Dow announces targeted actions to deliver $1B in cost savings

Rhea-AI Summary

Dow Inc. (NYSE: DOW) has announced targeted actions to achieve $1 billion in cost savings in response to ongoing macroeconomic uncertainty. The plan includes:

- $500-700 million reduction in direct costs, focusing on purchased services and third-party contract labor
- Workforce reduction of approximately 1,500 roles globally
- Expected charges of $250-325 million in Q1 2025 for severance and related benefits
- Additional implementation costs of $20-30 million to be expensed as incurred

The company aims to reinforce its long-term competitiveness while adapting to current market conditions. CEO Jim Fitterling indicated that further actions may be taken if necessary as 2025 progresses. The implementation will involve engagement with local stakeholders and comply with regional regulations.

Positive

• Clear cost reduction target of $1 billion annually
• $500-700 million savings from direct costs optimization
• Proactive approach to maintain competitiveness in challenging market conditions

Negative

• Elimination of 1,500 jobs globally
• One-time charges of $250-325 million in Q1 2025
• Additional implementation costs of $20-30 million
• Indication of ongoing macroeconomic weakness affecting operations

Insights

Financial Restructuring Analyst

Dow's ambitious $1 billion cost-savings initiative represents a strategic pivot that warrants careful analysis. The program's structure reveals two critical components: $500-700 million in direct cost reductions and a global workforce reduction of 1,500 positions. The implementation timeline and cost structure provide key insights:

Breaking down the numbers:

• Initial restructuring charge: $250-325 million in Q1 2025
• Implementation costs: $20-30 million
• Expected annual run-rate savings: $1 billion

The cost-to-savings ratio indicates an efficient restructuring program, with initial costs representing approximately 25-35% of annual targeted savings. This positions the program to achieve positive ROI within 12-18 months of full implementation. The focus on purchased services and third-party contract labor suggests Dow is prioritizing operational flexibility while maintaining core capabilities.

Particularly noteworthy is the timing of this announcement. With the chemical industry facing persistent headwinds, including volatile raw material costs and uncertain demand patterns, this proactive measure appears designed to protect margins and maintain competitive positioning. The scale of the cost reduction (~3.5% of Dow's global workforce) is substantial enough to meaningfully impact the bottom line while being modest enough to avoid significant operational disruption.

The structured approach to cost reduction, focusing first on external services before internal workforce adjustments, demonstrates a thoughtful sequencing that should help maintain operational integrity during the transition. However, investors should monitor potential risks, including:

• Impact on innovation and R&D capabilities
• Ability to respond to potential market recovery
• Employee morale and productivity during implementation
• Potential loss of institutional knowledge

• Proactive, additional actions will further reduce costs in response to ongoing macroeconomic weakness and support Dow's long-term growth objectives
• Reinforces Dow's financial foundation and supplements near-term cash flow

MIDLAND, Mich., Jan. 30, 2025 /PRNewswire/ -- Dow Inc. (NYSE: DOW) today announced targeted actions to deliver $1 billion in cost savings. The proactive actions will further reduce the Company's costs in response to ongoing macroeconomic uncertainty, while reinforcing its long-term competitiveness across the economic cycle.

Specifically, Dow expects to achieve the majority of the $1 billion in cost savings on an annual run-rate through:

• $500 million to $700 million reduction in direct costs, primarily focused on purchased services and third-party contract labor; and
• Decreased labor costs, including through a workforce reduction of approximately 1,500 Dow roles globally.

"While these decisions are difficult, we must continue to take proactive actions to reduce costs while we navigate through this ongoing slower-than-expected macroeconomic recovery," said Jim Fitterling, Dow chair and CEO. "These cost actions support our commitment to our long-term growth objectives, while aligning spending levels to the realities of the current macroeconomic environment. As 2025 progresses we will continue to evaluate options to reinforce our competitiveness and take further action if necessary."

The Company will record a charge of $250 million to $325 million in the first quarter of 2025 for costs associated with these activities, which primarily include severance and related benefit costs, and the costs to implement these actions will be expensed as incurred ranging from $20 million to $30 million.

As Dow implements the actions announced today, the Company will engage local stakeholders in each region and in compliance with local regulations and consultation processes.

About Dow

Dow (NYSE: DOW) is one of the world's leading materials science companies, serving customers in high-growth markets such as packaging, infrastructure, mobility and consumer applications. Our global breadth, asset integration and scale, focused innovation, leading business positions and commitment to sustainability enable us to achieve profitable growth and help deliver a sustainable future. We operate manufacturing sites in 30 countries and employ approximately 36,000 people. Dow delivered sales of approximately $43 billion in 2024. References to Dow or the Company mean Dow Inc. and its subsidiaries. Learn more about us and our ambition to be the most innovative, customer-centric, inclusive and sustainable materials science company in the world by visiting www.dow.com.

For further information, please contact:

INVESTORS:	MEDIA:
Andrew Riker	Rachelle Schikorra
ajriker@dow.com	ryschikorra@dow.com
+1 989-633-5564	+1 989-513-8598

X: https://twitter.com/DowNewsroom 
Facebook: https://www.facebook.com/dow/ 
LinkedIn: http://www.linkedin.com/company/dow-chemical 
Instagram: http://instagram.com/dow_official 

Cautionary Statement about Forward-Looking Statements

Certain statements in this presentation are "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "opportunity," "outlook," "plan," "project," "seek," "should," "strategy," "target," "will," "will be," "will continue," "will likely result," "would," and similar expressions, and variations or negatives of these words or phrases.

Forward-looking statements are based on current assumptions and expectations of future events that are subject to risks, uncertainties and other factors that are beyond Dow's control, which may cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements and speak only as of the date the statements were made. These factors include, but are not limited to: sales of Dow's products; Dow's expenses, future revenues and profitability; any sanctions, export restrictions, supply chain disruptions or increased economic uncertainty related to the ongoing conflicts between Russia and Ukraine and in the Middle East; capital requirements and need for and availability of financing; unexpected barriers in the development of technology, including with respect to Dow's contemplated capital and operating projects; Dow's ability to realize its commitment to carbon neutrality on the contemplated timeframe, including the completion and success of its integrated ethylene cracker and derivatives facility in Alberta, Canada; size of the markets for Dow's products and services and ability to compete in such markets; failure to develop and market new products and optimally manage product life cycles; the rate and degree of market acceptance of Dow's products; significant litigation and environmental matters and related contingencies and unexpected expenses; the success of competing technologies that are or may become available; the ability to protect Dow's intellectual property in the United States and abroad; developments related to contemplated restructuring activities and proposed divestitures or acquisitions such as workforce reduction, manufacturing facility and/or asset closure and related exit and disposal activities, and the benefits and costs associated with each of the foregoing; fluctuations in energy and raw material prices; management of process safety and product stewardship; changes in relationships with Dow's significant customers and suppliers; changes in public sentiment and political leadership; increased concerns about plastics in the environment and lack of a circular economy for plastics at scale; changes in consumer preferences and demand; changes in laws and regulations, political conditions or industry development; global economic and capital markets conditions, such as inflation, market uncertainty, interest and currency exchange rates, and equity and commodity prices; business, logistics, and supply disruptions; security threats, such as acts of sabotage, terrorism or war, including the ongoing conflicts between Russia and Ukraine and in the Middle East; weather events and natural disasters; disruptions in Dow's information technology networks and systems, including the impact of cyberattacks; risks related to Dow's separation from DowDuPont Inc. such as Dow's obligation to indemnify DuPont de Nemours, Inc. and/or Corteva, Inc. for certain liabilities; and any global and regional economic impacts of a pandemic or other health-related risks and events on Dow's business.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section titled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, and the Company's subsequent Quarterly Reports on Form 10-Q. These are not the only risks and uncertainties that Dow faces. There may be other risks and uncertainties that Dow is unable to identify at this time or that Dow does not currently expect to have a material impact on its business. If any of those risks or uncertainties develops into an actual event, it could have a material adverse effect on Dow's business. Dow Inc. and The Dow Chemical Company and its consolidated subsidiaries assume no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/dow-announces-targeted-actions-to-deliver-1b-in-cost-savings-302364321.html

SOURCE The Dow Chemical Company

FAQ

How much cost savings is Dow (DOW) targeting in its 2025 restructuring plan?

Dow is targeting $1 billion in cost savings through reductions in direct costs and workforce optimization.

How many jobs will be cut in Dow's 2025 cost reduction initiative?

Dow plans to reduce its workforce by approximately 1,500 roles globally as part of its cost-saving measures.

What financial impact will Dow's 2025 restructuring have on Q1 earnings?

Dow will record a charge of $250-325 million in Q1 2025, plus implementation costs of $20-30 million.

What are the main components of Dow's $1 billion cost savings plan?

The plan includes $500-700 million in direct cost reductions, focusing on purchased services and third-party contract labor, along with decreased labor costs through workforce reduction.

When will Dow implement its 2025 cost reduction measures?

The implementation begins in Q1 2025, with the company engaging local stakeholders and following regional regulations throughout the process.