Merck KGaA sets out savings target as staff threaten to strike
pharmafile | May 15, 2012 | News story | Research and Development, Sales and Marketing | Merck KGaA, R&D, Serono, cuts
Merck KGaA has outlined its plan to make €300 million in savings from its Serono drugs unit, with over half of this expected to come from cutting staff at its headquarters.
Merck announced last month that it would be shutting down its Serono HQ in Geneva, and today has said it expects to make around €180 million from cutting 500 sales, general and administration (SG&A) posts from the Geneva site over the next two years.
The remaining €120 million in savings will come from the planned closing of the R&D hub in Geneva, the firm said.
But in the wake of the cuts, Merck Serono staff have teamed up with its local union and are now threatening to strike, according to local news reports.
The union claims that Merck’s estimate of 500 cuts is simply wrong – instead, it believes that up to 1,500 positions could be lost by 2014, which includes long-term contract workers not factored in to Merck’s estimates.
A vote on whether the staff will strike is expected later today, making the savings drive even tougher for Merck.
The cutting of Serono’s HQ staff will cost the firm €600 million over the next year, but Merck believes that in the long-term, this reduction will help it become more profitable.
For the Merck Group, the company expects annual sales to rise from €9.9 billion in 2011 to around 10.4 billion to 10.7 billion in 2014 – and this guidance will only be realised by meeting its saving targets, the firm said.
Karl-Ludwig Kley, chairman of the executive board of Merck, said: “Merck faces unprecedented market shifts and increasing competition in key product areas.
“Today, we are fortunate that we can address these challenges from a position of relative strength. However, if we do not take urgent action, we will face the prospect of tackling these issues from a much weaker position.
“While our initial focus is on our largest division, Merck Serono, the efficiency programme will affect all businesses in all regions.
“We are convinced that this program will lay the foundation for Merck to better capitalise on future growth opportunities.”
Merck added that it would not consider major portfolio divestments or transformational acquisitions prior to completing the efficiency programme.
Instead, it “will exploit its leading market positions to optimise organic sales growth”, while continuing to complete bolt-on acquisitions, the firm said.
Ben Adams
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