The world's largest health-care company, New Jersey-based Johnson & Johnson (J&J), has announced plans to cut up to seven percent of its global workforce, a figure which represents more than 7,000 people, as it attempts to reduce costs.
With a global workforce of 117,000 Johnson & Johnson, the manufacturer of such brands as Neutrogena skin care products, Band-Aid wound strips and Johnson's baby products, anticipates that the reduction in the number of people it employs will save as much as $900 million in 2010.
As
AFP reports, by 2011 the restructuring that is being undertaken by the company will result in annual savings possibly as high as $1.7 billion.
However, in the fourth quarter of 2009, J&J will see its restructuring costs amount to between $1.1 and $1.3 billion pre-tax.
In October J&J confirmed that, year-over-year, its third quarter sales in 2009 had dropped by 5 percent to $15 billion. Net income remained at $3.3 billion but sales in its pharmaceutical unit fell sharply, by 14 percent in fact.
Whilst some of that fall in sales may be attributable to the global financial crisis, the U.S. company's CEO William Weldon acknowledged in September that the normally resilient health care sector had found itself suffering like many other industries during the global recession, the loss of patents for Risperdal and Topamax, used to treat psychiatric disorders and epilepsy respectively, had a significant impact.
According to
BusinessWeek between them Risperdal and Topamax generated sales worth $7 billion annually.
Full year earnings for J&J in 2009 are expected to come in at $4.54 to $4.59 per share.
Mr Weldon, who will be 61 later this month and has spent his entire career with J&J, insists that the job cuts are not just about saving money but are also aimed at making the organization more efficient. Regarding the fortunes of his company, he noted:
We've gone through the headwinds that a lot of companies are about to run into. But the economic headwinds are still ahead of everybody
The headwinds to which Mr Weldon refers are, says
BusinessWeek, the loss of important patents during the last 12 months.
Tiers of management are expected to disappear at J&J as major changes occur within its pharmaceutical division and quite probably its sales operation. Interactive websites are, for example, likely to become the means by which the company communicates with primary-care physicians in the future. Sales reps will then concentrate on dealing with more complex matters that involve the specialists within the medical profession.
Commenting on the restructuring at J&J, Sheri McCoy, who was appointed head of the company's pharmaceutical division earlier in the year, said:
Like all of the industry we're looking at the new commercial model and asking, 'How do we go to market differently?
The planned job cuts at J&J, that could actually effect as many as 8,200 employees overall, may be subject to consultation procedures in certain countries where J&J has a presence.
