Ludwigshafen,
Germany - Chemical giant BASF announced Wednesday that it was slashing
production worldwide because of a dramatic fall in demand.

The company said it was temporarily shutting down around 80 plants across the globe and reducing production in 100.

Some
20,000 employees would be affected, BASF said in a statement. Flexible
working time arrangements will be used wherever possible, it said.

"We
already drew attention to the difficult economic situation at the end
of October. Since then, customer demand in key markets has declined
significantly," board chairman Juergen Hambrecht said.

"In particular, customers in the automotive industry have canceled orders at short notice," he added.

Hambrecht
said there was also a negative impact on sales by increased reduction
of inventories by customers and a lack of credit in customer
industries.

As a result, BASF will therefore not achieve the previous year's earnings level, he said.

"How the coming year will develop is difficult to foresee. BASF is preparing for tough times," Hambrecht said.

Around
5,000 workers at BASF's plant at Ludwigshafen in the south- west of
Germany would be affected by the cutbacks, the statement said.

The
company said adjustments were primarily being carried out in units that
supply the automotive, construction and textile industries.

BASF said the reduced capacities were expected to last until January 2009 for individual plants.

"Should
the period of weak demand continue and if all other flexible
working-time models have been exhausted, the company cannot rule out
the need for short-time working at individual sites worldwide," it
said.

BASF shares dropped 11.72 per cent on the Frankfurt stock exchange to 22.45 euros after the news was announced.

The company has more than 95,000 employees and posted sales of almost 58 billion euros (73 million dollars) in 2007. (dpa)