DuPont to trim polyester business

1,400 jobs being cut in austerity move

June 08, 1999|By BLOOMBERG NEWS

WILMINGTON, Del. -- DuPont Co., the largest U.S. chemicals company, said yesterday that it will eliminate 1,400 jobs in its money-losing polyester business, about 14 percent of the unit's work force, and cut production to save $90 million a year.

The maker of Dacron polyester and Stainmaster carpet fibers said it will trim 800 DuPont positions and end contracts with other companies that affect 600 jobs. About 80 percent of the job cuts will be in North America.

DuPont expects to take charges of 4 cents a share in the second quarter for severance pay and 2 cents to 4 cents a share for asset write-offs.

The move is the latest in a series of steps at DuPont to restore profitability in its polyester business. The unit posted a $6 million loss last quarter, after Asian producers tried to make up for falling demand at home by shipping more lower-cost fiber to the United States. The polyester business contributed $2.8 billion to DuPont's $24.8 billion in 1998 sales.

"This suggests that the environment for polyester is still very tough and that putting assets into joint ventures may not have been enough," said Jim Kelleher, an analyst at Argus Research. "This could be a precursor to DuPont bundling and selling the business, though I don't think that's imminent."

The company said in April that it plans polyester joint ventures with companies in Turkey, Japan and Mexico to help cut costs.

DuPont will close some older production lines permanently and will shut others until demand picks up, a company spokesman said.

The company's shares rose $2.5625 to $72.8125 yesterday on the New York Stock Exchange.

Polyester prices fell about 30 percent worldwide during the past year because of declining demand in Asia and excess production capacity, said Sergey Vasnetsov, an analyst at Alex. Brown Inc.

"There's not much DuPont can do about the [slow] growth rate in the industry, but in terms of the company's profitability these are pretty serious cuts and a strong step forward," Vasnetsov said.

DuPont will close some older production lines permanently, a spokesman said. The company expects the cost savings to begin in the fourth quarter.

"The deep and prolonged decline in the global polyester market is driving fundamental structural changes in the industry, making it imperative that we take additional steps now to strengthen our businesses," George MacCormack, group vice president of the polyester business, said.

Analysts expect DuPont to earn 73 cents a share in the second quarter.

"Growth will resume in Asia, and we're already starting to see signs of that already. But right now we're in the bottom of a very deep [price] trough," MacCormack said.

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