't work for CHEVRON. They can't fire me," said Kaili Blackburn, a flight attendant with American Airlines. Reactions like that, replied O'Reilly, "are not very sporting."

Inspiration for CHEVRON's plan came from the success of many previous cutback initiatives, said company officials. In January of 1999, for instance, the company announced it would trim 15% of jobs over two years.

However, with CHEVRON's SITE program, just six month's later CHEVRON had already reached its quota. "We were quite surprised at the number of employees willing to leave CHEVRON in such a hurry, and we decided to build on that," O'Reilly said.

Analysts credited O'Reilly' short-term vision, noting that the announcement had the desired effect of immediately increasing CHEVRON share value.

However, the long-term ramifications could be detrimental, said Bear Stearns analyst Beldon McInty. "It's a little early to tell, but by eliminating all its employees, CHEVRON may jeopardize its market position and could, at least theoretically, cease to exist," said McInty. O'Reilly, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens.