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Midland — Dow Chemical Co., the inventor of Saran Wrap and other ubiquitous household products that built Midland into one of Michigan's fastest-growing cities, will separate officially from its parent company Monday.

It's a divorce more than three years in the making that executives say will allow the company to innovate and grow as a streamlined material sciences business known simply as Dow Inc. The new $50 billion company will be focused on the raw materials for sneakers, mattresses, baby wipes and more.

But it sends management of its former units making herbicides and nutrition ingredients out of Michigan. And it leaves some of the remaining employees uncertain of the future.

Restructuring from the separation will continue over the next few years and will include "natural" workforce reduction when personnel departs the company, according to written responses from Dow, which declined in-person and telephone interviews about the transition.

"I think it makes all the workers nervous," said Kent Holsing, president of United Steelworkers Local 12075, which represents 730 Dow employees. "I tell our members: Change is not over. It's not done."

Pressed by activist investors, Dow Holdings Inc. and E.I. du Pont de Nemours and Co. made a $70 billion deal to merge in 2017, divvying up operations between three divisions for their eventual separations. The combined company, DowDuPont Inc., makes due on that promise starting with Dow Inc.'s spinoff next week.

The company reaffirmed its commitment to Michigan and promised to honor its philanthropic obligations.

“Dow will continue to have a leading presence in the region and we will continue to provide our resources, time, talents and people to the Great Lakes Bay Region," Dow CEO James Fitterling said in a statement. "We will continue to partner with our community organizations that make our region a great place to live and work.”

It is a "critical" juncture for Dow and its sister companies, said E. Han Kim, business administration professor at the University of Michigan's Ross Business School. The new Dow is slimmed from 15 business units to six under three verticals for packaging, infrastructure, and home and personal-care goods.

"Diversification is not necessarily good (for a company), but it is good only when the business is made to generate synergies," Kim said. "The fact that they decided to go separate ways probably means there’s not much of a synergy there."

Focused only on material sciences, Dow should be able to react more quickly to industry changes, Kim said.

The two other units being spun off from DowDuPont — agriculture chemical business Corteva Agriscience and specialty products business DuPont — will split on June 1.

Diversifying Midland

The new Dow Inc. will maintain its headquarters in Midland, but Corteva and DuPont are not disappearing. Both will have some of their largest presences in Michigan despite being based in Delaware.

"Dow and Midland have prospered together because of our ability to work for the benefit of everyone," Midland Mayor Maureen Docker said. "We definitely will become a much more diverse community when this is done. We’re going from one major company to multiple global companies in our community. It is a story that is full of opportunities and growth."

It could mean more investment and jobs for Midland, a corporate town defined by the company that developed Ziploc bags and Scrubbing Bubbles since Herbert Henry Dow founded it there in 1897.

A high school, arts center, library and the minor league baseball stadiumfor the Great Lakes Loonsall carry the Dow name. The company essentially built Midland with investments to attract talent to the city of nearly 42,000. Dow and its subsidiaries represented 14 percent of the city's property tax income with $289 million of taxable value at the end of Midland's 2018 fiscal year.

After its separation, Dow will have approximately 37,000 employees globally, down from 56,000 people ahead of its merger. Its Michigan workforce is relatively unchanged with 5,300 workers across six sites.

The company said in September its Michigan operations manufacturing complex in Midland was expanding to become an industrial park with presences from its two sister companies along with Korean plastic-maker SK Saran's first American operations and room for more.

The "i-Park" will have Corteva's largest manufacturing facility in the world and DuPont's second-largest manufacturing site by number of employees with about 1,200 people.

"The i-Park will facilitate collaboration, growth and inclusiveness in the region," said Tony Stama, CEO of the Midland Business Alliance, the city's business hub. "The spinoffs will give Midland a more diverse economic base and a chance to serve new industries. This is an intriguing prospect for our workforce and the vibrancy of our community."

'Some challenges'

The marriage between Dow and DuPont to date has had little effect on operations in Midland, employees told The Detroit News.

"For the most part, it's been business as usual," said Dick Govitz, Corteva operations specialist and unit bargaining committee president for Steelworkers Local 12075.

For many, the transition only has begun to be felt within the past six months, as workers learn to which of the three spinoffs they will go. Those were finalized Jan. 28. But change is not always easy.

A separate steelworkers union, Local 12934, rejected a lastbest and final offer from Dow for a new labor contract last week, said Michael Orvosh, the union's president. It is the first time the steelworkers are negotiating directly with Dow after the company fully acquired its silicones joint-venture Dow Corning Inc. in 2016, which was announced with the DuPont merger.

Dow has agreed to continue negotiations on Monday, Orvosh said. The local represents 690 Dow employees who work in chemical process operations, maintenance, logistics and labs.

Meanwhile, Holsing's local is adding two bargaining units as 316 of its Dow members transfer to Corteva and more than 300 go to DuPont. Eighty remain at Dow. That local's contract, which expires in February 2021, remains intact. Wages are unchanged, though some Corteva and DuPont workers may have to pay higher medical deductibles.

"There are some challenges," said Mikal Shanks, a Corteva lab analyst and unit bargaining committee member. "I think some of the guys with lower wages are more concerned. Not everyone has $1,400 to spend on medical bills before insurance kicks in. ... They didn't do this for our benefit. It's all for Wall Street."

Another challenge is the cultural transition, especially from 121-year-old Dow to 216-year-old DuPont. Holsing described DuPont's labor philosophy as being "what we used to do at Dow 10 to 15 years ago." For example, DuPont's production and logistics departments operate together, while Dow's are separate.

"When you come into Midland, they need to realize, they just can't instantly make us DuPont," he said. "Both sides have to agree from a safety and cultural standpoint."

Mike Bilodeau, DuPont operations specialist and unit bargaining committee president, remains optimistic: "(The split) should take the good from both companies and make it even better."

DuPont said in a statement it has begun working over the past year to introduce former Dow employees to the company.

"Throughout this process our efforts have been laser-focused on building a company that would be more nimble, more efficient, more focused — in a word, stronger — more capable of attracting and retaining talent and better able to serve our employees, our communities, our customers, our investors, and the world," Dan Turner, DuPont reputation and media relations leader, said in a statement.

Enticing investors

But Holsing worries that a greater workforce reduction or divestment from certain product lines soon could follow at any of the three companies. He believes the merger didn't work out as well as company leaders hoped it would.

"My concern is: The quickest thing a company can do to get their stock price up is to announce a global workforce reduction," he said. "I'm not going to say Dow is, but after the spin, they could to entice investors to the Dow stock."

The merger created a $130 billion company. Now, DowDuPont's market capitalization is less than $119 billion. Year-to-date, the overall chemical industry has a 7 percent return compared to DowDuPont's minus 1 percent, according to Zack's Investment Research. Total return over the past three years, however, is around 20 percent for both.

The company already has said it will launch a $3 billion stock repurchase program starting as early as April 2, when Dow shares begin trading the usual way on the New York Stock Exchange. Stock buybacks are a way for companies to drive up share prices.

The company says it is in a position to deliver long-term growth.

"The iconic red diamond logo will serve as a point of continuity for all of our stakeholders," Dow's Fitterling said in a statement, "as we build the most innovative, customer-centric, inclusive and sustainable materials science company in the world."

bnoble@detroitnews.com

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