CONFIRMED: DuPont to resume salary increases, bonuses, promotions as merger cuts loom
Europe keeps asking for more merger data
TUESDAY UPDATE: The DuPont Co. will resume salary increases, annual bonuses and promotions, ending a couple of years of wage freezes. Spokesman Daniel Turner confirmed the plan, which I first reported in this space yesterday from sources inside the $28 billion (yearly sales), Wilmington-based chemicals and materials maker.
Salary hikes are to resume in the fourth quarter, bonuses in 2017. DuPont has also resumed promoting professionals, in departments where upgrades have been scarce. (update: Callers told me Wednesday that some of what one called "the coat and tie people," salaried professionals, did get DuPont "stipend" payments over the past 18 months; non-union hourly workers were excluded.)
The move back to more-normal career progress follows the familiar wave of resignations companies undergoing mergers and layoffs often face, as managers and researchers spooked by past and expected job cuts went elsewhere pending the planned Dow Chemical merger and spin-offs.
DuPont cut 5,000 jobs in 2015 as it prepared for the merger, including 1,700 in the Wilmington area, where DuPont was long the dominant employer (it now employs fewer than 5,000 locally, about half as many as JPMorgan). Together Dow and DuPont employ around 100,000 worldwide. Dow, which employs more than 2,000 in the Philadelphia area, including former Rohm and Haas workers, also plans cuts.
Dow boss Andrew Liveris expects to collect $53 million from the deal, while DuPont boss Edward Breen stands to collect $27 million, or more if the companies' planned spin-offs do extra well.
MONDAY: As they continued to plan job and vendor cuts, Dow Chemical Co. and DuPont Co. hoped to merge "during the second half of 2016," the companies said in their July letter to shareholders, who approved the deal. See p. 14.
The partners still need approvals from national regulators. The European Commission -- the same EC that demanded $14 billion from Apple on Aug. 30 -- this summer called DuPont's initial defense of the merger's impact on farmers and other customers "insufficient," asked for more time, and finally froze its investigation awaiting more information from the partners.
If delays repeat, the EU probe could become an issue: "The merger agreement may be terminated" if the deal isn't done "by March 15, 2017," the partners told shareholders in that July letter, p. 17. Or they may stretch the deadline until June 15 if "any legal restraint is in effect in the United States, European Union, China, Brazil, Canada or other jurisdiction" into Spring.
While pensioners and environmentalists are worried DowDuPont's plans to split up after the merger will leave massive bills unpaid while enriching executives and bankers (see also David O'Reilly's July story on plans to reopen part of DuPont's derelict Repauno works as a South Jersey port), few U.S. officials have raised public objections.
Except Sen. Charles Grassley, R-Iowa. Last winter, Grassley courted the companies, asking them to locate the corporate headquarters for their planned $30 billion seed-and-pesticide successor company out in Des Moines.
But after DowDuPont said it'll put a bare-bones ag HQ and bosses in Delaware instead of moving out to the corny plains, Grassley urged the Justice Department to investigate the combined companies' pricing power.
So DuPont ag chief Jim Collins will head down to Washington to hear Grassley's complaints in person at this Senate Judiciary Committee hearing Sept. 20.
Collins "will represent DuPont and speak before the Committee about the pro-competitive aspects of the merger and how we will be better able to help farmers by providing greater choice, more innovative products, and competitive price for value, ultimately increasing grower productivity and profitability," spokesman Daniel Turner told me.
The Justice Department asked for merger data back in February. DuPont and Dow say they have been cooperating.
The EC summarized the case for the merger here. In August, the EC opened its own case listing "preliminary concerns" about the merger here, including whether "the proposed merger could reduce competition" for crop herbacides, fungicides, nematode-killers, gene-editing technologies, and oil-based wrapping plastics (polyolefins and monomers).
EC worries the merger, by combining two leading producers, could drive up prices and reduce pesticide choices, hurting farmers and consumers.
In their July statement, the companies "address(ed) some of the Commission's preliminary concerns." But the Commission in its "preliminary concerns" paper said it "considered these commitments insufficient."
On Aug. 11, Dow and DuPont said the EC was starting a Phase II review of the merger and would take up to 90 days to consider what the merger would mean for product choice and prices. On Sept. 2 (corrected), the companies said the EC was going to take at least 10 days longer. On Sept. 9, the EC told reporters it was "halting its review," Reuters said here.
"This is a routine procedural part of the EC process. It does not change our timing expectations," spokesman Daniel Turner told me. "We are continuing to work constructively with the Commission [and Justice in the U.S.] to address their concerns and to obtain clearance of the merger by year-end 2016."
How are DuPonters dealing with uncertainty? "The mood is lightened a bit, as [EC delay] inconveniences Ed Breen's plans," says a sardonic scientist who survived the winter's pre-merger job cuts but worries what's next in the Dow-DuPont combo/cost-cuts/spin-off drama.
"I've heard the EU's questioning has gone very deep," he added. "They're asking specifically why funding wasn't available to compete particular areas of research... Anything that puts a pebble in [Breen's] shoe brightens our day," since "it could buy us a few more months of salary."
How are DuPonters coping with uncertainty? He notes several common responses:
- Marine Corps types, "in the trenches waiting to go up and over the top," into what could after all be a streamlined, less-frustrating, more-effective DuPont successor company (or at least a buyout package);
- Wishful thinkers, who hope European regulators or farm-state U.S. Senators will kill the deal, as if that would somehow ease cost-cutting pressures;
- Searchers, very actively looking for other jobs;
- The "Zombified," waiting passively for events they don't control.
