SEARLE WILL LOSE 2,250 JOBS IN MONSANTO COST-CUTTING PROGRAM
SEARLE WILL LOSE 2,250 JOBS IN MONSANTO COST-CUTTING PROGRAM, or 70% of the 3,200 jobs in total that will be eliminated at Searle's corporate parent. The restructuring, announced Nov. 23, will include across-the-board job cuts through personnel reductions, the sale of businesses and facilities, early retirement and, at Monsanto, severance packages. At Searle, costs will be reduced "by selling and consolidating certain facilities worldwide, and selling certain assets that no longer fit strategically," Monsanto said. "In addition, marketing, administration and technical reductions will be made." Searle currently employs just fewer than 10,000 people worldwide, putting the targeted jobs at about 23% of the total. Searle has 15 manufacturing facilities worldwide, including plants in India, Spain, Puerto Rico, the U.K. and Belgium, and two main R&D facilities (Skokie, Ill. and Mont Saint-Guibert, Belgium) that comprise the pool for potential shutdowns or spin-offs. Early retirement packages for employees 50 years of age and older who have worked for Searle 10 or more years will be detailed in mid- December, the company said. Searle is hopeful it can approach or reach the 2,250 job reduction target through U.S. early retirements alone. Early retirement packages are not being offered outside the U.S. Searle also has a generic drug operation, its joint venture with the Italian firm Schiapparelli. That venture, currently owned 51/49% in the U.S. and 49/51% in Italy by Searle, also will be examined as a potential area of cutbacks, Searle indicated, noting that it is looking at all operational areas. Searle sales totaled $1.3 bil. in 1991, with operating income of $170 mil. When Monsanto bought Searle in 1985, it had spotlighted the company as its fastest growing business sector; however, Searle sales were lower in 1991 than in the previous year as its pharmaceuticals felt the impact of a number of pressures, including the loss of patent protection for the calcium channel blocker brand Calan/Calan SR (verapamil), the introduction of generic competitors and the more than $20 mil. in Medicaid rebates Searle paid under OBRA '90 requirements. Despite the pressures, Searle indicated in its annual report for the year ended June 30, 1992 that it is moving toward its mid-decade goal of $3 bil. in sales with the help of what the company said were 15 major product launches in the seven key world markets expected in 1992-93. The Searle cutbacks follow similar announcements from a handful of other pharmaceutical companies. Bristol-Myers Squibb, Syntex, Warner-Lambert and Upjohn all have announced programs to cut back on employees and facilities and to cut operating costs. However, Monsanto additionally may be feeling the pressure of a Searle pipeline that has been deemed disappointing by financial analysts. These factors have left Searle exposed as a rumored possible divestiture. Trimming the company of extraneous facilities and operations and making its employee ranks leaner, while fitting in with industry cost-cutting measures in general, could in Searle's case also be preliminary to putting the company on the block. * Monsanto said the cost-cutting steps are permanent and not just a response to the depressed global economy. In addition to job and facilities cutbacks, the program will include a "realignment of selected research investments" that will result in a one-time, after-tax charge of $425 mil. in the fourth quarter. The $425 mil. write-down will partly offset the $550 mil. after-tax gain recorded earlier in 1992 from the sale of the subsidiary Fisher Controls. The impact of the cost-cutting program is expected to generate savings that will ramp up to $200 mil. pretax beginning in 1994. Commenting on the cost-savings measures, Monsanto Chairman and CEO Richard Mahoney said: "In our view, these conditions are a permanent shift of requirements rather than simply a reflection of currently depressed economic conditions...Significant growth opportunities do exist in these demanding times for those who can respond to the required changes better than others -- and we will." While Searle will be the most deeply affected by the cutbacks, other Monsanto operating units will refocus research programs, write down certain assets and consolidate manufacturing facilities. "Significant cost reductions will also occur in corporate staff functions," Monsanto said. Monsanto also adopted Financial Accounting Standards No. 106, which will bring the company into compliance with reporting requirements for the costs of medical and retirement benefits, and No. 109, which deals with tax liabilities. Adoption of the former standard will result in a one-time after-tax charge of $658 mil. and will reduce previously reported net income for the first three quarters of 1992 by $8 mil. per quarter, Monsanto reported. Adoption of the latter standard will result in a one-time after-tax gain of $118 mil.
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