Midland remains anxious, despite Dow’s assurances
Dow Chemical Co.’s promises to remain and grow in its Midland home, amid its historic merger with rival DuPont Co., are doing little to allay rising anxiety of its Michigan workforce.
“Employees are concerned,” said Kent Holsing, president of United Steelworkers Local 12075, which represents an estimated 750 Dow laborers in Michigan. “Everybody wants to know, ‘What is my future is going to look like?’ ”
The so-called merger of equals, finalized Friday after more than a year of discussion and regulatory approvals, brings together two chemical industry giants to form a new company named DowDuPont Inc. But not permanently.
The companies plan to trade various segments, then split into three still-unnamed separate companies within 18 months. One of those will be a new material-science company referred to for now as “New Dow,” which will be headquartered in Midland and will focus on making performance plastics, materials and chemicals.
“Midland will see very little (negative) effect,” Dow CEO Andrew Liveris, now executive chairman of the combined DowDuPont, told The Detroit News in an interview. “It sees a positive effect. We’re doubling down on (research and development) based here. We have a nice factory base. Midland is an attractive place to put more.”
The deal closes a long chapter for Midland, a company town defined by Dow Chemical since Herbert Henry Dow founded the company there 120 years ago. Dow essentially built Midland, investing through philanthropy, new buildings, manufacturing facilities and investment to help attract talent to the city of about 42,000.
But changes in the region are expected to be seen by the beginning of 2019, and the 5,000-plus people Dow employs in Michigan have unanswered questions about how the post-merger split will affect their employment, benefits, pensions and standing with the company — and how those effects will ripple through the city.
Company officials say the “New Dow” will emerge a stronger, more focused company that will spur growth in the region, despite $3 billion in cost cuts on the table as result of the merger. Most of those cuts will come from combining facilities and cuts unrelated to the workforce, but a representative said that some savings will come from a headcount reduction for Dow.
The company declined to say how many jobs will be cut or how those cuts might affect Michigan. Holsing, the union leader, said he is not expecting job cuts in his bargaining unit.
The company repeatedly has stressed that Dow is not leaving Midland. The company has said multiple times that Friday’s deal will lead to $1 billion in growth for both Dow and DuPont in years to come. They say the move will allow Dow to focus on the materials sciences after its shedding agriculture and electronics areas to other parts of DowDuPont.
Dow this year completed construction on a new Midland headquarters. The company in July announced it would begin construction on a $100 million Innovation Center in Midland to drive research and development in the silicone sciences and organic chemistry that Dow absorbed when it acquired Dow Corning Corp. last year.
“We believe the merger will bring long-term growth not only to DowDupont but to all businesses,” said Becky Church, vice president of operations for the Midland Area Chamber of Commerce’s Midland Tomorrow. “We will see untold growth that will affect everything from small business to large, from service providers, restaurants and even families alike in a very positive and beneficial way.”
DowDuPont will have joint headquarters in Midland and Wilmington, Delaware, for the next year and a half. The merged entity is registered with the U.S. Securities and Exchange Commission in Delaware with addresses in Michigan and Delaware, according to a Friday filing.
By early 2019, Liveris and new DowDuPont CEO Edward Breen, formerly CEO of DuPont, plan to break the new company up into three independent, publicly traded companies.
DuPont will absorb Dow Chemical’s agricultural and electronics facilities and employees, which don’t currently have a large presence in Michigan. Existing facilities under those parts of the company in Michigan and other places will then bear the DuPont name.
Liveris said DowDuPont has a blueprint on how to reorganize the companies for the split, but they are reviewing whether more, smaller companies could be spun out of the merger.
For now, the plan calls for the agriculture and specialty products spin-offs to be headquartered in Wilmington operating under DuPont. DuPont’s materials sciences facilities, employees and research will be part of the new Dow. Added to Dow’s assets in the division, the companies estimate the new Dow will have net sales of $51 billion and boosted earnings.
Dow in 2016 had $48.12 billion in revenue.
“Dow has been rebuilding its portfolio,” said Liveris, who plans to keep his primary office in Midland. “We’re more ready. We have the playbook. We understand what we need to do.
“We see ourselves as a very important member of this state. This company knows where it’s going, and we have stability and certainty for the next months.”
DowDuPont Inc. expects most of the fallout from Hurricane Harvey to come from lost production as a result of plant closures.
Andrew Liveris, executive chairman, said Friday that facilities shut down in Victoria, Texas, due to flooding didn’t see much damage. He expects that facility to be operational in a few weeks.
Dow employs around 6,000 people in Texas. Other facilities in the Gulf Coast are currently running.
“(Most) of the impact will be lost production,” Liveris said. He said that’s not bad “compared to what it could have been.”