Web Date: December 8, 2008
Dow To Cut 5,000 Jobs
Dow Chemical will eliminate 5,000 jobs, roughly 11% of its workforce, in response to the rapidly deteriorating economy, the firm announced on Dec. 8. The company says the move accelerates an ongoing program to streamline operations.
Dow plans to eliminate 700 jobs by closing 20 facilities in "high cost" locations in the U.S. and Europe. Approximately 2,000 jobs will be lost through the planned divestiture of several unidentified businesses. The remaining layoffs will be in centralized business services. In addition, Dow will lower production by temporarily idling 180 plants and will reduce its contractor workforce by 6,000, or approximately 30%.
Overall, Dow expects the reductions to save the company $700 million in annual operating costs by 2010. The savings are in addition to the $800 million in expected cost synergies from the acquisition of Rohm and Haas, which is scheduled to be complete early next year.
In a phone call with stock analysts, CEO Andrew N. Liveris stressed that Dow will not cut dividends to shareholders. "The actions we are taking today are an acceleration of our long-term strategy to transform Dow into an earnings growth company, and this will strengthen our financial position as we respond to this rapidly changing and deteriorating economy," he said.
Dow's announcement follows a Dec. 5 statement by DuPont that it will reduce its workforce by 2,500, primarily in businesses that support the motor vehicle and construction industries (C&EN, Dec. 8, page 18). DuPont revised its fourth-quarter earnings guidance to a loss of 20 to 30 cents per share, not including a charge for restructuring costs.
In contrast to DuPont's focus on the weak housing and auto markets, Liveris stated that the production cuts at Dow were spurred by an across-the-board deterioration in market demand and that the entire industrial supply chain outside of food, health, and agriculture is in a recession.
The layoffs by Dow and DuPont will contribute to mounting unemployment in the U.S. manufacturing sector. On Dec. 5, the Department of Labor reported that U.S. unemployment rose 0.2% to 6.7% in November, the highest level in 15 years. Nonfarm payroll fell sharply by 533,000 jobs, of which 85,000 came from manufacturing.
According to the American Chemistry Council, the U.S. chemical industry's main trade organization, the industry lost 1,000 jobs in November. T. Kevin Swift, ACC's chief economist, projects that employment in the U.S. chemical industry will decline 3% in 2009.
Both Dow and DuPont are cutting back on capital spending to preserve cash flow. DuPont will reduce its 2009 spending by between $200 million and $400 million, and Dow plans to spend $600 million less than it did in 2008.
Dow's cost-cutting strategies will not derail its planned K-Dow Petrochemicals joint venture or its merger with Rohm and Haas, Liveris said. He assured investors that the company has "plenty of financing" for both deals.
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