Bayer Announces Restructuring 

Bayer has announced a major restructuring plan through the launch of a new operating model and “significant” staff reductions of the company’s operations in Germany. The company announced the restructuring plan as part of a joint declaration of the Board of Management of Bayer AG and the employee representatives on the company’s Supervisory Board.  

The new operating model, called “Dynamic Shared Ownership” (DSO) worldwide, aims “to reduce hierarchies, eliminate bureaucracy, streamline structures and accelerate decision-making processes to make the company much more agile and significantly improve its operational performance,” said Bayer in a January 17, 2024, statement. In a joint declaration, the Board of Management of Bayer AG and the employee representatives on the Supervisory Board have agreed on principles for the future of the company. This also includes regulations for significant staff reductions expected in the course of the restructuring in Germany. 

“Bayer is currently in a difficult situation for various reasons,” said Heike Prinz, member of the Board of Management and Labor Director of Bayer AG, in a January 17, 2024, statement. “In order to make rapid, sustainable improvements to our operational performance and our room to maneuver, far-reaching measures are necessary. We want to get Bayer back on the road to success quickly. The Company management and employee representatives must pull together and agree on the steps expressed in the Joint Declaration to overcome this challenging situation and secure the future of the company.” 

Bayer’s current difficulties are in large measure due to its $63-billion acquisition of Monsanto, an agrochemical and seed company, in 2018, the largest acquisition in Bayer’s history. Subsequent litigation for Monsanto’s glyphosate-based herbicide, Roundup, and the related costs of that litigation has put that acquisition into serous question. 

Those issues resulted in a key leadership change in 2023 with the naming of Bill Anderson, formerly CEO of Roche’s Pharmaceutical Division, to become CEO (Chairman of the Board of Management) of Bayer, who succeeded Werner Baumann in that role. Baumann was behind Bayer’s $63-billion acquisition of Monsanto and continued the company’s strategy to make life sciences the focus of Bayer. Bayer’s strategy to become a pure-play life-sciences company (pharmaceuticals, crop protection, and consumer health) began full force with the company’s decision to spin off its material-science (i.e., polymers) business, an approximate $12.5-billion business, which the company did in 2015 to form a separate, independent company, Covestro, leaving Bayer as a pure-play life sciences company. The acquisition of Monsanto made the company’s crop-protection business the largest piece of Bayer, surpassing its pharmaceuticals business, which had been the company’s largest business prior to the acquisition.  

Bayer’s recent financials reflect its difficult situation. The company reported an overall decline in sales of 7.7%  through the first nine months of 2023, to EUR 35.8 billion ($38.9 billion) compared to EUR 38.7 billion ($42.1 billion) in the year-ago period. Hardest hit was its crop-protection business, which saw sales decline 10% to EUR 17.6 billion ($19.1 billion). Sales in its pharmaceuticals business fell 6.2% to EUR 13.5 billion ($14.7 billion), and sales in its consumer health business declined 2.3% to EUR 4.4 billion ($4.8 billion). Overall, the company’s operating performance fell,  with a 22% decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) to nearly EUR 8 billion ($8.7 billion) for the first nine months of 2023. At the same time, its net debt, stemming in part from the Monsanto acquisition and related litigation costs as well as recent higher interest rates, climbed 7.9% for the first months of 2023 to EUR 38.7 billion ($42.1 billion). The company will report is full-year 2023 results in March (March 2024).

Implementation plan for job cuts 
The recent job cuts are to be implemented over the coming months (as reported on January 17, 2024), and the company says will be completed by the end of 2025 at the latest. In line with the principles of the DSO, Bayer says that the implementation will be largely decentralized, meaning that its scope cannot be quantified for the time being. As the DSO intends to reduce hierarchies and complex structures within the company, the job cuts will include employees with management or coordination tasks. Bayer currently employs around 22,200 people in Germany.  

In its German Group companies, Bayer is offering employees severance agreements staggered according to age, as in previous restructuring measures. The company is also offering employees whose jobs are eliminated a reflection period of up to six months, during which they will be supported by targeted positioning and external placement offers to find new employment outside the company that matches their skills and qualifications. If required, affected employees can also receive individual training measures for the external job market for up to 12 months. A “Future Skills Academy” is also intended to identify skills relevant to the future and support employees in acquiring them. 

In order to give the employees affected by the loss of their jobs the necessary time and security for external reorientation and qualification, the company parties (management and employees) are extending the agreement on job security with the waiver of compulsory redundancies until December 30, 2026. Bayer says this also offers employees affected by the loss of their jobs more time and security for reorientation and qualification. Employment contracts of employees whose jobs have been lost and who have not left the company by the end of 2026 will be terminated as of December 31, 2026, for operational reasons if necessary. 

The joint declaration also contains a number of commitments for the company’s location in Germany and its employees. For example, the parties reaffirm the Future Concept for Germany adopted in March 2022, which aims to strategically develop Bayer in Germany and align the business units there for the future. Bayer also intends to further develop its corporate headquarters in Germany in accordance with the DSO. The parties also agree to improve the company pension scheme at Bayer and to complete the already initiated repatriation of initial vocational training from external service providers to the company by the end of 2024 as planned. 

Source: Bayer