By Damian J. Troise AP Business Writer — November 4, 2009
NEW YORK (AP) — Johnson & Johnson said Tuesday it will trim layers of management, cut thousands of jobs, and set other restructuring moves in order to save up to $900 million next year.
The New Brunswick, N.J., company said the cuts will affect 6 to 7 percent of its global work force of roughly 118,700 workers, or potentially more than 8,000 jobs.
The layoffs will prompt a restructuring charge of up to $1.3 billion pretax in the fourth quarter. Still, the company confirmed adjusted profit guidance between $4.54 and $4.59 per share for 2009.
Johnson & Johnson plans to simplify its business structure and projects that it will save between $1.4 billion and $1.7 billion annually after the restructuring is complete in 2011.
The company, the world's most diversified health-products maker, saw its revenue fall 5 percent in the third quarter as intensifying generic competition slashed sales of about a half-dozen of its prescription drugs, including the schizophrenia drug Risperdal and the epilepsy treatment Topamax.
Chairman and CEO William C. Weldon said the moves are meant to position the company for long-term growth in an evolving, and sometimes turbulent, market.
"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," he said. "We recognize their contributions to the achievements of our business, and are committed to treating them fairly and with respect throughout this process."
The new restructuring program comes on heels of management's decision to cut its comprehensive care business in August. That unit was created under a 2008 restructuring program with the goal of boosting sales, though sales were down during the first half of 2009. The unit made medical devices and tests. Its operations were spread throughout other parts of the company.
"When you look at the total economic environment, I don't think anybody knows what's going to happen," Weldon said. "But nobody expects it to come back tomorrow."
He said the move is based on a broad, global view of the changing health care industry, taking into account national and international markets. As for health care reform, management has said it needs more clarity on what any future plan could look like before assessing a more concrete impact on the business. The restructuring program is also not a move to centralize J&J's operations, he added.
"We're trying to make sure we've really set ourselves up for the future," Weldon said. "We have such a rich portfolio that we have to make sure we have the resources to invest."
In morning trading, shares of Johnson & Johnson fell 25 cents to $59.24.