Wilmington, DE, Dec. 1--DuPont Co. said Monday it would accelerate the shift of facilities and staff to such emerging markets as Asia and Eastern Europe to be closer to a fast-growing customer base in those regions.
On a conference call to discuss a program that will result in a projected $900 million in annual cost improvements starting in 2005, Chairman and Chief Executive Charles Holliday said he saw DuPont's "center of gravity" moving to such places as China, where revenue is up 30% this year.
While that means moving more top managers to places such as China, most of the staff additions will be local and increases in capital spending in those areas aren't expected to be significant, he told analysts.
The aggressive restructuring plan to improve competitiveness and capture larger profit margins comes two weeks after the Wilmington, DE, company announced a definitive agreement to sell its fibers business, Invista, to privately owned Koch Industries. The sale is expected to be completed in the first half of 2004.
As part of the new cost-cutting program, DuPont said it would cut fixed costs by $200 million to offset residual costs from the separation of Invista.
Consolidation of laboratories is part of the cost-cutting plan, but CEO Holliday said DuPont hadn't yet decided how many of the 8,800 employees remaining at the Wilmington headquarters after Invista's separation would be affected by the cuts.
Less expensive sourcing of raw materials will be a key part of the cost improvements, requiring more people on the ground in local markets such as Shanghai to ensure the quality of materials and certify that suppliers have the appropriate financing in place necessary for long-term relationships with DuPont. Operational cost savings of $200 million are projected from sourcing improvements.
The company also plans to add technical services in China and expand marketing efforts to the outer provinces in the western part of the country, Holliday said.
The company expects to reap savings from a 20% reduction in inventories in emerging markets and will work with customers to simplify product lines being offered.
In a news release Monday, DuPont said it wouldn't be able to meet its annual 6% earnings-growth target while supporting "the complexity and cost entailed by diverse and specialized organizations and processes."
While each of DuPont's five business platforms can do more to serve a growing customer base in China, Holliday singled out products the company manufactures for the automotive industry.
"The build rates are accelerating there faster than anywhere else in the world," he said. "We need engineering polymers and coatings to keep up with that."
He added that electronics manufacturing was likely to move increasingly to China.
The company estimates it can increase profit margins by $500 million in 2005 from measures that include consolidation of office space and billing terms for customers, as well as in its engineering infrastructure and staff.
There probably will be one-time restructuring charges associated with head count and plant reductions, to be quantified early next year, Holliday said.
