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LEDERLE, UPJOHN WORK FORCE REDUCTIONS BYPASS OTC BUSINESSES

This article was originally published in The Tan Sheet

Executive Summary

LEDERLE, UPJOHN WORK FORCE REDUCTIONS BYPASS OTC BUSINESSES in restructuring plans announced by the two firms on Oct. 19. The two companies both indicated that the work force reductions would be arrived at primarily through restructuring of the companies' manufacturing operations. Lederle's parent company, American Cyanamid, said it plans to cut 2,500 positions, including 1,000 from Lederle's U.S. pharmaceutical operations. Lederle's Pearl River, N.Y. facility will be reduced by about 500 positions, mostly in the manufacturing and support services sectors. The remaining 500 reductions, the company said, would affect nearly every department. However, the planned reductions will "have little impact" on Lederle's consumer health business, a company spokesperson said. If the OTC business is affected at all, the spokesperson indicated that it would be from reductions in corporate staff that might affect some "service functions." Upjohn also indicated that it will not cut its OTC work force. A company spokesperson said the company "has made a commitment" to building its presence in the OTC drug industry. The company announced on Oct. 19 that it planned to cut 1,500 positions as part of a restructuring program that also targets a reduction in excess manufacturing capacity at 14 plants worldwide over the "next several years" as well as a write down of "certain intangible assets" and an increase in liability reserves. To cover the restructuring, Upjohn took an after-tax charge of $ 183 mil. in the third quarter but expects the actions will save $ 150 mil. in annual operating expenses. Pfizer, however, reported that a restructuring plan also announced on Oct. 19 will affect all parts of the company's business over the next three years. The company's latest work force reduction plan will lead to about 3,000 cuts. "This restructuring, coupled with earlier initiatives already completed or in progress," Pfizer said, "is expected ultimately to reduce Pfizer's total work force by approximately 4,000 people, or approximately 10%." To account for the cutbacks, Pfizer announced a $ 750 mil. restructuring charge in its quarterly sales and earnings report for the third quarter. The charge also covers manufacturing, distribution and administrative consolidation. Pfizer anticipates savings of at least $ 130 mil. per year from the restructuring. The latest round of cutbacks reflects an industry-wide downsizing trend among pharmaceutical companies. A total of 12 U.S. pharmaceutical firms have announced worldwide reductions of an aggregate of 26,650 employees in the past year.
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