Johnson & Johnson, the world's largest healthcare company, will generate up to $1.7 billion in pretax cost savings through job cuts and other means…
By Militza Richard
Hit hard by the economic downturn, Johnson & Johnson (JNJ) has revealed plans to overhaul the company and generate cost savings through job cuts. CEO William Weldon announced that up to 7 percent, or more than 7,000, of the company’s nearly 120,000-person work force will be cut.
This year has been a tough one for the company; it cut about 900 jobs from its U.S. pharmaceutical unit earlier this year, and in August it consolidated its management structure. All three sectors of the business were down this year as the growing generics market hurt its prescription-drug arm, while unfavorable currency-exchange rates pulled down sales growth for consumer health care and medical devices.
But the company insists that job cuts are part of a bigger plan to restructure and generate revenue. Position eliminations will form only one component of the savings. Weldon said, “These types of changes are difficult under any circumstances, and will have a very personal impact on people who have been dedicated to the mission of Johnson & Johnson. We recognize their contributions to the achievements of our business, and are committed to treating them fairly and with respect throughout this process.”
However, he said the company hopes to reduce the layers of management and increase efficiency. "We're streamlining the business so we can make faster, easier decisions," Weldon told analysts.
Additionally, the company is considering streamlining its sales operation, perhaps replacing some salespeople with new technology.
The company expects the changes to save it more than $1.4 billion a year, starting in 2011, and it will take a $1.3 billion charge in the fourth quarter of this year for the restructuring.
Edited by Kevin Doyle