Sunoco Inc. chief executive officer Lynn L. Elsenhans will step down March 1, marking the end of the Philadelphia oil company's tumultuous four-year makeover from a manufacturer into a pared-down retailer and transporter of fuel.
Elsenhans, 55, will be replaced by chief financial officer Brian P. MacDonald as part of a sweeping package of initiatives announced after markets closed Thursday. The changes were started in September, when the company announced plans to exit the unprofitable refining business this year and to conduct a strategic review of its operations.
Sunoco said it would continue efforts to sell its 330,000-barrel-per-day refinery in South Philadelphia. But after reaching out to more than 150 potential buyers, it said it received no offers for its Marcus Hook plant, and has given up hope that it will continue to operate it as a refinery.
"At this time, Sunoco does not believe that Marcus Hook will be repurchased and started as an operating refinery," the company said. The process of shutting down the plant, begun in December, will be completed in the next few weeks.
Sunoco's refineries lost $900 million in the last three years, and the company concluded there was little promise of making them profitable in an era of declining demand for motor fuels and too much refining capacity. "This is why we need to exit the refining business, as difficult as this is for our employees and communities," Elsenhans said in a conference call Thursday.
Elsenhans, who came to Sunoco in 2008 with a background in refining and manufacturing, inherited a company whose weaknesses became urgently clear as the nation's economy sank a few months after her arrival. She had essentially completed her mission by reducing Sunoco's assets by two-thirds, selling off its units that manufacture chemicals, metallurgical coke, and, finally, its refining operations.
According to Bloomberg, Elsenhans' various moves boosted value for shareholders 52 percent.
"After extensive deliberations with the board, I recommended to them that I was no longer the right person to lead Sunoco as it progresses to the next phase of its future," she said in the call.
Her efforts to rein in costs and to exit the iconic business that has defined Sunoco since it opened the Marcus Hook refinery in 1902 won plaudits from investors, but angered many employees and community leaders.
"She was brought here to do something, she did it, and now she's going," said Jim Savage, president of United Steelworkers Local 10-1, which represents workers at the Philadelphia refinery. "I know a couple of thousand people who wouldn't mind helping her pack."
MacDonald, 46, the new chief executive, joined Sunoco in 2009 from Dell Inc., where he was chief financial officer of a commercial business unit. A native of Canada, he previously held financial-management positions at General Motors Corp.
"Sunoco will be a stronger company focused on our established high-return logistics and retail business," he said in a statement.
Sunoco announced the changes along with the release of its quarterly earnings, which showed a loss of $660 million, most of that attributed to a write-down of its Philadelphia and Marcus Hook refineries.
Its refining-and-supply segment reported a loss of $117 million for the quarter. But the two segments that represent the company's future were profitable. The retail business earned $40 million - it said its fuel margins were about 9.9 cents per gallon. And Sunoco Logistics Partners L.P., its pipeline affiliate, contributed $66 million in pretax income to the parent company.
As part of its announcement, Sunoco presented a buffet of initiatives aimed at shareholders, bondholders, employees, retirees, and communities to redeploy some of the $2.1 billion cash it has stockpiled in recent years from the sale of assets.
Sunoco said it would buy back 19.9 percent of its shares over the next 12 to 18 months, increase its quarterly dividend from 15 to 20 cents to reflect greater earnings expected from the streamlined company, and reduce debt by $400 million to get the balance sheet into equilibrium with the smaller company.
It also plans to contribute $80 million to employee pension funds, allot $200 million to a trust fund to pay future retiree medical obligations and establish a $250 million fund to pay for environmental remediation at its properties.
MacDonald said the payments represented an effort to put Sunoco's legacy costs behind it, and to eliminate "a significant source of potential cash strain in the future."
In a statement, presiding director John P. Jones 3d signaled the board's satisfaction with Elsenhans for guiding Sunoco through "one of the most significant periods of change in the company's history."
"While very difficult for employees and other Sunoco stakeholders, the restructuring was absolutely necessary to provide for a sustainable future for the company and its stakeholders," said Jones, former chairman and chief executive of Air Products & Chemicals Inc. "We value Lynn's insight and leadership, and on behalf of the board, I want to thank her for her service and wish her all the best in future endeavors."
Elsenhans will remain as chairwoman of Sunoco Inc. and Sunoco Logistics Partners until Sunoco's annual meeting in May, when MacDonald will become chairman of the two companies.
Michael Hennigan, one of the few remaining Sunoco executives who served with former chief executive John G. Drosdick, will become chief executive of Sunoco Logistics.
Founded 125 years ago by Joseph Newton Pew and Edward O. Emerson, Sunoco grew into a worldwide integrated oil company during the automobile age, when it explored for oil and developed a huge shipbuilding operation.
Titles: Chairman, president, and CEO, Sunoco Inc.; chairman and CEO, Sunoco Partners L.L.C. (the general partner of Sunoco Logistics Partners L.P.).
Hometown: Rahway, N.J.
Education: Bachelor's degree, mathematical science, Rice University, 1978; M.B.A., Harvard University, 1980.
Career: Worked for Royal Dutch Shell P.L.C. for more than 28 years, most recently as executive vice president of global manufacturing, Shell Downstream Inc., January 2005-July 2008.
Corporate boards: International Paper Co., Memphis (March 15, 2007-present).
Awards: Paradigm Award (presented by the Greater Philadelphia Chamber of Commerce in 2011); Texas Business Woman of the Year (presented by the Women's Chamber of Commerce of Texas in 2005); Distinguished Alumni Award (presented by Rice in 2005).
Sports: Played on the Rice women's basketball team in the '70s; golf.
SOURCES: Sunoco SEC filings, Rice University publications.EndText
Title: President and CEO, Sunoco Inc., as of March 1.
Education: Bachelor's degree, chemistry, Mount Allison University, 1987; M.B.A., McGill University, 1989.
Career: Senior vice president and chief financial officer of Sunoco, August 2009 to present.
CFO of Sunoco Logistics Partners L.P., March 2010 to present.
CFO of the Commercial Business Unit of Dell Inc., December 2008 to July 2009.
Corporate vice president and treasurer, Dell, December 2002 to January 2009.
Various management positions at General Motors Corp. over 13-year period.
Corporate boards: SunCoke Energy Inc., December 2010 to Jan. 17, 2012.
SOURCES: Various companies, LinkedIn.EndText
(All transactions in millions of dollars.)
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