Dow to close 20 plants, including one in South Charleston
The Dow Chemical Co. announced it will eliminate about 2,400 jobs and close roughly 20 manufacturing facilities, including its gum base plant in South Charleston.
The moves are part of a restructuring plan aimed at coping with slowing economic growth in Europe and elsewhere.
Kanawha Commission President Kent Carper said, "It's my understanding they're ready to send out a WARN (federal Worker Adjustment and Retraining Notification) notice on about 13 employees."
The gum base plant produces the material that makes chewing gum chewy. Dow reportedly tried to sell the plant a few years ago and entertained a delegation of Brazilians who inspected the facility. But a sale obviously didn't materialize.
"You ask why this has happened and we don't really know," Carper said. "If you look on the Internet you can see they've opened some new plants and are closing others. One of the curses of the modern age is an efficient transportation system that allows the easy transport of goods. It's a global and national decision on their part.
"I'm certainly not one to say 13 jobs are not significant," Carper said. "It certainly is significant for 13 families."
Dow spokeswoman Trish Thompson issued a statement confirming the decision to close the gum plant. But the statement did not say how many employees will be affected or exactly when the closure will occur.
"Specific impacts are still being finalized," it said.
"The decision to shut down this asset was a portfolio-based decision and is aligned to a series of moves the company is taking to strengthen our long-term competitiveness, focus our resources in areas that will drive growth and deliver the most profitable returns on our investments," the statement said. "The gum base employees have done an excellent job and have demonstrated outstanding performance."
Dow said gum base is one of nine operating units at the South Charleston site.
"Operations at the other plants at the site will continue as normal," the company said. "West Virginia Operations will work with the regulating agencies to cease operations and shut down the operating unit in a manner consistent with applicable environmental, health and safety laws."
Dow said Tuesday that the 2,400 total job cuts amount to 5 percent of the company's workforce worldwide.
Dow expects the strategy will result in roughly $500 million in annual cost savings by the end of 2014.
The company also plans to slash capital spending and investments. It expects that will save an additional $500 million.
All told, Dow anticipates it will save $2.5 billion, including other cost-cutting measures.
Dow produces materials used in nearly every business sector and region of the world, leaving it exposed to shifts in global economic growth.
Late Tuesday, the company issued its third-quarter earnings report that had been expected to come out Thursday morning.
It reported a nearly 40 percent drop in net income to $497 million, or 42 cents a share, from $815 million, or 69 cents a share, in the same quarter last year.
It said revenue dropped 10 percent, to $13.64 billion, led by a 10 percent decline in Europe.
Analysts had been expecting the company to earn 37 cents a share on $14.18 billion in revenue, according to FactSet.
The company's business has been hurt by Europe's debt crisis and slower growth in China. Manufacturers, construction businesses and some transportation customers have reduced demand for Dow products. The company's coatings and materials for electronic devices also have been weak.
"The reality is we are operating in a slow-growth environment in the near-term and, while these actions are difficult, they demonstrate our resolve to tightly manage operations particularly in Europe and mitigate the impact of current market dynamics," Andrew Liveris, Dow's chairman and CEO, said in a statement.
Rival DuPont Co. on Tuesday reported a big drop in quarterly profit and missed Wall Street expectations. The company announced a restructuring that includes 1,500 layoffs. The company said the layoffs would not impact its operations at Belle or its Washington Works in Wood County.
Over the next two years, Dow plans to close certain manufacturing facilities in the U.S., Belgium, The Netherlands, Spain, the United Kingdom and Japan.
The company projects it will book between 50 and 60 cents per share in charges related to the restructuring in the fourth quarter of this year. That includes a write-down of assets related to its Dow Kokam LLC joint venture -- a move the company is making due to weak global demand for lithium-ion batteries.
Despite the sweeping cost reductions, Dow plans to continue to invest in areas where it believes that it can clearly expand its profit margins. Those include Dow AgroSciences, Dow Electronic Materials and its Sadara and U.S. Gulf Coast investments.
"Taken on the whole, Dow's strategy remains intact, and our long-term growth fundamentals are strong," Liveris said.
Dow shares ended regular trading down $1.19, or 4 percent, at $28.55 amid a broad market decline. The stock slipped another 24 cents to $28.31 in extended trading.