Hospira To Restructure, Lay Off 10%

Hospira, Inc. announced a multi-phased restructuring initiative Project Fuel aimed at improving the company’s margins and growth efforts. The project aims to increase shareholder value and improve operational efficiency by optimizing its product line, evaluating non-strategic assets and streamlining its organizational structure. During the next 24 months, the company expects to reduce its global workforce by approximately 10% in an effort to cut costs by $110 million to $140 million.

The company plans to focus on its key growth drivers, Specialty Injectable Pharmaceuticals (SIP) and Medication Management Systems (MMS) product lines and will rationalize non-strategic assets. In its conference call announcement, the company stressed the importance of Hospira’s contract manufacturing business.

“To maximize our opportunities for growth and sustainable shareholder value, Hospira is taking a number of important steps to simplify our business, strengthen our financial position and establish a strong foundation for our future,” said Christopher B. Begley, chairman and chief executive officer, Hospira. “By reducing costs and improving efficiencies, we can free up more dollars to invest for profitable growth and shareholder returns. And with a streamlined, focused organization, we will reduce complexity, improve performance and be better positioned to advance our significant opportunities.”

Hospira will streamline its global product line by simplifying presentation choices in order to improve inventory management and manufacturing efficiency. The company’s product line includes thousands of list numbers, or SKUs, many of which represent multiple presentations of the same drug compound that serves the same medical need.

The company will streamline its organizational structure to improve efficiencies and performance in several areas, including global procurement, finance and information technology. These efforts will include “de-layering” the management structure, consolidating functions and focusing on process improvement to reduce redundancy and accelerate decision making to increase productivity.

The projected reduction associated with these actions represents approximately 10% of the company’s global workforce, with the majority of reductions occurring in the next year. The total charges for the project include cash costs of approximately $120 million, primarily related to restructuring costs, including employee-separation and other costs, as well as process optimization implementation costs.

“Every day our employees make valuable contributions to Hospira, our customers and the patients we collectively serve,” said Mr. Begley. “We understand the impact these decisions have on our employees and their families, especially during tough economic times. Our actions, while difficult, are designed to benefit all of our stakeholders by ensuring a strong foundation for our future.”