Your Source for Up-To-Date News and Research on the Collision Repair Industry
click here to subscribe to the FREE INSIGHT Editor's Desk News Alert Email
SUBSCRIBERS-ONLY
Today's News
INSIGHT This Month
INSIGHT Archives
Survey Center
Letter to the Editor
Business Tools
Subscription Information
CSI Reporting
Financial Analysis
IRS Audit Guide
Management/
Technical Info
Market Watch Rates
INSIGHT Inside this month's issue...
Feedback
Letter to the Editor
Friday October 28
BASF Restructuring in North American Business Increases Cost Savings by $150 Million
BASF's North American business has announced that its ongoing restructuring programs will yield an additional $150 million in annual fixed cost reductions by mid-2007. The company expects one-time costs of $80 million arising from these measures. The added savings are beyond the originally targeted $250 million already achieved and will bring the total fixed cost reductions for the restructuring program announced in early 2003 to $400 million annually.In addition to the cost reductions, the company expects to see its earnings before interest and taxes (EBIT) rise by $200 million on an annualized basis as a result of the company's Commercial Effectiveness program. Commercial Effectiveness involves adoption of new pricing methodologies and business models and focusing technical and developmental capabilities on customers with whom BASF can grow profitably. At the same time it will further reduce complexity.
"The upward revision in our targeted cost reduction program is the result of two factors," said Klaus Peter Loebbe, member of the Board of Executive Directors of BASF AG and Chairman and CEO of BASF Corporation, BASF's North American affiliate. "One, we have expanded the scope of some restructuring projects, and, secondly, we are further improving the efficiency of our larger manufacturing sites through intensive benchmarking."
The benchmarking program will identify specific process, productivity, and technology enhancements that will increase each site's overall effectiveness while maintaining the highest standards in safety, health, and environment.
Loebbe added, "The revised estimate of fixed cost reductions reflects the success that we are having with the restructuring that we announced in 2003. To be a world-class competitor, we must strive continuously to be an efficient manufacturer, a partner of choice with our customers, and a leader of innovation. These two initiatives in cost savings and Commercial Effectiveness are important milestones in meeting our financial objectives as well as the goals set out in our BASF 2015 strategy."
In addition, Loebbe said that BASF is still assessing losses from the Gulf Coast hurricanes; the final loss estimate will depend to a great degree on the start-up of the Port Arthur, Texas, cracker that BASF operates in a joint venture with Total. Losses primarily are due to interruption of business at BASF sites in the region as well as at suppliers' and customers' facilities, severe impacts on the transportation infrastructure in Texas and Louisiana, and, to a lesser extent, property damage. Currently, all facilities with the exceptions of Beaumont, Texas, and Port Arthur, both in the area hit hardest by Hurricane Rita, are back to normal operations. The Port Arthur cracker is in the process of being restarted. The agrochemicals site in Beaumont will resume full operations November 1.
In 2003, BASF announced a two-phase restructuring program with an initial target of $250 million in annual fixed cost reductions in North America by 2006. This goal was reached in the second quarter of 2005, 18 months earlier than scheduled. In the restructuring, BASF optimized support functions, improved and consolidated manufacturing site operations, reduced headcount by 30 percent or more than 4,000 positions, and streamlined business processes.
©2005 Collision Repair Industry INSIGHT
All Rights Reserved
FEATURED
LINKS:
INSIGHT Supports the NABC!
Do You?