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Executive Summary

JOHNSON & JOHNSON WILL ELIMINATE 3,000 STAFFING POSITIONS worldwide through an early retirement package announced Aug. 11 aimed first at employees at J&J's New Brunswick, N.J. headquarters and subsidiaries and other efficiency moves being implemented this year. The downsizing will be 3.6% of the company's workforce; J&J currently employs 40,000 people in the U.S. and 84,000 worldwide. A total of 1,000 employees are expected to take advantage of the early retirement program. The early retirement package is being offered to New Brunswick employees who are at least 50 years old and have worked for J&J for seven years. J&J said 28 other operating subsidiaries are considering similar packages for their qualified employees. Decisions on those plans will be made "between now and early 1994," J&J said, adding: "It is expected that some subsidiaries will offer the plan and others will not." The other 2,000 staffing positions becoming redundant will be drawn from restructuring and cost reduction programs already under way or planned. These include the merger of Ortho and McNeil; the restructuring of the Ethicon surgical products unit; and reductions in the headquarters staff of Ethicon Endo-Surgery. J&J implemented the merger of Ortho-McNeil in February. The merger, which entails an estimated reduction in workforce of 150, primarily affects administrative, financial, staff and other functions and consolidates McNeil's former headquarters in Spring House, Penn. with Ortho's in Raritan, N.J. McNeil Pharmaceutical, Ortho Pharmaceutical and Ortho Dermatological retain their separate sales and marketing forces and sales managements. Eric Milledge, who had been president of Ortho Pharmaceutical, heads the merged operations. The former McNeil president, Michael Casey, left J&J to join Genetic Therapy, Inc. as president and chief operating officer ("The Pink Sheet" July 5, In Brief). The Ethicon restructuring, already under way, includes the elimination of 200 positions. Ethicon spun off its Endo-Surgery lesser invasive surgical products business, based in Cincinnati, in January 1992. Endo-Surgery will lose 335 people from its staff under the restructuring. Other restructuring/reorganizations under way include the closing of a sanitary protection product manufacturing facility in France and a disposable diaper facility in Brazil. The estimated cost of all these programs is approximately $200 mil. pretax, which J&J made contingencies for in its 1992 reserve for post-employment benefits (FASB 112). Last year, the company took a one-time, after-tax charge of $595 mil. for its adoption of FASB 112, 106 and 109. No special charges for these programs will be taken for 1993, the company noted. Estimated savings generated by these programs are forecast at more than $100 mil. after tax. J&J is the latest in a number of health care companies to downsize in the face of the changing health care environment, including Bristol-Myers, Squibb, Ciba-Geigy, Marion Merrell Dow, Merck, Searle, Syntex, Upjohn and Warner-Lambert. Of the diversified company's $13.75 bil. in 1992 sales, J&J pharmaceuticals accounted for $4.34 bil., or 31.6% of the total and about half of the company's $2.07 bil. in pretax profits. While the company has set a reduction in force goal of 3,000, other firms have seen more employees take advantage of early retirement programs than planned. At Merck, a similar package attracted more than twice the number estimated.

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