Will Teva actually manage to make the cuts?

Shiri Habib-Valdhorn

Teva's previous rounds of layoffs have fallen short of the company's targets.

The streamlining plan that Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) will present tomorrow is not the company's first in recent years, and laying off employees has also been previously discussed. Even before Teva's official report, the plan is arousing great concern among its employees and controversy among the public's representatives. The question arises of whether Teva will succeed in carrying out its plan this time, or whether this time also, as in the previous cases, it will be carried out partially or not at all. Throughout recent years, Teva laid off employees after completing major acquisitions, such as that of IVAX Corp in 2006, Barr Pharmaceuticals in 2008, and Cephalon in 2011. As part of the integration of the acquisitions, Teva eliminated duplication and let employees go, but there was no orderly streamlining program, and no need for one arose. In 2009, at the peak of the global economic crisis, Teva's then chairperson, the late Eli Hurvitz, said that Teva was cutting expenses, but noted, "Cutting expenses does not have to be layoffs. It can be anything, from large to small. We're cutting back on everything."

The situation changed in 2013, when Jeremy Levin, Teva's CEO at the time, realized the need for cuts, given the impending loss of exclusivity for Copaxone, which was still generating record revenue and profits for Teva. Levin presented the capital market with a plan that included laying off 5,000 employees worldwide, 10% of its workforce at that time, and which was designed to save the company $2 billion a year in costs. As expected, the plan aroused strong opposition among the workers' committees, the Histadrut (General Federation of Labor in Israel), and MKs. The plan was shelved very shortly after it was presented, and amidst disputes between Levin and the board of directors, Levin lost his job.

In the two years after he left, Teva's workforce nevertheless declined by 2,000, but by 2016 had risen again with the addition of 12,000 employees. Mainly as a result of its acquisition of Actavis Generics, Teva's workforce reached nearly 57,000. As a result of its large debt, Teva decided to cut its staff by 7,000 by the end of the current year. Last August, the number of employees who left was 6,000 out of the planned 7,000. At the same time, Teva announced last summer 350 layoffs at its sites in Kfar Saba and Ramat Hovav. Following Knesset debates and negotiations with the workers' committees, the number of these layoffs was reduced to 230.

Published by Globes [online], Israel Business News - www.globes-online.com - on December 13, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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