“Economic growth in 2012 has slowed to a trickle, and that has spooked a lot of people.”-Jake Dollarhide, Longbow Asset Management
“Our low cost feedstock [natural gas] advantage enabled us to deliver volume growth, despite weakening demand. These difficult conditions [bad economy] may have extended staying power, as the new reality is that we are operating in a slow growth and volatile world.”-Andrew Liveris, Dow Chemical CEO
On 24 October 2012, Liveris explained the 2,400 job cuts (inadvertently announced the day before) as being necessary because Dow officials see the world economy getting worse.
Some analysts were surprised by the elimination of jobs and 20 factories: “Dow had very strong volumes in an uncertain macroeconomic environment. When I heard the announcement they were cutting jobs, I thought they had a really bad quarter, but it seems that business is A-OK.”-Hassan Ahmed, Alembic Global Advisors
Stock market investors are overjoyed at the announcement of the elimination of jobs (as they always are), and Dow Chemical stock values shot up 5 to 6% the morning after the job cuts were announced.
Dow reported net revenue for this past quarter at $582 million USD. But that’s down from the same quarter last year, when they reported $900 million. (note: various U.S. media sources are reporting slightly different revenue numbers) Dow officials say their sales are down across the board. The only area they see possible increase in sales is in their plastics made from cheap natural gas.
Their natural gas supplies come from the U.S. Gulf of Mexico operations, and Saudi Arabia. Dow has no plans for cutting workers from those operations. About 1,500 of the job losses will come from Dow’s paint and solar cell factories.
20 factories in Japan, Belgium, Netherlands, United Kingdom, Spain and the United States will be closed. Bloomberg reports that Dow did not want to make the layoffs public, but mistakenly emailed the announcement to some media outlets!
Despite stock investors buying up Dow stock, the chemical company said it will also cut $500 million from their own investing and capital spending. That’s the exact opposite of what U.S. President Barack Obama has been saying is needed to revive the economy. Obama has been stressing that unAmerican Corporate America needs to increase spending on investments and capital.