BASF to Cut Back U.S. Operations

At BASF, a new series of plant shutdowns and job cuts in the U.S. will result in the closure of three sites, the loss of 400 jobs, and an expected $150 million in annual cost savings by 2007. The price tag for this latest consolidation round is $80 million.

Klaus Peter Lbbe, CEO of BASF Corp., the German companys North American unit, said last week that the latest cuts add to the 11 sites shuttered, 4,000 jobs slashed, and $250 million in annual savings achieved in the firms North American businesses since 2003.

The guiding principle behind the cost-reduction programs, Lbbe said, is to increase productivity and efficiency by concentrating production at fewer sites, closing older and less efficient plants and sites, achieving higher utilization rates at existing plants, instituting process innovations, and streamlining our support functions.

BASF now plans to close its nylon resin plant in Enka, N.C., and its superabsorbent polymer plants in Aberdeen, Miss., and Portsmouth, Va. In their place, BASF is building a new superabsorbents plant in Freeport, Texas, adjacent to an acrylic acid feedstock plant. Freeport, where BASF makes the nylon feedstock caprolactam, will also be home to an expanded nylon resin plant.

Expressing confidence in the U.S. chemical industry, Lbbe said BASF expects to grow both organically and through acquisitions. There are numerous opportunities for BASF to grow in North America, he said.

BASFs plants in Port Arthur and Beaumont, Texas, suffered only minor damage from Hurricanes Katrina and Rita, Lbbe added. However, the firms steam cracker in Port Arthur, jointly owned with Total, is just now restarting. Regional shortages of raw materials and energy mean that BASF will have to continue allocating supplies of a number of ethylene and propylene derivatives through the end of the fourth quarter, he said.

Lbbe pointed out that the hurricanes have highlighted the most pressing issue facing the North American chemical industry today: the high cost of oil and natural gas. The U.S. has gone from being a paradise in terms of feedstock six years ago, when natural gas cost $2.00 per million Btu, to one having the highest price for natural gas in the industrialized world, he said.

He called on the U.S. government to encourage alternative energy and a strategic reserve for natural gas, and to allow energy production in new areas.