Dormann feels the flames of discontent

16 March 1998 00:00  [Source: ICB]

Since January, HMR employees have been walking Frankfurt in a candlelight protest against Jürgen Dormann's job cuts. Now in an open letter to their ceo, HMR managers are also voicing their concerns.

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Many people in J&uumlrgen Dormann's shoes would be having nightmares, perhaps populated by factory workers, secretaries, white-coated lab assistants and research scientists protesting against the company's recently announced job cuts.

However, employee protests are just one problem to give Dormann restless nights. His management's recent open letter voicing their fears about his vision for the company may be a better reason for insomnia.

The failure of the Glaxo Wellcome/ SmithKline Beecham merger earned Dormann a brief respite from pressure to take swift action to shore up the shaky position of his envisaged life-sciences group, Hoechst Marion Roussel (HMR), on the stock market and the global pharma arena.

But last week he and his top executives, finance chief Klaus-J&uumlrgen Schmieder and HMR ceo Richard Markham, had to meet the press and financial analysts to interpret earnings figures and answer tough questions such as: Will HMR management have to revise its timetable for turning out two 'innovative new' drugs a year after 1999? Will HMR merge with another drugmaker? Why did the Hoechst holding buy Courtaulds' stake in the films joint venture Hoechst Trespaphan, while selling its own stake in another films producer, Kalle Pentaplast?

Listeners on the shop floor and in the research labs were particularly interested in news of how much more the group's workforce might shrink before downsizing is completed. But observers outside the company, too, are confused about management's current course.

Analysts scorned by Dormann's turnaround on taking HMR public now react to his every move by stamping 'sell' on Hoechst AG shares. Even those once convinced of Dormann's shareholder value offensive now openly question the logic behind the sell-off of well-established industrial companies to pump millions into a fickle pharmaceutical business.

The 'Hoechst case' has even penetrated the political arena. The state legislature of Hesse spent a day-long session trying to assign blame for HMR's decision to cut 600 German R&D jobs. Had the company neglected its social responsibility, or had the state failed to provide sufficient support for new technologies? No one had any answers.

Developments at Hoechst have radicalised a workforce that until recently had never showed much interest in corporate decisions as long as their pay packets were well filled.

On the heels of the January announcement of HMR's planned job cuts, an estimated 8000 demonstrators assembled outside factory gates in Frankfurt-H&oumlchst calling for Dormann's resignation. This was followed a few days later by a candlelight march through the old town centre of H&oumlchst, where employees 're-created' in candles on the pavement the venerable 'tower and bridge' corporate logo replaced in 1997 by a small blue square.

Dormann believes Hoechst's current negative public image is due more to its failure to make his strategy transparent than to the failure of the strategy itself. In a media 'blitz' launched after demonstrations began he voiced surprise at the vehemence of the response.

Some of what is happening at Hoechst has happened at other European chemical groups which restructured or merged - workforces at Roche and Boehringer have demonstrated too.

But why has the outcry at Hoechst been so great? Why are its employees so reluctant to accept that 'global competition forces constant realignment of corporate structure', as Dormann expressed it in a February interview with the German news magazine Focus?

One explanation comes from HMR works council head Arnold Weber who complained at the January rally that HMR's management had refused to put all its cards on the table. As union officals pointed out, German employees were notified of plans to quit penicillin production two days before Christmas - by fax from New Jersey, US, although senior management 'resided' only a few doors away.

Moreover, at the time, executives denied rumours of the extensive job cuts to come, only to do an about-turn two weeks after the holidays.

Hoechst staff seems to be as much upset by Dormann's attempts to wipe out more than 130 years of company history as by the job attrition itself. Whatever their differences with his predecessors' failings, they note that these chemist-managers did not tamper with tradition.

Even in modern Germany, established customs die hard. The concept of a 'Hoechst family' has led generations of sons to follow fathers through its factory gates.

Hoechst and HMR academic and managerial staff, including accountants, chemists and physicians, have their own personal explanation for the disappearance of a Hoechst corporate culture, and their own way of exacting revenge.

Someone with access to confidential information about company accounts leaked the news in February that unadjusted financial results for 1997 were far worse than management has been willing to admit.

In an open letter to the supervisory board of Hoechst and in private circulars dripping with bitterness, HMR members of the professional employee organisation VAA criticised the alleged hold managers brought in from companies acquired abroad have on their German boss.

The cost-cutting measures conceived by HMR's US-led management team are more likely to backfire than to push the drugmaker forward in the global hierarchy, the authors insist. And, they argue, a pharmaceutical company that cuts R&D staff cannot keep up with its competition.

In their view, the DM18bn ($10bn) Hoechst has spent on acquisitions over the past several years 'would suffice to finance research activities for decades'. Dormann's vision of launching two 'innovative new drugs' a year after 1999 is also termed 'unrealistic.' Even employees whose jobs have not being eliminated are 'demotivated,' the scientists say.

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