PPG Industries will shutter plants and lay off 1,800 employees, approximately 4% of its workforce, in the U.S. and Europe as part of a cost-cutting plan, according to an Oct. 17 press release.
The restructuring strategy aims to eliminate the $15 million in stranded costs related to the August sale of PPG’s silica business, as well as its architectural coatings business last week, Chairman and CEO Tim Knavish said in an Oct. 17 earnings call.
Last week, the company sold 100% of its architectural coatings portfolio in the U.S. and Canada to private equity firm American Industrial Partners for $550 million. The transaction is expected to close in late 2024 or early 2025, according to the release.
The company doesn’t have additional specific information to share about the cost savings plan, including which plants it will close, Mark Silvey, director of PPG’s corporate communications, said in an email. The layoffs will include “a mix of positions,” Silvey said.
The three-year cost-cutting plan is expected to save the coatings and paint maker $175 million, including $60 million in 2025, according to the release.
“While these decisions are difficult, they are necessary to adjust our fixed cost base and to right-size our company following these two business divestitures,” Knavish said in a statement. “None of these actions will impact our ongoing investments or focus on organic growth.”
PPG expects to spend approximately $250 million in Q4 related to current exchange rates as well as employee severance, according to an Oct. 17 securities filing.
“We are making some structural changes to our footprint, so that takes some time as we look at facilities and have to move production around,” SVP and CFO Vincent Morales said on the earnings call.
Manufacturing and distribution sites part of deal
PPG’s silica business makes and supplies precipitated silica products to major companies globally as performance-enhancing additives, according to the website. The architectural coatings business in the U.S. and Canada represented approximately $2 billion of PPG’s 2023 total net sales, according to the release.
“These two divestitures further optimize our portfolio by improving our organic growth and financial return profiles and will result in increased capability to channel our growth resources to areas where we have the strongest growth and strongest margin profiles and a demonstrated right to win,” Knavish said in the call.
The divestiture of the architectural coatings business will allow PPG to focus its resources on other segments such as aerospace, Knavish said on the call. PPG’s aerospace coatings business ended Q3 with an order backlog of approximately $290 million, according to the securities filing.
“We are looking at long-term capacity additions in that business in parallel with continued bottlenecking and productivity at our existing facilities,” Knavish said. “So we're very bullish, not only on Q4 and 2025, but multiyear kind of momentum for aerospace. And we'll invest accordingly.”
Once the transaction closes, more than 6,000 employees across the U.S. and Canada will join American Industrial Partners, Silvey said in the email. The pending deal entails nine manufacturing facilities and 12 distribution centers in Georgia, Kentucky, Ohio, Nevada, Texas, Illinois, California, Pennsylvania, Puerto Rico and Canada.
