Published on 17 December 2018

CSR

Job cuts and a falling stock market: bayer in turmoil after purchasing monsanto

How will Bayer come out of this crisis? Since its merger with Monsanto, Bayer’s stock has decreased by 38%. The 9,300 glyphosate-related complaints against the firm have investors fearful of hefty fines. To minimise damage, Bayer announced 12,000 new job cuts. But employees do not want to be the ones to pay for company mismanagement.

Bayer Monsanto dans la tourmente suppression de poste chute bourse
Bayer faces both an operational and reputational crisis due to Monsanto's bad image.
@Bayer

Bayer has cut its workforce. The agrochemical giant announced on 29 November its decision to cut 12,000 jobs by 2021, or 10% of its total workforce. This announcement follows the group’s $66 billion acquisition of Monsanto, the GMO and pesticide multinational, in June 2018.

Since the merger, Bayer has been plagued with accusations against Monsanto including lawsuits concerning glyphosate-based weed-killers, such as the American brand Roundup. In August, the firm was first sentenced to pay $289 million to a gardener who is believed to have developed cancer due to this product. The final amount was smaller, but still totaled $78 million, with the judge upholding the merits of this judgement.

9,300 complaints frightening investors

More than 9,300 similar complaints are currently pending. "If every lost trial cost $250 million, it does not take much because this will be expensive enough," said Michael Leacock, senior analyst at MainFirst, during the first California court ruling. Several investors estimated that the invoice could easily reach between $5 billion and $10 billion, even with amicable agreements.

Hence, the stock market fall of the German group. The security has lost 38% since the beginning of the year. “It's wrong to say that the employees now have to carry the can,” said Oliver Zuehlke, who represents Bayer's German workers, to Reuters.

An “activist fund” to split from Bayer

In addition to downsizing, Bayer has also announced an end to its veterinary business and the elimination of two consumer health brands, Dr. Sholl’s and Coppertone. In the hope of reassuring investors on the group’s management, CEO Werner Baumann insisted that "these decisions have not been made due to the recent acquisition of Monsanto".

It’s uncertain if that will be enough. According to Reuters and Bloomberg, the Elliott Management activist fund has taken a position in Bayer and is set to put pressure on the German giant to split into agrochemical and pharmaceutical conglomerates, against the advice of executive management.

A reputational crisis

Beyond this financial and operational crisis, the group is also facing a reputational crisis. In June, Bayer decided to remove the name Monsanto in an effort to erase the American giant’s bad reputation. But "Bayer is not going to sweep 50 years of Monsanto liability under the rug by changing its name. We will always remember Agent Orange and Roundup. Bayer has put its own image in jeopardy because of Monsanto, and in the eyes of the general public, the group is the real bad guy", said Mathilde Théry, from the Nature and Man Foundation in France.

Moreover, on 11 December, several yellow vest protestors blocked truck access to the Monsanto plant in Trèbes, France. "We do not want to bother individuals but society," said a protestor in front of the offices for the Dépêche du Midi regional newspaper, saying it was "an anti-capitalist and ecological action" against "one of the worst offenders on this planet".

 Marina Fabre @fabre_marina


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