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Implementation of the plan is expected to cost the company approximately $160 million in cash. A pre-tax charge of approximately $190 million, or $.88 per share, will be recorded in the company’s first quarter 2009 financial results. An additional charge of up to $50 million is possible later this year as the evaluation and approval of other elements of this restructuring plan, including additional plant closures, are finalized.
The first quarter charge includes the cost of closure of a paint manufacturing operation at the company’s Saultain, France, plant, as well as several smaller production, laboratory, warehouse and distribution facilities across PPG’s businesses and regions. The company also plans a broad global reduction in employment; in total, approximately 2500 jobs will be eliminated.
“These are sweeping steps that will impact all of PPG’s business segments and regions,” said Charles E. Bunch, PPG chairman and chief executive officer. “We are making significant structural changes to the way we operate our businesses. By implementing this program, not only will we be better able to weather today’s difficult conditions, we will also be a more efficient company coming out of the current economic downturn.” Bunch said that the largest portion of the cost reduction activity will take place in the company’s automotive OEM coatings and industrial coatings business units, which have been particularly hard hit by severe declines in global end-use market demand.
Last September, PPG announced a restructuring plan that included closing several coatings manufacturing facilities, including those in Clarkson, Ontario, Canada, and Geldermalsen, the Netherlands. As part of that plan, PPG closed its Owen Sound, Ontario, Canada, glass manufacturing facility and idled one float glass production line at its Mt. Zion, Ill., facility. These prior actions are expected to result in pretax cost savings at an annual run-rate of about $100 million by the end of 2009, and a reduction in employment of 1357.
In addition to its restructuring actions, PPG stated that it has implemented a wide range of cost-reducing and cash-conserving measures, including employee furloughs, salary and bonus actions, and the elimination of the company match of employee contributions to 401(k) plans. Capital spending, excluding acquisitions, is being reduced by about 50% from the $383 million spent in 2008. Also, based on updated information, PPG estimates that its 2009 pension contributions will be lowered from the $400 million to $500 million expected at the beginning of the year to approximately $350 million.
PPG also announced that it expects its first quarter 2009 adjusted earnings per share to be in the range of $.10 to $.15 per share, excluding the restructuring charges and the net increase in the current value of the company’s obligation under its proposed asbestos settlement agreement, which is pending court proceedings. Bunch added that the company continues to see significant weakness in its global industrial end-use markets, with even sharper deterioration in Europe. These conditions are negatively impacting results in the company’s Industrial Coatings and Glass segments, several business units in the Performance Coatings segment, and the company’s Silicas business unit. He said that the company’s Architectural Coatings EMEA segment is performing at a level near last year’s first quarter, and that the Commodity Chemicals business is expected to post solid results.
For more information, visit www.ppg.com.