Bayer laying off 10 percent of its workforce

In a bid to reboot its sluggish performance, the pharmaceutical and agribusiness giant has announced cuts of 10 percent of its global workforce and the disposal of underperforming divisions.

Pharmaceuticals and agribusiness giant Bayer is to cut 12,000 jobs worldwide as part of a radical restructuring plan aimed at reshaping the company by 2021. The job cuts represent 10 percent of Bayer’s global workforce.

A “significant portion” of the layoffs will be in Germany, the company said, although agreements with labor unions mean there will be no forced redundancies there until 2025. In Germany, reductions will come through natural wastage and voluntary redundancies.

As well as cutting jobs, Bayer plans a wide-ranging reorganization of the company, with major brands and even entire divisions up for disposal. In the biggest move, the company will abandon the animal health business. The sale of that division is expected to raise between €5 billion and €7 billion ($5.7–8 billion). The troubled Consumer Health division will sell key product groups, including Claritin (allergies) and Dr. Scholl (foot care).

The wave of job losses will impact all divisions. Consumer Health, whose products include aspirin, will lose 1,150 jobs. Pharmaceuticals will dispose of 1,250, including 900 in research and development. Crop Science will lose 4,100 jobs after completion of the merger with American agrichemical giant Monsanto, a recent acquisition for around $62 billion. A further 6,000 jobs will go in corporate administration.

Possibly poison

Bayer’s share price has been hit in recent weeks by fears that Bayer could end up liable for billions in compensation to those affected by glyphosate, a herbicide ingredient used by Monsanto. Last month a US court linked the substance to certain forms of cancer. The long-term implications for Bayer remain unclear.

In a conference call, CEO Werner Baumann said the restructuring had “absolutely nothing to do with” the glyphosate issue. He said the main goal was to solve long-term problems in individual divisions.

However, the scale of the reorganization suggests that Bayer is eliminating waste across its operations, in preparation for tough challenges ahead. “We’re laying the groundwork to improve Bayer’s long-term performance and earning capacity,” Baumann said. The company’s supervisory board unanimously approved the measures.

In addition to pulling out of animal health, Bayer plans to dispose of a 60 percent stake in chemical industry service provider Currenta, a joint venture with Lanxess. The sale is expected to raise around €1.5 billion. Possible buyers include former Bayer subsidiary Covestro, and specialist industry investment funds.

Poor pipeline

Analysts welcomed Bayer’s moves, suggesting it could raise up to €9 billion for investment or to pay down debt. Savings in Pharma and Consumer Health could contribute a further €1.6 billion.

Once the measures are fully implemented in 2022, Bayer hopes to save €2.6 billion annually. But costs associated with the restructuring plan could amount to €4.4 billion, as well as fourth-quarter write downs of €3.3 billion.

Bayer hopes the reorganization of its pharmaceuticals division will strengthen its unsatisfactory product pipeline, more quickly bringing new active substances to the consumer market.

The division has run into substantial difficulties in recent years, plagued with sluggish growth and diminished competitiveness. The oncology unit, for example, has made little progress in immune therapies, seen as a promising area of innovation. Restructuring the division, it is hoped, could refocus research in cutting edge fields.

In what will be a bitter blow, the company will also close a high-tech biotech facility in the city of Wuppertal, purpose-built three years ago to host blood medicine research. Competitors have taken a substantial advantage in the area; as a result, Bayer will focus exclusively on its California research facilities.