NOVARTIS TO CUT WORKFORCE 120 PERCENT
Basel, SZ (AP.com) – Novartis will reduce its workforce by an unprecedented 120 percent by the end of 2012, believed to be the first time a major corporation has laid off more employees than it actually has.
The reduction decision, announced Wednesday, came after a year-long internal review of cost-cutting procedures. The initial report concluded the company would save $1.2 billion by eliminating 20 percent of its 48,000 employees.
From there, said Ree Cola, spokesperson for Novartis, "it didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save $2.4 billion, and if we cut 100 percent of our workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another 20 percent and save $7 billion.
"We believe in increasing return on investment, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added.
Novartis 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 10,000 non-Novartis employees who presently work for other companies.
"We pretty much picked them out of a hat,” said Cola.
Among firms Novartis has picked as "External Reduction Targets," or ERTs, are Quaker Oats, AMR Corporation, parent of American Airlines, Lockheed, Boeing, and Charles Schwab & Co. BIPI’s plan presents a "win-win" for the company and ERTs, said Cola, as any savings by ERTs would be passed on to Novartis, while the ERTs themselves would benefit by the increase in stock price that usually accompanies personnel cutback announcements.
"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 Novartis 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 cooperate.
"This is ridiculous. I don't work for Novartis. They can't fire me," said Fawn del’ Myehole, a flight attendant with American Airlines.
Reactions like that, replied the spokesperson "are not very sporting."
Inspiration for Novartis’ plan came from previous cutback initiatives, said company officials. In January of 1998, for instance, the company announced it would trim 8,000 jobs over two years. However, just a year later, Novartis said it had already reached its quota. "We were quite surprised at the number of employees willing to leave Novartis in such a hurry, and we decided to build on that.” "It's a little early to tell, but by eliminating all its employees, Novartis may jeopardize its market position and could, at least theoretically, cease to exist," said Hugh Janus, a business analyst at S&P.
The spokesperson, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens."
In last night's debate, Mitt Romney weighed in and said that, while Bain was not involved, he felt that this constructive deconstruction would help create more jobs in China.
Basel, SZ (AP.com) – Novartis will reduce its workforce by an unprecedented 120 percent by the end of 2012, believed to be the first time a major corporation has laid off more employees than it actually has.
The reduction decision, announced Wednesday, came after a year-long internal review of cost-cutting procedures. The initial report concluded the company would save $1.2 billion by eliminating 20 percent of its 48,000 employees.
From there, said Ree Cola, spokesperson for Novartis, "it didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save $2.4 billion, and if we cut 100 percent of our workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another 20 percent and save $7 billion.
"We believe in increasing return on investment, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added.
Novartis 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 10,000 non-Novartis employees who presently work for other companies.
"We pretty much picked them out of a hat,” said Cola.
Among firms Novartis has picked as "External Reduction Targets," or ERTs, are Quaker Oats, AMR Corporation, parent of American Airlines, Lockheed, Boeing, and Charles Schwab & Co. BIPI’s plan presents a "win-win" for the company and ERTs, said Cola, as any savings by ERTs would be passed on to Novartis, while the ERTs themselves would benefit by the increase in stock price that usually accompanies personnel cutback announcements.
"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 Novartis 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 cooperate.
"This is ridiculous. I don't work for Novartis. They can't fire me," said Fawn del’ Myehole, a flight attendant with American Airlines.
Reactions like that, replied the spokesperson "are not very sporting."
Inspiration for Novartis’ plan came from previous cutback initiatives, said company officials. In January of 1998, for instance, the company announced it would trim 8,000 jobs over two years. However, just a year later, Novartis said it had already reached its quota. "We were quite surprised at the number of employees willing to leave Novartis in such a hurry, and we decided to build on that.” "It's a little early to tell, but by eliminating all its employees, Novartis may jeopardize its market position and could, at least theoretically, cease to exist," said Hugh Janus, a business analyst at S&P.
The spokesperson, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens."
In last night's debate, Mitt Romney weighed in and said that, while Bain was not involved, he felt that this constructive deconstruction would help create more jobs in China.