Bayer is planning “significant workforce reductions” in Germany

DThe pharmaceutical and agrochemical company Bayer has announced a “significant workforce reduction” in Germany, without naming the exact number of job cuts. “The job cuts should be implemented quickly in the coming months and be completed by the end of 2025 at the latest,” the DAX group announced on Wednesday evening. Bayer currently employs around 22,000 people in Germany.

The new CEO of the DAX group, Bill Anderson, wants to introduce an organizational model called “Dynamic Shared Ownership” (DSO) in order to reduce hierarchies, eliminate bureaucracy and streamline structures in the group. Overall, decision-making processes are intended to be accelerated; the program primarily aims to eliminate positions in middle and senior management. The American Anderson, who previously worked at the pharmaceutical company Roche, had already criticized the excessive bureaucracy within the Bayer Group after taking office in June.

There are even plans for layoffs

As Bayer announced on Wednesday evening, the management board and the employee representatives on the supervisory board have agreed on a joint statement on restructuring. This also means that protection against dismissals for operational reasons will only be extended by one year until the end of 2026. According to the announcement, employees whose jobs are eliminated and who have not left the company by then will be “terminated for operational reasons if necessary” as of December 31, 2026.

“The fact that job security is only being extended by one year makes it clear that we are in an extraordinarily serious situation,” said Heike Hausfeld, the works council chairwoman and deputy supervisory board chairwoman of Bayer. Redundancies for operational reasons have been “more of a theoretical danger” at Bayer for 27 years and have now “become a real option”. “Despite the difficult situation, we found it extremely difficult to accept this,” said Hausfeld. “However, we agree with the employer that dismissals for operational reasons should only be used as a last resort in the future.”

Six months to think about it

The extension of the agreement is intended to give employees time for reorientation and qualification. In Germany – as with previous savings programs – employees are offered severance contracts based on their age. Employees should be given up to six months to think about it, during which they can receive help in finding other employers. This also includes continuing education programs that should run for up to a year.

Anderson wants to make the company more agile, a goal clearly demanded by investors is that the operational performance of the DAX group is improved. “Bayer is currently in a difficult situation for various reasons. In order to quickly and sustainably improve the performance of our organization and our scope for action, drastic measures are now necessary,” said Heike Prinz, board member and labor director at Bayer.

Investors are putting pressure on you

The general works council chairwoman Hausfeld emphasized that the programs already running were not sufficient “in the company's tense economic situation”. “As employee representatives, we are committed to the continued existence of the group with all three divisions,” said Hausfeld. The Bayer board is faced with demands from numerous investors to split up the group. CEO Anderson is also keeping this option open, but primarily wants to restructure the company internally in order to curb bureaucracy. However, with setbacks such as the recent failed study in the pharmaceutical division and the share price trend, which also suffers from glyphosate lawsuits, the pressure for major changes is increasing.

Anderson is dissatisfied with Bayer's structure, he made that clear months ago: “Almost 50 billion euros in sales, but zero cash flow – that is simply not acceptable,” said the American. The same applies to the share price development. The company is currently examining whether Bayer will remain in its existing three divisions or whether the group will spin off the non-prescription products division (consumer health) or the agricultural division.

Anderson wants to make this more specific at the Capital Markets Day in March 2024. Anderson's predecessor Werner Baumann had always rejected a spin-off, but investors have been demanding this for a long time because they consider the individual parts of the company to be more valuable than the entire group. With a market capitalization of just over 32 billion euros, Bayer has lost more than half of its value in the last five years. For the American seed company Monsanto alone, the Leverkusen-based company paid almost twice as much as it is worth today.