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Business

Dow To Cut Jobs

Eliminating 1,000 jobs worldwide will result in a $600 million charge against earnings

by Marc S. Reisch
December 10, 2007 | A version of this story appeared in Volume 85, Issue 50

DOW CHEMICAL plans to close at least four plants and cut 1,000 jobs—about 2% of its current workforce of 45,000—in what the firm says is an effort to improve the efficiency and cost-effectiveness of its global operations.

Dow expects to take a charge against fourth-quarter earnings of $500 million to $600 million to cover costs such as severance and asset write-downs. The firm says it should realize annual savings of $180 million per year when it completes all cutbacks now planned.

Andrew N. Liveris explains that this first major downsizing since he became CEO in 2004 "reflects our commitment to prune businesses that are not delivering value and tackle tasks more efficiently."

The cutbacks are not what investors have been expecting since the firm cancelled a meeting with the financial community that was scheduled for last month. Many investors speculate that Dow is planning a major deal that would reduce its exposure to the commodity chemicals and plastics business and focus the firm on higher margin specialty products.

Gregg Goodnight, an analyst at investment banking firm UBS, told clients in a research note on the Dow announcement that the cutbacks were "typical housecleaning" and "totally unrelated" to an expected major deal.

In addition to the plant shutdowns, Dow intends to exit the automotive sealers business in North America, the Asia-Pacific region, and Latin America within the next 18 months. The firm says it will explore "strategic options" for automotive sealers in Europe.

Dow also plans to write down its investment in the Pétromont ethylene and olefin derivatives joint venture outside Montreal with partner Société Générale de Financement du Québec. A Dow spokesman says the write-down will not immediately affect production plans at the struggling operation.

In addition, Dow plans to significantly reduce administrative and R&D operations at the former Union Carbide site in South Charleston, W.Va., affecting 200 jobs.

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