NEW YORK - Dow Chemical Co. said today it will slash 5,000 full-time jobs - about 11 percent 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 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.
Dow announced in July that it was buying Philadelphia-based Rohm & Haas.
"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," Andrew N. Liveris, chief executive and chairman, said in a statement.
Last month, Dow Chemical 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 that it will suspend dividend payments as a way to conserve cash. In a conference call today, 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 made up 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 scheduled 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 expected 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-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.
Shares of Dow Chemical jumped $1.24, or 6.5 percent, to $20.24 in morning trading. The stock is still worth less than half of its 52-week high of $45.50, set nearly a year ago. Shares of DuPont rose $1.17, or 4.9 percent, to $25.29, as the broader markets rallied early in the session.