Last week Teva’s CEO Kare Schultz announced he was laying off 14,000 employees or 25% of its workforce. Some had expected up to 10,000 headcount reductions, but 14,000 totally blew investors away. The stock rose 10% on the prospects of saving $3 billion in expenses:
Teva Pharmaceutical Industries Ltd.’s new Chief Executive Officer Kare Schultz proved that when it comes to saving the struggling drugmaker, he’s ready to pull out all the stops.
Just six weeks into the job, he announced plans to slash 25 percent of the Israeli company’s 56,000-strong workforce, suspend dividends and forgo employee bonuses. The plans, which envision cutting costs by $3 billion in two years, surpassed even the most aggressive forecasts from analysts and sent shares surging the most on record in Tel Aviv.
Teva will suspend its dividend and cut employee bonuses. In the Shock Exchange’s opinion Kare Schultz is making the right moves. The generics drug giant Teva has been reeling since Mylan won approval to offer a generic version of blockbuster multiple sclerosis drug Copaxone. The problem is that employees, particularly those in Israel, will bear the brunt of the company’s austerity measures. That could be problematic after Teva received billions in tax benefits from Israel.
Avi Nissenkorn And Histadrut Trade Union Hits Back
If Teva lays off thousands of workers then do the benefits of low taxes inure to current management and shareholders? The fact that Teva seems to want its cake (sweetheart tax deals) and eat it too (the option to lay off thousands of workers) has not been lost on the locals. Labor union Histadrut is expected to hit back at Teva in the form of a major strike at Ben Gurion airport in Tel Aviv:
Israeli employees are planning to participate in a general solidarity strike on Sunday called by Israel’s national labor union, the Histadrut to protest the layoff of 1,750 employees at Teva Pharmaceuticals as part of a global reorganization.
The company is planning to slash 14,000 of its 55,000 jobs worldwide over the next two years. Of those in Israel, 1,250 are to be laid off in 2018, with 500 to be let go the year after. Histadrut head Avi Nissenkorn said in his announcement that the union was calling a general strike in order to send a “clear message” that the layoff of Israeli workers is not acceptable.
Transportation to the airport, banks, clinics and the stock exchange could be disrupted by the strike. In addition, Nissenkorn expects an open-ended strike on Teva. Such a large scale strike could potentially disrupt the daily lives of citizens in Tel Aviv and other cities in Israel. By potentially making the downsizings a matter of public interest Nissenkorn could potentially gain sympathy for Teva employees. If strikes portend the populace stop buy drugs from Teva it could also hit the company where it hurts most – in its pocketbook.