Teva Pharmaceuticals announced on Thursday it will lay off 14,000 workers worldwide, nearly 25% of its workforce, over the next two years as the struggling drugmaker moves to cut costs. 1,700 of the fired employees will come from the company's Israeli workforce. Two facilities in Israel will be shut and another sold.
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The layoffs are part of a strategic plan that will be presented by CEO Kåre Schultz, who was hired six week ago to turn Teva around.
The Histadrut labor federation said Teva intends to lay off 1,750 workers in Israel over the next two years after the planned sale or closure of a considerable number of its facilities. It will affect employees at research and development facilities and other office throughout the country.
The company's two manufacturing plants in Jerusalem, which employ 1,100 people, will be shuttered. The plant in Kiryat Shmona will be sold. Spared from the cuts are the Teva-Tech facility in Ramat Hovav in the Negev and the company's facility in the Tel Aviv suburb of Kfar Sava. Both facilities have already experienced downsizing recently and are the subject of a labor pact through 2021.
The company said that workers who are being laid off would be expected to receive dismissal notices within the next three months. The company also said it would immediately suspend the payment of dividends on its ordinary shares and continue to examine the possible sale of assets beyond its core operations.
Prime Minister Benjamin Netanyahu spoke with Schultz before the cuts were announced. A statement by the Prime Minister's Office said Netanyahu told Shultz that he was worried about the state of the company and asked him to minimize the the damage to Israeli workers, especially those in the country's periphery, and the CEO said he would make an effort.
The prime minister also asked that Teva do everything possible to preserve the company's identity as an Israeli company. The statement said Schultz promised that it would be so.
The brunt of the cutbacks are falling on the 57,000 people Teva had on its payroll worldwide as of the end of 2016. Although it is an Israeli company, only 12% of its employees are based on Israel, while 42% are in Europe and 18% in the United States. Buying Activis increased its payroll by 10,000.
Teva currently has three factories in Israel, in addition to research and development and management. Its headquarters employs 1,300 people alone. Israeli manufacturing costs are high, which makes local operations vulnerable to cost-cutting. Teva closed its TAPI division, which makes raw materials for pharmaceuticals and employs 1,100 people. That manufacturing can be done more cheaply in India.
Over the last year, Teva has suffered multiple problems. It bought Activis, a U.K. maker of generic drugs, for $40 billion, saddling it with $35 billion in debt just as prices for generics started to turn lower. Meanwhile, the last of its patents on its best-selling Copaxone multiple sclerosis drug expired, cutting sharply into its biggest single source of profits.
Teva is committed to repaying $9.1 billion in 2018 and 2019, at a time when its cash flow is contracting and it has no choice but to cut costs, reduce shareholder dividend and sell assets, all of which it has been doing.
The Histadrut has called for a general strike for several hours on Sunday to protest the layoffs at Teva. The strike is to include the country's airports and seaports, public transportation, government ministries and local governments, as well as public health services, banks and all of Teva's plants in Israel, Histadrut Chairman Avi Nissenkorn announced on Wednesday.
"From our standpoint as a family, I'm concerned," Hagit Ziv, who has worked for some 10 years at Teva's Migada plant said before Teva's announcement. "The situation here is not stellar. There isn't enough work even for the small number of people. All the more so for the number of families who will be left without anything."
Ziv, a mother of three, described how staff from the plant had blocked traffic on the main highway into the city and, as she spoke, they were sitting tensely at the entrance to the plant waiting to hear what would become of their jobs.
She said layoffs could affect 1,000 families in the area "who will get up tomorrow morning facing the unknown."
For Meir Ben-Elul of Kiryat Shmona, Teva has been his employer for the past 23 years. Speaking before knowing his own fate, he said: "The feeling is very bad. Employees are crying." For his part, however, Ben-Elul said he is more angry at Netanyahu than at Teva itself.
"The government should have given [Teva] an ultimatum," he said. The prime minister should have intervened and should not have allowed Teva to transfer jobs to India. "We are here guarding the north, the country, our children here. Why is the government allowing them to do this? Why is there no safety net to protect us?"
With reporting by Omri Zerachovitz, Tali Heruti-Sover and Reuters