Dow Chemical Co. will cut as many as 4,000 jobs in 2003 in an effort to improve its financial performance, which resulted in a pretax loss of $622 million in 2002.
Those cuts will include the closing of crackers that produce plastic feedstock ethylene in Texas City and Seadrift, Texas. Those plants have a combined annual capacity of 2.5 billion pounds.
``2002 was not a good year for Dow,'' Chairman, President and Chief Executive Officer William Stavropoulos said in a Jan. 30 conference call. ``Neither the general economy nor industry fundamentals offered much relief from the difficult conditions we faced in 2001.
``Our earnings were, in a word, unacceptable,'' said Stavropoulos.
Job cuts of between 3,000 and 4,000 will come from divestitures, plant closings and attrition. In addition to the two ethylene crackers, Midland, Mich.-based Dow has identified potential closings of other assets with book value of $100 million.
Dow already had announced the elimination of 125 manufacturing jobs in Midland for 2003, but it did not specify how many of those would come from plastics work. The plastics portion of the new, larger wave of cuts also is undetermined, Dow spokeswoman Leslie Hatfield said.
The firm also will cut overall capital spending for 2003 by $400 million, representing a drop of 25 percent from 2002.
Stavropolous cited high feedstock costs and weak economic conditions for Dow's financial hardships. The firm also continues to see negative impact from its 2000 merger with Union Carbide Corp.
Dow took a pretax charge of $828 million for future and pending asbestos-related claims against Union Carbide, and absorbed an additional $225 million pretax charge for expenses and restructuring related to the merger.
The firm hasn't specified when in 2003 it will detail more cuts, but Stavropoulos has moved quickly since coming out of retirement to replace Michael Parker on Dec. 13. Within a week of his return, Stavropoulos - who led Dow as CEO during 1995-2000 - announced plans to cut more than $1 billion in costs in 2003.
Plastics-related businesses brought in almost half of Dow's $27.4 billion sales total in 2002. Sales in Dow's Plastics unit - including polyethylene, polypropylene and polystyrene - were flat vs. 2001 at about $6.5 billion, while sales in Performance Plastics - including polycarbonate and other specialty resins - were down 3 percent to $7.1 billion. Overall 2002 sales at Dow were down a little more than 1 percent.
Pretax profit in Plastics dropped almost 5 percent to $612 million in 2002, while Performance Plastics in that same area climbed almost 21 percent to $151 million.
In other news, Dow is blaming gloomy market prospects and a bleak global economic outlook for its decision to shut its PET plant in Pisticci, Italy, with the loss of as many as 70 jobs.
Dow will close the 132 million-pound-per-year facility by March and concentrate PET production at larger Dow Europe sites in Ottana, Italy, and Schkopau, Germany.
``Due to the current unfavorable market conditions and global economic environment, which are not expected to recover sufficiently in the medium term, we are forced to concentrate'' on more efficient facilities, said Flavio Terruzzi, global business director for PET/purified terephthalic acid.
Dow will assist workers through options including relocation or early retirement, he said.
The company first went into PET production and inherited the Pisticci plant when it acquired INCA International SA from EniChem SA in 1996. Once the plant is closed, Dow still will have total annual PET capacity of 617 million pounds, leaving the company among the world's top 10 suppliers, Terruzzi said.
Dow Europe is based in Horgen, Switzerland.
Plastics News correspondent Richard Higgs contributed to this story.