Teva halts Israeli layoff plans amid pressure from labor, government

Teva Pharmaceutical CEO Jeremy Levin

Teva Pharmaceutical Industries will back off its layoff plans in Israel--at least for now. Thanks to vociferous and colorful opposition from labor, plus worker support from politicians, Teva ($TEVA) now pledges to negotiate with unions before cutting jobs.

It was a lickety-split turnabout for the Petah Tikva, Israel-based generics giant. As soon as Israeli labor leaders heard that Teva's global job-cutting plans would include up to 800 in its home country, they pounced. Union officials not only threatened to strike, but also highlighted multimillion-dollar pay packages enjoyed by top company executives. Government officials quickly aligned themselves alongside labor, and the closed-door meetings began.

And it's one of those meetings that yielded the compromise. Ofer Eini, who heads up the Histadrut organization of trade unions, met with Teva management yesterday, including CEO Jeremy Levin, Haaretz reports. Both sides emerged from the meeting with new attitudes. Labor acknowledged that the drugmaker faces some rocky times ahead, as it faces earlier-than-expected competition for its best-selling product, Copaxone. And management expressed new willingness to work together.

"We are aware of the difficulties Teva is going through and are determined to make sure it stays strong," said one official with Histradrut who attended the meeting (as quoted by Haaretz). And Teva announced that it had promised Economy Minister Naftali Bennett to rejig its restructuring plans to soften the impact in the country. "[T]he sides agreed that a joint team will be established to examine how to implement the company's plan while preserving most of the workforce in Israel," the company said in a statement.

The agreement echoes similar moves in Europe when Big Pharma job cuts hit. Sanofi's ($SNY) plans to slash hundreds of jobs and consolidate R&D sites met with quick opposition from workers' reps, and politicians persuaded CEO Christopher Viehbacher to scale back those plans. The negotiations on that score continue. Meanwhile, Novartis' ($NVS) plans to shrink its workforce and footprint in Switzerland, its home country, met with protest from employees there. Eventually, CEO Joe Jimenez met with labor leaders, who agreed to pay cuts and other concessions to continue operating at least one previously doomed facility.

One issue that's driving the opposition to Teva's plans is different, however--nearly 12 billion shekels' worth of tax breaks benefited the company beteween 2006 and 2011, as Israel sought to boost capital investment in the country. Current government leaders say such tax breaks should be tied to employment numbers.

Now, labor leaders and politicians say they hope that the Israeli job cuts will be limited to voluntary exits, such as early retirements. "Seven percent of [Teva's] workers leave every year in any case, and they will try to get them to retire early and leave voluntarily," Finance Minister Yair Lapid told Channel 2 News in Israel.

Will the numbers add up to the kind of cost savings Teva envisions? It's too early to tell. Plus, there's the question of whether job cuts avoided in Israel will trigger more job cuts elsewhere. Stay tuned.

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