Job cuts and plant closures as demand tumbles
US chemical giant Dow has responded to the slump in demand caused by the financial crisis and announced plans to ’eliminate’ 5000 jobs, cast off several business units and idle around 30 per cent of its production plants.
The 5,000 job losses amount to nearly 11 per cent of the company’s global workforce, 2,000 of which will go units the company is casting off. On top of those, some 6000 contractor positions will be lost as the company temporarily halts production at 180 production plants in Europe and the US.
As yet, it is unclear whether the company is including those jobs associated with the business unit it is selling to its K-Dow joint venture with the Kuwait Petroleum company.
The news comes less than a week after rival chemical company DuPont announced its own restructuring programme that would see it cut 2,500 jobs - some 4 per cent of its workforce.
Dow’s job losses and plant closures should lead to a reduction in annual expenditure of around $700 million (?472 million) by 2010, according to a company statement. These savings are on top of the $800 million of cost reductions Dow plans to make after it completes its purchase of Rohm and Haas, which is itself in the midst of axing 925 jobs.
Because the credit markets have dried up, the company is planning to reduce its working capital - the amount of money it needs to operate - by around $2.5 billion. Dow says that part of those savings will come from by reducing its capital spending - the amount it invests in property and equipment - by $600 million.
’While we are making a number of reductions in our cost structure, let me assure you we will not cut spending at the expense of growth, we will continue to fund our growth projects, we will continue to fund R&D spending to drive innovation and we will continue to pay our dividend,’ said Dow’s chairman Andrew Liveris during an investor conference call.
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