Merck KGaA Announces Restructuring

Merck KGaA announced measures intended to reduce costs and increase efficiency to ensure the long-term success of its business model. The measures announced this week are part of a comprehensive transformation program that will be implemented in two phases. In the first two years, Merck plans to implement a new leadership organization, implement efficiency measures, and develop a long-term growth strategy. In the second phase, the company will explore new areas for growth. Cost savings from the first-phase efficiency measures are expected to fuel second-phase growth.

The announcement this week marks the beginning of the efficiency measures. At the beginning of 2012, Merck began the implementation of the new leadership organization, which defines the relationship of businesses, group functions, and country organizations. According to the press release, the objective of the new leadership organization is to streamline the organizational structure to be leaner, easier to navigate, and to speed up decision-making processes. The organizational realignment will continue in parallel to and support the efficiency program as well as the development of Merck’s long-term growth strategy.

The company expects the efficiency measures to result in workforce reductions across all businesses and regions, according to the release. The company deliberately did not release figures related to expected headcount reductions. In the release, Karl-Ludwig Kley, chairman of the executive board says, “We have a view on what needs to be achieved, but we will consult with the employee representatives on a country-by-country basis and we will consider any pragmatic proposals. We have specifically not published potential figures related to the efficiency program as we are committed to engaging constructively with the relevant stakeholders to achieve a mutually acceptable solution.”