Dow's actions follow those of rival DuPont, who last week said it would cut 2,500 jobs and warned it won't turn a profit in the fourth quarter due to a slowdown in the automotive and construction markets. -- PHOTO: AGENCE FRANCE-PRESSE
NEW YORK - DOW Chemical Co said on Monday it will slash 5,000 full-time jobs - about 11 per cent of its total work force - close 20 plants and sell several businesses to rein in costs amid the economic recession.
The company, one of the largest chemical makers in the world, expects the plan to save about $700 million (S$1 trillion) per year by 2010. Dow also will temporarily idle 180 plants and prune 6,000 contractors from its payroll.
Exactly which workers and plants will be affected is still being determined, a company spokesman said.
'We are accelerating the implementation of these measures as the current world economy has deteriorated sharply, and we must adjust ourselves to the severity of this downturn,' Chief Executive and Chairman Andrew N. Liveris said in a statement.
Last month, Dow Chemical had said it would review all options to reduce costs and eliminate or defer capital spending.
Dow's actions follow those of rival DuPont, who last week said it would cut 2,500 jobs and warned it won't turn a profit in the fourth quarter due to a slowdown in the automotive and construction markets.
Like Dow, Wilmington, Delaware-based DuPont is releasing 4,000 contractors, halting discretionary spending, slowing or stopping noncritical projects, and temporarily idling more than 100 manufacturing units.
The year-long restructuring plan will affect about 4,200 employees, or roughly 7 per cent of DuPont's work force.
Due to this latest move, Dow said it will take a fourth-quarter charge of $700 million, or 50 cents to 60 cents per share, to cover $350 million in severance payments and $350 million worth of plant shutdown costs.
But the company assured shareholders it has no plans to cut its dividend, which has been issued quarterly for nearly a century.
'We will not break that string ... not on my watch,' Mr Liveris said in a call with investors.
The Midland, Michigan-based company expects 'the new Dow' to be comprised of three units: joint ventures; performance products; and health and agriculture, advanced materials and other market-facing businesses.
The plan appeared to be well-received on Wall Street, where Dow's stock jumped $1.34, or 7 per cent, to $20.34 in afternoon trading.
The broader markets also rallied on an infrastructure spending plan put forth by President-elect Barack Obama.
'We believe that there will be some pain to be realized in the near-term, so staying on the sidelines appears prudent to us,' BB&T Capital Markets analyst Frank Mitsch said in a note to investors.
'However, we see plenty of opportunity for long-term investors given the excellent dividend yield'.
The stock is still worth less than half of the $45.50 it peaked at a year ago.
Mr Mitsch - who kept a 'Hold' rating on the company - lowered his earnings outlook for the fourth quarter to 30 cents per share from 54 cents, and for 2009 to $2 per share from $2.75.
Analysts polled by Thomson Reuters expect, on average, fourth-quarter earnings of 42 cents per share and 2009 earnings of $2.20 per share, on average.
The reorganization comes just days after the company closed on a plan to spin part of its plastics business into a joint venture with a Kuwaiti company that will be called K-Dow Petrochemicals and located in Michigan.
Dow also is slated to close on its $15.3 billion buyout of Rohm & Haas Co. early next year, a deal it hopes will help it grow into the high-margin specialty chemicals market. The company expects that deal to result in about $800 million in savings over time. -- AP
