CARBIDE TO CUT COSTS BY $250 MILLION/YEAR

Union Carbide Corp., Danbury, Conn., has started implementing a series of actions designed to cut costs by $250 million/year by 1994. That savings is to result from reductions in: Plant fixed costs stemming from work simplification and elimination. Functional support staffs at the business and corporate group levels. Selling and administrative costs. Variable costs stemming from raw material efficiency improvements. Interest costs enabled by lower inventory levels and better management of

Oct. 7, 1991

2 min read

Union Carbide Corp., Danbury, Conn., has started implementing a series of actions designed to cut costs by $250 million/year by 1994.

That savings is to result from reductions in:

Plant fixed costs stemming from work simplification and elimination.
Functional support staffs at the business and corporate group levels.
Selling and administrative costs.
Variable costs stemming from raw material efficiency improvements.
Interest costs enabled by lower inventory levels and better management of accounts payable.

In addition, Carbide will sell several smaller businesses not essential to the company's long term strategy. And it will rein capital spending "to adjust to expected business conditions."

While Carbide's chemicals and plastics businesses will account for much of the savings, the industrial gases segment also is to make "a significant contribution."

Carbide Chairman Robert D. Kennedy said management is underscoring its commitment by freezing the salaries of senior corporate officers "until the board and I agree that Carbide has made substantial progress toward our return on capital and shareholder return goals." Variable compensation for middle and senior management is to be sharply reduced from recent years to reflect reduced profits.

The belt tightening program will cut Carbide's work-force from the yearend 1990 level by an estimated 5,500, including contractors and consultants. Of those, 3,700 are already accounted for by an earlier restructuring of the company's packaged gases business, by reductions of 800 positions at the company's Brazilian industrial gases affiliate, from the sale of a transformer servicing business, and by other reductions throughout the company.

Kennedy said in implementing workforce reductions Carbide is examining individual performance and will try to redeploy affected employees who are solid performers into positions currently held by contractors and assist top people in acquiring new skills they may need.

Despite the austerity program, Kennedy emphasized Carbide's dedication to meeting its health, safety, and environmental responsibilities. He called that "an absolute and unwavering commitment to protect our people and our neighbors that has nothing to do with good times or bad."

Carbide will take a charge estimated at $100-150 million pretax against 1991 earnings to cover the cost of severance payments and other things.