Dow, the largest U.S. chemical maker, said the restructuring program - its second of 2012 - was necessary because of dropping demand for its plastics and other products.
Dow will record a charge of $900 million to $1.1 billion for the layoffs, plant closures, as well as a write-down of Dow-Kokam LLC, Dow's lithium ion battery joint venture with TK Advanced Battery LLC. The disclosure came as part of a filing with the U.S. Securities and Exchange Commission on Tuesday.
Before the filing, analysts had expected Dow to post a fourth-quarter net profit of about $429.3 million, according to Thomson Reuters I/B/E/S.
Roughly $400 million to $500 million of the charge will be in cash payments for severance and other items. The rest will be to write down the value of some projects, including the Dow Kokam venture.
Dow owns 61 percent of the Dow Kokam joint venture and had originally hoped it would bolster the company's sales in the renewable energy market.
Dow Kokam was formed in 2009, the same year it won a $161 million grant as part of a $2.4 billion Obama administration program designed to build up the advanced battery industry in the United States, add green jobs and put one million plug-in hybrid and electric vehicles on American roads by 2015.
The joint venture, which received the third-largest grant under the program, said it would use the funding from the U.S. Department of Energy to build an 800,000 square foot lithium-ion battery plant in Midland, Michigan, that was expected to employ up to 800 people, according to its 2009 news release.
In June 2010, U.S. Vice President Joe Biden attended the groundbreaking for the Midland plant. At the time, Dow Chemical Chief Executive Andrew Liveris said Dow Kokam was evidence of a "rebooting" of American manufacturing.
In a proxy statement filed with regulators this year, Dow Chemical cited "progress with the Dow Kokam joint venture" as a major highlight in 2011.
Demand for hybrids and electric vehicles has been weaker than expected and analysts are skeptical that Obama's goal can be reached by 2015. Excess supply has hurt lithium-ion battery makers, pushing two other grant recipients, A123 Systems Inc and EnerDel, to file for bankruptcy protection.
Dow Kokam's Midland plant was designed to make batteries for up to 30,000 pure electric vehicles equipped with 20 kilowatt hour batteries, according to fact sheets provided by the JV.
But just under 8,000 electric vehicles were sold in the United States during the first nine months of 2012, auto research company Edmunds.com said. Plug-in hybrid sales over that same time have added up to just over 20,000.
The 2009 battery development program supported the construction of 3.9 gigawatt hours of lithium-ion battery production capacity by 2013, or nearly 200,000 electric vehicles made with 20 kilowatt hour batteries, said Menahem Anderman, president of consulting firm Advanced Automotive Batteries.
Anderman projects that 2013 demand for lithium-ion batteries from U.S. automakers will be less than 1 gigawatt hour, or fewer than 50,000 electric vehicles.
The overcapacity problem is worldwide. There will be enough global capacity to build between 25 and 30 gigawatt hours of automotive lithium-ion batteries in 2013, when global demand will likely top out at 3 gigawatt hours, Anderman said.
"Most of this demand will be met by established factories with proven product and reliability records in Korea and Japan," he said. "With worldwide overcapacity, it will be very difficult for the less experienced U.S. factories to compete."
It was not immediately clear if the Dow Kokam plant is still under construction. Dow Chemical spokeswoman Rebecca Bentley said the plant is producing battery parts, but referred additional questions to a Dow Kokam spokesman, who did not immediately respond to a request for comment.
Dow Kokam also produces battery parts in Ohio and France.
Dow Chemical, based in Midland, Michigan, plans to lay off 3,000 workers in total. The net job loss will be roughly 2,400 as the company plans to boost staff in growth areas.
Dow shares have dropped 15 percent in the past six months.
Written by Ernest Scheyder and Deepa Seetharaman