With more than 160 subsidiaries and joint ventures in place, BASF’s product lines stretched from indigo dye colouring through agricultural chemicals to a variety of polymers. Such was BASF’s importance on the global stage that in 2003 The Wall Street Journal described it as a ‘bell weather for the business world’, anticipating swings in the global industrial economy by as much as six months in advance.
For decades BASF dominated chemical production and supply throughout the world. Hambrecht, whose career with the company stretched back 27 years, earned his reputation while serving as the head of BASF’s East Asia operations from 1995 to 1999. When the region’s economies began faltering in 1997, many companies began restructuring their joint ventures and some firms dropped out of partnerships with BASF. In spite of this Hambrecht argued that BASF needed to remain active in East Asia and urged the directors to continue with the firm’s long-term plans by buying out the South Korean partnerships. Ultimately, this advice would position the company to profit immensely from the economic resurgence that began several years later.
Hambrecht began his career as a chemist. He received his doctorate in organic chemistry from the University of Tübingen in 1975 and began his career with BASF the following year, working in the company’s polymers laboratory.
Ten years later he had made the transition from chemist to businessman, being appointed head of purchasing and research at Lacke und Farber, which later became BASF Coatings. In 1990 Hambrecht was made president of BASF’s engineering plastics division and in 1995 he assumed the position of president of the corporation’s East Asia division, based in Hong Kong. He joined the board of directors in 1997 and in 2002 became chairman.
Clear and unambiguous strategy
In an interview conducted at the beginning of his tenure as chairman of BASF in 2002, Hambrecht highlighted the importance of maintaining BASF’s traditions of reliability and trustworthiness. He also explained that he had developed a long-term business plan based on innovation and devotion to customer service and satisfaction.
Hambrecht identified four major focus areas: providing customers with an excellent service; creativity in exploring new technologies; nurturing and promoting employees who could address problems using innovative thinking; and managing the costs by offering the best return on investment available in the chemicals manufacturing industry.
Furthermore Hambrecht pointed to five factors that must be taken into consideration in order to secure the long-term success of BASF. The first was that the US-Iraq war had had a large impact on both the raw materials upon which BASF relied in making its products as well as the ability of firms to buy the company’s end products. Furthermore it had created volatility in the market, increasing demand for some of BASF’s products while reducing demand for others.
Secondly, the European Union had just issued a white paper establishing a new chemicals policy, setting limitations on emissions trading, which Hambrecht believed to be ‘dampening the competitiveness of the chemical industry.’ To address this he began to work closely with the EU in order to find solutions to these regulatory issues. Hambrecht’s third area of concern lay in the corporate restructuring that had begun to characterise the chemical industry. He believed that BASF needed to focus on: internal consolidation of operations, acquisitions and divestments of non-core product portfolios, exposure to private equity investment and a strong petrochemicals product line.
Finally, Hambrecht’s experience in East Asian markets allowed him a valuable insight into the importance of expanding BASF’s customer base in the region. He saw Asia as the most rapidly growing market for the corporation’s chemical products, predicting that by 2010 Asia-Pacific would account for 20 percent BASF’s total worldwide sales. To this end, in 2004 BASF opened a new plant – the world’s largest plant for the production of polytetrahydrofuran (a chemical used in the manufacture of spandex and some polyurethanes) – Shanghai.
The 2000 global downturn
The global downturn that began early in the new millennium caused Hambrecht some headaches. Between 2001-2004 profitability in the North American sector fell abruptly, and soon after his appointment as CEO in 2003 he was forced to slash 1,200 jobs in the US market. Although in 2003 the company’s half-year earnings were up 1.2 percent over the same period from the previous year – to approx €832m – BASF suffered from the fact that oil prices did not drop at the end of the Iraq war as many had predicted. Furthermore, orders for chemical products were not as high as had been anticipated.
From the start of his reign, Hambrecht was forced to focus his attention on increasing profits, and he effectively used new, cutting-edge technology to improve production and profitability. For example, BASF responded to the 2003 decline in revenues by improving the efficiency of its 50 North American plants, an exercise which reduced costs by around $100m.
Hambrecht’s attention to profit and to the company’s bottom line has paid dividends. He has implemented a business strategy of limiting capital expenditure to areas of the business where growth was a certainty. However, he has also emphasised the need to explore the business potential of new, emerging technologies, including nanotechnology, materials science, energy-management technologies and biotechnology.
Today’s challenges
In spite of rigorous cost-management, Hambrecht has not been able to shield BASF from the full force of the global economic downturn. In 2009 BASF reported a 68 percent decline in first quarter net profit to €375m, a fall that Hambrecht attributed to ‘persistently weak demand’. The April results confirmed that company earnings had fallen 58 percent to €985m, on sales that lost 23 percent – €12.2bn. BASF also confirmed what many analysts had predicted- the loss of at least 2,000 jobs by the end of 2009.
In mid 2009 the company announced that further job losses would be made, principally in its newly-acquired Ciba division, where 3,700 redundancies were to be made by 2013, the majority of which would be made by the end of 2010. This figure represents one-quarter of its total workforce. More recently, news has emerged that BASF was weighing up a reorganisation, sale or even closure of 23 of Ciba’s 55 former production sites, with a decision planned for early 2010.
From beginnings as a scientist, Hambrecht has emerged as a highly-competent business leader and an inspired, forward-thinking strategist. But not even he could have predicted the profound effects of the global economic slump, and recent mergers may have proven a step too far for the company, which throughout its history has normally taken a conservative approach to acquisition.
In 2004, Hambrecht led the the rebranding of BASF, which saw the company adopt a new company motto: The Chemical Company. At the time Hambrecht explained the significance of the motto, ‘We make it clear what we are proud of: we are, and want to remain – the world’s leading chemical company. Today, the company still retains the title, but it is going to have to focus on what is core to the business, now more than ever, if it is to retain the top spot.