Byline: Scott Malone

NEW YORK — In a move to cut under-performing operations, DuPont on Monday said it plans to lay off 4,000 staffers and 1,300 contract workers in the coming months.
About half the staff cuts are coming from the Wilmington, Del.-based industrial giant’s polyester and nylon operations — eliminating about 18 percent of the company’s domestic workforce for those enterprises. The company said it will be shutting down older domestic production lines in an effort to eliminate what chairman and chief executive officer Charles O. Holliday Jr. called “geographically disadvantaged” operations.
“We will have to focus this business where the geography fits,” he said, explaining that fiber plants need to be located near fabric mills. “If we have an asset located in Western Europe and the market is growing in China, it’s geographically disadvantaged because of where the plant is situated.”
The company is also reducing the manpower of its Lycra spandex operation and moving more of that business’s staff to developing markets.
“We will be reducing our assets in North American and Europe, while we produce more in Asia and South America,” he said. “We are adding resources in a targeted way where we can improve business performance. Some reductions in Lycra are in U.S. and European marketing positions, but we are adding marketing positions in Asia and South America because that’s where the demand is.”
Polyester and nylon job cuts will come within the company’s North Carolina and South Carolina plants, though executives stressed that no facilities would be closed outright.
“All the plants are very viable sites for the long term,” said Holliday, who spoke with Wall Street analysts and reporters in a pair of conference calls.
A spokeswoman said few, if any, cuts would be made in DuPont’s 4,600-member overseas polyester and nylon work force.
Company officials also said they believe the economic outlook in the U.S. is getting worse, though they emphasized that the cuts were not made with an intent to boost results in the short term.
“Most economists are becoming increasingly pessimistic that the economic downturn will be more widespread, cover more countries around the world and be longer than previously thought,” said Gary Pfieffer, senior vice president and chief financial officer.”
The company said it expects the cuts to produce about $400 million in pretax annual savings, beginning in 2002. Last year, DuPont earned $2.31 billion on revenues of $29.2 billion.
The cuts will result in second-quarter charges of 40 to 45 cents a share, the company said in a statement. According to First Call/Thomson Financial, analysts had expected DuPont to post earnings of 69 cents a share, compared with 65 cents a share, or $688 million on a net basis, in the second quarter of 2000.
To make up the slack for the closing polyester production, DuPont will be turning over more of its polyester filament manufacturing to machinery owned by Unifi Inc. Since inking a joint-venture deal last April, the two companies have co-managed DuPont’s Kinston and Wilmington, N.C., plants and Unifi’s more modern Yadkinville, N.C., facility.
In addition to the cuts in the polyester and nylon operations, DuPont said it was accelerating its efforts to integrate its agriculture-related businesses and cutting corporate support staff.
DuPont has taken a number of steps in recent years to make its fiber operations more efficient. The company has moved the bulk of its polyester operations into independent joint ventures with regional partners around the world, using a model in which DuPont contributed its existing assets to the ventures, calling on its new partners to pony up the funds to modernize facilities where needed.
Last fall, the company integrated most of its textile fiber operations under one unit, Apparel and Textile Sciences, under the leadership of president Steve McCracken, who had headed the company’s Lycra unit. That unit is responsible for a small piece of DuPont’s polyester operations, namely branded specialty fibers.
Pfieffer said the company had confidence in the Lycra and nylon operations, but was more guarded in his assessment of polyester.
“We obviously have work to do in parts of the polyester business, given the industry structure, to position it to be a positive contributor,” he said. “We’re going to continue to evaluate all of our options for our polyester businesses in all regions of the world.”
Spandex, which enjoys a somewhat higher margin than polyester and nylon, has been the standout player in DuPont’s fibers portfolio. Over the past year, the company has stepped up its efforts on the unbranded spandex front to give it a presence at the low end of the market to complement its Lycra brand on the high end.
While the firm’s nylon business has been more troubled, DuPont officials have emphasized that they feel it is in much better shape than polyester, largely because DuPont manufactures the raw materials that go into nylon.
“Our relative competitive position in nylon is very, very different than that of polyester,” said Pfieffer, “in part because of industry structure and in part because of technological advantages and geographic scope.”
Holliday said that the company’s textile unit would need to focus on more profitable parts of the apparel industry.
“Clearly we see that as an important part of our company going forward, but it will be focused on those areas where we can bring new technology, new products and brands,” he said.
Still, he declined to say how committed DuPont is to the textile business over the long haul.
“I’m never going to comment on the future of the businesses,” he said. “What we think we have done right here is make these businesses very competitive. These are bold steps and very significant reductions, but these are the steps that are necessary to make these businesses competitive in the long term.”