German chemicals in deep structural crisis

25 October 1993 00:00  [Source: ICB]

THE GERMAN chemical industry is in a deep structural crisis, Hoechst chairman Wolfgang Hilger said at his last report to the press as president of the chemical industry association, VCI.

Speaking at the VCI annual meeting in Baden-Baden, Hilger remarked that companies in western Germany are losing ground in base chemical production to producers in Asia and eastern Europe, where cost structures are 'considerably more favourable than in Germany or western Europe'.

VCI companies are now closing older, less profitable plants in Germany at the rate of 'two to three a week', said Hilger, adding that, while the first step is to reduce capacities, rather than quit entire products, it is 'disturbing to observe that in recent times more profit groups have become unprofitable than new, profitable products have been developed'.

Due to the poor profit development of the past several years, German chemical producers have cut back capital spending plans for Germany by around 20% this year, Hilger said, indicating that foreign subsidiaries of the German majors have no plans to cut spending.

At the same meeting, VCI vice president and BASF chairman Jürgen Strube emphasised that Germany's problems reflect those of most of the chemical industry in western Europe. He predicts that the next few years will see further weeding out of unprofitable products, especially in agrochemicals.

Observing that the chemical industry's traditional customers are developing their own technological innovations in other parts of the globe. Hilger expressed reservations about the future role of chemical production in Germany. He believes that the chemical industry's best chance to improve business will be to develop more innovative products. But he added that further concessions are needed, especially in environmental regulations.

* Meanwhile, Hoechst said that earnings from its key pharmaceutical businesses plunged in the first eight months of this year and is therefore being forced to cut 300 pharmaceutical jobs. Earnings in this sector are only one third of the level seen a year earlier.

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