Tough Times for BASF

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And it has dashed hopes that the destructive force of the recession would be limited to financial high-flyers, venture capitalists and the mismanaged automotive industry. There is no reason to succumb to a mood of gloom and doom, says BASF CEO Jürgen Hambrecht, but he is bracing himself "for very difficult times," and that is ominous news for the employees at Ludwigshafen—as well as the German economy as a whole.

BASF has always been the pride of German industry. It outperformed cheap suppliers on the world market with quality and innovative products made in Germany. The company expanded throughout the world without firing for economic reasons even a single employee at its original German headquarters. Instead of speculative stock market gains, BASF held out the possibility of solid dividends. It strictly adheres to all government environmental regulations, works closely with the chemical trade union, and requires the wearing of hard hats throughout the company premises.

The CEO has a Ph.D. in chemistry and speaks with a pronounced southern German accent. With his no-nonsense haircut and preference for rather inexpensive suits, Hambrecht has always stood in contrast to the arrogant manager types that occupy the board rooms of other companies. When German Chancellor Angela Merkel travels abroad with a delegation of German business leaders, Hambrecht is especially welcome to come along. The company has a long history of good political connections. Former Chancellor Helmut Kohl, who once worked part-time at BASF to pay his way through college, loved to visit the plant, which even boasts its own wine cellar and a cafeteria that occasionally serves his favorite dish—stuffed pig's stomach with fried potatoes.

A Global Corporation

But now it looks as if BASF is not robust enough to ride out the crisis unscathed. On two occasions in less than two weeks, the company has had to revise downwards its business forecast for 2009, something that has never happened under Hambrecht's solid leadership. Within just a single hour, the company's shares temporarily lost nearly 20 percent of their market value. That corresponds to roughly €5 billion, which analysts saw as an incredible overreaction, but it accurately reflects how strained nerves have become during the current crisis.

There is a large map of the world hanging on the wall of the visitor center at the main BASF plant in Ludwigshafen. Major production plants are marked with dark circles, and smaller ones with a dot. This is the map of a global corporation. With the exception of Africa and parts of Eastern Europe, there is no region that doesn't have dozens of branch facilities.

Anxiety in the Workforce'

BASF does over three-quarters of its business abroad, but what was once seen as an advantage has now become a problem. The company has to fight the downturn on all fronts around the world at the same time. Business has slumped everywhere, even in China, where BASF built a slightly smaller copy of its main plant in Ludwigshafen over three years ago.

"Asia is the real disappointment," says Hambrecht. Some 80 units around the world have ceased operation and 100 additional facilities have cut back on their production. Currently, roughly 20,000 BASF employees around the world—a fifth of the workforce—have nothing to do.

Hambrecht cannot say when it will be worthwhile to start up the facilities again. Expectations that business would pick up again before the end of the year have turned out to be little more than wishful thinking. Basic substances for laundry detergent and cosmetics are still selling well, but the outlook for the construction and automotive divisions is gloomy, and that augurs badly for the production in Ludwigshafen.

It's a very risky business to leave a unit out of operation at a chemical plant. In principle, the production could be compared to how people traditionally slaughter their livestock. Just like in the old days on the farm, the idea is to utilize an initial product directly on location—and to do this so thoroughly that not even a scrap remains.