Dow Chemical to cut 11% of jobs, close 20 plants
— -- Dow Chemical dow said Monday it's cutting 5,000 jobs, or 11% of its workforce, and closing 20 plants amid the global economic downturn.
The steps, which follow similar moves by chemical giants DuPont dd and BASF, are expected to save $700 million a year by 2010. Dow also said it will temporarily idle 180 factories and trim 6,000 contract workers.
Dow CEO Andrew Liveris said it has planned for several years to prune its portfolio to create a "leaner, higher-growth, market-centered" concern. "We are accelerating the implementation of these measures as the current world economy has deteriorated sharply," he said in a statement.
Dow shares closed up $1.37, or 7.2%, at $20.37.
Dow makes chemicals for an array of industries, including construction, automotive, pharmaceuticals and personal-care products. Besides the recession, earnings have been buffeted by a cyclical buildup of capacity to produce commodities such as polyethylene and polypropylene.
Dow plans to restructure into three groups: joint ventures; distinctive products such as specialty chemicals; and health and agriculture, and other products with high profit margins and strong brands.
It will take a fourth-quarter charge of $700 million, or 50 cents to 60 cents a share, to offset $350 million in severance payments and $350 million in plant-shutdown costs. Liveris reiterated that Dow will not cut its quarterly dividend, noting it's the only Fortune 200 company to pay one without interruption since 1912.
Dow has been linking with other businesses to boost growth. Last week, it said it formed a joint venture with a unit of Kuwait's national oil company that will become the world's leading supplier of petrochemicals and plastics.
Last summer, it said it would buy Rohm and Haas for $15.3 billion to boost sales in more lucrative markets such as electronics and paints, and realize $800 million in savings. But analyst Frank Mitsch of BB&T Capital Markets says Dow overpaid for Rohm, at $78 a share, and may try to revise the terms.
Other chemical mainstays are also retrenching. Since last month, BASF has said it will temporarily shut 80 plants while DuPont said it will cut 2,500 jobs.
"It's taken (Dow) so long to … react," says analyst Michael Judd of Greenwich Consultants.
Also Monday, 3M CEO George Buckley said the company is eliminating another 500 jobs beyond the 1,800 it announced Friday for a total of 3% of its work force. The company — whose products include Scotch Tape, stethoscopes and water filtration systems — lowered its earnings outlook from about $5.44 per share to $5.10 to $5.15. Its stock dipped $2.47 to close at $57.38 .