Dow Chemical to Slash 2,500 Jobs
In early June, when Dow Chemical announced it had assumed full control of Its former 50:50 joint venture with Corning, one of the unanswered questions was how many jobs would be eliminated in the process as the business is merged into the new Materials company that will be part of DowDuPont.
The question was answered on Jun. 29 with Dow’s announcement of a “series of actions to achieve synergy capture and accelerate shareholder value from the restructuring of its ownership in Dow Corning.”
Concretely, the US chemical giant said it will eliminate some 2,500 jobs worldwide, or about 4% of the workforce, mostly related to the silicone portfolio, over the next two years. In the process, manufacturing plants in Greensboro, North Carolina, USA, and Yamakita, Japan, will be closed, along with other manufacturing sites and administrative offices at undisclosed locations.
The moves are designed to achieve $500 million in combined run rate annual synergies. This, Dow said should include $400 million in cost synergies – an increase of $100 million against the $300 million previously expected – along with $1 billion of additional EBITDA at full rate.
On top of the plant closures, the company said cost synergies will also result from harmonizing energy contracts at large sites, optimizing warehouse and logistics footprints, implementing materials and maintenance best practices, combining information technology service structures and leveraging existing R&D knowledge management systems.
Dow plans to take a charge of $410-460 million in this year’s second quarter of 2016 for asset impairments, severance packages for employees and other costs related to the measures, which he said will position the company to achieve its Dow Corning-related cost synergy target run rate of 70% within 12 months of closing the transaction and 100% within 24 months.
The chemical producer also hinted at broadening its product offerings in “key business areas,” cross-selling opportunities and expanding R&D capabilities to commercialize innovations faster.