"You need to be much more emotional," says Jurgen Hambrecht, who became chief executive of gene and chemical giant BASF last year. "You can't just work via the brain, you need to get to people's hearts..."

Then they may be willing to trust you to take the necessary risks for innovation, as with GMOs, that BASF's native Germany is rejecting.

"The last European soccer championship is a synonym for all that. The big teams, the big economies went out very early. Why? Some have the superstars, but they don't have a team, they don't have the will," he says. "So the big economies are slipping into mediocrity, whereas the smaller emerging nations are the ones striving for excellence."

BASF's chief executive's faith in small emerging nations must be the reason he's been talking of relocating BASF's GM research and development to "a place where you can really push innovation into reality" - the United States!
http://www.lobbywatch.org/archive2.asp?arcid=4116
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Chemicals giant tries to touch our hearts
By David Firn and Bettina Wassener
July 19 2004
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373805457

The sight of two dozen 10-year-olds in laboratory coats squealing excitedly about making muffins and washing clothes is not something for the faint-hearted. But with luck, their day of applied chemistry at BASF's Kids' Lab in Ludwigshafen will have hammered home the point that chemicals are basic ingredients of everyday life, and that chemistry can even be fun.

BASF has played host to tens of thousands of schoolchildren in the Ludwigshafen area, as well as Asia, in recent years. The project is part of the German chemical giant's efforts to bring chemistry closer to the public, and improve the image of an industry that for many people conjures up only thoughts of periodic tables and sulphurous smells or accidents and pollution.

So the Kids' Labs are close to the heart of Jurgen Hambrecht, who became BASF chief executive last year, and has since been a vocal campaigner for injecting more innovation and "emotion" into the industry.

BASF's growing awareness of its public image coincides with a growing series of challenges to the industry from several quarters.

For a start, the industry's growth rate is lagging behind overall economic growth; regulations planned by the European Union will increase the burden of bureaucracy; and environmental concerns, notably over genetically modified foods, threaten to constrain the industry's ability to bring innovations to market.

This, argues Mr Hambrecht, means that it is more important than ever for the industry to secure social acceptance. Success in this will affect everything from its ability to operate to its chances of attracting the best recruits.

"You need to be much more emotional," Mr Hambrecht says. "You can't just work via the brain, you need to get to people's hearts, to try to explain the social value of things, what the chemical industry stands for, and that it's so essential for human beings."

In a sector whose polysyllabic product names are a mystery to outsiders, the 57-year-old chemical engineer's speeches and conversations, peppered with football analogies and delivered with boyish enthusiasm, are a breath of fresh air.

As head of the world's largest chemicals company and president of Germany's VCI industry federation, Mr Hambrecht sees an urgent need for less red tape and more innovation, if the European chemicals industry is to remain competitive.

BASF has, for example, been in recent years one of the most vocal critics of planned EU chemicals regulations. First outlined in 2001, the EU's plans, known as Reach - registration, evaluation and authorisation of chemicals - will replace a plethora of rules that subject new and old chemicals to different levels of regulation.

Although the industry, too, wants a single system for all chemicals, companies say that more than 30,000 substances will need to be tested, regardless of the level of risk they pose to health and the environment. And the bulk of this, argues the industry, would fall on the mainly small and medium-sized companies in the specialist chemicals sector, who can least afford the extra burden.

Along with the other challenges facing the industry, says Mr Hambrecht, "it's as if you are a marathon runner and you have to take with you a rucksack with additional weight. You cannot run, let alone win, any more. If it goes on like this, competitiveness will, at the end of the day, be endangered."

The debate over EU regulation was bound to be controversial even at the best of times. But it has become doubly so because it coincided with a severe downturn in the industry.

Since 2001, flagging demand from the many industries that chemicals companies supply - ranging from motor manufacturing, construction and electronics to consumer care - has forced BASF and its competitors into painful cost-cutting and restructuring efforts.

A pick-up is now beginning, but overcapacity and price pressures remain, in spite of predictions that second quarter financial results from chemicals companies, due out in coming weeks, will confirm the gradual recovery.

"In the past, the chemicals industry saw growth rates above gross domestic product growth," says Mr Hambrecht. "But those times are over: we expect the industry to grow less rapidly than the overall economy until 2015."

The fact that BASF is outperforming the industry average in this environment is a result of early cost-cutting, a strong position in Asia and a diversified product portfolio.

BASF will have cut costs by a total of [EUROS]1.8bn (GBP1.25bn) by the end of 2006. It will also make disposals where underperforming businesses cannot be sufficiently improved and are not integral to BASF's overall strategy.

But the company also retains the means to make selective, and occasionally chunky, acquisitions. Fipronil, an insecticide acquired from Bayer last year, cost it [EUROS]1.18bn.

BASF is also able to invest [EUROS]2bn a year in its massive Ludwigshafen headquarters and elsewhere, and investments totalling [EUROS]2bn in China alone in 2001-2005 make BASF the biggest foreign chemical industry investor in the country.

The decision to invest heavily in Asia was taken under Mr Hambrecht's predecessor Jurgen Strube and implemented by Mr Hambrecht, who spent four years in Asia in the 1990s.

The early move gave BASF a head start in what is deemed the industry's most important battlefield in coming years. BASF expects to generate 20 per cent of its sales in Asia-Pacific by 2010, up from 16 per cent, and aims to produce 70 per cent of that locally.

The group's third advantage over its competitors is its wide-ranging portfolio, in particular its oil and gas business.

Many companies have chosen to focus either on oil or on chemicals. French oil group Total, for example, is seeking to spin off parts of its struggling Atofina chemicals operations. BASF, however, has bucked this trend, and its oil and gas business generated almost 15 per cent of its [EUROS]33.4bn sales last year.

The business also gives BASF a "natural hedge" against movements in the price of oil, which is needed to produce many chemicals and plastics. The earnings of "pure" producers of such materials - including BASF's own chemicals and polymers divisions - suffer when oil prices rise to their present levels.

Although the prospect of tighter EU regulation is unwelcome, BASF's size means the extra burdens it will bring are less worrying than they are for many others.

Moreover, the final version of the Reach regulations is likely to be far more acceptable to the industry than early drafts. Mr Hambrecht hopes that the new Commission, under Jose Manuel Barroso, will be more pragmatic, not least because the new EU members have a different agenda, says Mr Hambrecht.

Even so, he believes that both politicians and the general public must become much more open to taking the risks that are needed to ensure innovation and to safeguard Germany's leadership in research and development, which he says is "excellent".

Mr Hambrecht's support for genetically modified products (BASF is also a leading producer of agrochemicals) has brought him criticism in a country that remains firmly opposed to their spread. But he insists there is no evidence that GM crops pose a hazard, and says there is "no innovation without risk".

He also believes that the "zero-risk" attitude that prevails in Germany in particular - which, ironically, was where much of the modern chemicals industry was founded - could ultimately undermine the country's science infrastructure.

"The last European soccer championship is a synonym for all that. The big teams, the big economies went out very early. Why? Some have the superstars, but they don't have a team, they don't have the will," he says. "So the big economies are slipping into mediocrity, whereas the smaller emerging nations are the ones striving for excellence."