Dow Announces Further Moves to Bolster Competitiveness
In its ongoing drive to improve the efficiency and cost effectiveness of its global operations, The Dow Chemical Company has announced plans to shut down a number of assets and make organizational changes within targeted support functions. As a consequence of these activities, approximately 1,000 jobs will be eliminated from across several functions, geographies and businesses.
The Company expects to incur a charge in the range of $500 million to $600 million, which includes such costs as severance and asset write-downs. This will be reflected in Dow’s results for the fourth quarter of 2007. Once these actions are fully implemented, the Company expects to realize savings in the order of $180 million a year.
“Today’s announcement reflects our commitment to prune businesses that are not delivering appropriate value and tackle tasks more efficiently across the entire organization … freeing up capital and resources that will be re-directed toward value-creating growth opportunities,” said Andrew N. Liveris, Dow’s chairman and chief executive officer.
“Our focus on financial discipline and low cost to serve remains as sharp as ever, and we will continue to seek ways to refine our organizational structure, asset base and business portfolio to ensure Dow’s competitiveness on the world stage.”
The most significant financial impacts of today’s announcement are described below.
Dow will record an impairment charge related to its manufacturing site in Lauterbourg, France, as a result of overcapacity within the industry, a disadvantaged cost position, and increasing pressure from generic suppliers. As required, the Company has launched an information/consultation process with the local employee representatives on the closure project.
Dow will exit the automotive sealers business in North America, Asia Pacific and Latin America within the next nine to 18 months, and will explore strategic options in Europe. The decision, which reflects concerns about the unit’s ability to meet the financial expectations of this business, will allow the Company to focus its resources on delivering differentiated and higher value technologies to the automotive industry.
The Company will write down its investment in a joint venture - Pétromont and Company, Limited Partnership – due to an unfavorable financial outlook, reflecting significant long-term economic challenges.
The Company’s styrene plant in Camaçari, Brazil, will be idled on January 1, 2008, in the wake of escalating competition and weak industry fundamentals.
The Company will close its manufacturing facility for hydroxyethyl cellulose located in Aratu, Brazil, in the face of capacity limitations, high structural and raw material costs, and aging technology. After studying several options to improve the profitability of the facility, the Company opted to close the plant during the first quarter of 2008.
Union Carbide Corporation, a wholly owned subsidiary of the Company, will shut down its polypropylene facility at St. Charles Operations in Louisiana before the end of the year. The decision was driven by a number of factors, including the substantial capital costs required to maintain long-term operations at the facility.
And the Company will significantly reduce support functions, including R&D, at the Union Carbide site in South Charleston, West Virginia, as those functions continue to align their activities more closely with Dow’s strategic growth objectives. Approximately 200 jobs will be affected.
“We are committed to maximizing value across every aspect of our operations – within both our businesses and our functions. Decisions like these are not easy, but they will remain a fundamental part of our strategic agenda, maintaining a solid foundation of efficiency and efficacy as we aggressively build the Company to deliver long-term shareholder value,” said Liveris. “We recognize the uncertainty and anxiety that these decisions will cause our employees, their families and those living in the communities near our sites; and we will work hard to minimize the impact of these changes on those affected,” he said.
Dow is a diversified chemical company that harnesses the power of innovation, science and technology to constantly improve what is essential to human progress. The Company offers a broad range of products and services to customers in more than 175 countries, helping them to provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products. Built on a commitment to its principles of sustainability, Dow has annual sales of $49 billion and employs 43,000 people worldwide. References to “Dow” or the “Company” mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted.
Note: The forward-looking statements contained in this document involve risks and uncertainties that may affect the Company’s operations, markets, products, services, prices and other factors as discussed in filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.
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