With sales slumping, Japanese company will cut 8,000 jobs in electronics division and slash investment.

NEW YORK (Reuters) - Dow Chemical Co (nyse: DOW - news - people ) said Monday it would close 20 facilities, divest several businesses and cut 5,000 jobs, or 11 percent of its global workforce, in response to the global economic slump.

Dow said the action, which comes less than a week after its U.S. rival DuPont (nyse: DD - news - people ) announced cutbacks, is an acceleration of its "transformational strategy" and will lead to annual cost savings of $700 million by 2010.

"We are accelerating the implementation of these measures as the current world economy has deteriorated sharply, and we must adjust ourselves to the severity of this downturn," Chairman and Chief Executive Officer Andrew Liveris said in a statement.

The Midland, Michigan, chemicals maker is also in the process of buying specialty chemicals maker Rohm & Haas for $15.3 billion, a move the companies said would yield $800 million in savings by 2010.

Dow will cut 5,000 full-time jobs, close 20 facilities in high-cost locations and sell non-strategic businesses. The company will also temporarily idle 180 plants and reduce its contractor workforce by 6,000.

Fears that the year-long U.S. recession will deepen prompted DuPont to cut 2,500 jobs and phone company AT&T to eliminate 12,000 jobs.

The Detroit Free Press reported today that General Motors, in its attempt to put forth a workable restructuring plan to keep it from going bankrupt, is at least looking at killing off three brands—Pontiac, Saab and Hummer.

Everyone knows that GM is over-branded. The problem has long been that the company does not want to have to pay dealers to fold the brands it does not need as it did with Oldsmobile in 2001. State franchise laws prevent a car company from simply ending a brand. Closing down Oldsmobile cost the company around $2 billion.

It’s unclear how GM could avoid paying big money to shutter the three brands.

Hummer has been on the selling block for months. The automaker has circulated a document to prospective buyers, which have ranged from Russian business moguls to Turkish private equity groups.

Saab is not thought to have any hot buyers. According to past conversations with GM execs, Saab Cars has never turned an annual profit for GM. It has, at times, made money in Europe. But those gains have always been off-set by losses in the U.S.

Saab is one of two Swedish car companies with limited interest from both consumers and investors. Ford, too, tried to sell Volvo earlier this year, and found no takers willing to pay Ford’s asking price.

Both Saab and Volvo have a problem of not being quite luxury. Both premium brands have long had followings of people who place safety above all other vehicle characteristics. Saab has also attracted some performance-oriented buyers as the company has long offered turbo chargers in some of its models.

Volvo is on track to sell about 82,000 vehicles this year. Sales through October were down 28%. Saab is on track to sell about 20,000 vehicles this year. Sales were down 32% through October.

Earlier this year, GM CEO Rick Wagoner said GM did not have too many brands.

Pontiac has been starved of hot new products for two decades. The current lineup consists of the Vibe (a twin of the Toyota Matrix and engineered by Toyota, built at the joint-venture NUMMI plant in Calif.), the G6/G5, Pontiac Torrent (twin of the Chevy Equinox) and the G8 sedan. The G8 has been well received by auto journalists since its debut last year, but the large sedan category is so soft and sleepy that few have noticed. The Pontiac Solstice roadster convertible, while also well received by journalists, is such a niche product that it can’t hold up the whole brand.

Pontiac sales are on track to sell around 280K to 290K vehicles this year. Sales through October were down 21%. A hefty percentage of Pontiac sales, though, are fleet sales to rental agencies.

At the core of GM’s problems is that it does not have, and has not had, enough resources to feed eight brands with unique products, and then the resources to feed each brand with unique and competitive brand campaigns. Every industry analyst and consultant has told GM management that for 20 years. It is one of the reasons that Pontiac, Buick and Saturn in particular have had a revolving door of brand campaigns—each new brand chief groping in the dark for a new big idea that will kick-start bigger interest in these product portfolios.

The contrast with Toyota and Honda is astonishing. Toyota manages a 14.9% market share (throughOctober) with just its one brand. Yes, it has added Scion and Lexus. But the Toyota brand is amazingly efficient by putting so many efficiently produced vehicles under its flagship brand. Ditto Honda, whish has a 9.8% share.

Hummer, Pontiac and Saab together only manage a 2.5% share of the U.S. market, and I’m willing to bet at least .5 of that is rental fleet.

Nah….GM doesn’t have too many brands.

A few years ago, ad agency Deutsch, which currently handles advertising for the Saturn brand, cooked up a brand positioning for Pontiac that focused on the gritty side of Detroit, and surrounded the brand with music reminiscent of Bruce Springsteen. The strategy was centered on performance, street rods and American car culture. But the decision was made that while the positioning was attractive, GM couldn’t fund a product program that would live up to the ads.

GM has been merging dealerships into a single network of GMC/Buick/Pontiac stores wherever it can. That way, each dealer can manage a single showroom of products that has depth and breadth of sports cars, sedans, SUVs and trucks. But that strategy also depends on supporting three different, attractive brand strategies.

If GM can execute this plan, that would leave it with Chevy, Cadillac, Saturn, Buick and GMC. One of the arguments for keeping Buick is how well it sells in China. The Chinese are mad for the Buick brand. I’m not entirely sure, though, that GM would lose sales in China if it killed the brand in the U.S. Sure, some brands are global. But I’m thinking Buick would do just fine in China without U.S. sales.

Now, we are down to Chevy, Cadillac, Saturn and GMC. GMC sells well, and GM execs have long said there is now reason to kill it. There are a flock of consumers who go for the “Professional Grade” nonsense. GMC is, after, all just a slightly stepped of version of Chevy trucks and SUVs.

There is much argument for killing Saturn, too, leaving GM to concentrate in the U.S. on Chevy and Cadillac as the company. Indeed, without the GMC/Buick/Pontiac sales channel, I don’t know how you would support GMC as a brand, unless you engineered a rapid consolidation of retail distribution perhaps selling GMC through Chevy or Cadillac dealerships.

But, as I said earlier, the big barrier is the state franchise laws, which give dealers a lot of legal firepower to get paid off if GM moves to shutter these brands. It seems like a reach that it would just close Hummer anyway as it still sees a market to sell the brand. GMC/Pontiac/Buick dealers would surely miss the sales volume from Pontiac. But is a GMC/Buick network really worth keeping long term?

OPEC oil ministers on Friday downplayed expectations of, but didn't dismiss outright, an immediate output cut as they faced a third test in as many months of their ability to engineer a rebound in oil prices.

The outcome of the hastily convened Cairo meeting Saturday, billed as a consultative gathering to assess the impact of earlier production cuts, likely hinges on a key issue with which the cartel has had a checkered past: unity.

Kuwaiti oil minister Mohammed Al-Aleem told reporters in Cairo that while the market was oversupplied, he believed there was "no need" for the Organization of Petroleum Exporting Countries to decide on cuts ahead of its regularly scheduled Dec. 17 meeting in Algeria.

But Rafael Ramirez, oil minister for price hawk Venezuela, later said the option remained to cut production by "at least 1 million barrels" at the weekend gathering. "Maybe it's necessary, a new cut," Ramirez said. He quickly added, thought, that such a decision could be taken now or next month.

The diverging takes highlighted the difficulty of the task facing producers of almost 40 percent of the world's oil.

"There is total confusion" among OPEC's 13 members, said Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co. in New York. "These people ... really have no business model. They basically thrive when oil prices go up, and now they are crying uncle when prices go down."

And, down they have gone, in a financial avalanche triggered by demand destruction, itself sped along by a world financial meltdown that also threatens to cut deeply into OPEC member states' government budgets.

Whereas crude stood at about $147 a barrel in mid-July, it now hovers about $90 lower. On Friday, the U.S. benchmark West Texas Intermediate crude for January delivery was trading at down about $3 per barrel at about $51.

"They (OPEC) simply don't react quick enough, and prices keep going down," said Vincent Lauerman, OPEC expert and president of Calgary, Canada-based consultancy Geopolitics Central.

This meeting will come down to what kingpin and traditional price dove Saudi Arabia wants, he said.

Saudi oil minister Ali al-Naimi told reporters answers would come on Saturday.

The cartel has already held one emergency meeting - on Oct. 24 in Vienna - to try to halt the slide in prices with an announcement of a 1.5 million barrel per day drop.

It failed to support prices, and the cartel cobbled together the Cairo gathering on the sidelines of the Organization of Arab Petroleum Exporting Countries' meeting.

But members have been circumspect about expectations, leading some to speculate OPEC is staying quiet to maintain the element of surprise.

"As long as they do a substantive cut, they may be getting ahead of the curve, and should be cutting enough to get ahead of demand destruction," said Lauerman, citing about 1 to 1.2 million as the magic number.

That has been the figure most readily cited by those nations proposing cuts, including Venezuela which, like fellow price hawk Iran, need crude of about $90 per barrel to meet current spending needs aimed in part at propping up its domestically unpopular regime.

The two have found support from non-OPEC oil giant, Russia. Its president, Dmitry Medvedev, said Thursday his country would cooperate with the group to support prices.

Other OPEC members, such as Nigeria and Ecuador, face budget problems too, making them reluctant to implement more cuts that might shrink revenues further.

Nigerian envoy, Odein Ajumogobia, said the ministers were "just going to exchange ideas and views" at the gathering.

Kuwait's al-Aleem said current low prices benefit neither consumers nor producers and could undercut investments in future projects - a scenario that could lead to another spike down the road.

"We think a decision could be taken, but I think it will happen in Algeria," he said.

OPEC's last round of cuts would put its total production at about 30.5 million barrels per day, according to the IEA.

Unlike many of their fellow members, the Saudis are better positioned to cope with the drop in prices. The International Monetary Fund estimates Riyadh needs crude in the range of about $50 per barrel for 2008 fiscal accounts to break even.

While al-Naimi refused to tip his hand, an indication of the Saudi thinking may have emerged earlier this month when, during the Group of 20 meeting in Washington, King Abdullah pledged the kingdom would do everything in its power to help the global economy recover.

Higher oil prices would undermine that promise.

Also unclear, after two earlier cuts failed to push prices higher, is what the group can do without prolonging the global economic downturn.

"I would play 'good cop' and not do anything," said Oppenheimer's Gheit. "If they are patient, they will be rewarded because you will see a precipitous drop in capital spending, and that will tighten the market, in itself."

But demand has shown little indication of rebounding soon, and global crude stockpiles are growing - as evidenced by a U.S. government report showing a surprisingly large 7 million barrel build in stocks last week.

Those factors argue against restraint if some in OPEC want crude back up to at least $70.

Even so, Algerian oil minister and OPEC president Chakib Khelil has urged a wait-and-see approach, saying that the group risks losing credibility if it enacts new cuts in Cairo only to find members were not complying with the Vienna decision.

Political considerations are also likely to factor prominently.

Saudi Arabia is a close U.S. ally in the Middle East, and is eager to see concerted Washington backing for peace efforts in the region.

One way of winning new support from the incoming administration of U.S. President-elect Barack Obama would be by tacitly working to undercut two of Washington's most strident foes, Venezuela and Iran. It would not be an onerous job for the Sunni Muslim Saudis, who have no great affection for Shiite Iran.

"Saudi Arabia is playing ball with the U.S.," said Gheit. "It is going to punish Venezuela. It is going to punish Russia. It is also going to curtail Iran."

AP Business Writer Adam Schreck contributed to this report.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Daimler AG says it's considering cutting working hours at some of its car production plants in Germany as the economic gloom pushes down sales.

The company said Thursday it may scale back hours at Mercedes-Benz car manufacturing facilities in Sindelfingen, Berlin, Bremen and Duesseldorf. It says company officials have met with employee representatives to talk about the slowdown in sales.

Company spokeswoman Marina Krets tells The Associated Press, "Talks regarding the locations will be continued, with the goal to have a concrete plan in December."

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Beijing enacts the largest cut in more than a decade to support the country's faltering economy.

China Hacks At Rates

Beijing sharply cuts interest rates to aid the country's faltering economy.

• World Bank: China Needs Balanced Development
• Beijing's Confidence Game
• China Cooling Too Quickly

China Hacks At Rates

Parmy Olson, 11.26.08, 11:50 AM EST

Beijing sharply cut interest rates to aid the country's faltering economy.

Getty Images

Thanks to some timely tailoring, shares of Gap (GPS) jumped 27% on Nov. 21 even as the retailer's sales fell 8%.

The reason for the favorable reaction was another round of successful cost-cutting at Gap, which boosted profits despite the reluctance of consumers to spend at Gap, Banana Republic, and Old Navy stores.

Across the economy, corporate executives are looking to follow a similar strategy. As a potentially nasty recession sets in and revenues drop, firms are forced to cut their way toward higher profits.

Some analysts predict the Gap can continue boosting profits next year even as revenues decline. But eventually, many analysts say, Gap must find a way to draw more shoppers' dollars—not just cut costs through inventory controls, shrinking real estate holdings, or other measures.

A Short-Term Strategy

"While expense management has been impressive, we continue to wonder how sustainable earnings growth is longer-term with deteriorating sales and given a bleaker economic outlook in '09," wrote Banc of America (BAC) analyst Dana Cohen. (BofA handles banking services for Gap.)

Many other firms are taking similar cost-cutting steps, which often involve large rounds of layoffs. Dell (DELL) was also able to increase profits last quarter despite falling sales. The computer maker said it has cut 11,000 jobs in the past year.

"It's a necessary strategy, but it's a short-term strategy," says Dan Genter, chief executive and chief investment officer at RNC Genter. After a certain point, you're no longer cutting fat from your budget, he says—you're cutting bone.

For some firms, cost-cutting can be a healthy process that repositions them for future growth. Greg Estes, portfolio manager at Intrepid Capital Management, cites Starbucks (SBUX), which is shutting down less profitable coffee shops after "growing too fast" for several years. "If and when a positive environment returns, they'll be in a better position [with] better margins and a better portfolio of stores," says Estes, whose funds own Starbucks stock.

However, Estes says that, with some exceptions, it's generally very difficult to cut costs significantly for more than four quarters. After a while, though you may be widening profit margins, you're shrinking the entire firm.

When Are Cuts Permanent?

The financial sector is the most glaring example of these sorts of permanent cost cuts. Faced with a financial crisis and a tough economy, financial firms are slashing costs, shrinking expenses and perks, and laying off hundreds of thousands of workers—sometime alongside mergers with weaker rivals, sometimes not.

For example, Citigroup (C), the recipient of a federal government bailout Nov. 24, "may end up being a shadow of what it was," Genter says. Citi, like other financial firms, faces the problem of leverage, he says. Because it built its business on borrowed money, its contraction is more striking and more permanent when that leverage goes away.

In corporate board rooms, there is a raging debate on how much and how quickly to cut as the economy slows down. If you believe the recession will be over by mid-2009, you may want to hold onto valuable employees and keep facilities open so you can profit from the recovery.

When Chrysler was near death and awaiting a government bailout in 1979, then-CEO Lee Iacocca ordered drastic spending cuts and required all checks above $1,000 to be approved by a senior vice president.

Chrysler LLC and General Motors Corp. need to follow the same play book now, industry analysts and management professors say, as they try to outlast the debate in Washington over whether they will get billions in government loans.

With no hope of getting credit elsewhere and auto sales at a 25-year low, both automakers are perilously close to having only the minimum amount of cash needed to operate.

Today, with GM alone spending $6.9 billion more than it took in last quarter and having operations in 34 countries, Iacocca's $1,000 limit might not be practical. But industry analysts and bankruptcy experts say both companies must take similar measures to ensure their companies live long enough to use any loans they get.

"You turn the electricity off. You do things like shut the proving grounds down," said Jim Hall, managing director of 2953 Analytics of Birmingham, Mich.

Top executives of GM, Chrysler and Ford Motor Co. went to Washington this week seeking roughly $25 billion but ran into so much opposition that Congress delayed voting on the bailout until the automakers prove they can be viable.

They must submit a plan to Congress by Dec. 2, followed by more hearings before any vote is taken. That means money won't be available at least until late December, probably not until early next year.

Meanwhile, the companies face huge expenses and a lack of revenue because car buyers are having trouble getting financing or are delaying big purchases because of uncertainty about their jobs. October was the worst U.S. auto sales month in 25 years, and November is looking only slightly better.

Chrysler CEO Bob Nardelli told the Senate Banking Committee his company had $6.1 billion in cash at the end of the third quarter after burning up $1 billion in cash per month from July through September.

GM fared worse. It burned up $6.9 billion last quarter and about $6 billion in the first half of the year and has warned that it could reach its minimums sometime next month.

Ford, while burning through billions as well, has a big stockpile of borrowed money and says it can last at least through 2009.

But without aid soon, GM and Chrysler will have trouble paying bills and may have to seek bankruptcy protection.

Inside both companies' headquarters, teams likely are looking to cut spending any way they can, including delays in new investments, experts say.

"They have to take really drastic steps in their cost-cutting," said Robert Wiseman, a Michigan State University professor who teaches strategic management. "Stop buying everything except for the most critical things they need for their operation."

GM announced Friday it is canceling its traditional holiday party for the media "due to the very difficult economic situation facing the nation, the state, the industry, and our company." The party will be replaced by a $5,000 donation to a journalism scholarship fund.

At Chrysler, Nardelli testified, there's a cash committee that scrutinizes requests every week.

But what they're doing now may not be enough. Some in Congress criticized the CEOs for flying to Washington on separate corporate jets. GM is reducing its leased fleet from seven planes last year to three, but the stigma remains.

Lawmakers also rapped the automakers' high labor costs and particularly the jobs bank, in which laid-off workers get 95 percent of their pay plus benefits even though they aren't working.

The United Auto Workers said it has cut the jobs bank and placed time limits on it in new contracts signed with the companies last year. Still, more than 3,500 workers are getting paid for not working, and that number is sure to rise as the companies continue to cut jobs.

On Friday, GM announced it would extend holiday shutdowns and make other production cuts at five North American factories. It also accelerated the closure of a truck plant in Oshawa, Ontario.

Harlan Platt, who teaches corporate turnarounds at Northeastern University in Boston, said GM should turn to the UAW for help.

"The bank right now is the union, and they're going to have to give up something in the near term so they have something very valuable in the long term," Platt said.

Initially the UAW said it already gave up a lot in the new contracts, agreeing to lower wages for new hires and to shift the companies' huge retiree health care costs to a union-administered trust.

But on Thursday, President Ron Gettelfinger softened his stance, saying that the union is at the bargaining table already.

"We would welcome all the other stakeholders to the table to make some concessions," he said.

In Washington, House Speaker Nancy Pelosi said lawmakers are trying to get reassurances that the companies have a specific plan to survive before the government hands over taxpayer money. But that might be troublesome for the automakers.

GM Chief Executive Rick Wagoner told reporters Thursday that the company already has shared a detailed plan confidentially with the Bush administration and key staffers in Washington. He's concerned that sensitive information could be made public.

"Historically things like your future product plans, technology plans and financial plans would be competitively sensitive information, and so for a variety of reasons, we wouldn't be sharing that publicly," he said.

Douglas Baird, a professor who specializes in bankruptcy at the University of Chicago Law School, says the automakers were too vague, giving Congress less information than companies normally give lenders when seeking bankruptcy financing.

"That's not the way you approach a lender in a work-out. That's just not the way it's done," he said.

Wagoner, he said, will have the difficult task of showing Congress how GM can be viable with its current structure.

"That's not going to be easy to do," he said.

Iran called on OPEC Saturday to cut production by a further 1 million to 1.5 million barrels per day when it meets in Cairo later this month, state television's Web site reported Saturday.

Iran's OPEC governor, Mohammad Ali Khatibi, said the cartel needs to act to slash output because demand for oil has declined due to the global financial meltdown.

OPEC, which produces about 40 percent of the world's crude oil, decided to cut production by 1.5 million barrels a day last month in response to a dramatic fall in oil prices from a record $147 in July to below $70 last month.

Despite the cut, oil prices have continued to decline. Light, sweet crude for December delivery fell $1.20 to settle at $57.04 a barrel on the New York Mercantile Exchange Friday.

Diving prices have forced OPEC to plan an extraordinary meeting in Cairo, scheduled for Nov. 29, to discuss the plunge.

"It would be better that, at the urgent meeting in Cairo, it (OPEC) decides to slash production by a further 1 to 1.5 million barrels per day in order to create a relative balance between supply and demand," Khatibi said.

Iran is afraid of the consequences of falling oil prices on its ailing economy. About 80 percent of Iran's public revenues come from oil exports and Iran's oil industry needs foreign investment to keep up production and export.

Khatibi said the continuing decline in oil prices means there is oversupply.

"The continuing fall in prices and increase in oil reserves by big industrial states shows there is oversupply. ... OPEC members have to remain committed to their quota obligations otherwise prices will keep diving," he added.

Iran, as OPEC's second largest oil exporter, has traditionally opposed any crude output increase by members, arguing that it would cause a fall in prices. It has also urged fellow OPEC members to respect their output quota to avoid a worsening of the oversupply.

Iran produces about 4 million barrels of oil per day. The country's recoverable oil reserves are estimated at 137 billion barrels -- or 12 percent -- of the world's overall reserves.

Iran also has the world's second largest natural gas reserves, estimated at 28 trillion cubic meters.