Merck's Executive Board today presented initial plans for an efficiency program spanning all businesses and regions to the Supervisory Board and relevant employee representative bodies. The planned efficiency measures are part of the Group's comprehensive transformation program, which was announced last year and consists of two phases: In the first two years, Merck plans to set up a new leadership organization, implement efficiency measures and develop a long-term growth strategy. In the second phase, the focus will be on exploiting new growth opportunities ahead.
"In its long history Merck has grown to be a successful, world-class company with strong positions in many of its key businesses," said Karl-Ludwig Kley, Chairman of the Executive Board. "Nevertheless over the next two years Merck needs to address unprecedented market shifts, increasing competition in key product areas and existing inefficiencies in its own organization to ensure the long-term success of its business model. We will therefore progress with our planned efficiency program in order to deliver recurring cost reductions and free up resources for investment in promising growth areas.”
Kley added: "While it is regrettable, our preliminary analysis has shown that the overall purpose of our transformation program and the expected measures to realize it may lead to workforce reductions across all businesses and regions."
Paying tribute to the traditionally strong relationship with the employee representatives at Merck, the Group will now start the consultation processes with the respective employee representatives in different countries, with the intention to seek socially acceptable solutions where they are possible. Until the consultations are further advanced, it would be premature to announce any detailed cost or headcount reduction plans.
"We have a view on what needs to be achieved, but we will consult with the employee representatives on a country-by-country basis and we will consider any pragmatic proposals," Kley said. "We have specifically not published potential figures related to the efficiency program as we are committed to engaging constructively with the relevant stakeholders to achieve a mutually acceptable solution. This approach reflects the strong tradition of Merck."
At the beginning of 2012, Merck has started the implementation of a new leadership organization which defines the relationship of businesses, Group functions and country organizations. The objective of the new leadership organization is to streamline the organizational structure to be leaner, easier to navigate and to speed up decision-making processes. This realignment will continue in parallel to and support the efficiency program as well as the development of the Group's long-term growth strategy.
In the second phase of the transformation program, Merck will tap areas for future growth based on broader industry and macroeconomic trends. Initial work to explore these growth opportunities has already been started and Merck will further drive the development of its long-term growth strategy over the next two years. Merck is convinced that the ability to effectively implement any major strategic initiatives in the future will be predicated on successfully implementing the new leadership organization and completion of the efficiency program.
About Merck KGaA
Merck is a global pharmaceutical and chemical company with total revenues of € 9.3 billion in 2010, a history that began in 1668, and a future shaped by more than 40,000 employees in 67 countries. Its success is characterized by innovations from entrepreneurial employees. Merck's operating activities come under the umbrella of Merck KGaA, in which the Merck family holds an approximately 70% interest and shareholders own the remaining approximately 30%. In 1917 the U.S. subsidiary Merck & Co. was expropriated and has been an independent company ever since.