Europe’s largest chemical company, BASF, is quietly turning its back on Germany. The closure of production sites and the relocation of investments to China are a clear signal to politicians: profit-oriented companies are not prepared to pay the price for political activism.

A market economy is like democracy, only more extreme. Democrats maximize votes and power, just as companies maximize sales and profits.

But for companies, voting does not take place within a small territory, but globally.

The competitor is not a veteran politician like Joe Biden, but a young wild one like Elon Musk or Mark Zuckerberg.

The most important drivers for entrepreneurial success are not slogans and promises, but innovations that must first surprise and then delight the customer.

For political parties, one’s own state is the measure of all things, for businesses it is just one option among many.

That’s the big difference: the SPD and CDU only have Germany. A company like BASF can simply leave.

That is exactly what is happening these days. We are witnessing a silent farewell. Europe’s largest chemical company is investing ten billion euros in a new Chinese large-scale plant and is closing parts of its production in Ludwigshafen. New staff are being hired in China and parts of the core German workforce are being bid farewell.

The reason for this should shame politicians of all parties: despite capable managers, highly qualified employees and a long industrial tradition, it is no longer possible to make a profit in Germany.

The industrial heartland appears to have burned out. BASF’s CFO had to inform the board of directors for 2023: Apart from expenses, there has been nothing domestically.

BASF in Germany contributes 0.00 cents to the Group’s profit and, in the opinion of the Supervisory Board and the Board of Management, there is no chance of reversing this trend by business means in the foreseeable future.

The basis of industrial production is reliable and affordable energy. Both are no longer available for a chemical company like BASF, which had a total energy consumption of 50.1 million megawatt hours in 2023.

Facts: The EU Court of Auditors recently warned the Commission not to take its climate targets to extremes. Europe must not jeopardize its industrial sovereignty in its ambitions for climate protection. That is exactly what is happening now.

Martin Brudermüller says that the problem is not the absolute energy prices, but the comparison with other locations such as the USA or the Middle East. Germany is falling behind. We are witnessing the relative decline of the economic power of the Federal Republic.

With the Chemicals Directive, the EU Commission has set another standard for hostility towards industry. The complaint by long-time BASF boss Brudermüller that the EU is banning the production of chemicals that are essential for the energy transition fell on deaf ears.

Anyone who is under pressure or even disrespected at home looks around the world. China is thus in the crosshairs, including BASF. The Middle Kingdom, says Brudermüller, offers the largest chemical market in the world, which already accounts for 50 percent of the entire chemical market worldwide. China will continue to grow in the chemical products segment, he says – “and significantly more than all other regions.”

BASF’s operating return has more than halved to 5.5 percent compared to 2017, the year before the recently departed CEO took office. The same applies to the return on capital employed.

In Germany, it is not just the energy costs, but also the constantly increasing bureaucracy, the rising social security contributions, the reduced working hours with rising wages and, last but not least, the shortage of skilled workers, which in turn triggers new wage increases. All in all, this mixture has a toxic effect on a company that wants and needs to operate profitably.

Brudermüller says:

“We make profits everywhere in the world, except in Germany. The Ludwigshafen site is making a loss of 1.6 billion.”

The company’s largest complex has been in the red for years – all other regions of the world are profitable. With a net profit of 225 million euros in 2023, the group only achieved around three percent of the net profit of 2019 (8.4 billion euros).

This means that the profits and thus all dividend payments are currently being generated by hard-working BASF workers abroad. The domestic economy is eating up profits and no longer contributes to the dividend payout.

The board cannot ignore figures like these forever and has therefore cut costs. Eleven production plants in Germany, including some relatively new ones, are now being closed, the Tagesschau reported yesterday.

The savings package announced in autumn 2022 will bring a total of 1.1 billion euros in savings by the end of 2026. By the end of 2023, BASF had realized around 600 million euros of this. As the economic situation remains fragile, the volume of the savings program will be increased by one billion euros. Further job cuts and production closures are the result.

CEOs and politicians no longer have much to say to each other. Martin Brudermüller was once very proud that he sat on the Greens’ economic advisory board. He believed that he had the ear of the new economics minister just because Robert Habeck patronizingly gave him his cell phone number. At the start of the traffic light coalition in November 2021, Brudermüller said optimistically:

“The speed and unity with which the three parties have reached an agreement is remarkable. This is an encouraging sign.”

Nothing came of it: Habeck is pushing through his climate agenda, including shutting down stable electricity supplies from the nuclear industry. There is also no mercy when it comes to chemical directives, supply chain law and corporate tax. The quiet departure of BASF is being accepted. Meanwhile, Brudermüller sounds different:

“The economy is no longer able to get its concerns and calls across to the federal government.”

If disappointment could be turned into gold, the BASF administration building would be a cathedral. But as it is, it is a monument to a declining era. Politicians will one day pay dearly for this deliberate ignorance of the economic interests of their companies and citizens – possibly with democracy itself.