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RESTRUCTURING
Now with the last in a series of asset disposals about to take place--the $4.4 billion sale of DuPont's Invista textiles business to Koch Industries should close early next year--Holliday last week unveiled $900 million in personnel and cost cuts calculated to spur growth and make DuPont's name once again synonymous with the latest in science and technology. "We have a lot of change ahead of us--difficult, trying, yet ultimately gratifying change," said Holliday to the media. Such change has come before, as Holliday has transformed DuPont from a $45 billion per year oil and chemical giant in 1997 to a $20 billion specialty house today. In 1999, it cut 1,400 jobs and 3% of its capacity in its polyester fiber business to save $90 million. In early 2001, the company eliminated 5,300 jobs to save $400 million in payroll costs and shut down noncompetitive assets, mostly in the U.S. and Europe. This round again will include job cuts. Holliday won't put any numbers on jobs to be eliminated until first-quarter 2004 results are released in April. However, analyst Frank J. Mitsch of Fulcrum Global Partners says he believes that more than 2,500 positions are in jeopardy. DuPont will take four broad steps--three involving cutbacks and the fourth dependent on expansions--to help increase global competitiveness, cope with high energy costs, and shift toward serving emerging economies. As expected, the firm will save $200 million by 2005 through cost reductions from the agreed-upon sale of Invista. Consolidations of infrastructure, including staff functions, support services, and manufacturing operations, will help DuPont realize an additional $500 million in savings. Product line consolidations by at least 20% to improve margins will yield an additional $200 million. The fourth step commits DuPont to put more people and manufacturing units in emerging markets such as China, Holliday said. "We need more technical service people there, and we need to do more marketing in the outer provinces," he said. Holliday said DuPont is counting on research--for example, work that allows separation of carbon nanotubes according to electronic properties--to help the firm achieve its 6% annual revenue growth target. At an investor conference last week, Holliday said that while the firm budgeted 55% of its R&D spending of more than $1 billion in 2003 to advance new product lines--up from 40% in 2000--rather than support existing lines, its goal was to put 65% of research dollars in innovation efforts by 2005. U.S. patent filings, which were declining at the firm, are up 20%--to about 1,080--through the third quarter of 2003 versus the same period in 2002. "We must differentiate our products with science," Holliday said. The firm will even seek "technology developments that give us a razor-thin edge. We can get paid for that," he said.
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