BASF chief dismisses financial ‘panic’

BASF chief dismisses financial ‘panic’

By Peter Marsh and Gerrit Wiesmann in London

Published: February 10 2008 22:05 | Last updated: February 10 2008 22:05

The US is unlikely to suffer a recession this year, according to the chief executive of BASF, who has accused the financial industry of “panicking” about the economic effect of the credit crunch.

Jürgen Hambrecht, head of one of the world’s biggest manufacturers, said: “I am glad to say that business in general does not show the panicking approach of the financial industry. The reality is better than the words [written about the scale of problems] and I am sleeping well at night,”

The comments, in an interview with the FT, are one of the most robust declarations from a leading industry executive about the likely effect of the credit crunch since the banks’ difficulties became apparent last summer.

Similar sentiments are being echoed by other non-financial groups. European manufacturers remain optimistic that sales will increase in 2008 and their businesses will remain immune from deepening gloom over the US’s economy and in its companies.

In a pan-European survey of expectations by the NTC Economics consultancy, 56 per cent of European manufacturers expected sales volumes to rise in the coming year compared with 12 per cent forecasting a decline.

North America has been at the centre of the banking problems and the focus for economists’ concern about demand.

With sales last year estimated at €58bn ($84bn), Germany-based BASF is the world’s biggest chemicals producer. It sells more than 100,000 products across the world in industries from construction to textiles. About 60 per cent of the company’s sales are in Europe, a fifth in North America and a sixth from Asia-Pacific.

There had been “too much emotion” about the likely impact on business, Mr Hambrecht said, much of this emanating from the US. “In North America, if they have growth of less than 2 per cent, they worry like hell.”

While there was danger of certain industries – particularly related to housing and the consumer sector – experiencing “a little bit of infection” from credit problems, most BASF customers were relatively unaffected.

“In the real economy – in much of manufacturing – many companies have a big order backlog and are extremely busy with meeting demand. In this context, why should there be a big, big crisis? I can’t see this happening.”

The financial sector could learn from manufacturing how to improve its operations, Mr Hambrecht said, particularly in simplifying products. “Perhaps when these [credit] problems are over, manufacturing real stuff will be appreciated much more.”