Shell Profits Rise as Outsourcing Plan Moves Forward

Shellwill hold its fourth quarter earnings call Thursday, where it’s expected toannounce quarterly earnings of $5.82 billion. Added to the rest of the fiscalyear’s profits, the year-end earnings after expenses should tally near $27billion?roughly 5 percent greater than 2006.

Shell,the world?s third-largest oil company and fourth largest corporation byrevenue, launched plans earlier this month to outsource nearly IT 3,200jobs?most in the United Kingdom and Europe?as part of a corporate-widecost-cutting program.The company expects to save nearly $500 million a year through theseorganization changes.

"RoyalDutch Shell is in a good position to drive new, standardized ways of workingthrough the company, to reduce complexity and speed up decision making," saidShell CEO Jeroen van der Veer in his strategic statement released earlier thismonth. "Operational synergies and cost savings should add some$0.5 billion to earnings each year, across the medium term."

Despiteoil prices selling at record highs on world markets, a Shell and oil companieshave come under increasing profit pressures as the cost of exploration andrefining crude increases and erodes retail profits. In published reports, vander Veer has said that Shell?s production costs have increased more than 65percent since 2005.

Shellreportedly began notifying its 3,600 IT workforce of its outsourcing plansearlier this month. The Anglo-Dutch company is mum on details, but stated inprevious interviews that roughly 40 percent of its current IT staff iscompromised of contractors. That means upwards of 1,800 full-time Shellemployees could be affected by the outsourcing plan.

AT&T,EDS and Deutsche Telekom are reportedas the leading contenders for the massive outsource contract. The companyexpects to implement the outsourcing plan by June.

Oneobstacle standing in the way of Shell’s IT plans is union opposition.Amicus, a large U.K.-based manufacturing union, is challenging the plan becauseof previous changes in employee compensation plans.

Underrevisions enacted last summer, Shell employees who lose their jobs becausetheir positions were rendered redundant by other means would receive a packageworth 50,000 British pounds (roughly $100,000). Previous to the change, workerswere entitled to 200,000 pounds ($400,000).

There isno word on what, if any, actions the union may take to stall Shell’soutsourcing plan.