Reaffirms it won't cut dividend and will close deal for Rohm & Haas 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. The news follows rival DuPont Co. announcement last week that it would dismiss 6,500 workers, including contractors. See full story. "The entire industry supply chain [that Dow serves], all the way to what the consumer buys -- outside of food and healthcare -- is in a recessionary model," said Chairman and Chief Executive Andrew Liveris on a conference call with analysts. 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. "We are dialing down, and in the case of the 180 [plants to be idled], we can turn them all the way off...to minimize the cash burn," said CEO Liveris. By idling plants, rather then shutting them down completely, Dow said it will be able to increase production once the economy improves while avoiding hefty startup costs. Shares of Dow were up 7.6% at last check to $20.48. For the year, the stock is down nearly 50%. Dow is moving to raise cash ahead of closing an acquisition deal with Rohm & Haas , targeted to close in early 2009. Some investors and analysts have worried over financing the $15 billion deal with the credit markets in turmoil. Last week, Dow reaffirmed a new joint-venture company with Kuwait's Petrochemical Industries Co. will provide the cash it needs to close the deal. See full story. The company also plans to reduce its working capital next year by $2 billion and have about $600 million in lower capital spending, reducing 2009 cash requirements by about $2.5 billion and delivering an additional $1 billion in free cash flow, said Chief Financial Officer Geoffrey Merszei. Concern has also been raised over the future of Dow's dividend, an option Liveris said is not on the table. "Dow is the only company in the Fortune 200 to have paid its regular quarterly cash dividend without reduction or interruption since 1912," Liveris said. "I have said it before, but I want to say it again: We will not break that streak." Monday's announcement also represent an acceleration of a broader company strategy to decentralize Dow into three different business models with a leaner, more efficient corporate center. "We have the portfolio in hand to move to this new model," Liveris said. "Clearly we are accelerating this move given the deterioration in the world economy and in most of our markets." Specifics of the new operating models will be outlined next year, the company said. But at its heart is an agreement made last year in which Dow sold a 50% interest in its raw plastics businesses to Petrochemical Industries, a subsidiary of state-run Kuwait Petroleum Corp. In turn Dow gained greater access to emerging market growth and petrochemical materials used in its products. It will also result in a 50-50 joint venture, K-Dow, which is expected to begin operations by Jan.1, and have annual sales of $15 billion. Further, Dow said it expects to receive $9 billion in total pre-tax proceeds once the deal is complete. Completion of the deal will mark a critical milestone in Dow Chemical's hopes to transform into an earnings-growth company from one tied to cyclical conditions.

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