FOREST LABS TO CUT WORKFORCE 120 PERCENT NEW YORK, N.Y. (AP.com) - Forest laboratories will reduce its workforce by an unprecedented 120 percent by the end of October 2011, believed to be the first time a major corporation has laid off more employees than it actually has. FRX stock soared more than 12 points on the news. The reduction decision, announced Wednesday, came after a year-long internal review of cost-cutting procedures.The initial report concluded the company would save $20 million by eliminating 20 percent of its employees. From there, said Cary Renner, “it didn’t take a genius to figure out that if we cut 40 percent of our workforce, we’d save $40 million, and if we cut 100 percent of our workforce, we’d save $100 million. But then we thought, why stop there? Let’s cut another 20 percent and save $120 million. “We believe in increasing shareholder value, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line,” he added. Forest plans to achieve the 100 percent internal reduction through layoffs, attrition and early retirement packages. To achieve the 20 percent in external reductions, the company plans to involuntarily downsize 3,000 non-Forest employees who presently work for other companies. “We pretty much picked them out of a hat,”. “We’re also hoping that since, over the years, we’ve been really helpful to a lot of companies, they’ll do this for us kind of as a favor,”. Legally, pink slips sent out by Forest would have no standing at ERTs unless those companies agreed. While executives at ERTs declined to comment, employees at those companies said they were not inclined to
Analysts credited the short-term vision, noting that the announcement
had the desired effect of immediately increasing SA’s share value.
However, the long-term ramifications could be detrimental, said Bear
Stearns analyst Beldon McInty.
“It’s a little early to tell, but by eliminating all its employees,
Forest may jeopardize its market position and could, at least
theoretically, cease to exist,” said McInty.
The spokesperson, however, urged patience: “To my knowledge, this hasn’t
been done before, so let’s just wait and see what happens.”
Analysts credited the short-term vision, noting that the announcement
had the desired effect of immediately increasing SA’s share value.
However, the long-term ramifications could be detrimental, said Bear
Stearns analyst Beldon McInty.
“It’s a little early to tell, but by eliminating all its employees,
Forest may jeopardize its market position and could, at least
theoretically, cease to exist,” said McInty.
The spokesperson, however, urged patience: “To my knowledge, this hasn’t
been done before, so let’s just wait and see what happens.”