Dow Chemical Co. will cut 1,000 jobs worldwide and close several locations in an attempt to improve performance at the Midland, Mich.-based plastics and chemicals leader.
The cuts include the previously announced closing of a polypropylene plant in Hahnville, La. In a Dec. 4 news release, Dow officials said a plant making polystyrene feedstock styrene monomer in CamaÃ§ari, Brazil, also will close as of Jan. 1. The CamaÃ§ari plant also makes toluene diisocyanate, a polyurethane feedstock.
Dow will take a fourth-quarter charge of between $500 million and $600 million for the closings, which will result in annual savings of $180 million.
``Today's announcement reflects our commitment to prune businesses that are not delivering appropriate value and tackle tasks more efficiently across the entire organization,'' Dow Chairman and Chief Executive Officer Andrew Liveris said in the release.
The job cuts represent about 2 percent of Dow's total global workforce. About 200 of the cuts will come from a Dow research and development center in South Charleston, W.Va. None of the R&D jobs are plastics-related, Dow spokesman Chris Huntley said.
Dow also plans to exit the automotive sealers business in all regions except Europe in the next nine to 18 months. In Europe, strategic options for the business will be explored. The business includes epoxy-based Betadamp-brand sealers. Officials said the decision ``reflects concerns about the unit's ability to meet the financial expectations of this business.''
In Canada, Dow will take a financial write-down on its Petromont & Co. LP joint venture. The 50-50 venture with state-owned Ethylec Inc. operates a high density polyethylene plant in Montreal East, Quebec and an olefins plant in Varennes, Quebec. Huntley said the venture - which has 325 employees and annual sales of $500 million - ``is facing a challenging future.''
The PP plant that will close in Hahnville employs about 60 and represents about 2 percent of North American PP capacity. Industry consultant Robert Bauman said the plant uses technology that's different and more costly than that used by Dow's other PP works.
``I would have to guess that Dow is closing the plant for a combination of environmental and operating cost issues,'' said Bauman, who's with Nexant Inc.'s ChemSystems division in Houston. ``They'd have to invest a lot to keep it running.''
At its Midland headquarters, Dow is eliminating 80 customer service positions and will replace them with 75 lower-paying jobs. The previous jobs focused on technical support service with minimal customer contact, while the new ones will focus exclusively on responsibilities that do not involve customer interaction.
``The positions [in Midland] were overqualified for their roles,'' Huntley said. ``It wasn't competitive to pay at those rates. We were facing a decision on possibly moving those jobs overseas or resizing them.''
Huntley said Dow was not releasing information about the pay differential between the old and new positions in Midland.
Industry consultant Balaji Singh said he agrees with Dow's actions.
``They're cutting out underperforming activities and becoming more market-oriented,'' said Singh, who owns Houston's Chemical Market Resources Inc. consulting firm. ``They're taking assets to where they can be more productive.''
In a Dec. 4 note to investors, stock analyst Kevin McCarthy of Banc of America Securities LLC in New York said that ``if there is a surprise in [Dow's] announcement, it is that the breadth of actions extends beyond commodity products to include specialties.''
In the first nine months of 2007, Dow's global sales were up 6.5 percent to $39.3 billion, but pretax profit was up less than 1 percent to about $3.8 billion. Plastics-related businesses accounted for 52 percent of Dow's nine-month sales total.
On Wall Street, Dow's per-share stock price began the year around $40 and rose close to $48 in July, but was just over $42 in early trading Dec. 7.