DuPont Announces Work Force Reduction As Part of Competitiveness Actions
Press release from the issuing company
April 12, 2004 — DuPont today updated its progress toward the USD 900 million cost improvement commitment it announced in December 2003.
As part of today's announcement, DuPont said it will reduce its global employee work force, excluding INVISTA, by 6 percent, or 3,500 positions, as part of the cost improvement program. In addition, the company is reducing 450 contractor positions.
During the period Dec. 1, 2003, to Dec. 31, 2004, the company expects to eliminate about 3,000 positions through severance programs and about 500 positions through normal attrition. The impact will be primarily in North America and Western Europe. These actions do not include the company's INVISTA subsidiary.
The work force reductions are among actions DuPont is taking to achieve USD 900 million annualized cost improvement in 2005. The company said it is on track to realize that objective through fixed and variable cost reductions, as well as variable margin improvements.
"These are difficult but necessary decisions as we align our resources with market needs and adjust the size of our infrastructure following the anticipated separation of INVISTA," said DuPont Chairman and CEO Chad Holliday. "These actions will help assure the near- and long-term competitiveness of our businesses worldwide as well as progress toward our mission of sustainable growth."
Chad provided an update on the company's plan to achieve USD 900 million cost improvement in 2005:
USD 700 Million Fixed Cost Reduction Target: The workforce reductions announced today are expected to deliver about USD 325 million in annualized savings. Since most reductions will occur mid-year 2004, roughly half of the annualized savings will benefit 2004, primarily in the second half. Essentially all of the annualized savings from position reductions will benefit 2005.
The company expects to deliver approximately USD 375 million in fixed cost reductions by 2005 by reducing external spending in areas such as contract services, supplies procurement, telecommunications and information technology expense.
USD 200 Million Variable Margin Improvement Target: The company expects to achieve about half of this improvement through SKU reduction – which enables efficiencies of manufacturing through product line simplification and frees up capacity for higher value products in a number of businesses that are capacity constrained. The remaining improvement will be achieved through specific projects targeting energy utilization, improved product yields, and sourcing optimization.
The company is on target to improve its cost structure by USD 900 million in 2005, with about USD 450 million of that amount to be achieved in 2004. Some of these savings will fund capability building in growth markets; some will offset residual costs from the separation of INVISTA and other expected fixed cost increases; and some will directly improve earnings.
Chad emphasized that the company's actions to achieve cost improvement have not diminished its attention to growth. DuPont is driving top line growth in three important ways:
Improve the effectiveness of both sales and marketing functions across DuPont. The company is comprehensively and systematically taking action to increase the professionalism and rigor of its marketing and selling capabilities, with a goal of achieving world class capability across all businesses and geographies by mid-2006.
Achieve stronger customer focus by capitalizing on the scale and scope of DuPont to deliver high-value offerings to customers and markets worldwide. Special focus is on high-growth regions such as China, India, Central & Eastern Europe and Brazil.
Accelerate value creation through the company's innovation capability by increasing the percent of revenue from new products and by targeting R&D efforts to growth priorities. DuPont is on track to achieve its 2005 target of 33 percent of sales from products introduced in the last five years. It is currently at 29 percent, compared to 22 percent in 2000.
DuPont expects to take a one-time second quarter charge of approximately 17-19 cents per share as a result of the restructuring actions, largely for employee severance costs. The company will finalize the amount of restructuring charges during the second quarter.
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