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Dow, 3M slashing jobs amid slowdown

Dow Chemical is cutting 5,000 full-time jobs, closing 20 plants and selling businesses in an effort to cut costs amid poor market conditions.
/ Source: The Associated Press

Dow Chemical Co. said Monday it will slash 5,000 full-time jobs — about 11 percent of its total work force — close 20 plants and sell several businesses to control costs amid the economic recession.

The company, one of the largest chemical makers in the world, expects the moves to save about $700 million per year by 2010. Dow also will temporarily idle 180 plants and prune 6,000 contractors from its payroll.

"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. "We are going to take necessary, bold and proactive measures to manage our transformation through these extremely challenging times," Liveris said at the time.

The company 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 denied it will suspend dividend payments as a way to conserve cash. In a conference call Monday, Liveris said Dow has paid a dividend each quarter for nearly 100 years, and has no plans to stop that trend.

"We will not break that string...not on my watch," he said.

The Midland, Mich.-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 reorganization comes just days after the company closed on its K-Dow Petrochemicals joint venture with a company controlled by the Kuwait government. The K-Dow venture, which both companies estimate will be worth about $17.4 billion, is slated to open by Jan. 1 and will market plastics and other related products. Dow and Kuwait's Petrochemical Industries Co. hope the venture will help them capture a larger share of the global chemicals market and boost profitability.

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 results in about $800 million in savings over time.

The joint venture and Rohm & Haas deal come as the global credit markets have all but ground to a halt, leading some to question the validity of high-priced deals amid the economic turmoil.

Dow Chemical's latest 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 severe slowdown in the automotive and construction markets.

Wilmington, Del.-based DuPont also is releasing 4,000 contractors by the end of this year, with additional contractor reductions expected in 2009, and will implement work schedule reductions and redeploy more than 400 employees on projects to reduce working capital and operating costs.

DuPont, one of the world's largest chemicals makers, is stopping all discretionary spending, slowing or halting noncritical projects, and temporarily idling more than 100 manufacturing units. The year-long restructuring plan will affect about 4,200 employees, or roughly 7 percent of DuPont's work force.

Meanwhile, 3M said Monday it cut nearly 1,800 positions in the fourth quarter, mainly in the U.S., Western Europe and Japan. The cuts are expected to save $170 million in 2009, and are in addition to the 1,000 jobs eliminated in the third quarter ended Sept. 30.

Companies have been slashing thousands of jobs amid one of the deepest economic slowdowns in decades. On Friday, the Labor Department reported that U.S. employers shed 533,000 jobs in November alone, the largest monthly job loss figure in 34 years.

3M Co., which makes everything from Post-It Notes to Scotch Tape, lowered its 2008 earnings outlook and forecast 2009 profit below Wall Street expectations, citing slowing revenue in the weakening economy.

The Maplewood, Minn.-based manufacturer now expects earnings per share for 2008 will range between $5.10 and $5.15, down sharply from its previous estimate of $5.40 to $5.48 and well below Wall Street's $5.43 average forecast, accordint to analysts surveyed by Thomson Reuters.

3M expects 2009 earnings per share between $4.50 and $4.95, also widely missing analysts's average estimate of $5.31 per share.