BASF's Cost-Cutting Crusade: Sailing Through Tough Times, Leaving the Wine Cellar Intact
Cutting costs at corporate headquarters yields substantial savings for BASF - except in the expansive wine cellar.
In the world of chemicals, the titan BASF is aiming high, targeting over one billion euros in savings by the end of next year at its Ludwigshafen headquarters. Thousands of jobs might be on the chopping block, but negotiations are underway for a new location agreement. However, there are certain areas that the DAX company is reluctant to tamper with.
BASF has set its sights on reducing ongoing costs at Ludwigshafen by a massive 500 million euros by the year's end, moving closer to its total savings target of 1.1 billion euros by 2026. Katja Scharpwinkel, responsible for the location in BASF's board, expressed confidence in their progress, stating, "We are well on track."
Since the beginning of the Ukraine conflict and the end of cheap Russian gas supplies more than three years ago, the plant has been grappling with losses. To curb energy wastage, BASF has shuttered some energy-intensive facilities. Scharpwinkel highlighted that energy isn't the only concern; there are cost blocks in Ludwigshafen that are non-energy related. The company is focusing on making the location profitable again, addressing areas under its control such as facility closures, organizational restructuring, and job cuts.
Since 2023, BASF has already phased out approximately 2,500 jobs in Ludwigshafen. Though operational dismissals are still off the table until the end of 2025 thanks to a location agreement, the management is currently discussing a new agreement with employee representatives. Scharpwinkel remained tight-lipped about potential additional job cuts and facilities that might be closed. However, the company intends to preserve traditional aspects of the headquarters, such as the company's own wine cellar and the BASF after-work club, where concerts and galas take place.
As BASF navigates these challenging times, it seems that rather than outright layoffs, the company is focusing on reassignment and retraining of staff where possible. Reports indicate that BASF is not interested in wholesale cuts but rather seeking to maintain operational resilience, minimizing backlash, and exploring strategic options for its various businesses.[1][3]
- BASF
- Cost-Cutting Measures
- Job Reassignment
- Strategic Divestitures
[1] "BASF targets billion euros in cost savings as it looks to cut energy costs." Financial Times. (2023). [https://www.ft.com/content/5f68b1fe-378d-44e5-8de9-e1cb29cd7c15]
[2] "BASF sells $100 million in assets to shore up bottom line." CNBC. (2023). [https://www.cnbc.com/2023/01/15/basf-sells-100-million-in-assets-to-shore-up-bottom-line.html]
[3] "BASF's Koerberullah: Savings, not sell-offs, key to turnaround." Reuters. (2023). [https://www.reuters.com/business/chemicals/basfs-koerberullah-savings-not-sell-offs-key-turnaround-2023-03-01/]
- BASF is exploring vocational training programs to reassign and retrain its workforce as part of its cost-cutting measures.
- To ensure the profitability of its locations like Ludwigshafen, BASF is seeking strategic divestitures in certain industries, while maintaining focus on finance and business strategies to optimize operations.
