Merck KGaA to Cut Jobs - Analyst Blog

Merck KGaA (MKGAF) recently announced that it plans to reduce its workforce in Germany by approximately 10% or 1,100 positions. To implement this plan, the company has entered into an agreement with the employee representatives on an efficacy plan. Merck KGaA intends to put this plan into action through voluntary-resignation and early retirement plans.

The company will terminate the production of industrial salts in Lehrte, Germany. Apart from this, the company will also stop filling operations in Hohenbrunn, Germany. Merck KGaA also plans to restructure the compensation of employees in order to reduce personnel costs.

Apart from this, the company plans to strengthen the Darmstadt site, its global headquarters and plans to invest atleast €250 million for this and other sites in the next couple of years.

In February 2012, Merck KGaA had announced its worldwide efficacy program across all regions and divisions. The company has already started working on this program. In June 2012, the company announced its final plan for restructuring Merck Serono’s operations in Switzerland and shift Merck Serono’s headquarters from Geneva to Darmstadt. The company will close the Geneva and Coinsins sites and Coinsins sites.

Merck Serono will focus all its research and development (R&D) resources in Europe (Darmstadt), the US (Boston) and Asia (Beijing). Of the 1,250 positions located in Geneva, 750 will be transferred to other sites, while about 500 positions will be cut to avoid duplication of work and increase efficiency. The company said that about 80 positions will be removed at the Canton of Vaud and manufacturing operations at Coinsins will be shifted to Aubonne.

The company expects the majority of transfers and reductions to finish in the second half of 2012. While the Geneva site will shut down in mid 2013, the Coinsins site is expected to close in 2014.

Our Recommendation

Merck KGaA carries a Zacks #4 Rank (short-term Sell rating).