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Dow to Lay Off 2,500

Monday, July 11, 2016

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Within weeks of The Dow Chemical Company’s completion of its strategic ownership restructuring of Dow Corning Corporation, the specialty chemical giant announced the elimination of 2,500 jobs as part of the integration process.

In addition to the job cuts, which reduce Dow’s workforce by 4 percent, the Midland, MI-based company said it would be closing two silicone manufacturing sites, as well as other administrative corporate and manufacturing locations.

Dow diamond logo
Photos: The Dow Chemical Company

Dow recently announced plans to eliminate 2,500 positions from its workforce in an effort to achieve the benefits of and value from the integration of the Dow Corning silicones into its operations.

In its announcement, Dow framed the actions as a means to better accelerate the anticipated benefits of the restructuring while increasing value for shareholders.

“We are moving quickly and effectively to integrate Dow Corning and deliver the synergies that will drive new levels of value creation for our customers and generate even greater returns for our shareholders,” said Andrew N. Liveris, Dow’s chairman and chief executive officer.

“With these difficult but necessary actions, we are bringing together the best of each company’s talent and technology, accelerating Dow’s strategy to go narrower and deeper into attractive, targeted market sectors, and setting the stage for the new Dow—the world’s leading material science company,” he added.

Integration Benefits

Dow anticipates its integration of Dow Corning’s silicone technologies and products will help it expand its footing in high-growth, high-value markets such as building and construction, transportation and others.

Having spent $4.8 billion to end the 73-year joint venture, according to Forbes, Dow expects the deal to achieve approximately $500 million in annual savings—consisting of $400 million in cost synergies and $100 million in growth synergies, it said.

It also expects the ownership change to deliver $1 billion of additional annual earnings.

Dow Corning will operate as a wholly owned subsidiary of Dow, and will be headquartered with Dow in Midland.

Streamlining Operations

In an effort to consolidate its workforce and operations, Dow said it plans to eliminate 2,500 positions globally over the next two years.

Dow science

Dow said it will also close two silicone manufacturing plants, in addition to other administrative, corporate and manufacturing sites, in order streamline costs.

Employee notification is slated to begin within the next several weeks and to extend through the third quarter of 2016, PCI Magazine reported. However, it will work to place affected employees into other open roles within the company if eligible, it added.

The company will record an expense between $410 million and $460 million in the second quarter of 2016 related to severance and other costs related to the layoffs.

In addition to the workforce reduction, the company intends to shutter select administrative, corporate and manufacturing facilities as a means to further enhance competitiveness and streamline costs associated with the deal.

Specifically, Dow will shut down silicone manufacturing facilities in Greensboro, NC, and Yamakita, Japan, it said. According to a local news source, 130 employees will be affected by the Greensboro plant closure.

Additional savings are expected from actions to institute materials and maintenance best practices, standardize energy contracts at large sites, optimize warehouse and logistics assets, consolidate IT service, and make better use of existing research and development systems.

According to the company, these actions should enable it to realize about 70 percent of its target savings within the first year of the deal, reaching 100 percent within two years.

Leadership Changes

Prior to the announced layoffs, the manufacturer revealed changes in the Dow Corning executive leadership in anticipation of the restructuring.

Dow welcomes Dow Corning

Dow Chairman and CEO Andrew N. Liveris (left) and Robert D. (Bob) Hansen, outgoing chairman, CEO and president of Dow Corning, took part in an event welcoming Dow Corning to the Dow family earlier this year.

As previously reported, Dow Vice Chairman and Chief Financial Officer Howard Ungerleider was tapped to serve as chairman of Dow Corning, in addition to his current responsibilities.

Dow Vice President Mauro Gregorio, who leads the Dow Corning integration team for Dow, will take on the role of chief executive officer for Dow Corning.

Andy Tometich, a 27-year Dow Corning veteran, has been named president of the silicones business.

These changes are also taking place amid anticipation of a merger between Dow and DuPont, creating mega-company DowDuPont. Dow had announced its deal with Dow Corning in conjunction with the merger announcement in December 2015.

The DowDuPont deal, valued at $130 billion, is expected to close in the second half of 2016, subject to closing conditions.

In this scenario, current Dow CEO Liveris is slated to become executive chairman of the new company, while Ungerleider has been tapped as DowDuPont’s CFO.

   

Tagged categories: Acquisitions; Business operations; Coating chemistry; Dow Chemical Company; Dow Corning; DuPont; Layoffs; Mergers; Personnel changes; Silicone; Transportation

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