Lilly CEO: 3,500 job cuts will make company healthier, stronger
Eli Lilly and Co. today announced it will cut 3,500 jobs globally as the Indianapolis-based drugmaker focuses on developing new medicines and improving its cost structure.
The cuts will save an estimated $500 million annually beginning next year. The 3,500 jobs represent about 8 percent of Lilly's total global workforce of about 46,000, including full-time and contract workers or 41,241 full-time employees if contract workers are excluded from the count.
About 2,000 of the job reductions will come in the United States, many through a voluntary early retirement program that the company will offer this fall, said Lilly Chairman and Chief Executive Officer David A. Ricks.
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The reductions will allow the company to pursue a "broad productivity agenda," Ricks said. Lilly plans to invest about half of the $500 million it saves into research and development for new medicines to treat a variety of conditions, from diabetes and heart disease to cancer drugs and autoimmune disorders such as lupus and psoriasis.
"As you know, with our company we have come out of a difficult period in the early part of this decade and are now entering a period of growth and strength," Ricks told IndyStar. "At the end of the day, a healthy and strong Lilly is great for our community and these actions will allow us to invest in growth for the future that makes the company healthier and stronger."
Employees learned of the early retirement program, which includes enhanced benefits, on Thursday, according to a news release.
Without knowing how many employees will apply for early retirement, the company could not say how many employees might be laid off involuntarily or how many in Indianapolis would be affected.
However, Ricks said it was likely the corporate headquarters based in Indianapolis would see some downsizing, while the manufacturing side of Lilly's operation in Indianapolis already is "right-sized."
As of June, Lilly had 11,312 workers in Indianapolis, company officials said.
At Oaktree Financial Advisors in Carmel, Ed Snyder, a certified financial planner, fielded more than a dozen calls plus emails from clients who work at Lilly, he said. The company has shared some information about the early retirement offer, but final details will not be available until Monday, he said.
Next week, he'll meet with a number of clients to help them work through whether or not to accept the offer.
"They just want help evaluating what they're being offered and whether they should consider it or not," Snyder said. "Really what it comes down to for people, is let’s look at the numbers and see if it makes sense that you stay working for a few years."
While Ricks said he could offer no promises that the future will not hold additional layoffs beyond the 3,500, he said that the company had debated whether to achieve the needed reduction through a series of small changes or all at once. The company opted for the latter.
At the same time the company is streamlining certain areas of its workforce, it is hiring in other areas, such as research and development, Ricks said.
Other lost positions will come from anticipated workforce reductions, including site closures. The company will move production from its animal health manufacturing facility in Larchwood, Iowa, to an existing plant in Fort Dodge, Iowa.
In addition, a research and development office in Bridgewater, N.J., and the Lilly China Research and Development Center in Shanghai will close as the company streamlines its pharmaceutical research and development activities.
"The actions we are announcing today will result in a leaner, more nimble global organization," Ricks said in a statement, "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."
"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," he added.
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Call IndyStar reporter Justin L. Mack at (317) 444-6138 or email him at justin.mack@indystar.com. Follow him on Twitter: @justinlmack.
Call IndyStar reporter Shari Rudavsky at (317) 444-6354. Follow her on Twitter and Facebook.