Bayer CEO: Company Restructure Coming

LINCOLN, Neb. (DTN) -- Bayer CEO Bill Anderson held nothing back during a quarterly earnings call Wednesday: A complete company restructuring is on the way.

"It goes without saying that despite some of the great things you've heard about, we're not happy with this year's performance," Anderson said during the presentation.

"Nearly 50 billion euros in revenue and zero cash flow is simply not acceptable. The status quo is simply not an option for Bayer. We share the belief that there's no quick fix for the multiple challenges that Bayer is facing."

The head of Bayer confirmed the company not only is exploring a complete restructuring of its business but is expected to make staff cuts and take other measures in the coming year.

Bayer has assembled a team -- including financial advisers from outside the company -- that is evaluating all restructuring options, Anderson said.

The company is not "wedded" to one particular structure, he said. However, Bayer has already eliminated the idea of splitting the company into three businesses.

Some shareholders have called for Bayer to split into three separate businesses -- crop science, consumer health and pharmaceuticals.

"We're ruling that option out," Anderson said. "It's just not feasible to do that all at once. A three-way split would require a two-step process, and we certainly will not pursue any structural moves that would come with a downgrade of our operational performance."

Anderson said the company continues to consider splitting either crop science or consumer health away from the other two divisions within Bayer.

The overhaul of the company has taken center stage in the past 90 days or so. On Wednesday, Bayer reported a net loss of $4.89 billion in the third quarter, compared to the same time last year. All three Bayer divisions reported losses in the third quarter.

The company's crop science division reported a 7% drop in sales. Bayer said this week it has been dealing with lower glyphosate prices, the main ingredient in the Roundup herbicide used by farmers. The ingredient is being phased out of residential Roundup products.

Bayer declined comment when contacted by DTN.

Anderson said the company is making fundamental changes internally in the way it makes decisions and carries out Bayer's mission. That includes an expected reduction in workforce and a greater focus on customers.

"Despite numerous reorganizations, the number of senior leaders has remained the same," Anderson said.

"There's still about 12 layers between me and customers. That's simply too much. And this isn't penny-pinching, it's an entirely new way of operating. From a static, command-and-control system to one where everything is centered on the needs of a customer."

By the end of 2024, Anderson said, Bayer will "remove multiple layers of management and coordination" in a step he said to enable Bayer employees to "turn things around."

"And the measure is simple -- 95% of the decision-making in the whole organization is going to go to the people doing the work," he said.

"This is a profound shift, and we're taking out a lot of work and that's going to include a significant reduction in the workforce. I've been in regular exchange with our employee representatives. I fully expect the results to be more meaningful jobs. This is jobs where people have the freedom to act like an owner, and we're going to make the jobs more meaningful, more innovation for our customers and a better performance for shareholders."

During the past six years, Bayer has implemented a number of cost-cutting measures in an attempt to improve its financial performance. Anderson said those measures haven't worked.

"We're redesigning Bayer to focus on only what's essential for our mission and then getting rid of everything else," he said.

"In most companies, layers of management spend months on things like budgeting processes, performance reviews, target setting -- by the way none of those do anything for the customer -- and Bayer is no exception. An incalculable amount of time and energy, very smart people, goes into our annual forecasts and budgets and targets and all the things that surround those things. But despite all of that, of course, we've downgraded our original targets for 2023. That's a serious issue and we're addressing it."

Anderson said Bayer will be "doubling down" on everything that promotes company growth. That includes advancing innovation companywide.

"When I joined the company, I saw two things very quickly, very clearly," he said.

"The first was an extensive landscape of administration and controls. The second is tremendous innovation potential."

Anderson pointed to the more than 1,300 pages of company rules and regulations and the resources dedicated to implementing them across the company, as an example of something in need of reform.

"We're going to consolidate that dramatically," he said.

"I already mentioned the countless hours spent on forecasting and planning. We're streamlining that process. We're aiming for something like an 80% reduction in the amount of time that leaders and people of Bayer are spending on planning, forecasting, target setting. All of that energy is going to be redirected to getting the most out of the company's great assets. Bayer's bureaucracy doesn't just weigh on people's time, of course it impacts results."

Listen to the Bayer earnings call: https://www.bayer.com/…

Read more on DTN:

"Court Blocks California Glyphosate Warning," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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