* Fourth-quarter charge of $900 million to $1.1 billion
* Charge related to closure of 20 plants and layoffs
* Will also write down value of Dow Kokam battery venture
By Ernest Scheyder and Deepa Seetharaman
Oct 30 Dow Chemical Co will take a
fourth-quarter charge of up to $1.1 billion related to last
week's announcement it will close 20 plants, write down the
value of its lithium ion battery business and lay off thousands
Dow, the largest U.S. chemical maker, said the restructuring
program - its second of 2012 - was necessary because of dropping
demand for its plastics and other products.
Dow will record a charge of $900 million to $1.1 billion for
the layoffs, plant closures, as well as a write-down of
Dow-Kokam LLC, Dow's lithium ion battery joint venture with TK
Advanced Battery LLC. The disclosure came as part of a filing
with the U.S. Securities and Exchange Commission on Tuesday.
Before the filing, analysts had expected Dow to post a
fourth-quarter net profit of about $429.3 million, according to
Thomson Reuters I/B/E/S.
Roughly $400 million to $500 million of the charge will be
in cash payments for severance and other items. The rest will be
to write down the value of some projects, including the Dow
Dow owns 61 percent of the Dow Kokam joint venture and had
originally hoped it would bolster the company's sales in the
renewable energy market.
'REBOOTING' U.S. MANUFACTURING
Dow Kokam was formed in 2009, the same year it won a $161
million grant as part of a $2.4 billion Obama administration
program designed to build up the advanced battery industry in
the United States, add green jobs and put one million plug-in
hybrid and electric vehicles on American roads by 2015.
The joint venture, which received the third-largest grant
under the program, said it would use the funding from the U.S.
Department of Energy to build an 800,000 square foot lithium-ion
battery plant in Midland, Michigan, that was expected to employ
up to 800 people, according to its 2009 news release.
In June 2010, U.S. Vice President Joe Biden attended the
groundbreaking for the Midland plant. At the time, Dow Chemical
Chief Executive Andrew Liveris said Dow Kokam was evidence of a
"rebooting" of American manufacturing.
In a proxy statement filed with regulators this year, Dow
Chemical cited "progress with the Dow Kokam joint venture" as a
major highlight in 2011.
Demand for hybrids and electric vehicles has been weaker
than expected and analysts are skeptical that Obama's goal can
be reached by 2015. Excess supply has hurt lithium-ion battery
makers, pushing two other grant recipients, A123 Systems Inc
and EnerDel, to file for bankruptcy protection.
Dow Kokam's Midland plant was designed to make batteries for
up to 30,000 pure electric vehicles equipped with 20 kilowatt
hour batteries, according to fact sheets provided by the JV.
But just under 8,000 electric vehicles were sold in the
United States during the first nine months of 2012, auto
research company Edmunds.com said. Plug-in hybrid sales over
that same time have added up to just over 20,000.
The 2009 battery development program supported the
construction of 3.9 gigawatt hours of lithium-ion battery
production capacity by 2013, or nearly 200,000 electric vehicles
made with 20 kilowatt hour batteries, said Menahem Anderman,
president of consulting firm Advanced Automotive Batteries.
Anderman projects that 2013 demand for lithium-ion batteries
from U.S. automakers will be less than 1 gigawatt hour, or fewer
than 50,000 electric vehicles.
The overcapacity problem is worldwide. There will be enough
global capacity to build between 25 and 30 gigawatt hours of
automotive lithium-ion batteries in 2013, when global demand
will likely top out at 3 gigawatt hours, Anderman said.
"Most of this demand will be met by established factories
with proven product and reliability records in Korea and Japan,"
he said. "With worldwide overcapacity, it will be very difficult
for the less experienced U.S. factories to compete."
It was not immediately clear if the Dow Kokam plant is still
under construction. Dow Chemical spokeswoman Rebecca Bentley
said the plant is producing battery parts, but referred
additional questions to a Dow Kokam spokesman, who did not
immediately respond to a request for comment.
Dow Kokam also produces battery parts in Ohio and France.
Dow Chemical, based in Midland, Michigan, plans to lay off
3,000 workers in total. The net job loss will be roughly 2,400
as the company plans to boost staff in growth areas.
Dow shares have dropped 15 percent in the past six months.