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Tyco CEO to Clean House; Plants to Close

http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030313/bs_nm/manufacturing_tyco_dc

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Business - Reuters

Tyco CEO to Clean House; Plants to Close

2 hours, 2 minutes ago

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By Tim McLaughlin

NEW YORK (Reuters) -

Tyco International Ltd. (NYSE:TYC - news) on
Thursday said it would close 300 plants over three years,
cutting $1 billion in costs by 2006, and its chairman vowed to
clean the "crap" from the sprawling conglomerate after
unearthing accounting problems in Europe and Asia.

AP Photo

Slideshow: Tyco

Related Quotes

TYC

DJIA

NASDAQ

^SPC

12.29
7821.75
1340.77
831.89

-1.74
+269.68
+61.53
+27.71

delayed 20 mins - disclaimer

Quote Data provided by Reuters

Tax season to-do list:

1.

Sharpen pencils.

2.

Mark calendar.

3.

Panic.

Tax Season Coverage
from Yahoo! News

Tyco's shares plunged 12 percent as investors realized
Tyco's persistent accounting problems were not going away any
time soon. Meanwhile, Tyco executives said the U.S. Internal
Revenue Service (news - web sites) is auditing the company's tax filings for 1997
through 2000. They said the audit was "nothing unusual."

Tyco Chairman Edward Breen's restructuring plan and fiery
comments to investors in New York City came a day after Tyco
cut its profit estimate for this year and fired the head of its
fire and security unit because of accounting problems.

Breen said he was "pained" and "disgusted" by the company's
latest difficulty.

"The goal for the year is to clean the crap up," Breen
said. "If I find anything wrong, heads will roll."

Breen later told a group of journalists that more personnel
changes could be coming as Tyco intensifies its audit of its
fire and security division. Over the past two weeks, problems
have surfaced in the unit's Asian and European operations.

Breen said the fire and security division, which includes
ADT security alarms, has the weakest internal controls, by far,
within Tyco. Allowances for doubtful accounts, inventory
reserves and writing off equipment on canceled accounts were
not done properly.

"We clearly missed it," Breen told reporters. Tyco said
some of the issues are six years old.

Tyco Chief Financial Officer David FitzPatrick said there
are "a lot of itty-bitty companies in fire and security." He
also said Tyco's internal audit team is understaffed.

"It needs to be larger," FitzPatrick told reporters.

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Tyco, which makes everything from duct tape to diapers,
said it would scale back its manufacturing facilities to 1,700
from 2,000 by 2006, slashing its manufacturing space by 20
million square feet.

SHARES FALL 12 PERCENT

Tyco shares fell $1.74, or 12.4 percent, to close at $12.29
in Thursday trade on the NYSE. It was the greatest percentage
drop in Tyco shares since July.

"The market is really not taking any of the news well,"
said John Boland, an analyst at NL Capital Management, which
owns about 500,000 Tyco shares. "I don't know how comfortable
the market is with the radical makeover that's being detailed,"
Boland said.

To transform Tyco from an acquisition-hungry company to one
that emphasizes lean operations, Breen must clean up Tyco's
messy accounting and slash manufacturing space that ballooned
under previous management.

Total job cut estimates were not immediately available, but
Tyco said it expects the plan to save it $1 billion by 2006.

Tyco plans to generate revenue of up to $44 billion in
2006, up from an estimated $38 billion this fiscal year, which
ends Sept. 30. Profit is expected to top $4.9 billion in 2006,
up from about $3 billion this year.

The company has been embroiled in controversy for more than
a year, beginning with a breakup plan engineered and then
abandoned by its former chief executive, Dennis Kozlowski.
Kozlowski abruptly quit in June and then was charged with
evading sales tax on millions of dollars in art purchases.
Later, he and three other senior leaders were charged with
looting company coffers.

Breen, who took over last year, has been working to
overhaul management and restore the company's tattered image
with investors.

"Hopefully, there's not a lot of other things there," Breen
said, adding that there could be more problems. "We've acted
quickly here. We've taken five people out of fire and security
during the past few days."

Tyco also found accounting problems in Asia, where four
executives were fired.

The revelations came less than three months after Tyco
released an internal accounting report by lawyer David Boies
that detailed $382 million in errors. No significant fraud was
found and the investigation report lifted Tyco's shares.

But the army of accountants and lawyers overseen by Boies
apparently did not detect problems at Tyco's fire and security
operations in Europe.

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