Merck Serono employees in Geneva may have won a battle, but do they have any hope of winning the war? Looking at the cost-cutting numbers Merck KGaA laid out today could be disheartening. After reporting a 48% decline in first-quarter profits (skewed by a one-time gain last year), the German company said it's aiming for €300 million ($385 million) in pharma-related savings by 2014--and €120 million of that comes from shuttering Serono's Geneva site.
The now-unionized workers at Merck Serono's Swiss headquarters are fighting that shutdown, which they say endangers 1,250 staffers and 250-odd longtime contractors. They've been protesting, petitioning and appealing to Geneva officials for backup. By threatening to strike, the employee group persuaded company officials to extend a required "consultation period" to June 4--giving the union more time to propose alternatives.
But here's what Merck Chairman Karl-Ludwig Kley said today: "Merck faces unprecedented market shifts and increasing competition in key product areas." Right now, Merck "can address these challenges from a position of relative strength," Kley said. "[I]f we do not take urgent action, we will face the prospect of tackling these issues from a much weaker position."
Merck is hardly the first major drugmaker to propose mass layoffs and close facilities. Big Pharma has been cutting jobs by the thousand for several years, and dozens of R&D sites and manufacturing plants have been tagged for closure. The €120 million in targeted savings from Geneva's closure is counterbalanced by €180 million in sales and administrative cuts across the Merck Serono unit.
But Merck's Swiss employees have a nearby success to inspire them: After Novartis ($NVS) announced more than 1,000 job cuts in Switzerland, demontrators hit the streets, and workers at a Nyon plant set for big downsizing stopped work for one day. Later, the company agreed to keep the Nyon facility and most of its staff, in return for the employees' offer of an across-the-board pay cut.
Also, the Merck Serono employees strongly believe in their value to their German parent. Unia plans to comb through the company's restructuring plans, looking for performance numbers on the Geneva operations, in an effort to prove that worth. But according to Le Temps, a few of the Genevois see the Novartis workers' success as irrelevant: "Geneva is not a production site," one researcher pointed out. "Therefore we have almost no leverage."