In its latest step to cut costs, Johnson & Johnson JNJ +0.03% will reduce pension benefits that are offered to employees who are hired – or rehired – after Jan. 1, according to an internal memo.
The changes, which do not apply to existing employees or retirees, were not detailed, but reflect the way the “benefit landscape has continued to evolve in recent years,” as well as “emerging trends” in employee career patterns and practices at competitors, writes Peter Fasolo, the J&J JJSF -1.22% worldwide vice president for human resources. A J&J spokeswoman confirms the memo was sent to employees.
“The changes will more closely align with benefits offered by our competitors and maintain a retirement program that’s above average among our peer companies,” he writes. “… More importantly, it will continue to support our efforts to attract and retain talent to drive innovation and growth across our family of companies, helping us manage for the long term.”
The move comes even as J&J, which sells a wide array of prescription drugs, medical devices and over-the-counter health products, continues to improve its financial performance. Sales in the second quarter this year, for instance, rose 9%, while earnings climbed more than 12%.
The healthcare giant has been attempting something of a turnaround, despite sluggish device sales and efforts to revive its over-the-counter business, which was plagued in recent years with embarrassing manufacturing gaffes that led to numerous product recalls.
The pharmaceuticals business, however, has been a stand out. In the second quarter, prescription drug revenue jumped 21%, thanks to sales of treatments for prostate cancer and psoriasis, among other. Over the past year, J&J stock has risen nearly 20%.
Like many other companies, though, J&J continues to cut costs. Earlier this year, the DePuy Synthes medical device unit eliminated all travel – except for sales reps – for the rest of this year in hopes of lowering those costs by 25% and meeting 2014 financial goals.
By Ed Silverman