Dow To Close Insulation Plants | April 9, 2012 Issue - Vol. 90 Issue 15 | Chemical & Engineering News
Volume 90 Issue 15 | p. 10 | News of The Week
Issue Date: April 9, 2012

Dow To Close Insulation Plants

Cost Cutting: Chemical maker will shutter four facilities, lay off 900 workers
Department: Business
Keywords: insulation, construction chemicals, home building, layoffs
Dow’s Styrofoam is heavily used in home construction.
Credit: Dow
Workers install Dow’s Styrofoam insulation.
Dow’s Styrofoam is heavily used in home construction.
Credit: Dow

Dow Chemical says it will close four manufacturing plants and idle a fifth to cut costs amid continued weakness in the European economy. The closures will take place over the next two years and will result in the loss of 900 jobs.

Dow will shut down three plants that produce Styrofoam, the company’s brand of closed-cell extruded polystyrene foam used for building insulation. The plants are located in Estarreja, Portugal; Balatonfűzfő, Hungary; and Charleston, Ill. In addition, a facility in Terneuzen, the Netherlands, will be idled. Lastly, Dow will close a plant in Camaçari, Brazil, that makes toluene diisocyanate, a raw material for flexible foams used in furniture.

“These actions, while difficult, are in full alignment with our commitment to continually manage our portfolio to adapt to changing and volatile economic conditions, as we are seeing particularly in Western Europe, and to preferentially invest in our fast-growing, technology-rich businesses,” says Dow CEO Andrew N. Liveris.

The company will take a first-quarter write-off of $350 million related to the closures, after which it expects to save $250 million annually. The cost cutting is part of a larger initiative that Dow calls Efficiency for Growth. The program garnered $500 million in savings last year, and the company says it is targeting an additional $750 million in savings in 2012.

In a February conference call with analysts to discuss 2011 earnings, Liveris described volatile economic conditions in Western Europe, complaining particularly of weak fundamentals in the construction industry. According to the construction forecasting group Euroconstruct, Europe’s sovereign debt crisis will delay recovery of the region’s construction market by about a year. Euroconstruct estimates that construction output will shrink 0.3% in 2012. Cumulatively, the region will have seen a decline in construction of around 17% between 2008 and 2012.

In contrast, construction spending in the U.S. is expected to rise this year. Construction tracking firm Reed Construction Data says total construction spending will increase 7.0% to $845 billion. Single-family-home construction is expected to grow 9.1%.

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