Sunoco Inc. (SUN) announced Friday that it will cut 750 jobs, 20% of the salaried work force, at its Philadelphia headquarters and two area refineries in an attempt to better perform during downturns in oil refining.

Oil refiners' profits have been squeezed by the economic downturn because demand for gasoline, diesel and jet fuel has weakened. Other refiners have focused on shoring up cash reserves or improving operations. Sunoco is the first refiner to announce widespread layoffs.

Layoffs at auto manufacturers, banks, technology companies and other major employers have driven U.S. unemployment rates, which rose to 8.1% in February.

Sunoco, the second-largest U.S. independent refiner, said its cuts are part of the first phase of the company's restructuring plan. Although the cuts apply only to salaried workers, the company will give some hourly employees the opportunity to resign with severance packages. Sunoco recently entered into a three-year contract with the unions representing these hourly employees.

A second phase of the project will review Sunoco's refineries in New Jersey, Oklahoma and Ohio, and its coke and chemicals businesses. Analysts say that review could take an additional six months.

"Like many other companies across a variety of industries, Sunoco is taking steps to remain competitive," said Chief Executive Lynn Elsenhans.

The layoffs, coupled with reduced energy use and cutbacks on materials will allow Sunoco to cut its costs for 2009 by $300 million, the company said. The cuts account for about 11% of Sunoco's total operating expenses, according to an estimate from analyst Chi Chow of Tristone Capital Co.

Sunoco's spending is currently in line with the industry average, and the cutbacks will enable Sunoco to perform at first-quartile levels, said spokesman Thomas Golembeski.

"We view the reduced cost structure as a precursor to a downsized asset base in the future," said Chow, of Tristone.

Since Elsenhans arrived at Sunoco in August, she has announced plans to sell its chemicals business, mothball a chemical plant and shutter its Tulsa, Okla., refinery, in the absence of a buyer.

Under Elsenhans, the company retained consultancy McKinsey & Co. to evaluate its operations in conjunction with an internal review.

Sunoco shares fell 6.6% to $27.18 in recent trading Friday. The stock is down one-third this year.

-By Jessica Resnick-Ault, Dow Jones Newswires; 201-938-4435; jessica.resnick-ault@dowjones.com

(Kevin Kingsbury in New York contributed to this report.)

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