The numbers are threatening: almost every fifth company wants to give up energy-intensive business areas in Germany. This also includes BASF. The chemical company wants to stick to its investment plans in China. The demands are getting louder that the traffic light has to act.
The numbers read ominously: almost every fifth company wants to give up energy-intensive business areas in Germany. BASF is also toying with the idea. And think of China of all places: The chemical company wants to stick to its investment plans in the Middle Kingdom.
De-industrialization is the name of the term that could have chances of the non-word 2022. Because the energy crisis, which is severely affecting Germany, is causing two things: Companies that can afford it are moving abroad, where countries with low energy prices are tempting. And those who don’t have that opportunity are on the verge of extinction.
Almost all companies in the metal and electrical industry (ME industry) are affected by the current energy crisis, as can be seen from the nationwide flash survey by Gesamtmetall among the member companies of the ME industry employers’ associations. 97 percent of the companies are affected by cost increases for energy and energy-intensive preliminary work, every sixth company even in a way that threatens their existence. The high prices are the reason: purchasing costs increased by 65 percent in 2022 compared to 2021, and for energy (gas and electricity) more than doubled (plus 115 percent).
Gesamtmetall Managing Director Oliver Zander said during the presentation of the results: “The energy crisis is hitting companies in the metal and electrical industry with full force – across all sectors and sizes. There can be absolutely no question of a stable situation. It is also characterized by great uncertainty. A gas shortage would exacerbate the problems extremely. In 2023 we expect another year of recession for the ME industry.”
At the same time, the order situation is not that bad at the moment: Only: If the looming recession develops more severely than feared, the order backlog will also decrease. Therefore, the companies that can act. Like BASF. And look abroad.
Brudermüller wants to significantly reduce the costs of the chemical company in Europe and especially in Germany as quickly as possible. According to the “Spiegel”, the CEO also confirmed this week that he would stick to the planned investment of ten billion euros in a new Verbund site in China and significantly increase sales in the country.
The problem: BASF slipped into the red in Germany in the third quarter. According to the group, the German locations lost millions during that time. We are talking about a low, three-digit million amount. “The high energy prices are having a big impact,” said BASF CFO Engel.
Due to deteriorated business and more difficult framework conditions in Europe, BASF management recently launched an austerity program that is to be implemented between 2023 and 2024. Because price adjustments alone don’t seem to help. The cuts are expected to reduce annual non-production costs by €500 million. The Executive Board intends to realize more than half of the savings at the Ludwigshafen site, where BASF employs around 39,000 of its approximately 111,000 employees worldwide. The company, service and research areas as well as the corporate headquarters are to be streamlined, it said. The company does not rule out job cuts.
As early as mid-October, an Ifo survey for the Foundation for Family Businesses showed that job cuts are now on the agenda. A quarter of companies in Germany are planning to cut jobs because of the rise in energy prices. 57 percent stated that they wanted to postpone planned investments because of this. And 17 percent of companies plan to give up energy-intensive business areas entirely.
The board of the foundation, Rainer Kirchdörfer, called the results of the survey an alarm signal: “For some time now we have been seeing a gradual shift in industrial value creation. We will only feel this in the form of deindustrialization and loss of prosperity in years to come – but then it will be irreversible.” This “fatal” development in Germany is accelerating, Kirchdörfer continued. Companies are reducing production in Germany or relocating their production to places where energy costs, taxes and bureaucracy are lower.
Two questions now arise: 1. How does politics react to this? The pressure from the opposition is growing: The federal chairwoman of the SME and Economic Union, Gitta Connemann, said to “Bild” that a “winter gap” endangered jobs and training positions, that SMEs were threatened by “the energy collapse”. The CDU politician called for a “winter bridge”: “The brakes must come by January 1 at the latest, not just for gas. And not just for energy-intensive operations,” she said.
She demands: “Anyone who wants to prevent de-industrialization must expand the energy supply, put the brakes on energy prices and relieve companies. Otherwise the exodus is programmed. Economics Minister Habeck must finally change his priorities – first the country, then the party.
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The majority of economic experts are still talking about a “mild recession”, i.e. the job cuts are moderate, also because of the shortage of skilled workers. However, if the worst-case scenarios with an economic slump of up to eight percent in 2023 become reality, for example because the gas shortage worsens due to a hard winter, this bastion should also fall.
No wonder calls for action are increasing at the traffic light before it turns red.
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