Dow Chemical cuts 11% of workforce; closes plants, page 1

Dow Chemical cuts 11% of workforce; closes plants

www.marketwatch.com

NEW YORK (MarketWatch) -- Dow Chemical Co. said Monday it will slash about 5,000 full-time jobs, or about 11% of its global staff, and eliminate an additional 6,000 positions in its contractor workforce as it moves to address "current economic realities."

Further, the Midland, Mich., chemical giant said it will idle 180 plants and shutter 20 facilities in "high-cost locations," cutting about 30% of its total production.

Here's what I found sobering:

Due to the restructuring, Dow said it will post a pretax charge in the current quarter of $700 million, including $350 million for severance packaged and a $350 million related to the closing of facilities. That should impact quarterly earnings by 50 cents to 60 cents a share.
Dow will also be hit with a related $80 million charge in 2009, but the move should eventually result in $700 million in annual cost savings by 2010, the company said.

They are spending at least $780 million dollars to save $700 million per year by 2010. That means that Dow clearly expects this recession/whatever you want to call it, to last beyond 2010 and even into 2011, as they don't plan to break even on these costs until then. This may be the clearest corporate indication of just how severe the coming economic situation is expected to be that I've seen so far. All the previous job cuts & operational closure news items I've seen haven't made any sort of statement related to the cost of the cuts (severence & plant closure costs) and exactly when those companies expected to break even on them. Unless I'm misunderstanding this, Dow is essentially saying that it will be at least 3 years down the road before they even start to think about bringing these jobs back.

www.marketwatch.com
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