The bell still tolls for German jobs

26 April 1993 00:00  [Source: ICB]

German chemical companies - long the determined optimists - have finally had to face up to recession. Now they are being forced to make compulsory redundancies and shed product lines.

'PROSPERITY IS just around the corner,' former US president Herbert Hoover was fond of saying, right up to the day the Great Depression struck. This time last year, as most western economies were in the throes of recession, a few chemical managers in western Germany seemed still to subscribe to the Hoover theory of economics.

By the third quarter of 1992, however, even the hardiest of optimists was forced to admit that 'recession has finally hit the German chemical industry', as Hoechst chairman Wolfgang Hilger noted in his role of president of the VCI.

The first step towards getting business back into balance, as the VCI sees it, is to throw off ballast. The association predicts that employment throughout the industry will decline by around 20 000 during the course of 1993, a figure some observers regard as too conservative.

BASF, which has had to cope with the most severe profits decline in 1992, plans some of the most dramatic cutbacks. A restructuring programme launched in 1990 is to be accelerated this year. Since 1990, the group has slashed 10 000 jobs worldwide, and an additional 4000 are expected to go this year.

The Ludwigshafen-based company has also decided to drop some of its 'peripheral activities'. With the swap of its polymethylmethacrylate business for ICI's polypropylene under its belt, and after giving up its structural materials business in the US, BASF is proceeding to divest its US polyester fibres and chips portfolio.

Analysts have repeatedly predicted that BASF could be interested in dropping its loss-making magnetic media and potash portfolios, but as chairman Jürgen Strube recently remarked: 'Solutions are in sight for both of these'.

The company is looking for a joint venture partner to operate the tapes business, which is being cut back to the bare basics, and the Treuhand has emerged as the saviour of the potash business. With production in both west and east Germany suffering from poor prices and competition from the former Soviet Union, plans are to merge the two into one company, under the management of BASF subsidiary Kali und Salz.

Bayer, after eliminating nearly 15 000 jobs from its payroll over the past three years, plans to cut another 3000 jobs in 1993. Some 3000 employees in dyestuffs, coatings raw materials and polyurethanes are working shorter hours during the second quarter of the year.

In mid-March, chairman Manfred Schneider said that even healthcare, which was the only division to make a profit in 1992, will see some streamlining, for the most part on the marketing and advertising side. Schneider estimates Bayer spent more than DM550m ($342m) in rationalising and restructuring the company in 1992, including more than DM300m for early retirement schemes, in addition to the cost of closing its Tedur PPS business and plant at Antwerp and cleaning up its chrome and acrylics fibres businesses.

After the shutdown of a lossmaking acrylics plant in Peru, plans for turning around Bayer's manmade fibres business include the closure of one of its older acrylics plants at Dormagen and concentrating production in the 'most modern' facilities, without reducing capacities.

Schneider has also hinted that there may not be a future for the production of dyestuffs and textile intermediates in Germany, as these plants are cost-intensive and the products are suffering from cheap Asian imports. Some of these, especially those requiring substantial investment to comply with stricter German environmental legislation, may be set for closure. He also hinted that Bayer may be close to signing a product swap deal with a German or European competitor in one of these product groups.

At Hoechst, too, the personnel carousel is turning, and more and more employees are being encouraged to get off ahead of time. In 1993, employment in the German group of companies was whittled back by more than 4000. Some 3000 additional jobs will be slashed at parent company Hoechst AG in 1993.

In all Hoechst spent DM771m on restructuring operations in 1992. After closing production plants for plastics at Knapsack and Kelsterbach last year, along with a plant for polyester films at Wiesbaden and plants for the chemicals intermediates beta-naphthol and resorcinol, the company plans to shut down a 150 000 tonne/year chlorine electrolysis unit as a result of phasing out its chlorofluorocarbons activities.

Four more plants are set to be shut down this year, including intermediates units at Greisheim, Offenbach and Frankfurt, and a dyestuffs plant at Frankfurt.

Hoechst board member Gunter Metz, with responsibility for plastics operations, said in late March that he is not optimistic about the prospects for joint ventures in the commodities sector as a means to returning to healthy profits. Although Hoechst is talking to Fina about a jv in PP, and to other plastics makers about possibilities for cooperation, Metz said that, apart from the jv with affiliate Wacker in PVC, announced in late 1992, no concrete moves are afoot.

At Hüls, where a DM210m operating profit in 1991 turned into a loss of the same magnitude in 1992, plans are to reduce personnel by 5000 over the mid-1990 level by the end of 1994. The company also plans to drop its small industrial gases business and the plastics division of Hüls America.

Henkel, although still among the most profitable German chemical firms, also plans to cut overheads by reducing staff. Some 1000 jobs are to be eliminated at the company's main works at Dusseldorf, spread over two years, using natural wastage and early retirement. Another 1000 are to be cut within the international workforce. Following a period of rapid expansion, particularly into eastern Europe, Henkel says it has now embarked on a 'consolidation' course.

Schering, on the sunnier side of the chemical industry thanks to its highly profitable specialised pharmaceuticals portfolio, also plans to make cuts in middle management. To reflect its new leaner structure, following the divestiture of its industrial chemicals, natural substances and electroplating divisions, some 400 jobs will be trimmed out, making use of natural wastage.

An additional 500 jobs will be taken out of the group's agrochemicals division by 1994. The division is still losing money and Schering is continuing negotiations about cooperation or jvs. Talks are understood to be underway with Ciba-Geigy as well as Hoechst, although Schering has confirmed neither. The Berlin group is believed to favour a Swiss partner.

Degussa's cost management programme, Degussa 2000, launched in the late 1980s, involves the elimination of at least 1500 jobs in the worldwide operation during the 1992-93 financial year, following on from a 1000 cut the previous financial year. The company's aim is to concentrate on core areas.

By: Grace Williams
+44 208 652 3214

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