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Fierce local opposition to Teva’s restructure efforts

Published on 15/12/17 at 09:56am

When Kare Shultz decided to take on the CEO position at Teva he would have known that he was setting himself up for a challenging time. In the opening period of his tenure, it seems he has taken the strategy to implement changes hard and fast – culminating in the decision to cut the global workforce of the company by over 25%.

Many of those cuts are reportedly planned to come from within its Israeli workforce, with about half of its 6,400 employees expected to be shown the door. The local media and unions reacted strongly against the cuts, understandable given that the company has enjoyed tax breaks from the Israeli government of around $5.2 billion between 2006 and 2014, according to the Israel Tax Authority.

This has led many within the country to claim that Teva enjoyed huge breaks while Copaxone sales, and the business in general, were strong, but when times get tough the employees are the ones that pay the price.

This is the second time a CEO has attempted to push through sweeping job cuts at the company. Previously, former CEO, Jeremy Levin, had tried to push through a major restructure at the business but had met with resistance from unions and fellow board members. He eventually resigned after five years in the role and the job cuts were minimised.

The unions are trying to use their influence to have the same impact this time around, with Histadrut – the main labour union in Israel – calling for a general strike in protest against the job losses. The crucial question will be whether the Israeli government attempts to apply pressure in order to minimise the job cuts within Israel.

In an interview with Globes, when questioned over dialogue with unions and the government, Shultz appeared to be stoic in the need for cuts to be made. He said, “There are things that are not matters for discussion. When a plant is not profitable and does not fit in to the big picture, the change has to be made. It's a global puzzle, and there is no specific focus on Israel in the plan.”

The position is a difficult one for Shultz, he takes charge of a company that made a number of acquisitions to become the largest generics company, capping it off with a $40 billion move for Actavis just before the bottom fell out of the generics market.

It was a move that was supposed to make up for the patent losses on its main product, Copaxone. Now, he is left not only with Copaxone facing competition from Mylan but also a sprawling generics business that is looking increasingly like a white elephant.

Shultz has moved quickly to cut costs, and it has started with employees – a decision that has clearly been mooted as far back as when Jeremy Levin was CEO but has always been too thorny an issue to tackle. It was never going to be an easy sell on Shultz’s part and, with a pay packet worth $52 million widely documented on his arrival, it’s going to be a difficult one for workers to swallow.

Ben Hargreaves

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