DuPont will cut 1,500 jobs Rising competition forces prudence in fiber business

Chemical Industry

March 01, 1996|By BLOOMBERG BUSINESS NEWS

WILMINGTON, Del. -- DuPont Co. said yesterday that it will slash 1,500 jobs in its fiber businesses to make them more competitive, and said it took a first-quarter charge of $27 million.

The action affects about 1,200 employees at the company's North American nylon and Dacron polyester divisions, and another 300 people who work under contract. Of the 1,200 DuPont workers, 800 will be fired and 400 transferred to other jobs, the company said.

Rising competition has forced the world's largest nylon maker to cut costs in an effort to maintain its leading position.

Lower polyester prices and weak demand from the struggling apparel industry mean that division must improve productivity to boost profits.

"This is all part of the new, worldwide competitive era," said Fred Siemer, an independent analyst in New York who covers the chemical industry.

"DuPont is going through every business with a fine-tooth comb."

DuPont began notifying affected employees yesterday. The 900 jobs being eliminated at the North American nylon business represent about 8.2 percent of the division's work force. The cuts will reduce operating expenses by 10 percent, the company said.

An estimated 40 percent of the jobs being eliminated in the nylon business are managerial or professional, and the cuts will extend across all of the unit's manufacturing plants and offices in North America, the company said.

About 9.1 percent of Dacron's work force will be eliminated, resulting in a 20 percent drop in operating expenses. The cuts will save about $100 million in the "long term," the company said.

An estimated 30 percent of the job cuts involve managerial positions. In addition to producing fibers and a variety of chemicals, DuPont has major businesses that produce items such as pharmaceuticals, polymers and agricultural chemicals. It also owns Houston-based Conoco Inc., a big energy company.

The Wilmington, Del.-based company has 105,000 employees.

Nylon is used to make carpets and upholstery. Dacron is used in pillows and clothing.

DuPont's fiber operations, which include Lycra spandex, accounted for about $7.2 billion, or 17 percent, of the company's 1995 revenue of $42.2 billion. DuPont doesn't break out the divisions' operating profits.

The company's shares fell $1.25 to $76.50 yesterday.

DuPont said it earned $959 million, or $1.40 a share, in the first quarter of 1995 on sales of $10.5 billion. The charge amounts to 5 cents a share.

By lowering costs, DuPont will be able to more effectively compete with smaller competitors that have entered the fibers industry.

"These are not our traditional competition," said DuPont spokesman Bill Brown. "There are more of these smaller and leaner operators we are competing against. This is a trend."

In some cases, the company's nylon customers have become its competitors. Most major carpet makers now also make some of their nylon fiber, said Gary Pfeiffer, vice president and general manager of DuPont's North American nylon business.

He also said many Asian, Middle Eastern and Eastern European companies have started selling nylon in the United States.

The polyester business, which has had problems meeting its profitability target, has had to cope with weaker demand for polyester fiber from a weak apparel industry.

DuPont has said that each of its divisions must earn at least the cost of capital.

Earlier this year, Wellman Inc., a Shrewsbury, N.J.-based maker of polyester fiber, said it expects 1996 earnings to be disappointing because of weaker polyester-fiber demand.

For months, analysts have said that DuPont might sell the Dacron business because it failed to meet the company's profit goals.

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