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Chemical Giant Increases Action in Response to Poor Economy

Posted: January 19, 2009
According to a company report, BASF’s global business declined significantly in December 2008. Demand for chemical products has not picked up in any region in the first half of January, and customers are continuing to destock.

“The situation remains tough and difficult to predict. We do not expect the economic environment to improve in the coming months,” said Jürgen Hambrecht, chairman, BASF.

Further, the company states that the decline in business is greater than was expected in November and will negatively impact earnings. BASF reduced capacity utilization at its production plants at its six Verbund sites worldwide in mid-November. On average, the capacity utilization rate within the BASF Group is currently less than 75%. Only demand for crop protection products and products for the food industry remains high.

Since implementing the production capacity reductions, BASF has, wherever possible, been using flexible working time arrangements such as reduction of overtime and holiday accounts at the affected sites worldwide. In doing so, the company is also utilizing the benefits offered by its integrated approach to production known as Verbund, which allows employees to be transferred between plants with varying capacity utilization rates. However, flexible working time arrangements are no longer sufficient to absorb the effects of production cuts everywhere. This applies primarily to sites that manufacture products for the automotive industry, but the company stated it cannot rule out the introduction of short-time working additional further sites.

“We will maintain strict discipline with regard to costs and expenditures. And we will accelerate the implementation of our existing global restructuring and efficiency programs,” said Hambrecht. BASF has already announced plant closures in North America and Asia. Further job reductions may be necessary, depending on how economic conditions develop.