Still two months to go before Markus Kamieth takes over as CEO and already his in-tray is creaking under the weight of Ludwigshafen, BASF’s loss-making flagship site.
CEO Martin Brudermueller today announced yet another savings program, tasking his successor to work out the best way to find another EU1 billion in cost cuts. The industrial spectacle that is the Ludwigshafen Verbund is being sorely tested by “deteriorating competitiveness” in Europe, particularly so in Germany where BASF produces more upstream chemicals and materials.
Kamieth is already raking through which plants and jobs will need to close and “nothing is off the table,” said Brudermueller, who steps down in April. When he took over in 2018, it was a very different picture. BASF was still in swashbuckling mode, announcing the construction of a new $10 billion Verbund chemical complex in Zhanjiang. By contrast, Kamieth will lead Ludwigshafen’s battle for survival.
We already know that the site will be smaller and focused on specialties for the Europe. In the line of fire are those aging plants that are expensive to upgrade, Brudermueller added.
The Verbund concept of running integrated plants only hits maximum efficiency when 80-90% loaded.
“It’s nowhere near there right now,” Brudermueller said.
“We have to say good bye to the good old times in Germany.”
The downsizing will take time. Currently, there’s a labor agreement protecting jobs at the Ludwigshafen until 2025 and negotiations on a replacement have yet to start. Brudermueller added it’s more cost effective to let aging workers reach retirement age than pay them off.
Meanwhile, BASF is also flirting with doing things a bit differently, where possible. Businesses that are less integrated into the Verbund — like coatings, Ag and battery materials — are being given more space to behave like pure-play chemical companies. But they are not being completely let loose. Services like finances and R&D will continue to be provided by BASF centrale.