Tuesday November 29, 8:54 pm ET By Linda A. Johnson, AP Business Writer
Merck Workers in Ga., Pa., Canada Among 7,000 to Be Laid Off As Drugmaker Begins Restructuring
TRENTON, N.J. (AP) -- Merck & Co. workers in Georgia, rural Pennsylvania and Canada are among 7,000 employees to be laid off as the struggling drugmaker begins a global restructuring that aims to slash costs by cutting jobs and shuttering factories and research facilities.
Merck officials were notifying workers at some of the affected plants on Tuesday, a day after the Whitehouse Station, N.J.-based company announced the first phase of a wide-ranging reorganization meant to reduce costs by up to $4 billion by 2010. Merck intends to close or sell five of its 31 manufacturing plants and reduce operations at some others, close one basic research site and two preclinical development sites, and lay off 11 percent of its work force.
Merck's Flint River manufacturing plant in Albany, Ga., and its Cherokee plant in Riverside, Pa., each will be closed or sold. Meanwhile, hundreds of jobs will be cut at Merck's only Canadian factory.
The Cherokee facility, operated by Merck for more than 50 years, produces bulk ingredients for Merck antibiotics. It has about 450 workers and is the biggest employer in Northumberland County, about 50 miles north of Harrisburg. Workers there were told Tuesday that Merck will stop running the plant by the end of 2008 but hopes to sell it to another company that could manufacture drug ingredients for Merck.
"We're shocked and dismayed," said Peter Fleming, president of the borough council in the town of about 1,900 residents, adding that Merck positions are "the sought-after jobs," paying much better than others in the area.
"We know it's going to be a big hit, tax-wise," if the plant closes, Fleming said, adding that Merck also helps support local vendors, the town's sewage system and community activities.
Ed Vallo, president of Local 10580 of United Steel Workers of America, which represents 340 production and other workers at the Pennsylvania plant, said Merck officials told the staff in a meeting that the company will soon invest $15 million to install an additional production line for another ingredient for antibiotic Primaxin. Vallo said that shows a commitment to keep the plant running under another owner, and that news left workers optimistic they have futures there.
"What we were told today is not a death sentence," Vallo said. "I think there's a light at the end of the tunnel."
According to a Merck news release, Larry Naldi, vice president of U.S. chemical operations, told the workers Merck is committed to finding a buyer that will keep as much of the work force intact as possible.
Employees at the Flint River plant in southwest Georgia, which has about 350 workers, were told Monday that Merck will close the plant by the end of 2006 unless a buyer is found by October.
Closure could cost the local economy $75 million each year, or 1.5 percent of the city's economy, said Amit Singh, an associate business professor at Darton College.
"That's still a good dent, but it will not be devastating," he said.
The company is talking with state officials and suppliers to find a potential buyer, said Randy Hall, a Merck vice president.
The factory currently makes Merck's ingredients for a number of medicines, including cholesterol blockbuster Zocor, which will face generic competition after losing patent protection in June. That shift could slice about $2 billion off Merck's annual revenues -- one of the reasons analysts have cited for Merck's much-anticipated restructuring. Others include mounting lawsuits over its withdrawn painkiller Vioxx, slumping revenues, partly from lost Vioxx sales, and pricing pressures from increased generic competition.
Jeff Sinyard, who chairs the Dougherty County (Georgia) Commission, said the 1,000-acre plant's access to rail lines and waterways and its base of well-educated employees could make it an attractive site for chemical or drug companies.
Merck's Canadian subsidiary, Merck Frosst Canada Ltd., is cutting 235 jobs, mostly by year's end, by closing its only manufacturing plant in the country, in the Montreal suburb of Kirkland. The plant makes medicines for high blood pressure and other heart problems, including Mevacor, Prinivil and Vasotec.
Spokeswoman Marlene Gauthier said the Canadian division currently has 1,812 employees across the country. Those include workers in research and development, marketing and administration.
Merck has not released details about other plant closures and layoffs as it continues to notify workers. But the company does intend to complete construction of a Durham, N.C., vaccine plant due to open in 2007. The Durham plant, which could employ as many as 200, will focus on vaccines for mumps, measles, rubella and chicken pox.
Merck shares rose 46 cents, or 1.6 percent, to close at $30.02 Tuesday on the New York Stock Exchange.
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