MIDLAND, MI, Dec. 19 -- William Stavropoulos, Dow's newly elected president and CEO, outlined a game plan Thursday to get the company back on firm financial footing. He said the company in the short-term will improve its cash flow by improving productivity and cutting costs. Stavropoulos proposed several measures which would save more than $1 billion in cash flow during 2003.
"This effort is going to be far-reaching, touching every part of the company, and putting everything on the table," Stavropoulos said. "The bottom line is we only spend money on the essentials."
In a surprise management shakeup last Friday, Dow removed 34-year veteran Michael Parker from the top post and replaced him with the former president and CEO. In a statement Thursday to employees, Stavropoulos said "as a company, we have been under-performing. For the past eight quarters, we have not earned enough money to pay dividends; we have borrowed money to pay them. Our debt ratio is too high and is compromising future growth."
Stavropoulos said many on-going efforts -- optimizing the supply chain, reducing inventories, freight and raw material costs -- have made a difference and will be accelerated. In addition, he said the company will get prices and volumes moving in the right direction to improve profit margins; examine the profitability to Dow of customers, account by account; and evaluate plants around the world and accelerate decision-making around closing underutilized or uncompetitive facilities.
The company will also step up its Six Sigma effort, focusing on cost-saving projects with a plan to achieve over $700 million in EBIT in 2003; reduce capital spending, but not at the expense of plant safety; reduce prime controllables and cut back on new hires; optimize the supply chain, reducing inventories, freight and raw materials costs; and evaluate the organizational structure and eliminate costs, including potential job elimination. Stavropoulos said the moves would save more than $1 billion in cash flow during 2003.
The newly appointed chief also said that Dow is actively reviewing each business initiative currently underway, and has decided that any 2003 initiative that doesn�t generate financial results will be moved to 2004.