Dow Plans to Cut Workforce by 6%
US chemicals and plastics producer Dow plans to cut its workforce by 6% in response to the coronavirus crisis, CEO Jim Fitterling said on July 23 while presenting financial results for Q2 2020. The plans, he said, reflect management’s expectations of an uneven recovery from the ongoing pandemic.
Dow did not disclose a timetable for the cutbacks or say where jobs would be lost. Workforce reductions will go hand in hand with an overarching restructuring program that targets the creation of $300 million in annual benefits by the end of 2021. The US group based at Midland, Michigan, employs 36,500 people across 109 sites in 31 countries.
With challenges still anticipated for the rest of 2020 and the early part of 2021, management plans to increase its target for expense reduction from $350 million to $500 million. Fitterling said Dow will also look to exit “noncompetitive assets.”
The chemical producer earlier this month signed a definitive agreement to sell its rail infrastructure assets and related equipment at six major North American sites to Watco Companies, with expected cash proceeds at expected to exceed $310 million by year’s end.
For the second quarter, Dow reported a net loss of $217 million, its first since the separation from DowDuPont. Net sales plunged 24% to $8.4 billion against the 2019 period. Major business segments came under pressure due to lockdowns in important customer industries, and plants supplying the automotive and construction industries operating at about 50% of capacity.
In contrast, other businesses, including plastics, developed “solidly,” thanks to pandemic-related demand from the pharma, health and hygiene sectors. This helped offset weakness in durable consumer goods. China rebounded strongly from its earlier slump, and the CEO said there were also signs of recovery in western Europe, which he sees as a positive sign for the Americas.
In a conference call with journalists, Fitterling said it “may take a couple of years” for Dow’s business to rebound to pre-coronavirus levels. The chemical group does not plan to increase capital spending until volumes and margins climb back to their earlier levels. For this year’s third quarter, it has forecast sales of $8.5-9 billion.
