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Business

Bayer CropScience Cuts Jobs, Gets Sued

by Alexander H. Tullo
September 4, 2006 | A version of this story appeared in Volume 84, Issue 36

AGROCHEMICALS

In an effort to boost the performance of a key unit, Bayer is restructuring its Bayer CropScience business to save nearly $400 million annually.

Bayer CropScience will shed 1,500 jobs through 2009, mostly in North America, out of about 19,000 positions worldwide. The move will be accompanied by plant closures. The company says it will reduce the number of sites from 50 in 2005 to 36 in 2009, with cuts coming both from formulation and active ingredient synthesis plants. Together with procurement optimization, these steps are intended to generate annual savings of $385 million by the time the restructuring is completed in 2009. Because of the actions, Bayer will take charges and write-downs of nearly $600 million over the next two years.

The plan is in addition to a five-year program,initiated in 2002, meant to cut costs by $900 million.

Bayer CEO Werner Wenning told analysts last week that the unit has been performing well versus its peers but is facing tough times in North America and South America, particularly Brazil. Bayer CropScience had first-half 2006 sales of $3.3 billion and generated profit margins before taxes of 19%. The new cuts are meant to support a profit-margin target of 25%.

Separately, Bayer is facing class-action lawsuits brought by rice farmers over a genetically modified rice strain recently discovered in the long-grain-rice supply (C&EN, Aug. 28, page 7). The suits allege that Bayer was negligent in allowing the strains to contaminate the market. They seek compensation for the drop in rice prices since the contamination with genetically modified rice was found.

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