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Sustainable crisis management using consistent cost-out management in the chemical industry

STARTING SITUATION – IN THE STORM WHIPPED UP BY THE FINANCIAL CRISIS, THE SHIP FOUND ITSELF IN DIFFICULTIES AND COULD BE STEERED ONLY BY SIGHT
The financial crisis caused a significant drop in profits at our client, one of the world’s largest companies in the specialty chemicals sector. The economic outlook also noticeably deteriorated. Compliance with bank covenants was in jeopardy; in addition, management lacked transparency on countermeasures that had already been agreed and initiated. The pressure to act was great, and the ship had to be brought back on course.

PROJECT APPROACH – CENTRAL PROGRAM MANAGEMENT AS THE BASIS FOR COORDINATED COST SAVINGS
The critical factor: time. One the one hand, a prompt response to the crisis needed to be found to ensure the company had adequate liquidity, while the cost base had also to be brought down to a lasting competitive level. As a first step, the overall cost target required was broken down into sub-targets for each division. Next, measures were developed and their implementation monitored over time. Intensive coaching in the divisions allowed prompt results to be achieved in this context.

The main objective was to anchor cost awareness in the mindset of the employees, thus exerting a positive influence on corporate culture. This was supported by a flanking company-wide communication initiative and numerous dialogues with the works council.

Finally, reporting of measures was standardized and prepared in a transparent format for top management, since the aim was to get the ship’s radar up and running again, even in the murky conditions of the financial crisis.

FINDING – SHORT-TERM COUNTERMEASURES ARE IMPORTANT, BUT SUSTAINABLE CONSOLIDATION EVEN MORE SO
After the crisis is before the crisis. Our client recognized in time that countermeasures that needed to be taken in the short term had to be combined with a lasting improvement in efficiency in order to allow it to emerge from the crisis in better shape. If the focus is simply on short-term improvements, the ship will again run into difficulties when the next storm comes along.

PROJECT RESULT

• Over 1,000 measures were formulated, implemented, and the effects produced monitored and secured in the income statement
• Realization of short-term and sustainable cost savings of over €400m and significant improvements achieved in terms of efficiency