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LANXESS: Styrenic Resins and Fine Chemicals Business Units to be Realigned

Published on 2005-06-08. Author : SpecialChem

LEVERKUSEN -- Chemicals company LANXESS AG has achieved a decisive breakthrough toward boosting its competitiveness. A viable solution has been found for the Group's two biggest loss-making operations, the Styrenic Resins and Fine Chemicals business units. Following tough negotiations with the employee representatives, LANXESS management has given the go-ahead for the realignment of these units. A package comprising a plant consolidation program and reductions in personnel costs is designed to achieve annual savings of some EUR 100 million as of 2008.

Welcoming the agreement, LANXESS CEO Dr. Axel Heitmann commented: "It was important to quickly reach an accord in order to ensure the survival of both units. We have achieved our aim of attaining competitiveness while at the same time preserving as many jobs as possible in Germany and Spain. We have scored a decisive breakthrough despite very difficult conditions. All those involved have thereby proven that in Germany, too, courageous solutions can be found to such problems."

Key elements of the restructuring:

The savings package will expand through 2008 to reach a sustained annual volume of EUR 100 million. It will lead to total costs of about EUR 150 million for LANXESS in the period 2005 through 2007.

A total of 960 positions are to be eliminated in Germany in a socially responsible manner. The employment pact that precludes dismissals for operational reasons before the end of 2007 will be adhered to. Employment will be reduced through a combination of natural wastage, retirements, part-time working arrangements for older employees and active outplacement assistance. It is intended to offer financial incentives to employees who are prepared to leave the company voluntarily. Some 200 jobs will be shed this year, and about 400 in each of the next two years. The number of positions will be reduced by around 300 in the Styrenic Resins business unit and by about 500 in Fine Chemicals. Some 160 employees in the current employment pools are also affected. It has been agreed to review the number of job cuts at six-month intervals.

In the Styrenic Resins business unit, a comparison between the Dormagen and Tarragona sites showed that both possess a considerable savings potential. Both will therefore be retained, but realigned. While the production of specialties will be concentrated in Tarragona, capacity in Dormagen will be reduced and the site will confine itself to manufacturing high-quality products for Bayer Material Science. Two thirds of the jobs in Dormagen will thus be lost.

The Fine Chemicals business unit will be carved out to form a legally independent subsidiary, and several unprofitable plants will be closed down. LANXESS management undertakes to invest EUR 50 million by the end of 2007. There is also an option to invest a further EUR 50 million by mid-2010. In this way the unit can be placed on a competitive footing for the long term. The aim is to enable it to compete successfully in the high-tech production of fine chemicals for the international market, especially agricultural and pharmaceutical chemicals. A major efforts will also be made to attract new customers. All these measures are designed to safeguard the remaining jobs in this unit in Germany - and especially in North Rhine-Westphalia - for the long term.

The German employees are making a solidarity contribution to support the realignment of these businesses. Cuts in personnel costs have been agreed that will apply from July 1, 2005 through the end of 2007. The work week for pay-scale employees will be shortened to 35 hours in conjunction with a 6.7 percent cut in pay. Bonus payments to all employees, including the Board of Management, will also be reduced.

Details of the agreement have yet to be negotiated.

Says Heitmann: "My thanks go to the employees, the politicians and the unions for the support they have shown. I am relieved that through mutual trust - and with a substantial contribution on the part of our German and Spanish employees - two units that have been losing money for years now have a positive future within the LANXESS Group."

This news release contains forward-looking statements based on current assumptions and forecasts made by LANXESS AG management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.


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