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BASF cuts worldwide production

Article-BASF cuts worldwide production

Global materials supplier BASF ( announced today that, in response to a “massive decline in demand” and to avoid creating overcapacities, it is temporarily shutting down about 80 of its plants worldwide and reducing production at about 100 plants. Jürgen Hambrecht, chairman of the board of executive directors of BASF SE, said that customer demand in key markets has declined significantly. “In particular, customers in the automotive industry have canceled orders at short notice,” he noted.

The company says sales are also being negatively impacted by inventory reductions and lack of credit in customers’ industries. Hambrecht noted that BASF will not reach the previous year’s EBIT (earnings before interest and taxes) and that it is difficult to foresee how the coming year will develop. “BASF is preparing for tough times,” he said.

The cutbacks, most of which have already begun, are primarily in units supplying the automotive, construction, and textile industries, and affect all six of the company’s Verbund (integrated multiproduct) sites in Europe, Asia, and North America (Freeport, TX; Geismar, LA). About 20,000 BASF employees worldwide will be affected by the production cuts, including about 5000 at the company’s headquarters in Ludwigshafen, Germany.

The company is using what it terms flexible work time arrangements and says the reduced capacities are expected to last until January 2009 for individual plants. It also says that if weak demand continues and its flexible work options are exhausted, it cannot rule out shortened work time at certain sites worldwide.

Hambrecht emphasized the company’s flexible response to market changes, and said the company will focus more closely on cost and budget discipline, as well as “use opportunities arising from the crisis.” He noted that BASF will move swiftly to complete its in-process acquisition and integration of Ciba as a way to optimize the business. “We are realistic, but we are nevertheless confident when we look to the future,” he said.

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