In a roller-coaster week, DuPont announced that it is cutting 3,500 jobs—6% of its total workforce—by the end of the year as part of its previously announced $900 million cost-cutting program. It also agreed to take on some $150 million in liabilities related to an antitrust investigation involving its DuPont Dow Elastomers joint venture with Dow Chemical.
Despite the bad news, DuPont upgraded its 2004 earnings forecast. Due to a recovering economy and particular strength in its agriculture and nutrition business, the company says its earnings for the first quarter—excluding 16 cents per share in extraordinary items—will be 95 cents per share, well above the 65 to 75 cents it expected in January.
What’s more, DuPont says the head-count reduction will generate savings of $325 million annually by the end of 2005, half of which will occur this year.
The workforce reductions exclude 18,000 jobs in DuPont’s Invista fibers business, which will be sold to Koch Industries at the end of this month for $4.2 billion. But CEO Charles O. Holliday Jr. adds that DuPont will need to reduce corporate positions that were tied to the fibers unit.
“These are difficult but necessary decisions as we align our resources with market needs and adjust the size of our infrastructure following the anticipated separation of Invista,” he says.
DuPont’s operations in North America will see about 70% of the layoffs; most of the rest will occur in Europe. The company will shed 650 jobs in Delaware alone. In addition, 450 contractor positions will be eliminated.
DuPont is revamping four manufacturing plants in North America. It is ending dimethyl terephthalate production in Old Hickory, Tenn., and exiting the merchant DMT business. Some 125 employees will be laid off there by July.
The company is closing its spandex fibers plant in Maitland, Ontario, next month. That closure, plus other restructuring, will result in 200 DuPont layoffs in Canada. Restructuring in Towanda, Pa., will result in 30 layoffs by the end of April. And DuPont is closing Liqui-Box container lines in Worthington, Ohio, resulting in 15 lost jobs.
In addition to the job cuts, DuPont says it will save $375 million annually by 2005 through cost reductions in areas like contract services, procurement, telecommunications, and information technology. The company plans to save an additional $200 million through improved manufacturing efficiency.
Separately, DuPont will take the lead in dealing with an ongoing antitrust investigation of DuPont Dow Elastomers in synthetic rubber. DuPont says it will fund liabilities in the investigation up to $150 million and will pay 75% of penalties over that amount. DuPont is taking a first-quarter charge of $150 million to cover potential liabilities.
Dow now has an option to pull chlorine and ethylene elastomers out of the venture in a cashless deal. If Dow does exercise this option, DuPont will buy out Dow’s equity interest.