BASF Completes Phase I Restructuring in North America, Phase II Underway
March 17 2004 - 5:30AM
PR Newswire (US)
BASF Completes Phase I Restructuring in North America, Phase II
Underway Restructuring Program on Target to Deliver $250 Million in
Savings MOUNT OLIVE, N.J., March 17 /PRNewswire-FirstCall/ -- The
first phase of BASF's two-phase restructuring program in North
America has been largely completed and the second phase is now
underway. The restructuring program, first announced in August
2003, aims to reduce fixed costs by $250 million annually by 2006.
"Based on our progress to date, we will clearlymeet our objectives.
In addition, we are continuing to take advantage of further
opportunities that will allow us to increase our profitability in
this important chemical market," said Klaus Peter Loebbe, member of
the Board of Executive Directors of BASF Aktiengesellschaft and
Chairman and CEO of BASF Corporation, BASF's North American
affiliate. Phase I successfully implemented The first phase,
involving the reduction of approximately 1,000 positions through
restructuring of service functions inNorth America, including, for
example, information technology, logistics, finance, human
resources, legal and purchasing, has now been largely completed. It
will lead to annualized cost savings of at least $100 million
starting in 2004. Special chargesof EUR 36 million ($39 million)
for Phase I were included in BASF's financial results for 2003.
Phase II aims to optimize business structure The second
restructuring phase targets a $150 million reduction in fixed costs
through a broad range of projects designed to optimize business and
site operations in North America. As a result of the actions
defined for implementation so far, BASF expects to realize half of
the cost reductions this year. The company expects to implement
additional restructuring actions in 2004 and 2005 and to fully
realize the full cost savings by 2006 at the latest. As a result of
the changes implemented to date under Phase II, BASF has reduced
employment by about 400 positions. The company currently expects
approximately 350 additional positions to be eliminated in
conjunction with further Phase II actions. Examples of Phase II
projects are: * Closure of the South Brunswick, New Jersey,
expandable polystyrene manufacturing site at the end of 2004 and
the transfer of the majority of production to Altamira, Mexico, to
take advantage of economies of scale at that site. * The formation
of a new 50-50 equity joint venture with Akzo Nobel to produce
chelates in Lima, Ohio, which began in February 2004. Sales and
marketing of the chelates will continue to be conducted separately
by both companies. * Retrofitting a former vitamins plant at BASF's
Wyandotte, Michigan, site to produce amino resins for the North
American coatings market. Production is expected to begin in the
second quarter of 2004. North American headquarters In addition to
its restructuring program, the company is targeting long-term
savings by relocating its regional headquarters from Mount Olive,
N.J., to smaller offices in Florham Park, New Jersey, by the end of
the third quarter. The company plans to sell the current
headquarters facility. Utilization of the current facility has been
decreasing since the sale of Knoll Pharmaceuticals in 2001 and is
currently less than 40 percent. Increased emphasis on profitability
While the company's restructuring program has a significant focus
on reducing fixed costs, BASF is also continuing to invest in
profitable products and markets in North America through an active
program of acquisitions, joint ventures and site investments.
"North America is one of BASF's most important markets globally and
we intend to continue to be a leading player here," said Lobbe.
"The North American market remains highly challenging and is
currently characterized by high raw material costs, low capacity
utilization and tough competition." "To be a leading player in this
market, we must be in top condition. This means that we must not
only reduce our costs, but also focus on strengthening our
profitable businesses," he said. "In this way, we aim to contribute
to BASF's global goal of earning a premium on our cost of capital."
BASF has made a number of targeted acquisitions in the past year,
including Honeywell's engineering plastics business, Ticona's nylon
6,6 business, the Callery Chemicals division of Mine Safety
Appliances, Agway's CPG FreshSeal post-harvest business,
ExxonMobil's Vistanex polyisobutylene business, Sunoco's
plasticizers business and most recently Foam Enterprises, Inc., a
polyurethane system house. In addition, the company has continued
to invest in new production capabilities, including a Styrolux(R)
styrene-butadiene copolymers plant in Altamira, Mexico, which began
production in January 2004. In addition, Sabina Petrochemicals LLC,
a joint venture between BASF, Shell Chemical LP and ATOFINA
Petrochemicals Inc., began production at its world-scale C4 olefins
complex in Port Arthur, Texas, in the first quarter of this year.
DATASOURCE: BASF CONTACT: Tim Fitzpatrick of BASF, +1-973-426-2305,
or Web site: http://www.basf.com/usa
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