Of 3,500 Eli Lilly Worldwide Job Cuts, 2,300 in U.S. Took Voluntary Severance
On Sept. 7, Eli Lilly announced it would cut 3,500 jobs worldwide by the end of this year. Of those positions, 2,500 would be in the United States. The company indicated yesterday that more than 2,300 employees at the company’s U.S. operations had accepted voluntary buyouts.
The cuts were expected to save the company $500 million. It’s not clear at this time if the 2,300 voluntary separations will end the U.S. job cuts or if Eli Lilly will resort to additional layoffs. The Indiana Business Journal reports that this round of cuts is the largest single workforce decrease since 2009, when it cut 5,550 jobs and $1 billion in costs.
In an email to the Indiana Business Journal, Lilly spokesman Mark Taylor said more information concerning possible layoffs would be forthcoming “once communications to employees is complete. I can tell you we are on track to achieve our stated goals as outlined in the announcement on Sept. 7. In addition to the U.S. voluntary early retirement program, the company will determine where it needs to further reduce costs and improve efficiencies. Remaining positions will come from other anticipated workforce reductions, including select site closures outlined on Sept. 7 as well as consolidation of some work to existing shared service centers. All streamlining efforts will be consistent with applicable local requirements.”
The original cuts are part of a productivity plan to improve its cost structure, especially fixed costs. David Ricks, the company’s chairman and chief executive officer, said in a September statement, “We have an abundance of opportunities—eight medicines launched in the past four years and the potential for two more by the end of next year. To fully realize these opportunities and invest in the next generation of new medicines, we are taking action to streamline our organization and reduce our fixed costs around the world. The actions we are announcing today will result in a leaner, more nimble global organization and will accelerate progress towards our long-term goals of growing revenue, expanding operating margins and sustaining the flow of life-changing medicines from our pipeline.”
In addition to the headcount reductions, Lilly plans to move production from its animal health manufacturing site in Larchwood, Iowa to an existing site in Fort Dodge, Iowa. It is also closing a research-and-development office in Bridgewater, New Jersey and the Lilly China Research and Development Center in Shanghai, China. It will consolidate some of its operations to existing shared service centers.
The company expects to incur charges related to the cuts of about $1.2 billion pre-tax, or $0.80 per share after-tax. That includes the voluntary early retirement program, global severance and facility closures. They will be spread across the third and fourth quarters of 2017 as asset impairment, restructuring and other special charges.
On June 30, Eli Lilly reported 11,312 staffers in Indianapolis and 12,528 in Indiana. The company has about 41,241 employees worldwide, with more than 18,500 in the U.S.