updated 12/29/2003 10:45:37 AM ET 2003-12-29T15:45:37

Tyco is pursuing at least $3 billion in cost savings and working capital improvements over the next three years, according to David FitzPatrick, chief financial officer of the US conglomerate.

Mr FitzPatrick also said he would try to nearly halve Tyco's debt before considering using its cash for strategic acquisitions. He said he would use Tyco's cash when its debt levels fell to $10-$12 billion, which is "out a couple of years". Tyco's long-term debt stands at about $21.6 billion.

In an interview with the FT, Mr FitzPatrick outlined plans to remake Tyco - whose worldwide portfolio ranges from medical instruments to security products - into a finely tuned operating company, rather than the acquisitions machine it was under previous management.

He also sees himself and Edward Breen, chief executive officer, making progress in changing Tyco's culture and improving its financial systems.

The two men find themselves in charge of a company with litigation liability, regulatory questions and a decimated reputation. Their predecessors Mark Swartz, former chief financial officer, and Dennis Kozlowski, former chief executive, are on trial for allegedly stealing $600 million via unapproved compensation and improper share deals.

Mr FitzPatrick seeks growth from improving factory efficiencies and streamlining a company which had $37 billion of sales in 2002 and is the product of a string of poorly integrated acquisitions.

Over three years, he wants a cut of $1 billion in purchasing costs, $1 billion in savings from quality programme Six Sigma, and a $1bn improvement in working capital.

"Those numbers are impressive but they are by no means ceilings," Mr FitzPatrick said.

Tyco expects to cut $2 billionin debt out of $4 billion due in 2006, with its renegotiated $2.5 billion bank credit. Its new bank credit will help pay off $2 billion owed in another bank loan facility.

Copyright The Financial Times Ltd. All rights reserved.


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