Pfizer’s 2,410 Job Cuts Shock Michigan
By John Gallagher, Detroit Free Press
Jan. 23–Feeling ambushed by the latest blow to Michigan’s economy, state and local leaders scrambled Monday to bounce back from Pfizer Inc.’s surprise decision to eliminate 2,410 jobs in Ann Arbor, Kalamazoo and Plymouth Township.
Michigan is no stranger to job loss, but this one stung particularly hard because the high-paying positions are the kind not dependent on the auto industry that the state is trying to attract. Leaders saw no easy fix but believe the pieces are in place for the life-sciences industry to rally in Michigan despite Pfizer’s cuts.
First, though, there were the immediate effects to deal with, including the impact on 1,000 additional contract workers in Ann Arbor who perform construction, food service and other chores daily at Pfizer’s sprawling Plymouth Road campus. Those contract jobs also will disappear by late 2008.
Realty agents in Ann Arbor were hit with a rush of Pfizer employees trying to cancel house deals because “it really caught a lot of people unaware,” said Kay Merx, a broker with a Real Estate One office.
Among those admitting she was caught off guard was Gov. Jennifer Granholm. Although for the last year the pharmaceutical giant has said it must streamline its worldwide operations after gobbling up rival firms Warner-Lambert in 2000 and Pharmacia in 2002, the enormity of the decision to cut Pfizer’s entire Ann Arbor operation of 2,100 workers was, in Granholm’s words, “a punch in the gut.”
But she and others quickly pointed out that Michigan has many other life-science companies, and their number is growing. Granholm estimated that Michigan has seen 120 new life-sciences companies operating in the state since 2000.
“While this is a devastating blow to so many Michigan families, the state’s economic plan and our 21st Century Jobs Fund are already at work positioning the state as a leader in life sciences, alternative energy, homeland security and defense, and advanced manufacturing,” Granholm said at a news conference Monday after Pfizer’s announcement.
David Canter, Pfizer’s senior vice president in charge of operations in Ann Arbor and a key adviser in helping create the state’s 21st Century Jobs Fund, suggested that many of those smaller biotech companies might grow faster by snapping up talented Pfizer researchers. But he agreed that the cutbacks were a blow.
“This is a short-term setback, and it will take a while to recover,” Canter said. “But I don’t think our thinking is wrong. Our thinking is absolutely right. Developing the entrepreneurial spirit with these companies is the right way to go. Yes, this is a short-term hit. It hurts. But I honestly believe we have to keep going.”
Besides the 2,100 jobs in Ann Arbor and the contract workers, Pfizer said it also will eliminate 250 jobs in downtown Kalamazoo and 60 at a research facility in Plymouth Township.
Job losses stagger Michigan
“Michigan adds jobs in teardrops, like Google, and loses them in roaring tsunamis,” said Tom Watkins, former state school superintendent of Michigan and chief executive of an education-consulting firm in Northville. Google, the Internet search engine, announced last year it would create 1,000 jobs in Ann Arbor by moving part of its advertising unit there.
Google’s move was one reason Ann Arbor has enjoyed the reputation as the center of Michigan’s new economy.
“There is no other way to look at this. This is a big blow to Michigan’s turnaround plans,” said Patrick Anderson, a Lansing-based economist.
If there was a bright spot in the announcement, Canter said Pfizer will employ about 4,000 people in the Kalamazoo area once the layoffs are complete by the end of 2008.
In Portage, outside Kalamazoo, Pfizer operates its largest and most diverse production facility in the world, making a range of medicines.
Nor is Michigan alone in its pain. Pfizer, the world’s largest pharmaceutical company, said it also was closing plants in Brooklyn, N.Y., and Omaha, Neb., and will seek to sell a third site in Germany. It also said it hopes to close sites in Japan and France.
Cuts worldwide
Overall, Pfizer is cutting 10,000 workers, or about 10% of its worldwide workforce, and trimming $1.5 billion to $2 billion in expenses.
Wall Street analysts viewed the cuts as Pfizer’s attempt to bolster profits hurt by the loss of patent protection on some of its most important drugs, including the antidepressant Zoloft and the antibiotic Zithromax. Pfizer said sales of both drugs fell more than 70% in the fourth quarter of 2006 because of competition from generics.
At the same time, Pfizer suffered a major setback in December when safety issues led it to pull the plug on development of torcetrapib, a cardiovascular drug that was a candidate to replace revenues from the cholesterol drug Lipitor, a pill that can be subject to generic competition as early as 2010.
Another factor: Insurers and other large purchasers of medicines are demanding lower prices and more evidence of products’ usefulness.
At Pfizer’s massive Ann Arbor research facility, the news came as a blow. The former site of a Parke-Davis facility acquired by Pfizer employs a host of scientists, lab technicians, and other workers, many of them earning $50,000 to $100,000 a year to work on the latest antibiotics, heart drugs and other medicines.
“I am stunned by today’s announcement,” University of Michigan President Mary Sue Coleman said Monday. “This is very difficult news for our region. Pfizer and its predecessors have been a positive force in our community for decades, and we have all benefited from these relationships.”
The research now done in Ann Arbor and a small Pfizer-owned Esperion facility in Plymouth Township will transfer to other Pfizer sites in Groton, Conn.; St. Louis; La Jolla, Calif.; and Sandwich in England. Pfizer said it expects that “a substantial number” of the workers in Ann Arbor will transfer, and that perhaps up to 70% of the jobs would be moved to the other sites.
Workers in Ann Arbor who do not transfer will be offered career and retirement counseling and possibly severance and health care based on years of service.
Besides the manufacturing plant in Portage, the global headquarters for Pfizer’s Veterinary Medicine research arm also will remain in Kalamazoo County, including a 2,000-acre farm in Richland Township and laboratories in downtown Kalamazoo. Slentrol, Pfizer’s new medicine for obese dogs, was developed by Pfizer scientists there and will be manufactured in Portage.
Unlike recent layoffs in other industries, Canter said the Pfizer cuts could not be blamed on Michigan’s tax climate, union demands, unfavorable weather or any other oft-cited challenges.
He said Pfizer, through a series of mergers and acquisitions, simply had too many research facilities and employees around the world. The Michigan cuts are part of a global streamlining.
On the commercial real estate side, Pfizer’s decision dumps a 177-acre, 2-million-square-foot research, office and industrial facility onto the market.
But in a hopeful sign, Steve Morris, a commercial broker with GVA Strategis in Southfield, said the site would probably find new users in Ann Arbor’s tight commercial market, where vacancy rates are among the lowest in southeastern Michigan.
“This is an awesome site for redevelopment. That site will be in demand. I think it will be readily picked up,” he said.
Contact JOHN GALLAGHER at gallagher@freepress.com. Staff writers Alejandro Bodipo-Memba, Carol Cain and Margarita Bauza contributed to this report.
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Copyright (c) 2007, Detroit Free Press
Distributed by McClatchy-Tribune Business News.
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