Martin Brudermüller

MARTIN BRUDERMÜLLER, the Hong Kong-based board member of BASF who heads the company's operations in Asia as well as its global polymers, polyurethanes, and styrenics businesses, does not pretend to know when the economy in Asia or the rest of the world will regain its footing. His focus is on making sure BASF ends up in a stronger competitive position when conditions do improve.

Even though Brudermüller, 48, has resided in Hong Kong for just three years, his ties to the China region go way back. He first visited Hong Kong in 1988, when he was still a student. That same year, he started working for BASF in its Ammonia Laboratory. He was so impressed with the city that he and his wife came back in 1993 for their honeymoon. Then, from 2001 to 2003, Brudermüller was head of BASF's strategic planning when the joint Sinopec-BASF petrochemical complex in Nanjing had yet to open. It was a time, he recalls, when many critical decisions about the complex were made.

He is a hard man to get ahold of these days. BASF is among a small minority of international chemical companies to have some board members located in the regions they manage. Brudermüller spends roughly one-third of his time crisscrossing Asia, another third in Germany, and the rest in Hong Kong. Colleagues say he further increased his workload in the past six months as he sought out BASF managers and customers throughout Asia to assess conditions and decide how the company should adjust to the downturn.

Brudermüller recalls that the recession took a particularly dramatic turn in the final quarter of 2008. Throughout Asia, and particularly in China, manufacturers of consumer goods that were exporting to the U.S. and Europe throttled back on chemical buying. "Basically, orders were canceled, stopped—overnight," Brudermüller says. In the first three months of 2009, BASF sales in Asia dropped 42% in terms of local currency compared with the same period a year ago.

Over the past two months, there has been a slight rebound, but it has been limited to China, Brudermüller says. For example, the Nanjing complex operated at reduced levels in the last few months of 2008 and early this year, but it is now at full capacity again. He attributes the improvement in business to customers' restocking of inventory and to the early impact of an economic stimulus package from China's government. Under the stimulus plan, residents of rural areas are being subsidized to buy home appliances and small cars.

The plan will really start to have an effect in the second half of this year, Brudermüller predicts. Yet it's far too early to conclude that this is a turning point, he warns. "It is very difficult to make a reliable statement about the future," he says. "Our own people and our customers hardly can look further than one or two months."

Despite the cloudy outlook, Brudermüller says it's important to stick to a long-term growth plan. Of the chemicals it sells in Asia, BASF is still seeking to produce about 70% within the region. The ratio is now at 59%. And BASF is keeping its doors open to experienced, productive people who may need a new employer. "It's a good time now, when a talented person out there might lose his or her job with one of the competitors or has fewer prospects in his or her company," he observes.

Owing to poor market demand, BASF has postponed a project to build, by 2010, a big plant for the polyurethane intermediate methylene diphenyl diisocyanate in Chongqing, a city in southwest China. But Brudermüller does not expect the postponement to be extraordinarily long because economic growth in that area of China is higher than the national average. "Our long-term expectation has not changed, but the timing must be synchronized with market needs," he says.

DURING THE FINANCIAL CRISIS of 1998, BASF made several large acquisitions in Asia, particularly in South Korea, where it spent nearly $1 billion. Brudermüller doesn't anticipate a repeat this time around because his management team is already busy with the integration of Swiss chemical maker Ciba into BASF.

Brudermüller says Ciba adds a range of innovative products to BASF's portfolio as well as a team with a new range of talents. But the integration will require much work. In particular, whereas Ciba has been making chemicals at many small Asian sites that are sometimes operated with joint-venture partners, BASF executives are convinced of the economic and environmental benefits of large, integrated sites.

BASF is constantly reviewing whether it needs all its manufacturing facilities, Brudermüller says. In recent months, the firm decided to close plants making 1,4-butanediol, tetrahydrofuran, and styrenics in South Korea, as well as a coatings facility in Japan. In China, it just sold a catalyst plant to SÜd-Chemie. "This rationalization of facilities is something that is maybe in an accelerated mode now," he says.

Owing to this ongoing process, Brudermüller says, it's difficult to say whether BASF's headcount in Asia will be higher or lower three years from now. But in the longer term, he has no doubt that the company's presence in the region will increase, both in terms of employees and facilities. One example is Nanjing, where BASF and Sinopec will expand the site's ethylene capacity and add a number of new plants producing specialty chemicals.

"There is no change for BASF that Asia-Pacific—with China at its core—is a growth region," Brudermüller says.