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Dow Chemical to shut plants, cut 1,000 jobs

The firm aims to reduce costs and direct money toward businesses with more growth potential.

December 05, 2007|From Reuters

NEW YORK — Dow Chemical Co. will shut a number of plants and eliminate about 1,000 jobs to cut costs and direct capital toward businesses with better growth prospects, the largest U.S. chemical maker said Tuesday.

Dow said it would incur a related charge of $500 million to $600 million, including severance costs and asset write-downs.

The plant shutdowns and job cuts will generate annual savings of about $180 million, the company said.

Dow has been hurt by soaring hydrocarbon feedstock and energy costs. It has been attempting to improve its earnings through a series of joint ventures and by expanding its more profitable specialty businesses.

"Our focus on financial discipline and low cost . . . remains as sharp as ever, and we will continue to seek ways to refine our organizational structure, asset base and business portfolio," Chief Executive Andrew Liveris said.

Dow has been under pressure from investors to reduce its exposure to the more cyclical and low-margin commodity chemicals business.

Analysts expect Midland, Mich.-based Dow to announce a joint venture for its North American commodity chemical assets or the acquisition of a specialty chemical company, both of which could change its earnings profile.

Dow said it would exit the automotive sealers business in North America, the Asia-Pacific region and Latin America in nine to 18 months and explore options for its business in Europe.

The company will also take an impairment charge related to its plan to shut down its agricultural sciences manufacturing facility in Lauterbourg, France. Dow plans to leave the business because of overcapacity in the industry, a disadvantaged cost position, and increasing pressure from generic suppliers.

The company also will write down an investment in its Petromont and Co. polyethylene joint venture in Canada. Polyethylene is a common plastic used for bags.

Dow will idle a styrene plant in Camacari, Brazil, after Jan. 1 amid tougher competition and weak industry fundamentals.

The company also will close a facility in Aratu, Brazil, that makes hydroxyethyl cellulose, a naturally derived polymer used as a thickener in creams and lotions, in the face of capacity limitations and high structural and raw material costs.

Dow unit Union Carbide Corp. will shutter a polypropylene facility in Louisiana by year-end. Polypropylene is used in fibers as constituents of fabrics, upholstery and carpets.

Dow also will trim research and development efforts at its Union Carbide site in West Virginia.

Shares of Dow, which have fallen about 4.4% in the last three months, closed down 49 cents at $41.05.

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