German industrial gas giant to restructure to save €550 million a year from 2019
The German industrial gas specialist Linde Group plans to slash costs as part of a new restructuring programme, which will lead to layoffs around the world. The new three-year efficiency programme, dubbed LIFT, was announced on 28 October. The news came as Linde confirmed that merger talks with US rival Praxair have been abandoned.
Linde aims to achieve annual cost savings of approximately €550 million from 2019. Just by itself, LIFT is expected to generate yearly cost savings of around €370 million. As part of the LIFT programme, the company anticipates incurring roughly €400 million in one-off restructuring costs during 2016 and 2017.
Linde spokesperson Matthias Dachwald acknowledges that there is ‘no question’ that the company will have to reduce its global workforce as part of this restructuring effort. However, he says Reuters’ estimate that Linde will likely cut 3000 to 4000 jobs from its global workforce of 65,000 is unofficial. ‘I guess this could be, but those are not the official numbers,’ Dachwald tells Chemistry World. He says the major effects of LIFT probably won’t be felt in Europe, and in Germany in particular, for several months.
‘We will have to face severe cost pressures, and at the same time we need to hold our own in the face of aggressive competition from those with a lower cost base than us,’ stated Linde’s chief executive, Wolfgang Buchele, during a press conference.
He anticipated that global industrial production growth will slow and that will damage the earnings of Linde’s gases division, which is by far the largest segment of the company. ‘Over the coming years, we are no longer going to see average annual growth rates of 5% as we have in recent years. A more realistic figure would be 3%,’ Buchele warned.
One way that Linde can increase its global competitiveness is to form an effective alliance with a competitor, Buchele said. That’s why the company spent significant time earlier this year evaluating whether a merger with Praxair would improve its market position, he noted.
‘In many ways this would have opened up new opportunities,’ Buchele stated. However, he said it became clear in late summer that Linde and Praxair couldn’t agree upon certain key details. According to Dachwald, there was disagreement about whether the various central functions of the combined company should be located in Connecticut, US or Munich, Germany. ‘That was the deal breaker,’ he said. ‘It was meant as a merger of equals.’
Meanwhile, other developments are afoot at Linde. Last month the company signed a contract for the pre-engineering phase of a petrochemical plant in Iran. Linde is also working on other projects in Iran in the petrochemical and steel sectors, supplying both plants and components.