Gloomy picture in chemical industry

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The Independent Online
FRANKFURT - Germany's chemical industry yesterday painted an alarmingly gloomy picture of its present situation, writes John Eisenhammer.

The president of the producers' association, Wolfgang Hilger, said industry returns fell by more than 30 per cent in 1992, 'with a negative tendency during the course of the year'. This followed successive declines in earnings of 20 per cent in 1991 and 25 per cent in 1990.

Chemical firms in western Germany are this year expected to shed 20,000 jobs out of a total workforce of 586,000.

'The German chemical industry faces the greatest economic challenge since the crisis year of 1982,' Mr Hilger said. 'But today the starting position is more difficult than a decade ago: aggravating factors have increased in number while conditions for an improvement have worsened. 'The increasing unattractiveness of Germany as a place to do business is aggravating the industry's ability to cope with competition, particularly from Asia.

'In Germany today it is much more difficult to market an innovation than it was 10 years ago. The example of genetic engineering shows that bureaucracy has increasingly turned out to be an obstacle to innovation,' Mr Hilger said.

In an industry that depended on exports for half its economic success, the situation was getting increasingly difficult, he said. Total turnover of almost DM171bn ( pounds 70bn) last year was down nearly 2 per cent on 1991. Eastern German firms accounted for less than DM7bn of this total.

In the first half of 1992, Mr Hilger said, increasing volumes had more or less balanced out declining prices. But in the second half, this compensation disappeared as both components moved sharply downwards. Prices had fallen because of the 'pressure of high capacities worldwide and the movement of exchange rates against the Deutschmark. On average the price decline last year reached some 2 per cent'.

He said western German labour costs rose by roughly 3 per cent resulting in strong pressure on costs.