Merck Schedules Big Shake-up

Merck & Co. will cut 7,000 jobs worldwide by the end of 2008 as part of the first phase of a global restructuring program aimed at reducing the companys cost structure, increasing efficiency, and enhancing competitiveness.

The company expects the initial phase of the restructuring plan to yield cumulative pretax savings of $3.5 billion to $4.0 billion from 2006 through 2010. Of the savings, about $2 billion will result from the implementation of a new supply strategy by Mercks manufacturing division. The company says it will create a global manufacturing network that is better aligned to current and future product demand.

The 7,000 positions, in manufacturing and other divisions, amount to 11% of the companys workforce. About half of the job cuts will be in the U.S. In addition, Merck will sell or close five of its 31 manufacturing facilities worldwide and will reduce operations at a number of its other sites. It will close one basic research facility and two preclinical development sites.

In the future, says Merck CEO Richard T. Clark, the company also plans to pursue improved approaches to R&D and marketing and sales. We are engaged in an ongoing effort to enhance efficiencies throughout the company and improve the way we discover, develop, manufacture, and market our medicines and vaccines, he says.

The restructuring will not be cheap. Merck estimates the pretax costs of the plan to be $350 million to $400 million in 2005 and $800 million to $1 billion in 2006. Through the end of 2008, when the program is mostly complete, the cumulative pretax costs are expected to be between $1.8 billion and $2.2 billion.