Bayer plans savings and efficiency improvements worth up to EUR 1.5 billion a year
"The voluntary withdrawal of our cholesterol-lowering drug Lipobay/Baycol obviously has implications for our pharmaceutical strategy and the future development of the Group," says Bayer Management Board Chairman Dr. Manfred Schneider. "The economic consequences are severe, but the safety and health of patients had to come first. We are currently analyzing the situation and will then draw the necessary conclusions, but hasty reactions will not get us anywhere at this stage. Irrespective of these deliberations, we will continue to pursue with all vigor the cost saving and structural improvement programs we have already embarked on. Our goal is to achieve savings of EUR 1.5 billion a year by 2005," the CEO explained.
In light of the economic situation and with a view to raising profitability for the long term, Bayer has expanded its current cost-cutting programs and launched additional measures to improve margins. In the Health Care, Polymers and Chemicals business segments, programs are already in place to achieve savings amounting to several hundred million euros in 2001, rising to nearly EUR 1 billion in 2002 and reaching EUR 1.5 billion a year by 2005.
The greatest savings, totaling over EUR 700 million in 2005, will be made in Polymers, Chief Financial Officer Werner Wenning told an analysts' conference in London on August 9, 2001. "The program comprises a reduction of 1,800 in the global workforce, the closure of 15 production plants and portfolio optimization in all of the business groups in this segment," Wenning announced.
In the Health Care segment, initial benefits of the restructuring are already being felt but are still partially obscured by the current difficulties. Here, a number of specific, clearly defined earnings improvement projects will achieve annual savings in the order of EUR 600 million, partly through plant closures.
The Pharmaceuticals Business Group is working to optimize drug development and realign its marketing operations. Consumer Care will save substantial sums through site consolidation, concentrating on Bitterfeld for Europe and Lerma in Mexico for the North and Central American markets. The production facilities at Elkhart, Indiana in the United States will be shut down. Efforts to raise margins in Diagnostics, too, are already bearing fruit: This business group is streamlining and realigning its processes, from research through the portfolio to marketing.
In Chemicals, where earnings already showed a year-on-year improvement in the first half of 2001, rigorous portfolio management will continue. The EUR 200 million annual savings potential identified in this segment will be realized through new operating structures, enhanced distribution channels and product line consolidations.
Major parts of the programs relate to foreign subsidiaries. At Bayer Corporation in the United States, for example, in view of the extremely unsatisfactory earnings situation, extensive action has already been initiated to restructure operations and contain costs. With regard to all measures to be implemented in Germany, Bayer will adhere to the provisions of the 2000 agreement with the employee committee, which precludes dismissals for operational reasons before 2004.
There is no intention to alter the alignment of Bayer's highly profitable Agriculture segment. The company will continue the current negotiations with a view to acquiring Aventis CropScience. Bayer's listing on the New York Stock Exchange on September 26, 2001 will go ahead as planned.
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