08 December 2008 15:54 [Source: ICIS news]
(adds updates throughout)
HOUSTON (ICIS news)--Dow Chemical's layoffs and plant closings will speed up its pre-existing plans to streamline the company, while helping it contend with a global downturn, CEO Andrew Liveris said on Monday.
Dow plans to eliminate about 5,000 full-time jobs, or 11% of its total workforce. In addition, Dow is removing roughly 6,000 contractor positions, or 30% of its total, Liveris said.
The company is also closing 20 plants, idling 180 others and selling off businesses.
Dow will eliminate many of the positions through the sell offs, Liveris said. Dow will eliminate other positions by streamlining its corporate centre.
At the same time, Dow will organise itself under three operating groups: feedstock-driven businesses, performance products and market-facing businesses, Liveris said. Market-facing businesses will include health and agriculture, advanced materials and Dow's Rohm and Haas acquisition.
The new corporate structure and the reductions all fall under Dow's asset-light strategy, Liveris said, which will reduce its exposure to low-margin feedstock chemicals while increasing its emphasis in high-margin businesses.
The changes go hand in hand with Dow's acquisition of Rohm and Haas and its joint venture with K-Dow Petrochemicals, which it established with Kuwait's Petrochemical Industries Co (PIC), Liveris said.
Nonetheless, Dow decided to accelerate the restructuring in light of the weakening economy, Liveris said. In September and October, Dow saw deterioration across the board.
"The entire industrial supply-chain - all the way to what the consumer buys outside of food and health - is in a recessionary mode," Liveris said.
The reductions and plant closings will cause Dow to take a $700m (€553m) charge in fourth-quarter earnings, said Geoffery Merszei, chief financial office. Out of the total, $350m will be related to severance payments, and the rest will be related to shutdowns.
The shutdowns should save Dow $350m/year by the end of 2009, and $700m/year by the end of 2010, he said. The savings come on top of the $800m that Dow expects to gain through its acquisition of Rohm and Haas.
Shares of Dow on the New York Stock Exchange were trading on Monday morning at $20.51, up $1.51.
($1 = €0.79)
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