MIDLAND, Mich. (March 13, 2008) — Dow Chemical Co. is cash-rich and heading in a new direction.
The company was product-driven, now it is market-driven, according to Balaji Singh, president of Houston-based Chemical Market Resources.
Because of that, the firm's synthetic rubber unit and a thermoplastic urethane elastomer line are on the examination table and eventually could be sold, axed or moved to a joint venture, Dow Chemical said in a release.
Both are part of a major realignment taking place at the company. The SR and Pellethane TPU units—along with Saran products, specialty films, polycarbonate, compounds and blends, and specialty copolymers—are the first to be lumped together under the newly created Dow Portfolio Optimization group with the goal of defining how best to maximize the long-term value of each unit.
After a thorough review and analysis, a spokesman said, the group will determine where to proceed with each business. That could include realignment to another Dow operation, placement in a current joint venture, creation of a JV with another company or divestiture, he said.
“Essentially, there are some businesses that aren't currently placed well for growth,” the spokesman said. By putting each unit under the spotlight, the proper determination can be made, he said, and if a business doesn't fit anywhere, it's sold.
George Biltz, who currently heads the company's Specialty Plastics and Elastomers operation, has been appointed business group president of Dow Portfolio Optimization.
Dow Chemical expects to put other businesses into the group as they are assessed for alignment with the firm's transformational strategy.
“Dow is going from product orientation to market orientation,” Singh said. “It is repositioning itself for individual markets. So products now have to fit with selected market sectors.”
That will have a positive impact on the company, he said.
Singh said the company is looking to optimize its specialty products as it focuses on market needs. That could result in more current lines being shifted to JVs or divested.
As an example, he cited a major move the company made in December when it placed some plastics assets into a joint venture with Kuwait-based Petrochemical Industries Co. to create an $11 billion business, headquartered in the U.S.
“The easier cuts to make are the ones that are financially driven,” according to Biltz. “Financial fit is one element of this discussion, but a strategic fit is more complicated. We have to look at where our company and society are headed.”
Dow Chemical is trying to tie each business to a sector where it provides a direct service, the spokesman said.
Because the Midland-headquartered company has garnered about $9 billion from a number of operations it has sold, the moves it has been making could result in more acquisitions that fit key markets—such as automotive, footwear, building solutions, personal care, inks and toners, and adhesives, Singh said.
Since 2003, the company has shut down 92 plants, exiting 42 sites and divesting 38 businesses. The firm said late last year it would cut some assets—including factories in Louisiana and Brazil—and trim about 1,000 jobs as it dropped some underperforming operations.
The personnel cuts represent about 2 percent of Dow's total global work force. Approximately 200 of the job losses will come from a Dow research and development center in South Charleston, W.Va.
Included in the cuts is its automotive sealers business in North America, Asia Pacific and Latin America. The operation will be eliminated within 18 months, Dow said, while the firm's European automotive segment will explore several options.
Dow is looking to improve its profits in 2008, after seeing earnings slide almost 23 percent in 2007 to less than $2.9 billion.
Frank Esposito, Plastics News Staff, contributed to this report.