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JOHNSON & JOHNSON WILL ELIMINATE 3,000 STAFFING POSITIONS

This article was originally published in The Tan Sheet

Executive Summary

JOHNSON & JOHNSON WILL ELIMINATE 3,000 STAFFING POSITIONS worldwide through an early retirement package announced Aug. 11 and other efficiency moves being implemented this year. Aimed first at employees in J&J's New Brunswick, N.J. headquarters and subsidiaries, the early retirement option is expected to affect 1,000 employees. Other efficiency actions will account for the remaining 2,000 positions. The downsizing represents 3.6% of the company's workforce; J&J currently employs 40,000 people in the U.S. and 84,000 worldwide. 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 J&J 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." A total of 1,000 employees are expected to take advantage of the early retirement program. 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, recently left J&J to join Genetic Therapy, Inc. as president and chief operating officer. McNeil Pharmaceutical does not include McNeil Consumer Products. The Ethicon restructuring, already under way, includes the elimination of 200 positions. Ethicon Endo-Surgery, spun off in January 1992, will lose 335 positions. Other restructuring/reorganizations under way include the closing of a sanitary products manufacturing facility in France, and a disposable diaper facility in Brazil. The estimated cost of all these programs is approximately $ 200 mil. pre-tax, 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, Procter & Gamble, 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 pre-tax profits. While the company has set a staff reduction goal of 3,000, other firms have seen more employees take advantage of the early retirement programs than planned. At Merck, a similar package attracted more than twice the number estimated.
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